L. Randall Wray
How to Pay for the Green New Deal
WORKING PAPER NO. 931 | May 2019
This paper follows the methodology developed by J. M. Keynes in his How to Pay for the War pamphlet to estimate the “costs” of the Green New Deal (GND) in terms of resource requirements. Instead of simply adding up estimates of the government spending that would be required, we assess resource availability that can be devoted to implementing GND projects. This includes mobilizing unutilized and underutilized resources, as well as shifting resources from current destructive and inefficient uses to GND projects. We argue that financial affordability cannot be an issue for the sovereign US government. Rather, the problem will be inflation if sufficient resources cannot be diverted to the GND. And if inflation is likely, we need to put in place anti-inflationary measures, such as well-targeted taxes, wage and price controls, rationing, and voluntary saving. Following Keynes, we recommend deferred consumption as our first choice should inflation pressures arise. We conclude that it is likely that the GND can be phased in without inflation, but if price pressures do appear, deferring a small amount of consumption will be sufficient to attenuate them
The Green Deal is not new and has been a topic that I have several papers and books out over the last decade. The way to pay for it is with what we now call “circular economics” which means that economics, finance and investment all need to be together. However, that means the need for more money which must come from the fossil fuel industries and those that support them. Has nothing to do with supply and demand. China started “Green Deal ” program a few years ago due to one of my books that was published in 2014 on the topic and translated into Mandarin. Last summer (July 2018) China and the EU signed a MOU for both working on Circular Economics. So the BIG question is: Where is the USA? Think about that as we are not doing well and certainly behind —
Absolutely outstanding. Thank you.
“.. However, that means the need for more money which must come from the fossil fuel industries and those that support them…”
Nope. Money doesn’t grow on rich people – Gov is the currency issuer. It may be necessary to moderate aggregate demand and private consumption of certain real resources, so that Gov may itself purchase them and put them to its own purposes. But that is a quite different issue to financial ‘means’.
You need to learn some monetary system basics Woodrow Clark, I suggest by learning MMT.
“Rather, the problem will be inflation if sufficient resources cannot be diverted to the GND.” Yes, MMT principles must be used to control all major federal expenditures, including this one. But when we talk about “resources” being “diverted” to the GND, we must keep in mind that those resources are being invested to preserve by far the most valuable and irreplaceable resource of all: a living planet that includes us. The loss of that fundamental resource would render all others meaningless. Does not inflation, while it needs to be controlled, pale into insignificance when compared with possible extinction?
I think this may have been just outside the scope of what you wrote, but it is a key point that is essential in any plan for a green new deal. As you correctly point out several times, it isn’t the cost that matters it’s the real resource availability. This is KEY when talking about such a rapid switch to renewables. There are a lot of rare earth metals that would be required to build PV and wind, there is no current ability to recycle them and when it comes to mining them, we mine the easiest stuff first so the more we use the more expensive they are likely to get. And it isn’t just us, it’s the whole world switching. Anyone who thinks a 12 year deadline to get off fossil fuels can be met with wind and PV alone is delusional. Here is a way too optimistic study about resources available for renewables and even it is sounding alarms about availability.
I notice you cited at least one report calling for 50% nuclear in states without a moratorium, which is infinitely more plausible, but then cited a study about how costs for nuclear go up. There is more to it than that; and if the process was going to involve much more central planning than the last roll out there is every reason to expect cost decreases.
Nuclear kills far less people per kW than any other type of power generation, by the way.