As Zac Carter has noted in The Huffington Post:
One priority the Green New Deal does not include? Balancing the federal budget. Neither the Green New Deal legislation nor an FAQ released by Ocasio-Cortez last week included a detailed set of plans about how to pay for it.
He's right: she didn't. But I have, over a long period. And I have done so again, in the last couple of days. My argument is that debt can pay for the Green New Deal. This will be debt that might be funded by pensions and ISAs in the UK because I suggest that the conditions attached to these should be changed to prioritise GND related saving given the importance of the issue. There is good reason for doing so. There is very compelling evidence that most saving in the UK is tax incentivised. Pensions and ISAs completely dominate this market. And I do not think that requiring a GND component in either will change that. The result would be that reforming tax incentives could, as I have shown, mean that the required debt to fund the GND could be raised.
That, then, leaves the question of whether or not debt is the mechanism to deliver this. MMT might argue that paying interest on these loans is unnecessary. But that avoids two issues. One is that these savings will go elsewhere in search of interest in that case: the savings and interest issue is not resolved as neatly as it is by using them for public purpose. And second, the fact is that we know this debt funding will have negligible real cost, whilst simply replicating an existing component in existing savings portfolios. So why not do it?
That is a question commonly asked in the last few days. I have already noted Simon Wren-Lewis doing so. He is not alone in concluding that debt is the answer, and that when the balance of priorities is saving the planet or balancing the government's books there is only one answer.
He is not alone. As FT Alphaville noted recently, in a discussion on how the USA has paid for wars, the relative weighting of tax and borrowing has been as follows:
That's a very heavy weighting to borrowing. And so it will have to be for the GND. If war creates a period of time when a government must spend, come what may, so too does the climate crisis. I have argued tax should be in this mix, most especially by beating tax abuse and closing tax spillover effects that undermine tax systems. But tax cannot do all the lifting here. Something else must, and that will be borrowing. We have no choice about that.
But, as Zac Carter noted, this outrages the right. As he put it:
[A]mong contemporary thinkers, the Green New Deal's very clear statement of priorities has prompted furious controversy. Noah Smith intonesthat Ocasio-Cortez is calling for “unlimited deficit spending” that will march America into “oblivion.” Steven Rattner accuses Green New Deal advocates of “intergenerational theft.” Marc Thiessen declares that Ocasio-Cortez has proffered “the neo-socialist lie that you can get something for nothing.” Even Paul Krugman is warning against putting forward ambitious new government programs without levying new taxes.
There are hysterics on display here. Saving the planet is intergenerational salvation, and not theft. Whilst no one is saying you can get something for nothing: that's simply absurd. And for the record, as I have noted, tax is in the mix so Krugman is making a fuss over nothing. AOC has said so too. But this will not stop the right: they will argue on a debt basis that the planet cannot be saved. Better a balanced budget than human life on earth, they seem to think. They are wrong. But this is the first battle the Green New Deal must now win.
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How do you argue with people who regard ‘defence’ spending on destructive offensive weapons systems as investment and and investment in sustainable development as spending ?
By suggesting they have to be wrong
You cannot invest in defence – because the return cannot be proven and so the only rational payback period is the present
But can the planet be saved without the Russians, Chinese, Koreans, Americans etc?? Any UK initiative is to be applauded but is surely meaningless without the polluting economies doing the same?
Two points
First, you may have noted there are international agreements on this issue, and the US is at the forefront of the GND right now
Second, I am well aware that you have many identities and are trolling here
I will be deleting further comments
Oh really – look I’ve had enough already:
‘Noah Smith intones that Ocasio-Cortez is calling for “unlimited deficit spending” that will march America into “oblivion.”
I mean c’mon – look at the US deficit NOW – as a result of 2008!!! America ALREADY is in oblivion after the blank cheque the US Treasury gave the financial sector! The only thing that stops the US going down the toilet is that the dollar is used as a world reserve currency, is used to trade oil, give loans from the IMF etc., and the US has always expected other countries to convert their currencies into dollars when settling bills. If it wasn’t for these phenomenon, the US would be totally ****** by now.
If deficit spending (which already existed before 2008 and never stopped the US investing in the military BTW) can work for saving a few of the 1% in 2008, it can surely be used to save the whole bloody planet!!
Honestly! Some people………………………..it’s getting really, really tiresome.
There you go, EAS you’re coming round to my fatalistic view at your own speed 🙂
Ah, but you clearly don’t understand the first thing about neoliberal economics.
It’s actually more efficient to get rich and pump carbon dioxide into the atmosphere now, so that in future we’re rich enough and smart enough to invest in technology to suck it all back out of the atmosphere, and bury it back under the ground.
And don’t argue, I’ve a very complex model based on a paper from the 1990s which proves this is cost optimal.
Sam says:
“And don’t argue, I’ve a very complex model based on a paper from the 1990s which proves this is cost optimal.”
….sounds like Disaster Capitalism 101. (?)
“debt is the answer, and that when the balance of priorities is saving the planet or balancing the government’s books”
Perhaps this is asking the wrong question(s)? Vast green investments need to be made – emphasis on the word “investments”.
Most/many/all? of these investments will have some form of return (ROI). This is certainly the case with any investment in renewables – which for the most part now need no subsdiy – although that also partly depends on where a given RES tech is built. Things are a bit less certain with respect to energy efficiency if only objective criteria are used (if subjecive criteria are introduced (e.g. the value of a warm comfortable low energy home) then it is game set & match for EE.
The point about gov debt – which seems to be rarely considered by the balanced book brigade is that it is used for something. We already know (previously noted on this site) that spending on health/hospitals has a multiplier of 2 to 4 on economic activity. The same applies with respect to the Green New Deal/gov debt focused on climate matter – it will have BOTH an economic multiplier and an ROI. Given this I do not understand why Wren-Lewis et al get their knickers in a twist about gov debt – perhaps they have their faces so close to a tree that they no longer percieve the outline of the forest.
Mike Parr says:
” perhaps they have their faces so close to a tree that they no longer perceive the outline of the forest.”
Oh that gets my day off to a good start, Mike.
Just when I thought my sense of humour had finally deserted me, I thought you were going to say ‘faces so close to the tree they were splashing their trousers.’ 🙂 🙂
Errrr…………Thanks Sam.
Very reassuring.
Lots of kicking and a can come to mind.
Here is a link to a blog by the climate scientist, Judith Curry. She describes her testimony to this month’s Congressional hearing. Ms Curry is outside the consensus and feels the climate “wars and “gridlock” are impediments to progress.
https://judithcurry.com/2019/02/07/climate-hypochondria-and-tribalism-vs-winning/#more-24715
Global warming is happening
Deal with it
She’s a flat earther
And so are you
And I have no time for such stupidity