The Guardian view on a Green New Deal: we need it now. Policymakers ought not wait for economic theory to catch up with the environmental crisis

The Green New Deal – In Britain it is advocated by both Tory MPs and Jeremy Corbyn; while a non-partisan Canadian coalition of nearly 70 groups are backing such a scheme. However, it has been made flesh by US Democrats, in particular the political phenomenon in the US House of Representatives, Alexandria Ocasio-Cortez. Ms Ocasio-Cortez has spelled out what a Green New Deal involves in a House resolution: rejecting economic orthodoxy to confront climate change. She ought to be congratulated twice over.

At present the thinking is for governments to tackle global warming by including the social cost of carbon in the prices people pay, either through a carbon tax or a system of tradable carbon-emission permits. Such ideas have a role to play in changing the way societies consume and produce energy, but they are only moving us incrementally – if at all – towards sustainability. Global emissions of carbon dioxide are higher than they have ever been, almost three decades after the first global conference aimed at reducing them. The situation is becoming dangerous for human life. The latest figures show there is little more than a decade to save ourselves and the other creatures with whom we share the planet. To do so we must decouple economic activity from carbon emissions and ecological destruction.

This will not be easy. Economic power has become increasingly concentrated, giving rise to grotesque levels of inequality – both within and among countries. With financial speculation now a feature of capitalism, so are fraud and instability. Meanwhile, investment in public goods across the globe has stagnated.

Growth increasingly relies on resource extraction, threatening civilisation itself. Ms Ocasio-Cortez’s plan recognises this and is rooted in making the economy both greener and more equitable.

Her prospectus calls for a reduction in the inequality of income and wealth, essential given that the world’s richest 10% are responsible for half of carbon emissions. It sees large public spending to transform the US economy with an industrial base that would be net-zero in carbon emissions in a few decades. The plan is to create good job opportunities as the economy is made sustainably viable for the future.

Critics claim such ideas are pie-in-the-sky and would require huge spending, sparking inflation or resulting in massive tax increases. Democratic leaders fret that it would make the party unelectable in conservative-leaning US states. Yet the issue is not the money to pay for the investments proposed. US government deficits are historically normal and often economically necessary. The constraint is what a nation can produce. As the economist Stephanie Kelton, who is advising Bernie Sanders, notes in her defense of the Green New Deal: “Inflation isn’t triggered by the amount of money the government creates but by the availability of biophysical resources that money tries to go out and buy.”

Policymakers ought not wait for economic theory to catch up to real-world events. Ms Ocasio-Cortez rightly sees parallels with the response to the 1930s crisis where President Roosevelt dispensed with economic orthodoxy and tamed Big Finance. He created a New Deal jobs program that employed millions, oversaw a massive expansion of government and remade the US industrial base. Humanity will run out of limited global resources long before the US runs out of dollars. We need something like Ms Ocasio-Cortez’s Green New Deal. And we need it now – before it is too late.


We Can Pay For A Green New Deal

Across America, calls for climate action are growing louder and more fervent. As Naomi Klein wrote this week, “[we have] been waiting a very long time for there to finally be a critical mass of politicians in power who understand not only the existential urgency of the climate crisis, but also the once-in-a-century opportunity it represents.”

We’re almost there.

We understand the problem ― we can’t allow temperatures to rise by more than 1.5 degrees Celsius. The United Nations Intergovernmental Panel on Climate Change gives the world 12 years to get halfway there globally (or most of the way off fossil fuels in countries such as the US). The urgency of the situation can’t be overstated.

We have momentum ― incoming Democrats, like Reps.-elect Alexandria Ocasio-Cortez of New York and Rashida Tlaib of Michigan, are building support for an ambitious climate plan, and more than 15 members of Congress are calling for a select committee with a mandate to draft comprehensive legislation: a Green New Deal. We have the outline of a plan: We need a mass mobilization of people and resources, something not unlike the U.S. involvement in World War II or the Apollo moon missions ― but even bigger. We must transform our energy system, transportation, housing, agriculture and more.

 Sunrise Movement 🌅


We got your back AOC. Stay fighting ✊🏽

What we don’t (yet) have is the final, vital ingredient ― a critical mass of politicians prepared to unleash the enormous power of the public purse to save the planet. We need more political courage and less political consternation. 

The Benefit, Not The Cost

Sure, it’ll cost a lot of money. That’s likely to rattle the nerves of self-proclaimed deficit hawks, Democrats and Republicans alike, who will ask the same tired questions: “How will we pay for it?” “What about the deficit and debt?” “Won’t it hurt our economy?” In fact, these questions are already coming, with the eager help of the fossil fuel lobby.

Republican Sen. Mike Lee of Utah recently said that “all the proposals I’ve seen so far… would devastate the U.S. economy.” Sen. Marco Rubio (R-Fla.) says he’s theoretically open to action but adds, “I’m also not going to destroy our economy.”

Democrats risk aiming low if they merely repackage proposals for “pay-go” infrastructure spending that would build more roads and bridges but fail to strengthen resilience to worsening climate hazards. These politicians, and the pundits who echo them, approach the debate all wrong. We can’t afford to let deficit politics stand in the way of an ambitious Green New Deal.

Here’s the good news: Anything that is technically feasible is financially affordable. And it won’t be a drag on the economy ― unlike the climate crisis itself, which will cause tens of billions of dollars worth of damage to American homes, communities and infrastructure each year. A Green New Deal will actually help the economy by stimulating productivity, job growth and consumer spending, as government spending has often done. (You don’t have to go back to the original New Deal for evidence of that.)

