Economic Policy in the Next Administration Should Target Efficiency, Not Redistribution

To a first approximation, economic policies target one of two objectives: efficiency (growing the economic pie) or redistribution (reallocating the economic pie). Alas, most politicians favor the latter, which typically shrinks the economic pie and often reallocates in perverse ways. Presidential candidates Kamala Harris and Donald Trump are no exceptions. Mostly, their policy positions emphasize redistribution (to groups whose votes they are trying to court) rather than maximizing economic output. We review some of the economic policies that will define the next administration and argue that both candidates must reorient the platforms toward maximizing efficiencies in order to grow the economic pie for all. Tariffs Tariffs and other trade restrictions force American consumers to pay more for goods and firms to pay more for inputs that they use to produce their products. This means that tariffs harm American consumers and businesses. The overall effects are often worse than the direct effects, since countries targeted by United States tariffs will likely retaliate with their own tariffs on U.S. exports. This is what happened in response to the Smoot-Hawley tariffs of 1930, with predictable, disastrous results. Indeed, the recent trade war with China has harmed U.S. industries.