Harris vs Trump
Harris vs Trump: Best for Restaurateurs
We will be looking at how their policies directly affect restaurant owners.
Some assumptions going into this:
You are a restaurant owner/operator.
Our typical establishments, and most restaurants on the national level, rely on the following guests:
Middleclass customers – which is 50% of our population. They make about 50-150k per year, depending on the size of the family.
We are at the mercy of interest rates, which affect leasing and mortgage rates, and loans for capital expenses. We are also at the mercy of cost of goods sold.
We’ll see whose policies are best in Labor Law, Labor Supply, Inflation, Economic Performance, and in Taxes.
Labor Law: Trump
Why: It is traditional for republican politicians to be more favorable towards business interests in regards to labor laws because of their wholesale dislike of regulations.
Now, there’s nothing wrong with regulations – most have the intention of keeping us safe and to hold companies accountable, but sometimes they can be burdensome when incorrectly formed or enforced. Labor laws that affect restaurant owners are: runaway minimum wage increases, tip-wage elimination, scheduling rules, new overtime rules, etc.
Restaurants already operate on tight margins and some regulations are so complex, like the 80/20 rule, that they basically force you to pay accountants or attorneys so that you remain in compliance.
Some of these regulations should exclude certain industries or businesses of certain sizes, but most politicians don’t have the real world experience to know our industry and therefore lump us along with the Fortune 500 companies.
In fairness, Harris has spoken about helping small businesses with increased standard deductions, but has said very little on lifting the foot off the the regulations pedal.
Labor Availability: Harris
Why: Labor availability, or unemployment rate, is about supply and demand.
Demand: Strong economies result in strong demands for labor. From a policy standpoint, Trump’s objective to supercharge the economy will have the effect of spurring activity for the first 8-12 months because our economy is still delicate and could easily fall back to inflation and/or recession. His tariff policy would also be detrimental to his goals, bringing economic growth down and demand for labor down in the long-run.
For Harris, their objective is to keep stimulus more concentrated on the under-$400k/yr families and let the Federal Reserve be independent. This means that economic growth will be slower but steadier and predictable.
Supply: However, Trump’s proposed policy of aggressive deportations of undocumented and documented immigrants will be disastrous for labor supply in our industry. Even just the threat of it, without follow-through, will bring uncertainty and increase the premium needed for this pool of labor to assume the risk.
Predictability is a business-owners best friend.
Inflation: Harris
Why: Inflation is primarily a result of one of two thing – too much stimulus in the economy (think 2021-2022) or supply not meeting demand. A disciplined plan to cut rates while observing economic response is the way to control inflation in the long run. It is a slow process, but it has to be in order for it to have a lasting effect. Too much stimulus in a delicate economy will bring us back to uncontrolled inflation and/or possibly recession. It’s important to have an independent Federal Reserve to have steady control over growth and counteract risky economic policy, domestic or global. Tariffs will only serve to inflate price of imported goods which will have to be paid by importers and passed through to consumers. Trump’s belief that the tariff cost is paid by the exporter is flat out wrong.
Economic Performance: Short-term, Trump. Long-term, Harris.
Why: This is the old story of the race between the Tortoise and the Hare. Trump’s previous actions and policy objectives will have the economy shot up with adrenaline in order to meet short-term goals, but the hangover will be very bad - especially in an economy with a delicate hold on inflation. In the long run, you will not have the peak of a Trump economy under a Harris administration, but the median performance through four years will be greater with Harris than with Trump AND you’ll avoid the inevitable tariff-induced crash. In short, would you rather have $10 once, or $4 four times?
Business Tax Implications: Trump, sort-a.
Why: In trickle-down economics the idea is that if you can save money for high earners and corporations, they are incentivized to pass that money along to their workers, expansion projects, and other investments - creating more jobs. However, the reality is that in all the times it has been implemented – focusing tax-cuts on the rich – they use those savings to enrich themselves by way of stock buybacks, dividend payouts, etc. In the long-run, the middle and lower-classes suffer because the taxes have to come from somewhere – so those income classes stop spending and smaller businesses dependent on disposable income (restaurants) start to suffer as well. If Trump somehow gets convinced that tariffs are a bad idea and he avoids overheating the economy, we will start to see the negative pressures of trickle economics towards the end of his administration, but he has committed on only yes-men this time and it does not look good.
In a Harris win, those higher corporate tax rates can have the effect of reducing labor wages, cooling the economy into a crawl. Her hope is reducing the personal tax rate of the labor class can offset any detrimental effects of corporate tax policy.
Where They’re Both Wrong: Elimination of Taxes on Tips and Overtime and National Debt
If it sounds too good to be true, then it's too good to be true.
At best, it's an outright lie. At worst, they're too dumb to comprehend the consequences.
Taxes and Tips: Listen, the United States government needs taxes to pay for a bunch of stuff - that's just the reality of it. Is there stuff we could do without or do with less? Sure, but that's another conversation altogether. If taxes get reduced somewhere, they have to come from elsewhere.
It's a compliance nightmare and minimum wage issues are going to go into overdrive more than they already are. The National Restaurant Association likes the Ted Cruz legislation, but I'm not sold on it. There's just too many unintended consequences that will come from this, a lot of them not good for Restaurant Owners.
Deficit: Both of their plans are terrible for the growing deficit, but Trump's is by far the worst. It's not a good time for austerity measures but we should definitely try to be a little more responsible with national debt. Government debt, especially USA debt, is not like personal debt. It's ok for a high rated government to carry debt, but anything over 110% debt to GDP is risky.