Transcript: Kamalanomics goes on defence

This is an audio transcript of the FT News Briefing podcast episode: ‘Kamalanomics goes on defence’

Sonja Hutson
Good morning from the Financial Times. Today is Tuesday, August 20th, and this is your FT News Briefing.

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The greenback is feeling blue. And Vice-president Kamala Harris is facing criticism over her economic plan. Plus, US-China tensions are threatening a long-standing science and technology collaboration. I’m Sonja Hutson and here’s the news you need to start your day.

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The US dollar has sunk to its lowest level since the start of the year. That’s because investors are betting the Federal Reserve will cut interest rates next month. A more stable stock market these days is also pushing the dollar down. After a wild ride at the beginning of the month, the S&P 500 has recovered all of its losses, so investors are feeling a bit better about piling into equities again. They’ll get their first clues as to whether the bet will pan out on Friday. Fed chair Jay Powell is scheduled to speak at the Jackson Hole symposium, and he’ll probably give some hints about future rate cuts there.

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Democrats have been fighting to defend Vice-president Kamala Harris’s recently announced economic plans. And it’s not just attacks from Republicans. Economists have also been criticising the presidential nominee’s ideas. The economy is a weak spot for the party, so this could have big consequences in November’s election. I’m joined now by the FT’s Lauren Fedor to unpack this. She is in Chicago for the Democratic National Convention this week. Hi, Lauren, how’s the Windy City?

Lauren Fedor
I only just got here, but so far so good. Check in with me at the end of the week though.

Sonja Hutson
Things usually change by the end. So before we get into this pretty icy reception that Harris’s plan has gotten, can you just unpack it for us? What are the main points?

Lauren Fedor
Sure. So there are kind of like three main buckets, I would say. One has to do with support for families with young children. The big headline there was that she wanted to increase the child tax credit for families with newborns to up to $6,000 a year. That’s a huge increase. Then I would say the second bucket is for the housing market. And in that category, she’s proposing downpayment support of up to $25,000 for first time homebuyers. And then the third category was about food and grocery prices. She really kind of espoused price controls and the idea that she would be enabling regulators to go after companies for unfair practices that she said were driving up costs. I would say the thread that links all of these is that we’ve seen for years now that inflation is people’s number one economic concern, even as the inflation rate has come down. And so I think Harris, through a variety of levers here is trying to say, look, I hear you, I understand you, and this is what I’m gonna do to try to make it a little bit easier to get by.

Sonja Hutson
So, Lauren, I mean, a lot of what you’ve been describing sounds like it could be pretty good news for a lot of Americans. So where is the criticism coming from?

Lauren Fedor
Look, I think these are very politically popular ideas. Like you say, they sound pretty good. When we look at how economists have reacted, they in particular have raised some red flags. The policy area that has raised the most red flags has to do with price controls. That is seen by most economists as something that could distort the market, something that could lead to supply problems or perhaps higher prices in the future. There are also some questions, though I think more broadly about just how much all of this is going to cost. And fiscal watchdogs have started kind of crunching the numbers themselves. They’re saying that all of that adds up to something like nearly $2bn added to the deficit over a 10-year period. That is a lot of money. Now, the Harris campaign hasn’t laid out specifically how they’re gonna pay for it, but they have started to give some indication. And just yesterday, the Harris campaign confirmed that the vice-president would echo what President Biden has called for, which is raising the corporate tax rate back up to 28 per cent, which could net a lot of money for the government and offset some of the costs of these programs.

Sonja Hutson
Now, I mentioned earlier that the economy has been a real weak spot for Democrats this election cycle. What do we know about how Harris and her economic plans are being received by voters?

