Four policy areas are coalescing in the platforms of both US presidential candidates: housing, immigration, food prices, and tariffs. Yet none of these plans can address the fundamental weaknesses of the US economy.

 

Housing

Harris and Trump share the idea that the US state should help people from certain social groups with the purchase of housing units. The Republicans noted in their party platform that they “will reduce mortgage rates by slashing inflation, open limited portions of federal lands to allow for new home construction, promote homeownership through tax Incentives and support for first-time buyers, and cut unnecessary Regulations that raise housing costs.” Here are the key elements of Harris’ housing plan:

• Up to $25,000 in down-payment support for first-time homebuyers.
• A $10,000 tax credit for first-time homebuyers.
• Tax incentives for builders that build starter homes for first-time buyers.
• An expansion of a tax incentive for building affordable rental housing.
• A new $40 billion innovation fund to spur innovative housing construction.
• Repurposing some federal land for affordable housing.
• A ban on algorithm-driven price-setting tools for landlords to set rents.
• Removing tax benefits for investors who buy large numbers of single-family rental homes.

Housing has to serve two functions at once. It is both a consumption good and an investment asset. A house is a place to live, but it is also something that is supposed to make you wealthier over time when its price goes up. These two objectives directly conflict — if owner-occupied housing becomes more affordable, that makes most Americans poorer. The homeownership rate is two-thirds in the United States, with only small fluctuations. And for middle-class Americans, most of their wealth is in the value of their home. But even so, the U.S. actually has the lowest percent of wealth in housing out of any OECD country (slightly above 25% while the OECD average is above 50%). This statistic reveals the strong wealth polarization in US society (modest home ownership vs. abundant possession of financial assets), which has significantly deeper roots than the housing shortage itself.

Under these circumstances, the state subsidizing housing demand is just a reallocation of wealth from homeowners to homebuyers and that is why it fits only partially to solving the problem of wealth polarization. Such a reallocation might be discriminatory for the owners in abstract terms, but it is not so if there is a housing deficit, which inevitably impacts price trends in the real estate market. Harris wants to overcome this deficit, estimated to be around three million homes nationwide, by stimulating a higher supply. Increased supply will require more construction workers, approximately 30% of which are immigrants currently, and in the case of intensified construction activities that percentage will likely grow further. Apart from this, Harris intends to support a higher birth rate achievement in society, which if successful, will put automatically additional pressure on homes demand. Republicans also envision support for working parents; i.e., they are similarly keen on improving the US demographic situation.

Both parties’ endeavors promise long-term upward pressure on housing prices. The only way to keep the market balance far from price extremes and thus prevent subsidies inflationary devaluation is to continue to uphold the supply with new subsidies or cancel them completely. Thus, subsidizing cannot be a long-term and sustainable solution to the housing problem, though it may be a solution to the available housing shortage in the here and now. The more sustainable solution is linked with reaching a more labor-productive economy and higher incomes, instead of supporting insufficient incomes by reallocation of wealth within society.

 

Immigration

The second cornerstone of the presidential campaign is the promised mass deportation of illegal immigrants by the Republicans. Trump’s running mate, JD Vance, has said that we should “start with deporting a million people.”  This, however, casts a heavy shade on the understanding of how the planned construction boom might occur and how to synchronize demographic aims with deportation ones in the party platform.

Will it happen via increased inflation in the economy due to the attempts to hire more construction workers among only the non-illegal US population? But even that is not easy to do. The U.S. only has 6 workers for every 9 available jobs every month, and according to the US Chamber of Commerce, the country is “missing” 1.7 million workers compared to February 2020.

To top it off, the employment deficit is at hand in parallel with very modest unemployment in the country. The national unemployment rate in December 2023 was 3.7%. But in Maryland and North Dakota, for instance, unemployment has fallen below 2% for many months. Notably, 77% of the approximately 45 million immigrants in the United States are of working age (18 to 64 years) – a much higher figure than the 59% of those born in the U.S. Even though immigrants represent only 14% of the U.S. population, they constitute 17% (around 29 million people) of the labor force.

Their percentage is even more significant in critical sectors of the US economy. Immigrants represent around 73% of all agricultural workers, over 30% of construction workers, 25% of STEM (science, technology, engineering and mathematics) workers, and 28% of all highly skilled healthcare professionals—such as physicians and surgeons. In the coming years, the country’s aging population stands to benefit from immigration in another way. In addition to addressing population decline, foreign-born workers are critical to care for an increasingly elderly population. Immigrants account for 25% of personal care aides and 38% of home health aides, projected to be one of the fastest-growing occupations in coming years.

