The circular logic of Kamalanomics

In last week’s debate, Kamala Harris embraced the leftist policy fallacy that more spending solves everything. Nothing epitomizes this fallacy more than Harris’s subsidized housing solution.  

Harris somehow believes that federal subsidies will increase housing, decrease prices and fix the problem the Biden-Harris administration’s inflation has created.

Harris touted her proposal to build 3 million new houses in four years and create a $25,000 housing credit for first-time buyers. Presumably, the new 3 million houses will be subsidized by the federal government (otherwise they would be built anyway), while the new homebuyer credit will do the same on the market’s demand side. 

What could possibly go wrong with giving something to everyone except those outside the housing market who will be picking up the tab? Plenty — and it will. 

First, Harris will have to get her pie-in-the-sky proposals through Congress. To do that, she will have to pay for them.

The average starter home now costs $240,000. To build 3 million houses would require $720 billion, because no builder is going to undertake such projects without a full cost guarantee from the federal government. 

All this also assumes that there would be ample building supplies and construction workers available to build an additional 3 million houses over the next four years, beyond the houses already planned. That’s a big assumption. America’s annual new home construction is 1.4 million, so Harris’s proposed 3 million new units is an increase of more than 100 percent.  

Harris also assumes that a federal program could somehow find local building sites and cut through all local regulations. Harris forgets that there are reasons why the houses she wants are not being built already.

Then there’s Harris’s $25,000 first-time home buyer credit. While not specifying who would qualify, let’s presume that all her promised 3 million new houses would somehow be available to people using her credit. That’s another $75 billion right there. It could be more if others qualify as well, in which the cost would exceed $795 billion. 

But even if Harris somehow finds the money, more government spending is hardly a problem-solving panacea. The Biden-Harris administration’s spending failures — the American Rescue Plan Act and the Inflation Reduction Act — prove as much. 

How Harris’s new housing would be distributed would be a big question. As a political program, it’s certain to be decided on politics — not necessarily on where housing is needed.  

According to a recent analysis by the Center for Transportation Policy of five grant programs in 2021’s Infrastructure Investment and Jobs Act, $7.8 billion of the $10.8 billion in approved funding since October 2023 has gone to blue states, even though such states make up less than half the U.S. 

That the programs even start operating as promised is also hardly a given. Another program from the same 2021 legislation, the Broadband Equity, Access, and Deployment Program was supposed to build out internet access in rural America. Biden boasted at the August Democratic National Convention that BEAD was “not unlike what Roosevelt did with electricity.”

Three years after the law’s enactment, virtually none of its $42 billion in funding has been used to increase internet access. 

The Biden administration’s inability to build electric vehicle charging stations is another cautionary tale. The same 2021 infrastructure bill provided $5 billion to build a promised 500,000 charging stations. As of June, only seven charging stations had been installed; Sen. Jeff Merkley (D-Ore.) called the results “pathetic.”

Even if Harris’s homes are built and her credits distributed, don’t expect these to keep prices down. To the contrary, just look at U.S. health care and college tuition costs — both sectors where government programs pump billions in, causing rampant cost increases. 

America’s housing problem can be largely laid at the Biden-Harris administration’s inflationary feet. Their exorbitant spending ($7.7 trillion in deficits from fiscal 2021 to 2024) triggered an inflationary spike that began in March 2021, peaked at 9.1 percent in June 2022, and still exceeds the Federal Reserve’s 2 percent inflation target.  

Seeking a safe harbor from Biden-Harris inflation, consumers moved to buy houses. In addition to the tax benefits of homeownership, inflation makes a home’s price go up even as the value of the mortgage against it decreases — a win-win if you already own a home.

But of course, the Fed was forced to raise interest rates to combat inflation. This drove up mortgage rates and made the dream of homeownership far less affordable. Inflated monthly housing prices have undermined young people’s ability to save up for down-payments, even as they have been forced to dip into their savings to keep pace with inflation.

So, Harris’s housing proposal merely throws more federal money at the problems created by excessive Biden-Harris spending. And Harris’ embrace of the Green New Deal and a guaranteed income proposal shows that such inflationary spending pressure would likely increase with her in the White House.

Harris’s problem is the left’s problem when it comes to spending. Like a dog chasing its tail, it imagines that, if it just goes faster, it can catch it. 

Prosperity comes from private sector investment, not public sector spending: the former yields higher wages; the latter yields higher prices. For a self-styled candidate of change, Harris simply promises more — a lot more — of what has already not worked under Biden.

J.T. Young was a professional staffer in the House and Senate from 1987 to 2000, served in the Department of Treasury and Office of Management and Budget from 2001 to2004, and was director of government relations for a Fortune 20 company from 2004 to 2023.