Lauren Fedor
Look, I mean, I think it goes beyond this election cycle, to be honest. For a long time, the Republicans have been seen as the party of business and the party of economic issues. Now, when it comes to this election cycle, we’ve seen kind of a couple of mixed messages. So, for example, there was an ABC news poll out this past weekend that showed Harris had a really comfortable lead over Trump nationwide when it comes to voting intention. However, that same poll put Trump ahead when it comes to who voters trusted on the economy. Now, the FT does its own poll on economic issues, and our poll earlier this month actually found that she had a one point edge on this question of who do you trust more? So I think we’re going to need to see how things kind of bet in over the next couple of weeks, particularly how Harris’s message is received coming out of the convention this week to get a full sense of how voters are thinking about this.

Sonja Hutson
Lauren Fedor is the FT’s deputy Washington bureau chief. She’s covering the Democratic National Convention this week in Chicago. Thanks, Lauren.

Lauren Fedor
Thanks, Sonja.

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Sonja Hutson
Trade tensions have been pretty high between the US and China in recent years. This probably doesn’t come as a surprise to you, we talk about it all the time on the show. But this stand-off is now also threatening a decades old pact that has allowed both countries to work together on big scientific research. It’s up for renewal later this month, but it’s not clear that will happen. Michael Peel is the FT’s science editor and he joins me now to discuss. Hi, Michael.

Michael Peel
Hi, Sonja.

Sonja Hutson
So first off, can you tell me a little bit more about this pact? What’s the history there and why has it mattered?

Michael Peel
Well, this was one of the first bilateral pacts between the US and the People’s Republic of China when the US recognised the PRC officially in 1979. So it’s a foundational science and technology co-operation agreement, saying there are big areas of science and technology in which we can fruitfully co-operate in all kinds of areas, from geology to disease management and many other spheres over the years.

Sonja Hutson
And what are some of the most notable benefits we’ve seen out of this type of co-operation?

Michael Peel
Well, they’ve been quite a few. One of the best known and most striking is the discovery, through a joint piece of research of how if pregnant women took folic acid supplements that could help prevent birth defects in their children. And this actually led, at least in part, to changes in health policy in both countries, which helped to lower birth defect rates because of this foundational research that have been done under the umbrella of this agreement.

Sonja Hutson
But, you know, like I mentioned earlier, this pact and the collaboration that comes with that are now at risk. Tell me a little bit more about why that is.

Michael Peel
Well, it reflects really the evolution of the US-China relationship more broadly and the tensions that have risen in that over the years to do with trade, as you mentioned, and also security. And obviously, there are very specific points about science and technology co-operation which echo that. So for example, on the US side, there are concerns about potential industrial espionage, intellectual property violations, and also the capacity for discoveries made during work with Chinese scientists to then be used for military purposes. On the Chinese side, there are obviously tensions to do with sanctions that the US has imposed on some high tech Chinese industries, notably semiconductors. So, there are obviously kind of questions over the long term viability of this agreement.

Sonja Hutson
So looking ahead, then, what are some of the key areas of co-operation that people on both sides would like to see continue?

Michael Peel
What researchers suggest would be viable and indeed needed co-operation are on the challenges which face the entire species and the entire planet. And that would range from obvious areas such as climate change to, for example, diseases of ageing, which reflect demographic changes seen very much in western countries, but also now in China. And you’re faced with ageing populations in many parts of the world. And of course, disease management is another very obvious one. We’ve seen in the pandemic how important a global approach to that is. We’ve also seen in the pandemic how difficult it is to get a truly global approach. And of course, there were specific tensions there to do with failure to co-operate fully on efforts to look into the origins of Covid-19.

Sonja Hutson
I got to imagine that it’s difficult to co-operate with this kind of looming threat of the pact not being renewed. What does it mean for the scientists actually doing this work if the pact does fall apart?

Michael Peel
Well, clearly, if the pact is not renewed, it will almost certainly have a deterrent effect on both sides. And of course, on the Chinese side, perhaps in particular, because as long as the pact is active, it’s a way for Chinese researchers to know that they have some kind of official government permission to engage in co-operation with American counterparts. But if the pact isn’t renewed, then that falls away and potentially leaves them in a very difficult position.

Sonja Hutson
Michael Peel is the FT’s science editor. Thanks, Michael.

Michael Peel
Thank you.

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Sonja Hutson
You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.