It is strange to proclaim with a party platform that your party (i.e., the Republicans) intends to promote economic policies driving down the cost of living and the prices for everyday goods and services while at the same time slashing the number of lowest-cost employees in the agricultural and construction sectors – workers that are directly shaping the cost of living. Such cuts may not cost just short-term inflationary spikes but also longer-term structural shortages in manpower.

 

Controls on Food Prices

The third cornerstone of the candidates’ presidential campaign is Harris’s goal of controlling food prices, as she wants to initiate the necessary steps in her first 100 days as president. It was mentioned many times in the mainstream media and by Trump himself that this might result in a Soviet-type outcome of empty shop shelves. But even if the actual deployment were not so utterly bleak, one day the price controls would have to be renounced. At that point, sudden price inflation will not only compensate for the lost profits during the freeze, but also surely incorporate an additional bonus for the trouble caused.

In fact, the declared price controls are a “solution” for problems that do not even exist. CPI inflation is back to its 2% target. Every month it has been below target for three months, while on a year-over-year basis it is down below 3%. Many Americans will argue that what they care about is not grocery inflation itself — which is the rate of change of prices over a month or a year — but the price level. And this makes sense — if prices rise a lot and then stop rising, people will still care that they rose in the past.

But it is also true that grocery prices were unusually low in the 2010s. Instead of continuing the trend of slow, steady increases from earlier decades, they remained flat for a while. In that sense, maybe half of the big price increase of 2021-22 was just “catching up” to the old trend.

The other half of the problem stems from the inertia of the COVID years – a lot of employees did not produce much then but received generous compensations and their PPP increased for the short-term future without the economy able to circulate any increased production output in the meantime. More importantly, what people probably care about even more than the price of groceries is how much groceries they can afford. When we divide wages (average hourly earnings for production and nonsupervisory workers) by the price of groceries, we see that while purchasing power did take a hit in 2021-22, regular workers are able to afford more groceries in 2024 than in 2019.

There is no indication that grocery store profits have anything to do with the rise in grocery prices in 2021-22. The grocery stores make almost no profit, and their profits barely increased at all when grocery prices went up. You can see from this chart that the big increase in prices did not translate to a big increase in grocery store profits. A 3% profit margin is very low — the S&P 500’s average profit margin is 11.5%! Grocery stores are a notoriously unprofitable business in general. Add to that the fact that the biggest retail grocery store chain in the U.S. has only 16% market share and you probably do not need to doubt whether capital over concentration is behind grocery pricing.

Moreover, if Harris wants to charge the food business economically to unburden the Democrats politically for the price hikes of the past three years, she may choose to do that more elegantly. She could propose progressive tax levies on the net incomes of sales regardless of the companies’ profits. Then, she would be able to reallocate the extra revenue to her subsidizing programs. But what is much better is to open the domestic market to cheaper imports from friendly countries without controlling any prices.

 

Tariffs and Trade Controls

The fourth cornerstone of the candidates’ presidential campaign is Trump’s priority of imposing steeper customs tariffs on all imports and especially ones from China. The Republicans thus expect to support US industry and return key supply chains to the United States. Rife examples of imports from Mexico and Vietnam of Chinese commodities and spare parts should say enough on the subject, as well as the fact that nothing of the expected industrial and supply chain outcomes occurred during the first Trump mandate when he introduced his initial round of tariffs against China. Moreover, it was precisely in these years that the manufacturing productivity of the US economy registered its largest slumps after 2010. It is also ridiculous that the Republicans have not described at least some tangible anti-inflationary measures in their plan to isolate the US economy from world markets via tariffs, apart from writing bluntly in the party platform that they will reduce inflation. Even populism and egoism should possess a bit of product quality when exhibited on a shop window.

 

Conclusion

To sum up, neither Harris’s nor Trump’s platforms deal with fundamental for the US economy problems, such as enhancing the US economy’s competitive strength through relevant geopolitics (focused on re-shoring, friendly and near-shoring) or reducing the massive US budget deficit. None of them answers how the United States could beat China on the global supply chain markets if it produces 1.7 times less industrial output. While US labor productivity grew at an average of 3.4 percent per year from 1987 to 2007, then it fell down to –0.5 per cent from 2010 to 2022, implying a slowdown of an average 3–9% vs. 1987 – 2007. Under these circumstances, why should key supply chains and industries return to the country, with its high customs tariffs and labor force shortages?

Why does the U.S. have the most expensive healthcare worldwide and life expectancy like Cuba?

Can you subsidize housing needs forever if the labor productivity in the economy is not sufficiently competitive globally, and thus incomes do not grow enough sustainably?

How would the US economy be competitive in the AI development field if the CHIPS Act supports only advanced chips production while global supply chains depend on mature chip volume production, a sector where China is a growing champion?

So, are the current presidential elections in the United States a costly and hollow political show of business sponsors, in which the ordinary voter could just choose between the bigger and the smaller disadvantage for himself?

 

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