The 2024 Election And Your Wallet
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We are right on the eve of the presidential election here in the united states. This episode is dropping the friday before we all go out and vote next tuesday. And what is truly a little election? Maybe some of you have voted already.

I know I have, and I voted early because I don't know about you, but this year, more than many others, IT seems like there is a unique urgency in here. At least part of that is because each candidate has pledge to make changes to some pretty critical facets of american life, including to our personal finances. That, of course, because where a money show is the topic that we're gonna stick with today.

For example, we've heard that the candidates wanted do things like make IT easier to buy a house, careful older parents change the that you get paid if you're someone who realize on tips. But it's also really hard to know how any of these proposals will work in reality or even the likely had that they'll be implemented at all. Further complicating things is an awareness gap.

According to you of seventy four percent of haris support ers can correctly identify her policies. Sixty four percent of trump supporters can confidently pinpoint his. Those numbers seem high, but they're not high enough.

Many voters may head to the polls with only a partial understanding of the specific platforms that they are endorsing. So we've got questions, and thankfully, we've got Katherine rappelle here to answer them. Catherine, a nationally syndicated opinion columnist at the washington post, A C.

Nn politics commentator, A P B S. News hour special correspondent. I know you loved IT when we had on the show last year to talk about the economy, and SHE is back today to help us dissect what the twenty twenty four election may mean for our wallets. Catherine, welcome.

Great to be here.

So I just wanna die writing. We have seen this year that inflation is one of the highest priority issues for voters, with fifty two percent saying inflation has an extreme important influence on their vote. How do you think the candidates stack up there? And what are you expecting as far as the impact that they can actually have on inflation?

So I will say this, whatever you hear from the two candidates, and both have argued that they will be the only ones who can bring down inflation. Presidents actually have very little control over Price levels, very little control. They can do relatively few things to bring Prices down.

I think that there are some things they can do around the edges. They might be able to, for example, repeal some tariff s on things that americans buy or they might be able to subsides production of certain things that americans by. But relatively little is, however, quite a bit that they can do to make inflation in worse, or at the very least, drive up the Prices of particular types of goods.

And on that score, I think former president trumps agenda is uniformally worse than como herricks. Like I said, I don't actually think como heroes going to bring Prices down all that much. You though he has pledge SHE would.

I do think former president trumps agenda would likely raise Prices on a lot of goods. And that's through a few different reasons. One, he has this proposal to impose universal tariffs of ten to twenty percent, depending on what day IT is, what he's promising, as well as sixty percent plus terabits on chinese goods.

And all of the goods that he would be terrifying are things that are consumed by americans. Now they might be american businesses. They might be american consumers, regular people who go to stores like walmart and target and what not.

But we have lots of evidence that when these kinds of tariffs are imposed, the costs get passed along to obesity down the food chain, to the ultimate buyer of those goods like american consumers. I'm thinking things like stuff you buy the girls restore, much of which is imported, particularly out of season fruit, right? You're getting grapes from chilly or various things from mexico, various kinds of goods from mexico.

All of those things will get more expensive. Gasoline will likely get more expensive, particularly in the midwest, in part because a lot of the refined products that the midwest purchases are from canada and those the refine gasoline would be tax as well, tariff as well, terrible or taxes. So he has a whole sweet of terriers that would likely make Prices higher.

He also has a proposal to deport something like tend to twenty million people. He says twenty million. There aren't actually twenty million people living on lawful ly in the united states. So I don't know that means that people who are currently here illegally would be designated as not being here illegally.

But either way, you were talking about a major chunk of the workforce that harvest craft, including a lot of the produce that I was just talking about that is farmed here, that builds houses, that processes meat. These are really hard jobs that are just portioned held by immigrants, in part because americans don't want hold them. So that would likely raise costs if you have fewer people available to produce those things.

And then the last thing that I think is especially troubling, it's a little more technical. So people haven't paid attention to IT is his intention to politicize the federal reserve. So the federal reserve of controls the money supply IT has historically ally been independent, and that's for good reason.

Generally, central banks around the world that control their country's money supplies have much Better outcomes on inflation. If the money supplies is not basically controlled by politicians. So all of those things are likely to raise Prices higher, whether we're talking about a one time increase through caribs or longer term inflationary potential through politicising without our reserve.

So two questions on that. Let me take the federal reserve first. What happens if the federal reserve is controlled by politicians? What's the likely outcome? They just print money because that's gonna make people feel Better and that proves to be inflationary. I mean, is that sort of where were headed?

Yeah, that's certainly what's happened in other countries. So if you look at places like argentina and eua is in bob way, lots of places where the politicians are in control the money supply. There's always this temptation to a little bit more money to lower interest rates in the near term to kind of duce the economy again in the near term, especially when an election is coming up.

