Green New Deal

Proposed U.S. legislation in 2018 by Alexandria Ocasio-Cortez that aims to address climate change and economic inequality and proposes the following to be completed in ten years or less: (1) A ban on 99% of the estimated 270 million cars currently on the road; (2) A ban on all oil, natural gas and nuclear power. That’s probably over 90% of how the country gets its energy. There’s no plan or mention on how we’d replace it; (3) AOC also wants EVERY building in America to be gutted and rebuilt so that they can be outfitted with energy efficient materials; (4) A ban on all air travel. Say goodbye to Hawaii; (5) The plan also calls for guaranteed jobs, a free house, free education for life, guaranteed income – whether the person has a quote “will to work” or not – and free healthy food (ie: no meat) for every American. It is essentially a communist green-glossed Trojan horse designed to increase government control over the economy.

Perhaps the most obvious flaw with anyone proposing a modern-day New Deal—whether green or any other hue—is that we are not currently in the midst of an economic depression. Even textbook Keynesians, who think that (say) the incoming Obama Administration was justified in administering a large “stimulus package” because we were stuck in a so-called liquidity trap, now admit that there is no economic rationale for continuing to run large budget deficits. (As Paul Krugman notoriously and conveniently wrote soon after the election of Trump, “Deficits Matter Again.”)

The very term “New Deal” was chosen to appeal to the 20%+ of the unemployed in the workforce, who had ostensibly been left behind by the traditional U.S. economic system. Yes, Ocasio-Cortez and her supporters are touting the Green New Deal as (among other things) the solution to lingering economic inequities in the current system. But to call concern over a wage gap a “New Deal” is as inapt as christening a bullet train program a “Green Moon Shot.”

The New Deal Actually Hurt the U.S. Economy and Prolonged the Great Depression

To reiterate, even if you were a die-hard Keynesian who believed in the virtues of fiscal stimulus, right now—with official unemployment at 3.7% and price inflation rising above the Fed’s target—it makes no sense to launch another New Deal.

But things are worse, because the Keynesian fans of FDR are wrong. The New Deal actually hurt the U.S. economy and prolonged the Great Depression.

I’ve written an entire book on this topic, but here is one key table, comparing unemployment rates in the U.S. and Canada:

Source: Robert P. Murphy, The Politically Incorrect Guide to the Great Depression and the New Deal, p. 103.

Roosevelt was elected in late 1932 and was inaugurated in early 1933. (Presidents were sworn in on March 4 back then.) As the table shows, unemployment in absolute terms remained awful for the next 8 years—it was not until 1941 that the annual average unemployment rate got back into the single digits (and just barely, at 9.9%).

Even worse, fans of FDR can’t simply blame the problem on the huge hole that FDR inherited from Herbert Hoover. In 1933, the U.S. unemployment was 5.6 percentage points higher than Canada’s. The next year, the gap widened to 7.2 percentage points. Jumping ahead to 1938—five years after Roosevelt is sworn in—the gap between the two countries’ unemployment rates is 7.6 percentage points.

In light of the above figures, why is it that people say of Roosevelt, “He got us out of the Depression”? As I ask in my book: What would the unemployment data have to look like, in order for conventional historians and the public to say FDR kept us mired in the Great Depression?

The “Green New Deal” Is a Power Grab for Progressives

Although it is of course cloaked in the mantle of peer-reviewed natural science, the Green New Deal is clearly a political program, designed to check every box on the progressive wish-list. For example, here is how Naomi Klein makes the case to left-wing activists to support Ocasio-Cortez against the establishment Democrats:

Pulling that [a 45-percent reduction in fossil fuel emissions in 12 years—RPM] off, the [IPCC] report’s summary states in its first sentence, is not possible with singular policies like carbon taxes. Rather, what is needed is “rapid, far-reaching and unprecedented changes in all aspects of society.” By giving the committee a mandate that connects the dots between energy, transportation, housing and construction, as well as health care, living wages, a jobs guarantee, and the urgent imperative to battle racial and gender injustice, the Green New Deal plan would be mapping precisely that kind of far-reaching change. This is not a piecemeal approach that trains a water gun on a blazing fire, but a comprehensive and holistic plan to actually put the fire out. [Naomi Klein, bold added.]

