Last night, Vice President Kamala Harris accepted the Democratic Party’s nomination for President of the United States. In doing so, she gave a deeply passionate speech, which, like most such speeches, was long on all the things she intended doing and short on how she intended doing them. But it was a great barnburner of a speech, anyway, that, as 100,000 red, white, and blue balloons fell from the ceiling, energized and electrified the faithful.
Now the real work begins, and momentum is with the Democrats. However, as Bill Clinton warned in his Wednesday night speech, the next 75 days will be difficult and everyone should be ready for some surprises. For my money, I think Kamala Harris will probably, like Hilary Clinton and Al Gore, win the popular vote, and you know what happened to them in the Electoral College tally. Our current President, Joe Biden, won the popular vote by nearly seven million votes, but it was only 44,000 votes in Georgia, Arizona and Wisconsin that separated him and Trump from a tie in the Electoral College.
“Joy” as a strategy will not carry Harris to victory on 5 November. She is going to have to coherently address actual domestic and foreign policies that will resonate with American voters.
One of the most important, and complex, policy issues that really matters is the economy. In 1992, “It’s the economy, stupid,” got Bill Clinton elected. I’m betting the same will be true in 2024 for whoever wins. After all, a political truism is that Americans vote with their pocketbooks. While it’s objectively true that the overall economy has been steadily improving over the last 15 months, prices are still high, especially grocery prices, and it’s fascinating how many political decisions get made in a grocery store checkout line.
One of the ways Kamala Harris says she’ll be attacking high prices if she’s elected is by passing a national law forbidding price gouging. However, most states already have in place laws against price gouging. They address prices during emergencies; for example, jacking up the price of shovels during blizzards, or air conditioners during heat waves. At some point, when it conceivably gets its act together, the Trump campaign will most assuredly point this out, Trump will take credit for it, and his MAGA followers will believe him.
Economists don’t like price gouging laws, but the public does, so Harris’s message might resonate — for a while. As Michael Giberson of the Cato Institute says, the argument by many economists goes like this:
Economists and policy analysts opposed to price gouging laws have relied on the simple logic of price controls: if you cap price increases during an emergency, you discourage conservation of needed goods at exactly the time they are in high demand. Simultaneously, price caps discourage extraordinary supply efforts that would help bring goods in high demand into the affected area. In a classic case of unintended consequences, the law harms the very people whom lawmakers intend to help. The logic of supply and demand, so clear to economists, has had little effect on price gouging policies.
Or the public. This is why Harris and Walz think pushing a national law to combat price gouging will benefit them. They believe they can make political headway with a “greedflation” narrative, blaming rising prices on corporate profit-seeking. They seem to have determined that trying to educate the public about our actual economic improvement and why it’s been happening — due to policies of the Biden/Harris Administration — is too high a mountain to climb, and, in addition, makes them too closely connected to elderly Joe Biden. Easier to find a mythological prince of demons, a Beelzebub, paint it Republican, and go after it tooth and nail.
It might work. But there’s an alternative approach the public might appreciate if given the chance.
These are three economic points Americans understand: inflation, gross wages, and real hourly wage earnings. The last is the value of wages after factoring in inflation. Hence the word, “real.” Here is a chart from the Economic Policy Institute showing how all three have interacted since 2019.
I know. Looks complicated. But stay with me.
The orange-arrowed light blue line is inflation. As the orange arrow shows, inflation’s greatest 12-month gain happened in June 2022: 9.1%. The green-arrowed dark blue line is real wage earnings, which nearly perfectly correspond to inflation; as inflation increased, real earnings decreased. As it decreased, real earnings grew, even though gross wages, the very light blue line, continued growing in the 5% range.
The dark blue line with the red arrow is the 12 month change from April, 2020, through March, 2021: 7.7%. That spike in real and gross wages happened because early in the pandemic the bottom fell out and so many low wage workers lost their jobs. This skewed the chart’s data, because most high wage earners were still employed, which drove up both gross and real wage numbers.
The political message, if one just looks at this chart for a moment, is this: In the period from April, 2023, through July 2024, — that’s one month ago — the U.S. has seen 15 consecutive months of real wage growth along with a corresponding leveling of inflation following a precipitous drop due to the Federal Reserve’s monetary policies. Further, in September, economists expect the Fed to decrease interest rates. If this happens, it will be the first drop in interest rates since the Fed began increasing them more than two years ago in March of 2022, and it will be great news for all Americans. It will also be great news for Kamala Harris.
Back to prices. Yes, they’re still high, and, more important, will likely not decline sharply before the election, but with the growth of real wages, Americans are catching up.
The bad news is that these statistics are esoteric. They’re data. And while charts convey noetic statistical information, Americans feel grocery prices. They get emotional about them.
Nonetheless, Kamala Harris has an exceptional economic story to tell of a superb turnaround after a devastating, once-in-a-century pandemic. Donald Trump had nothing to do with that, but Harris and Joe Biden did.
Politically, Harris must distinguish herself from Joe Biden, so focusing for a while on price gouging will probably continue. Ultimately, though, the price gouging issue is like a painted hook on a wall; it might look pretty, but no hat will ever hang from it.
To win in November, it’s going to take a lot more than painted hooks, a lot more than Joy and sound bites like, “We won’t go back.”
These economic data are certainly more than sound-bites. Americans, if given the chance, will digest them easily.