But over time, that causes the central bank either the central bank no longer cares about how much currency is out there, whether it's lars or or pay so or anything else, or people stop trusting in the central bank to kind of crack down when is needed if there's about of of higher inflation. So there's a lot of debate right now about why inflation in the U. S.

Has cooled so much, right? We had quite high inflation in the united states in twenty twenty two, twenty twenty three. I think that reflects a combination of forces, including supply chain problems, including high demand weather because consumers had a lot of savings or becomes the government sent everybody checks. I have actually been critical of some of the things that both trump bed by and have done in terms of sending cash out, not only to people who I think we're in hardship, but part of the reason why we've seen inflation come back down, that is Prices are not growing as quickly.

I have to do with those things on winding people spent down their savings, you know, access savings, supply chain problems, but also the federal reserve raise interest rates and had a lot of credibility that like they were willing to raise interest strates even more, even if everybody hated them for IT. With a lot of people do, including a former president trump, they're willing to the expression is take the punch bowl away, right? That you want a federal reserve, you want a sentral bank that's willing to do things that are politically unpopular in the near term.

There's fielded from sort of political blow back. If IT helps people be more convents that in the long term, they're willing to do those painful things to keep Prices down. Because at some point, if you don't think that the central bank is willing to take the punch bowl away or do these unpopular things, that inflation can become kind of self perpetuating or self fulfilling propac's.

So the classic example of this would be if you don't think that the fed is going to do, know, administer that painful medicine, then you say, you know, i'm worried that Prices are going to go up next year. I'm a business, let's say, I worried that input cost you gonna rise. I'm going to preemptively raise my Prices in my catalogues or on my website or whatever, just in case consumers likewise start by more now in the fear that Prices will go up later and workers start preemptively demanding higher raises, not linked necessarily to the existing cost of living or their existing performance.

And even everybody wants a higher or pay, but because they're worried that the cost of living world up later. So IT becomes the self perpetuating cycle, unless you have this sort of faith or credible belief that the people who weren't charge of the money supply will stop that cycle in its tracks. And when you have politicians who are in charge of the money supply instead, like I said, they're always going to be thinking about that shorter term time frame of what happens before the next election.

They don't want to do the thing that's painful, even if the painful thing in the near term leads to Better outcomes in the longer run. So this is all the way of saying that like it's very important that central banks can Operate independently. They're just they are to like do the unpopular things when they have to and not deal with the political blow back in that historical leads to much Better outcomes, not just here in the united states. Part of the reason when we had this inflationary episode, the seventies, was that the federal or didn't have that credibility until Walker came in. But again, this has been documented all over the world.

No, I I spend some time in argentina recently. We definitely don't want to to go down that road. But a really helpful explanation.

My other follow up question was back to controlling Prices, controlling inflation. And vice president Harris has been saying i'm gonna clamp down on Price gouging. What is that? And would that be an effective strategy?

That's an excEllent question. And the campaign has been very vague, I think deliberately vague about what that means early on when he announced that policy, I think that was actually her first big economic policy announcement after becoming the presumed nominee, or maybe the official nominee for president. IT sounded like he was referring to some legislation that senators Elizabeth warn in bob casey have sponsored with a host of others.

But there is the leaders on IT in the senate. And that actually commonly heras herself had cosponsored diversion of back when he was in the senate because this bill has gets introduced like every session. Even though that bill never uses the word's Price controls, that is effectively what that bill would do IT IT would allow the federal free commission, which is an independent agency, to decide when Prices have grown excessively and they can use whatever criteria they want.

In practice, what that means is this agency gets to decide when IT is justified for Prices to go up or to go down rather than market forces. And IT leads to a lot of uncertainty about if a company put something on sale one week and then they reverse the sale the next week, would that be an excessive Price hike? I don't know for that piece of legislation.

I think it's it's very problematic, maybe well intended, but very problematic and is likely to lead to a lot of issues again that we've seen elsewhere in the world where governments have tried to cap Price increases in a pretty widespread manner and have LED to shortages or black markets or at best, maybe nothing at all. I think that's the best interpretation of these bills that maybe I would do nothing. Harris has since kind of walked back her language, suggesting that was her plan.

Now it's really not clear what he means by that. He talks about lots of states having Price scouting laws on their books, individual state throughout in the federal government. And those laws kind of only they get very rarely invoked, generally only doing like a natural disaster, hurricane or a drought or a flood or something like that.

And even then, they're very rarely invoked because again, it's supply and demand tend to dictate what happens when there are Price increases or Price cuts for that matter. And you're either going to have to deal with higher Prices or shortages even when there is a natural disaster. And everybody's trying to, you know, buy a generator or something. You can neither raise the cost of the generator.