As Klein’s discussion makes perfectly clear, this really isn’t about climate change at all. That is simply the pretext to fundamentally transform every aspect of society and culture the way progressive leftists have wanted to do even before people talked about “global warming.”

Incidentally, the quixotic pundits and wonks who still plead with conservatives and libertarians to agree to a “carbon tax deal,” should see Naomi Klein in the quotation above spell it out just like so many of her colleagues before her: They are explicitly saying a carbon tax is not close to being enough to achieve their environmental goals.

An Inconvenient Omission

There’s one more clue to clinch it for the naïve reader, to realize that the “Green New Deal” really isn’t merely a technical solution to the problem of negative externalities: The word “nuclear” doesn’t appear once in the entire draft legislation for the Select Committee. Isn’t it odd that Ocasio-Cortez and Naomi Klein think we have 12 years to act, in order to save humanity from climate catastrophe, yet they have the time to talk about fixing gender imbalances while they don’t talk about a dispatchable, scalable energy source that is carbon-emission-free? (This source currently provides 20% of U.S. electricity.)

In fairness, some progressive outlets have grudgingly started talking about nuclear—but even the example of Grist only started in January 2018. The obvious explanation here is that these activist progressives don’t really believe their alarmist rhetoric. Imagine someone warning that a killer asteroid was hurtling toward Earth, and we had a mere decade to do something about it. And then these activists spent their time on funding medical clinics to treat society’s downtrodden when the asteroid smashed into the planet, killing billions of people.

Some puzzled onlookers might timidly ask, “Instead of worrying about demographics, shouldn’t we be building lasers or missiles to knock the asteroid off course?” But the activists would explain, “No, promoting heavy weaponry would interfere with our messaging on gun control.”

In that scenario, would you believe the activists who told you we had a decade to act before the asteroid hit? Would their actions lead you to think they believed their own rhetoric?

A “Green New Deal” makes no sense on economic grounds, either in spirit or in letter. Even if one endorsed a Keynesian economic framework in which the historical New Deal “worked,” it still would be nonsensical to implement such a program today, with very high (peacetime) debt loads and an economy at officially full employment. What’s more, the historical New Deal did not in fact work, but rather prolonged the Depression. When an economy is already on the ropes, the last thing it needs is for more resources to be allocated politically, or for more regulations to rain down from Washington.

Furthermore, the rhetoric of Ocasio-Cortez and her supporters shows that the Green New Deal is only distantly related to the ostensible scientific problem of greenhouse gas emissions. The people pushing a Green New Deal are using it as a vehicle to advance the traditional potpourri of the left’s political agenda.

A Carbon Tax Won’t Satisfy the Green New Dealers

Regarding this last point, consider the following excerpt from the Green New Deal draft text’s Frequently Asked Questions:

[Question:] Why do we need a sweeping Green New Deal investment program? Why can’t we just rely on regulations and taxes alone, such as a carbon tax or an eventual ban on fossil fuels?

Regulations and taxes can, indeed, change some behavior. It’s certainly possible to argue that, if we had put in place targeted regulations and progressively increasing carbon and similar taxes several decades ago, the economy could have transformed itself by now. But whether or not that is true, we did not do that, and now time has run out.

Given the magnitude of the current challenge, the tools of regulation and taxation, used in isolation, will not be enough to quickly and smoothly accomplish the transformation that we need to see.

Simply put, we don’t need to just stop doing some things we are doing (like using fossil fuels for energy needs); we also need to start doing new things (like overhauling whole industries or retrofitting all buildings to be energy efficient). Starting to do new things requires some upfront investment…

We’re not saying that there is no place for regulation and taxes (and these will continue to be important tools); we’re saying we need to add some new tools to the toolkit. [Green New Deal “draft text’]

The above excerpt confirms what I stressed above, in reference to Naomi Klein’s discussion: The proponents of government intervention on the progressive Left have quite definitively rejected the notion that a mere carbon tax would be enough to deal with climate change, in their book.

