A Green New Deal

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WAITING FOR THE POLITICIANS TO SAVE US FROM  OURSELVES

For years we’ve asked our students to read Michael Pollan’s Why Bother. First published 10 years ago, it is approaching canonical status in the environmental studies field. Many of our students have read it before, but it bears re-reading. I do it annually, at least. Why?

At the most basic level, Pollan asks us all to plant a garden. A simple act, and “utterly inadequate to the challenge” of climate change. His argument for doing so, essentially, is that “for us to wait for legislation or technology to solve the problem of how we’re living our lives suggests we’re not really serious about changing–something our politicians cannot fail to notice.”

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I can’t help but think of Pollan’s piece in the context of the Green New Deal, a non-binding Resolution sponsored by Alexandria Ocasio-Cortez, first-year Representative of New York and Senator Ed Markey of Massachusetts, revealed today after bubbling to the surface of progressive politics since November. Although specific policy measures are not proposed, the GND’s goal is a 10-year mobilization of the nation’s resources to effectively transition the country to a carbon-neutral economy. The plan calls for massive government investment to completely overhaul the energy, agriculture, manufacturing, and transportation sectors; upgrade all existing buildings for energy efficiency; restore ecosystems; and build resiliency against climate-change related disasters.

All this by 2030. And all while guaranteeing well-paying, local jobs to anyone who wants one and protections for historically marginalized communities and those most impacted by climate change. In short, this isn’t so much environmental policy as an ambitious vision for an economy that makes the “original” New Deal look like a rather modest social program in comparison.

Consequently, it is no wonder that House Democratic leadership has been cautious.

The GND proposes a fundamental reordering of our economy and represents a massive near-term electoral liability for Democrats in swing states that are going to have to stand up to the withering criticism of creeping socialism, already emerging as the latest rallying cry to the Trump base. Coupling the problem of climate change to wage and job growth is an effective way to broaden the plan’s appeal, but also complicates the politics infinitely. In a concession to labor and moderates, the GND’s proponents walked back from a plan that called for the elimination of fossil fuels from our energy supply to one that allows for the “clean” use of fossil fuels and nuclear energy, to the chagrin of the more progressive environmental activists.

From my vantage point, it is difficult not to view even this version of the GND as too ambitious. Let’s set aside the obvious arguments against the political viability of a GND (political gridlock, entrenched interests and corporate lobbying, the simple fact that our political system is designed to yield incremental – not wholesale – change, etc.) or the political liability that the democrats would own if it ever became legislation (assuming no or limited bipartisan support) in the form of unintended consequences, half-baked legislation, or bumpy program rollouts (healthcare.gov anyone?). I’d like to ask a simpler question:

Is the will of the people actually, truly behind this idea? And not just in a “sure, I’m all for green jobs” kind of way. Is the will of the people behind this in a way that can withstand the onslaught of money and media that will be unleashed before the words “Green New Deal” are ever uttered in a Congressional committee hearing? Do enough people actually care? We’ve seen the political tide turn surprising quickly on social issues like gay marriage, but this is of a magnitude that dwarfs even healthcare reform, to say nothing of the inter- and transnational complications or the base-level assumption that Democrats will control both chambers of Congress and the presidency in 2020. Proponents of the GND have been quick to point out that the public supports the idea, but who wouldn’t be in favor of good jobs, a strong economy, and clean, renewable energy (as the GND was represented to poll respondents in the aforementioned Yale survey)? You don’t have to look very hard to find examples of ideas with strong public support that nonetheless fail to become legislation even when one party controls government (exhibit #1: Hillarycare 1993; exhibit #2: the public has steadfastly favored increased regulation of Wall Street since the financial crisis).

Elected leaders who have been through a legislative fight or twenty know that it is going to take a monumental effort to turn this aircraft carrier around. The war reference is apt because, from an economic perspective, the GND looks a lot like a war economy, where resources are allocated and mobilized towards a different set of production goals. One argument of GND proponents is that an economy organized this way creates jobs, technical innovation, and long-run economic prosperity a la the United States in and following WWII. It all sounds great, especially when this war is being waged against environmentally harmful practices and social inequality, and not against actual people (except maybe some cartoon character, coalmine owning, industrialist pseudo-villains, like Don Blankenship of Massey Energy).