In fact, a Green New Deal can create good-paying jobs while redressing economic and environmental inequities. One policy vision, by the progressive think tank Data for Progress, is based on a foundation of equity and justice. It proposes a transition to a low-carbon economy using clean and renewable energy, the restoration of forests and wetlands, and the build-up of resilience in both rural and urban communities.

Rethinking The Budget

To save the planet and fix historical inequities, however, we must change the way we approach the federal budget. We must give up our obsession with trying to “pay for” everything with new revenue or spending cuts.

Are taxes an important part of an aggressive climate plan? Sure. Taxes can shape incentives and help change behaviors within the private sector. Taxes should be raised to break up concentrations of wealth and income, and to punish polluters for the cost and consequences of their actions. In a period without federal leadership on the climate crisis, this is how many state and local governments are considering carbon pricing. That’s useful ― not because we “need to pay for it” but to end polluters’ harmful behavior.

The federal government can spend money on public priorities without raising revenue, and it won’t wreck the nation’s economy to do so. That may sound radical, but it’s not. It’s how the U.S. economy has been functioning for nearly half a century. That’s the power of the public purse.

Civil Works Administration workers during the construction of the Lake Merced Parkway Boulevard in San Francisco in 1934.

Civil Works Administration workers during the construction of the Lake Merced Parkway Boulevard in San Francisco in 1934.

As a monopoly supplier of U.S. currency with full financial sovereignty, the federal government is not like a household or even a business. When Congress authorizes spending, it sets off a sequence of actions. Federal agencies, such as the Department of Defense or Department of Energy, enter into contracts and begin spending. As the checks go out, the government’s bank ― the Federal Reserve ― clears the payments by crediting the seller’s bank account with digital dollars. In other words, Congress can pass any budget it chooses, and our government already pays for everything by creating new money.

This is precisely how we paid for the first New Deal. The government didn’t go out and collect money ― by taxing and borrowing ― because the economy had collapsed and no one had any money (except the oligarchs). The government hired millions of people across various New Deal programs and paid them with a massive infusion of new spending that Congress authorized in the budget. FDR didn’t need to “find the money,” he needed to find the votes. We can do the same for a Green New Deal.

We must give up our obsession with trying to ‘pay for’ everything with new revenue or spending cuts.

Despite lawmakers’ stated fears, larger public deficits are not inherently inflationary. As long as government spending doesn’t cap out the full productive capacity of the economy ― what economists call “full employment” ― it won’t spin prices out of control. Inflation isn’t triggered by the amount of money the government creates but by the availability of biophysical resources that money tries to go out and buy ― like land, trees, water, minerals and human labor. 

The Deficits That Matter

Instead of talking about a numerical budget deficit, we should be talking about the deficits that matter, like our deficits in biodiversity, fresh water and the capacity of our environment to absorb pollution. We should be sounding the alarm about our deficits in education, in time we can spend with our families, in lifesaving medical care and access to mental health services, and in life expectancy itself. And what about our deficit in freedom from the violence of unemployment and jobs that pay starvation wages?

The U.S. government can never run out of dollars, but humanity can run out of limited global resources.

The shapers of the original New Deal understood this. James McEntree, director of the Civilian Conservation Corps, stated in 1941 that the CCC had “reversed the Nation’s traditional policy of using or wasting our natural resources at a rate faster than they were being replenished and had started the country on the way toward a balanced natural-resources budget.”

The U.S. government can never run out of dollars, but humanity can run out of limited global resources. The climate crisis fundamentally threatens those resources and the very human livelihoods that depend on them.

The Only Conversation Worth Having

Once we understand that money is a legal and social tool, no longer beholden to the false scarcity of the gold standard, we can focus on what matters most: the best use of natural and human resources to meet current social needs and to sustainably increase our productive capacity to improve living standards for future generations.

We can’t afford to let deficit politics stand in the way of an ambitious climate action plan.

We can’t afford to let deficit politics stand in the way of an ambitious climate action plan.

This is ultimately how a Green New Deal can also help bridge our political divides. Rural communities in the Midwest have as much to gain economically from a Green New Deal as coastal urban areas. We can ensure Farm Bill subsidies help American farmers earn a good living by simultaneously feeding the nation, generating renewable energy and capturing carbon in soil. We can also boost manufacturing and construction jobs by retrofitting buildings, electrifying transportation and hardening our shoreline communities against sea level rise.

That such a visionary undertaking can align with and support Just Transition efforts ― led by communities of color, women and indigenous groups uniquely affected by the climate crisis ― should also be viewed as an opportunity rather than a challenge or a burden.

Politicians need to reject the urge to ask “How are we going to pay for it?” and avoid the trap when it’s asked of them. A better question is: What’s the best use of public money? Giving it away to the top 1 percent who don’t spend it, widening already dangerous wealth and income gaps? Or investing it in a 21st century, low-carbon economy by rebuilding America’s infrastructure, bolstering resilience, and promoting good-paying jobs across rural and urban communities?

The greatest burden we are passing on to future generations is not the debt but our failure to respond to the climate crisis. We must move beyond the fatalism about paying for a Green New Deal so we can get to the conversation that matters most: How can a Green New Deal protect our finite natural resources, end the climate crisis and build the 21st century economy that works for everyone?

That’s the only conversation the American people should be willing to have.

Stephanie Kelton is a professor of economics and public policy at Stony Brook University and former economic adviser to Bernie Sanders’ 2016 presidential campaign.

Andres Bernal is a lecturer in urban studies at Queens College and a doctoral student in public and urban policy at The New School. He is an adviser to Rep.-elect Alexandria Ocasio-Cortez.

Greg Carlock is a Washington-based researcher in climate action policy and data, and a senior adviser to Data for Progress.