Don’t get me wrong, they want to impose a stiff tax on carbon dioxide emissions—as well as a 70 percent tax on high income earners, as Ocasio-Cortez revealed in a recent interview. But the point is, no libertarian or conservative should go along with a “deal” that ostensibly gets rid of other energy and transportation regulations in exchange for a carbon tax. The orthodox position among progressives is that such a deal would fall far short of the necessary climate goals to avoid catastrophe. Such a deal wouldn’t be acceptable to them, even in principle, let alone in practice.

A Green New Deal Would Be Incredibly Wasteful

The Green New Dealers’ desire for top-down regulations and massive new spending programs not only shows the futility of a carbon tax deal, it also underscores just how wasteful the program would be. Even if one believed in a “negative externality” from greenhouse gas emissions, there is no reason to suppose that policymakers have the knowledge or the incentives to correctly pick the proper ways in which the economy should adapt.

Especially when we are realistic about the political process, it should be obvious that funneling more than one trillion dollars in green “investment” spending through Washington will involve a gross misallocation of resources. For example, the draft text’s call for “retrofitting all buildings to be energy efficient” is a blank check to funnel money into the coffers of politically powerful groups in the construction industry. Anyone who thinks these funds will be spent according to the “social cost of carbon” needs to watch a few episodes of House of Cards.

Stringent Fuel Economy Standards Cause Automobile Fatalities

In his recent endorsement of the Green New Deal, Paul Krugman confirms that “it should emphasize investments and subsidies, not carbon taxes.” Ironically, Krugman and I for once agree that a political deal between conservatives and progressives is a no-go. As he puts it: “[C]laims that a carbon tax high enough to make a meaningful difference would attract significant bipartisan support are a fantasy at best, a fossil-fuel-industry ploy to avoid major action at worst.”

After throwing carbon taxes under the bus, Krugman moves on to argue why top-down regulations and spending programs can achieve significant emission cuts without imposing too much pain on ordinary Americans.

How is this possible? Krugman explains:

The majority of U.S. greenhouse gas emissions come from electricity generation and transportation. We could cut generation-related emissions by two-thirds or more simply by ending the use of coal and making more use of renewables (whose prices have fallen drastically), without requiring that Americans consume less power. We could almost surely reduce transportation emissions by a comparable amount by raising mileage and increasing the use of electric vehicles, even if we didn’t reduce the number of miles we drive each year.

Krugman is quite flippant in his above quotation with the word “simply,” as if eliminating coal—which in 2017 provided thirty percent of U.S. electricity—is no big deal. Krugman says we can simply “mak[e] more use of renewables,” without telling his readers that in 2017 (non-hydro) renewables accounted for less than 10 percent of electricity.

Regarding fuel economy, the simple fact is that in order for vehicles to achieve more miles to the gallon, automakers must make them more expensive, but also lighter and smaller. That means more Americans dying in car accidents than would otherwise be the case. How big a deal is this? Reputable studies have estimated that CAFE standards have caused anywhere from 40,000 – 125,000 excess vehicle fatalities.

Of course, proponents of stricter CAFE standards could quibble with these numbers, but the more significant point is that neither Ocasio-Cortez nor Krugman even admit that there is a tradeoff. They speak of cranking up mileage standards as if it’s a mere technical problem, without reckoning the tremendous human cost.

Conclusion

A so-called Green New Deal is aptly named, in the sense that the original New Deal was a massive boondoggle that restricted individual liberty and crippled economic growth. Besides revealing their plans for massive spending and inefficient regulations, the discussion of a Green New Deal indicates that there is no room for a “carbon tax deal” with conservatives.

Sources:

Chronological History of Events Involving the Green New Deal

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