I assume most listeners have heard of the proposed GREEN NEW DEAL. The proposal was mentioned by three separate OP ED columns in the New York Times on February 12.
[The articles are: David Brooks, “How the Left Embraced Elitism,” Steven Rattner, “Our Grandkids Are Already in Debt,” and Paul Krugman, “Democrats Versus the Deficit Scolds.” They are all on page A23 of the New York Times, February 12, 2019.]
Here’s Brooks on the Green New Deal, “I don’t know if it is socialism or not socialism, but it would definitely represent the greatest centralization of power in the hands of the Washington elite in our history.” (He also snidely asserts that the people running the show will be too incompetent to pull it off and it will become sweetheart deals to vested interests inviting widespread corruption.)
Rattner argues that proposals like the Green New Deal (he also refers to free college and Medicare for all) are supported by people who seem not to care about running up giant budget deficits which he warns will leave our grandchildren with an astronomical National Debt. A subheading of his article states, “We can’t add big programs without finding a way to pay for them.” He supports increases in taxes and modifications to entitlement spending in order to reduce future budget deficits. Specifically, he supports raising the retirement age and making some entitlements based on need while rejecting the kind of “reforms” to entitlements that would in effect eviscerate them. His point, however, is that all of the proposals kicking around Congress from the Progressive wing of the Democratic Party including the Green New Deal are out of the question if they are merely to be financed via deficit spending.
This is where Paul Krugman comes in. He makes the case that fears of deficit spending have been used so often as hypocritical political posturing that it appears the Democrats have finally stopped rising to the bait of austerity.
“For years deficit scolds dominated discourse inside the Beltway, much of the news media treated the urgency of fiscal austerity as an unquestioned fact …. All the wailing about the debt was hypocritical. Republicans never actually cared about debt; they just pretended to be deficit hawks as a way to hamstring President Barack Obama’s agenda. And many centrists have turned out to have a double standard, reserving passionate concern about debt for times when Democrats held power.”
The facts are obvious – under President Ronald Reagan, the ratio of National Debt to GDP rose from 36 percent in 1983 (at the end of a recession when the economy should have been growing faster than debt) to 50 percent in 1989. That ratio peaked at 65 percent of GDP in 1995 and then fell under President Bill Clinton to 55 percent of GDP in 2001. It rose again under President George W. Bush reaching 64 percent before the advent of the Great Recession. As a result of the recession and the Obama recovery programs, the debt to GDP ratio rose dramatically to 103 percent of GDP in early 2017. It has remained close to that, actually rising slightly to 104 percent of GDP in 2018. [This data is from the Federal Reserve Bank of St. Louis available at https://fred.stlouisfed.org/series/GFDEGDQ188S]
According to Vice President Dick Cheney in a well quoted assertion, “Reagan proved that deficits don’t matter.” Trump’s chief of staff, Mick Mulvaney echoed Cheney when he explained why there was no mention of deficits or the National Debt in Trump’s State of the Union speech – “Nobody Cares.”
The most pernicious thing that happened as a result of the fixation on budget deficits was that the Obama Administration’s efforts to pull the economy into prosperity after the Great Recession was short-circuited by a move towards austerity in 2011. Federal deficit spending – the key to stimulating an economy during a recession and subsequent recovery – fell from 9 percent of GDP in 2010 to just over 4 percent in 2013. The fact that it took from early 2009 till 2016 for the economy to begin looking “normal” is in large part due to the failure to maintain federal spending at the high level it achieved in the initial years of the Obama Administration.
[For details check out Sherman, Meeropol and Sherman, Principles of Macroeconomics, Activist vs. Austerity Policies, 2nd Ed. (Routledge, 2019): Chapter 18]
Of course (following Krugman’s point) once the Trump Administration took office, all concerns with deficits went out the window with the passage of the Tax Cut at the end of 2017. The federal deficit had fallen to 3.4 percent of GDP in 2017 and rose a bit in 2018 to 3.9 percent and is projected to reach 4.7 percent for 2019.
Some supporters of the Green New Deal are now wise to the hypocrisy described by Krugman. When asked how to finance it, some have asserted, “the same way we financed World War II.” And they are not being flippant – they are correct. World War II was fought with massive increases in deficit spending. By the end of the war, the National Debt was 114 percent of GDP. By the end of the 1970s, even though the absolute size of the national debt had grown dramatically, the economy had grown more and the ratio of Debt to GDP was at 31 percent. [In the orally delivered commentary I mistakenly said it had fallen below 30 percent.]
The reason so many have supported the concept of the Green New Deal is that the world faces an even greater existential threat than it did during World War II. Even if the Nazis and Japanese had won, the world as we know it would have remained inhabitable. With global warming unchecked, the entire planet is in danger.
[For a good overview, check out Mark Lynas, Six Degrees: Our Future on a Hotter Planet. (2008). It is not pleasant reading but conveys very important information.]
A rising National Debt is a negligible price to pay to counter global warming. Absent dramatic action, we are years (decades at most) away from condemning our grandchildren to lives (if they survive) that none of us would want to live.
The Green New Deal is a promise to marry the needs for good jobs with good pay for workers in the United States to the necessity of reducing our carbon footprint to zero as fast as possible. Increased government spending to guarantee jobs, decent health care and protect the environment will not just increase employment but raise wages as well.
The technology to switch to “green” sources of energy already exists. The skilled labor and industries already exist. The problem is getting the new technologies to the forefront and reducing (and finally eliminating) the carbon based technologies that are putting future generations at risk. This of course is no easy task. The carbon based industries have spent decades using their lobbying strengths to hide the truth about global warming. They have successfully confused too many of our fellow citizens that there is scientific disagreement – when in fact over 90% of the scientists agree that global warming is accelerating because of our activities and that it poses an existential threat of civilization.
Instead of attacking the Green New Deal with ridiculous demands that the sponsors explain how they are going to pay for it, experts should be working on how to utilize government spending, tax policy and regulations to speed the transition away from carbon. The faster it happens, the less suffering our grandchildren will endure.
Krugman has it right. The first (and easiest) step is to finally once and for all banish the fears of deficit spending and increases to the National Debt. During World War II, no one argued that government borrowing was dangerous --- THERE WAS A WAR ON --- Instead, the government told everyone it was their patriotic duty to buy war bonds. Well we need that same energy to sell Green New Deal bonds --- maybe we should call them “Save Our Grandchildren” bonds.
Answering Brooks’ argument about inefficiency and incompetence is a bit harder. But the US has always dreamed big. After World War II ended, there was a short period of cuts in military spending --- which was reversed with the advent of the Cold War. A massive military industrial complex was created. Yes there was waste and profiteering but it did the job. The balance of terror with the Soviet Union meant that there was no nuclear war – no World War III. (Along the way, the Defense Department laid the foundation for the creation of the internet!) In the 1950s, the interstate highway system began construction. I am sure there were contractors here and there who did shoddy work and some politicians got kickbacks. But the country was connected by ribbons on highway within two decades. In the 1960s, the government dedicated itself to putting a man on the moon. Again, maybe some contractors were over-paid and there were tragedies along the way – but a successful set of space flights did occur. The point is – yes, it might be expensive and involved some significant waste – but the goal is too important not to try.
What’s wrong with thinking big about ending the poisoning of our atmosphere with carbon? Our grandchildren’s lives depend on it.
Michael Meeropol is professor emeritus of Economics at Western New England University. He is the author with Howard and Paul Sherman of the recently published second edition of Principles of Macroeconomics: Activist vs. Austerity Policies.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.