HOW TO PAY FOR THE WAR

The question of whether or not we can pay for a GND are less about how much money it will cost and more so about how scarce resources – labor, natural resources, etc – are deployed while avoiding inflation. John Maynard Keynes’ 1940 book How To Pay For the War provides a model for the economic arguments that underpin the GND. Keynes notably maintained (and it is probably analogous in the context of the economic scope of the GND) the need to reduce consumption and divert resources to the war effort.

The economic mobilization proposed in the GND isn’t just about marshalling abstract government resources; it necessarily involves changing human behavior in significant ways. In economics, it is axiomatic that all goods are scarce. Whenever we make consumption decisions, we have to give something up. The cost of a Tesla Model 3 isn’t $35K in this sense; it is whatever else we didn’t spend $35K on. In fiscal terms, the federal government can spend trillions of dollars on a GND. How many trillions of dollars depends very much on other tax and spending decisions. Can we make the investments the GND calls for while also spending $580B annually on Medicaid and $600B annually on military expenditures? Yes. Can we do so without raising taxes or cutting spending elsewhere? Probably not at the scale needed. By injecting money into the economy, the government puts resources to work. Those resources are finite. While government budget deficits aren’t inherently inflationary, we have an economy approaching full employment. The economic fundamentals for a large government spending program were stronger a decade ago, when unemployment was in the double-digits and deficit spending was sound economic policy. Indeed, that stimulus spending pulled  our economy out of a liquidity trap without resulting in inflation and economic calamity.

The case for a multi-trillion dollar stimulus program today, however, is questionable. I’m not going to feign fluency with the economic principles, but I will point out that the TARP (Troubled Asset Relief Program) resulted in a comparatively modest $426B investment by the federal government over 8 years. We currently spend about 50% of federal discretionary budget spending on the military and as a share of GDP, discretionary spending is expected to “be equal to or less than spending in each of the two largest categories of mandatory programs, Social Security and Major Health Programs” by 2022, according to the Congressional Research Service. In other words, given the current macroeconomic conditions and government spending priorities, expansionary monetary policy will trigger inflation. Government needs to raise revenue or cut spending elsewhere. We have to give something up. I’m not inferring that the GND supporters don’t understand that concept. In an effort to maintain as large a base of support as possible behind the GND’s goals, the resolution is agnostic on the question of how to pay for it. Some on the far left argue that deficits never matter and that the US government can essentially print money to finance these investments ad infinitum. Again, I’m not going to assert anything other than a basic understanding of the arguments for or against this “modern monetary theory,” but it is a minority view and left-leaning economists, including the much pilloried from the right Paul Krugman, have debunked the idea. So how do you pay for it?

A PRICE ON CARBON

One obvious path forward is putting a price on carbon and other greenhouse gases, like methane, through a carbon tax and/or cap-and-trade scheme.Some progressives are critical of a carbon tax, believing that a market-based solution to this problem is insufficient to the challenge and will effectively amount to a regressive tax, instead favoring a tax on the wealthy or financial transactions to fund programs. Indeed the consensus view of a carbon tax among the Democratic party’s left flank is perhaps best characterized as lukewarm, not ruling it out, but definitely not enthusiastic about it as a core component of a GND. “A carbon price could be part of a ‘Green New Deal,’ but it must not prioritize corporate profit over community burdens and benefits,” said a spokesperson for the Sunrise Movement, a youth-led non-profit and the most prominent progressive advocacy group behind the GND.

I don’t see how a GND exists without putting a price on carbon. Some very rudimentary economic thinking tells us that if you want less of something, increase its price A carbon tax on transportation and heating fuels would be administratively simply to implement. Imposing emission caps on industrial producers has already been successfully implemented in multiple US states, Canadian provinces, in Europe, and in China. Phasing caps and taxes in over time allows for predictability, something firms and households need to make investment decisions. Carbon pricing is one mechanism, and an important one, that can be leveraged to drive down emissions while funding investment in new technologies, public infrastructure, and other social and environmental programs, and returning a portion of the revenues to economically vulnerable populations so that it is tax-neutral on the earners that can least afford to pay it. As a market-based solution, it is also one of the more politically viable ways to reduce emissions since moderate Republicans have shown an indication to support some form of carbon pricing.