And the people who need IT most will or most able to afford anyway will buy IT and you hopefully induce more suppliers to come into the market or not a state, for example, and sell theirs or you say they can't raise Prices at all and then the views that are available get sold out and then nobody comes in. So it's tRicky. I understand the optics are really bad about this stuff, but even in the cases of these state laws, they're very rarely invoked.

They generally get invoked against like small businesses, which is not the narrative here. You know, much of the Price gouging narrative is about big companies. So this is a long wind wave thing.

I don't know what you would do in practice. I think this is largely more about signal to the public that SHE is sympatheti C2Concerns abo ut cos t of liv ing, then actually having a tool at her disposal that would do anything useful. And even the bill that I mentioned before, the casey warned casey bill, I don't think whatever get the votes to pass.

So what would you do? I don't know. I do think that there are other things on her agenda that again, might help with the margins, not the Price scouting stuff, whatever that might be.

She's talked about trying to encourage more home builders to build. Federal government has relatively few tools that its disposal, but IT has some. But that would be helpful in bringing down housing costs if we could actually increase the supply of homes.

She's talked about other things like increasing the child tax credit, particularly for families of newborn's, that would bring down costs. But I would give more resources to at least the smaller population of people who are really struggling. So things like that, I think, matter more than promises to supposedly bring down Prices.

We're going to a take a very quick break when we come back. I want going to hit on a few specific proposals, things that related to student loan, social, clearly, ly taxes overall. Her money is proud ly sponsored by adult man financial engines you save for years for college.

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Flash her money. And we are back with the washington posts columns. Catherine rampa, alright, Katherine, I know this is an incredibly busy time for you. Uh, we only have you for a few additional minutes. When you look at the different student loan proposals out there, what do you think is likely that happened depending on who wins this election for trump?

IT doesn't seem like he has much of a plan relating to student loan that whatsoever, or for that matter, for other forms of assistance for people trying to afford higher education. You come la. Harris has proposed expanding pl grants, for example.

That's not something that republicans have recently anyway been on board with. Trump has talked a little bit about apprenticeship and other kinds of non ba programs that seems like they're some bioactive son support there. Again, that doesn't exactly get in the student loans, but IT is about access to post secondary schooling that might be relevant for the job market.

Come on, Harris. I think we are likely to see more a longer lines of what the bite administration has already tried. And to be clear, a lot of what the by administration has tried is still tied up in court.

He had a sweeping one time student debt forgiveness that was blocked by the supreme court. He has had his administration, I should say, has tried to revamp the student loan program going forward so that there's basically a more generous version of income driven repayment program. So it's basically people can qualify for forgiveness sooner after they graduate.

Their payments in the meantime are capable a lower rate, at least for most people at sea. That also has been held up in court. How that shakes out, I think, remains to be seen.

But again, from what we've heard from coming here is so far, I think it's unlikely we would see a major departure from all of that. SHE has not actually talked very much about student debt or student debt forgiveness in the campaign. And I don't think that's necessarily because he disagrees with the policy, but because IT is extremely divisive on the campaign trail. You look at this election as well as the twenty twenty two election, democrats actually have not really highlighted their proposals on the student debt front in political lads are elsewhere, in part because IT is extremely controversial, but nonetheless, they have been trying to work towards more forgiveness, even if the courts have hamstrung them.

How about on .

social security? Both candidates have kind of tried to present themselves as the guardians or saviors of the social security, the system, the social security system is going to be under great financial string. Whoever is president is the trust fund is expected to run out in the next few years, and then we'll have to see whether congress steps sent to back fill that money or automatic cuts go into place or what have you.

Some of the proposals that are on the table now would actually working that problem. So Donald from, for example, has said that he would make social security benefits tax free. Now that's a very popular idea.

But if you look at how the system works right now, actually, for lower income and middle income households who receive social security benefits, those benefits are already either completely tax free or mostly tax free. So the people who would be affected by making all social security benefits receive tax are overwhelmingly higher income people. So our tax system is very opake.

So a lot of this is not obvious like how IT works now and what would change. But if you look at how the law actually does work, if you ever have trouble sleeping someday and you decide that you want to treat your insomnia, you can look into this. But basically, the upshot is this would predominantly help higher income people and would likely worsen the social security trust fund and bring IT.

I think the estimate that I saw from the committee for responsible federal budget, which is the independent thing take, was that the social charity trust fund would go bust in six years, something like that under the thump proposal. Now it's not clear to me that commonly heroes is gonna the situation much Better from how IT is today. But I don't think she's likely to work in IT.

She's talked about raising taxes in general on higher income people on on corporations and that will pay for a bunch of the expansions of the safety net tree has embraced or the existing safe. But either way, the mass fill doesn't add up under either of them. But again, it's kind goes back to what I was saying about inflation. Harris may not make things a whole lot Better, but trump would probably make them a lot worse.

