Subsidizing Demand

Harris has proposed measures that would stimulate aggregate demand by boosting home construction and increasing the consumer’s disposable income.

In an effort to broaden homeownership, Harris floated a $25,000 first time homebuyer subsidy and the construction of 3 million affordable homes and rentals during her first term. A sizable housing subsidy would obviously boost demand for new construction homes, as would government contracts to build more houses.

Higher demand for new home construction also implies higher demand for a wide range of related sectors such as home appliances, furniture, basic materials, labor etc. Note that this may not increase affordability, as housing supply can be constrained by factors other than demand such as regulation or available land.

The debt forgiveness and middle class tax policies proposed by Harris would also boost aggregate demand because they amount to an income increase among cohorts that are most likely to spend.

Harris has floated the potential for the canceling of medical debt, and was part of the Biden Administration’s efforts to cancel certain student loans. She has also suggested tax cuts for middle to low income households. These efforts increase the disposable income among lower income cohorts, who tend to have a high propensity to consume. Some research suggests that the Biden Administration’s cancellation of student debt increases consumption by several billion each year.

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