As a basic rule of thumb, each dollar of tax per ton of CO2 would raise gasoline prices by about one cent per gallon. That means a $50 tax would add 50 cents a gallon to the price of gasoline. (Sweden’s carbon tax is currently about USD $130.) The price of other carbon-emitting energy sources would be impacted similarly. Broadening the carbon tax to include imports would be an economic necessity. Taxing or capping methane emissions, too, would be smart environmental policy since it is a potent greenhouse gas, and would be on of the simplest ways to reform the agriculture sector, one of the GND’s stated goals.

COMMUNITY BURDENS AND BENEFITS

The GND promises good jobs, a strong economy, and environmental justice. Who doesn’t want that. We all do. But what does our consumption look like in a Green New World? A few obvious examples come to mind immediately. No more SUVs and pickup trucks, at least not until we’ve mastered energy storage, except for the very wealthy. American car manufacturers have said that their business strategy depends on selling lots of higher margin large consumer vehicles to fund the development of electric vehicles, so how, too, do we ensure the financial health of these and other businesses as we transition to a carbon-neutral economy?

And what of all of the stuff we get from China, delivered to our doorstep on-demand by Amazon at a bargain price. That’s possible in our current cheap energy globalized economy. We can talk about the electric vehicle revolution that is so clearly the future, but no such opportunities exist in the pipeline of ideas for the global shipping industry. We are so many decades away from solving that problem that it surely means consumers will have to pay more for, wait longer for, or go without many of the things that we have come to deem as necessities, like cell phones and TVs and whatever $20 item you ordered just this week that was undoubtedly manufactured somewhere halfway around the globe. Some would view this as part and parcel with laying the foundation for a resurgence in domestic manufacturing, but I think it is far more likely that we will simply pay more for less stuff. This is what happens when production costs that were externalized are now internalized. Price increases while units sold decreases. Not at all a bad thing from an environmental standpoint, but as a society we need to be willing to pay more for less.

I think also of our food supply. A more localized and much less meat-based ag sector would be great for the environment and small farmers, although the thought of a winter subsisting on kale and rutabaga makes even me want to reconsider whether it’s worth the sacrifice. I’m being overly dramatic, I hope (winter lettuce does fine in a greenhouse with minimal energy inputs), but the issue of food production brings us back full circle to Pollan.

Pollan surmised that politicians aren’t going to take serious action on climate change unless society indicates that were serious about the issue. Are we? In the 10 years since Pollan’s call-to-action, have we planted enough gardens to get the attention of the powerful, the corporate and political leaders that can deliver us to green salvation if only the public will indicate that we will buy that electric car if you’ll just manufacture it and we will vote you into office if you support a carbon tax?

The victory gardens of the first and second world wars were one hallmark example of the public’s support of the war effort. Producing some of our own food at home, or in a community garden, was one important way the economy was reorganized. As a gauge of the public’s readiness to get behind a GND, perhaps we would use the “Pollan test” – the percentage of households producing a portion of their own food? According to a 2014 report by the National Gardening Association one in three households are now growing food in a home garden.  Between 2008 and 2013, spending on food gardening increased 40 percent and the number of home gardens increased by 4 million to 37 million households, while community gardens tripled from 1 million to 3 million, a 200 percent increase.

What level of home garden participation indicate a society ready to embrace the GND? Is it 50%? Higher? What if I don’t have a home garden, but I don’t own a car, buy only local produce, have divested from fossil fuels in my investment accounts and electric supply, and am a recycling and composting zealot?

Obviously, the Pollan test doesn’t stand up to scrutiny, but I do wonder how genuine the appetite is for a GND. I’m sure some proponents of the GND will say that my understanding of the proposal is misguided, pointing to the hypocrisy of spending trillions on wars or tax cuts for the wealthy that could be diverted toward decarbonization and a massive public works bil, and the many revenue generation options that could be used to pay for it, such as a carbon tax or a tax on financial transaction of the high-income earners. Currently there are no concrete numbers attached to the GND. But no matter what the price tag, I don’t see how this legislation moves forward without willingness of the public to accept that decisions about production and consumption are going to be fundamentally impacted. That is going to terrify a lot of people, even if assurances are provided that their taxes won’t go up and their job won’t be lost.

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