That sort of what we're hearing about taxes in general, when we look at the impact of taxes on the deficit. Can you talk about that a bit?

yes. So both candidates have promised tax cuts in some form to a large swath of americans. In Harris case, SHE has basically promised to extend the trump tax cuts for the bottom ninety, ninety five percent of americans. IT depends on like how you look at things. Either that's another tax cut because these things were related to expire or it's just the status quote, if you're regular person that feels like the status quo in addition to keeping tax rates as they are for at least not raising them for the majority of the population, he also would have some additional tax breaks, tax effect vely, tax cuts for specific population.

So he would increase the child tax credit to make IT much more generous, basically, for almost all families, but then especially much more generous for families of newborn SHE basically says, if you have a newborn, you get six thousand dollars for the year the child was born. And IT may be doled out not just as a lumpsum IT text time, but in a monthly fashion. In little instruments like we saw a few years ago, there was kind of a version of that delivery system under the biden american rescue plan.

And then SHE has some other tax breaks on the table for first time home buyers, for small businesses, things like that. Now if you are within that population, first time home buyers of small businesses, probably those are welcome. Free start up business, I should say those are probably welcome. Whether they'll have a big effect economy wide, i'm kind of dubious.

But i'm sure if for your first time home, bie, you're happy to have the twenty five thousand down payment tax credit, assuming IT doesn't get passed along in the form of higher housing Prices, which you might if we don't feel a lot more homes on the trump side of things. He has kind of been all over the place now. Initially, his his stance seemed to be cut the corporate tax rate to fifteen percent.

He would extend all of the twenty seventeen tax cuts that he signed into law. And he's also kind of thrown out a great bag of other tax cuts. So I mentioned social security.

No taxes on social security. He and common Harris, I should say, have said no taxes on tips. He said he would tax example over time, and i'm sure i'm forgetting something else. Now how many of these things would actually become law? I don't know.

There will be a huge portion of a tax code that is up for graphs that is expiring next year, that those twenty seventeen tax cuts, almost all of the individual side of things. So income tax rates, the child tax credit, very few things, those will expire next year, and there will be a big fight over what that looks like. So maybe some of these things could find their way in there, depending on whose president and who controls the senate and the house.

I would say that a lot of them will this portion ac help hire income people, particularly if you look at how they vary based on current law like that, no tax on tips thing. If you are a very low income worker and part of your income is based on tips, part of your income isn't either way, you're probably not pink income taxes to begin with. So it's going to be disproportionate higher wage people and you might have some other weird distortions like lots people decide to have more their income patients.

So a lot of these things will have weird distortions and may not actually provide a lot of help to the people who are most in need. Arguably of financial list distance. But either way, large portions of the taxes are changing next year. And so what you think the candidates are likely to push on what matter?

Such an amazing explanation. Thank you. Last question, Katherine. The stock market has been enjoying a very nice ride for a very long time. Twenty, twenty two accepted.

Do either of the candidates seem likely or more likely to be able to continue this run the markets going up? Is that anything we i've ever seen? Historically.

a lot of people have looked at stock market performance for economic performance under the different parties and have concluded, oh, that looks like things generally go Better into rats. I think that's kind of a spurious correlation.

Presidents don't control stock markets, and sometimes they get lucky, and sometimes they get unlucky and they get too much blame or too much credit either way, again, I think that there are some things that on the margin may make a difference. For example, if you do, then inflation is likely to be higher under either of the candidates. And I, among lots of independent economic analysis, have suggested IT will be higher under Donald trump.

That's likely to not be good for inflation adjusted market returns, including because IT might mean that the federal reserve, if IT remains independent, will have to raise interest rates to sort of the cool and higher interest rates tend to be worse for stock market performance. And in fact, we've got ten some weird signals lately on this like we've seen long term interest rates for the thirty year treasury for mortgage go up a little bit recently. And again, they're different ways to interpret why that might be.

But one way to interpret that is that, yes, the economy has been stronger, which might mean that the federal service less likely to cut. But also, if there is a big, let's say, a republican sweep, they take the White house in both chAmbers of congress next year, and they do pass enormous tax cuts that aren't paid for deck could drive deficits up, which will drive interest rates up, which will in turn likely lead to worst stock market performance. But again, now there are a lot of factors that influence all of these things. So i'm has in to say like, ahh, this candidate will be Better for markets in this candidate will be worse. You just kind of have to look at what we worth they're able to push in which direction you think that will lead interest strates and equity Prices to move in as a result.

you are a wealth pn intended of information. Thank you. Thanks for spending this time with us, Katherine. I hope that you have a good week and a calm and peaceful election and that we get to talk to again soon.

Thank you. I hope we can all stay saying in the next few days. thanks.

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