OPINION:
Whether voters choose former President Donald Trump or Vice President Kamala Harris in the November election, the economy will be altered by forces beyond either’s control or brand of populism.
Bain & Co. estimates that spending on artificial intelligence equipment and services will jump to $1 trillion by 2027. That’s 3% of projected gross domestic product, 23% of nonresidential investment in buildings, equipment and software and enough to move the needle on the shape of our society.
The advent of AI and decarbonization of energy systems, transportation and buildings will create and destroy jobs and usher new opportunities to compete globally.
Like prior transformations — the mechanization of agriculture and the industrial revolution, electrification of the workplace, moving assembly lines and the internet — jobs and communities will be disrupted, fortunes minted, the status of prior scions diminished and the ordering of power among nations irrevocably changed.
Wonder and fear abound. But Americans are no different from Europeans who are anxious about stagnation. Or the Chinese who built a manufacturing export powerhouse only to see their economy gripped by deflation, youth unemployment and pessimism.
American entrepreneurism and business leadership, begetting a succession of trillion-dollar companies such as Microsoft, Alphabet, Meta, Nvidia and soon perhaps OpenAI, bear testimony that capitalism and free markets offer the means and a beacon to a brighter future — a second American century.
Ordinary people caught in the clutches of disruption — displaced from jobs or raised in communities far from the centers of progress in rusting factory towns of the Midwest, remote areas of the rural South and distant pieces of New England — want a share of stability and fairness.
We see these anxieties play out as the candidates campaign in Michigan.
It’s no surprise that if Ms. Harris is elected, as her Sept. 25 Pittsburgh speech fact sheet on industrial policy and policy book explains, she wants to further support programs to boost new industries such as AI and electric vehicles and social programs to level up the struggling working and middle classes. As she puts it, an embrace of capitalism with “free and fair markets.”
In a nutshell, she wants to double down on President Biden’s industrial policies by adding $100 billion in investments in AI, semiconductors, solar, hydro, batteries and materials critical to our security — while lifting established industrial communities that have been disrupted and underserved groups. And to offer more help to working families with greater federal support for child care, enlarged child tax credits, expanded apprenticeship programs for young adults who won’t attend college and so forth.
She’d pay for it by letting the benefits of the Tax Cut and Jobs Act of 2017 lapse for those earning more than $400,000 annually, imposing a minimum corporate tax of 15% to align the U.S. regime with an international treaty mandating a floor under business taxes and raising the nominal corporate tax rate from 21% to 28%.
Former President Donald Trump talks about a similar path — cutting the corporate tax rate to 20% and 15% for domestic manufacturing — to make creating jobs in America more attractive. And reinforce and pay for this approach with tariffs — 10% to 20% across the board, higher for firms such as John Deere that might flee to Mexico and 60% on Chinese goods. And an array of personal tax breaks on overtime, tips and Social Security payments.
The difference is that a Harris administration, like that of her patron-predecessor, would orchestrate the investments from Washington — giving out goodies to firms she deems most responsible, progressive and pro-union. Basically, she raises taxes on businesses and the wealthy generally and then lowers the burden for those who comply with her industrial and social policy visions.
As Obama-era Solyndra as well as Tesla and Elon Musk’s other enterprises testify, government support for new technology has had both failures and successes.
Recent losing bets appear to be General Motors, which can’t make EVs at a profit, while scrappy Hyundai can, and Intel, which is the largest recipient of CHIPS and Science Act subsidies to reinvigorate semiconductor fabrication, flailing and may ultimately have to spin off its factories.
Relying on industrial policies vs. lower business taxes can have similar macroeconomic results.
After four decades of decline, manufacturing employment has been climbing again, supported by stronger tax and subsidy support in the Obama, Trump and Biden years — free enterprise but with a boost.
Neither approach has created enough jobs to satisfy those voters nostalgic for the Johnson-Nixon-Carter era, when factory employment crested. But both approaches do yield some gains.
Ms. Harris has significantly improved her polling standing by fleshing out her ideas and narrowing the gap with Mr. Trump on the economy.
Too much of this campaign has focused on the shortcomings of the two candidates’ personalities. Still, the choice should now be how voters receive these two competing visions for economic policy to support reindustrialization.
• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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