Alexandria Ocasio-Cortez
Credit: Senate Democrats/Flickr

On Thursday, Sen. Ed Markey and Rep. Alexandria Ocasio-Cortez released their framework for a Green New Deal. To address climate change, they include a broad outline for some major changes.

The Green New Deal is a 10-year plan to jumpstart the complete transition of our society away from fossil fuels to renewable energy sources and to achieve zero greenhouse gas emissions and pollution. The resolution outlines the plan to virtually eliminate greenhouse gas emissions and pollution from every sector of the economy through a World War 2 scale mobilization of our society to create the renewable energy infrastructure and clean industries as fast as possible…

The Green New Deal also calls for any infrastructure measures before Congress to address climate change and additionally calls for an end to the transfer of pollution overseas.  This provision goes farther than just calling for a ban on new fossil fuel infrastructure. Instead, it tackles all greenhouse gas emitting and pollution emitting sources in our economy and global trade. However, the more important driver to phasing out fossil fuel usage in the Green New Deal is the large-scale mobilization that will make new fossil fuel infrastructure or industries untenable.

David Roberts has more commentary on some of these particulars.

One of the more controversial elements of their framework is that it doesn’t just address climate change. It also includes a guarantee to:

  • A job with family-sustaining wages, family and medical leave, vacations, and retirement security
  • High-quality education, including higher education and trade schools
  • High-quality health care
  • Clean air and water
  • Healthy food
  • Safe, affordable, adequate housing
  • An economic environment free of monopolies
  • Economic security to all who are unable or unwilling to work

The fact sheet accompanying the resolution explains the inclusion of those guarantees with this:

The Green New Deal is a plan to make a full-scale transition of our economy that puts jobs and justice first. This plan will require a strong social safety net so that every U.S. person can make this transition comfortably and nobody falls through the cracks in the process. If we want to be able to mobilize our economy fully, we can’t afford to have employees stuck in their current jobs because they are afraid to lose health care or workers unable to participate because they can’t afford the education and training programs. We also need to be sure that workers currently employed in fossil fuel industries have higher-wage and better jobs available to them to be able to make this transition, and a federal jobs guarantee ensures that no worker is left behind. We believe that the economic securities and programs for justice and equity laid out in this Green New Deal resolution are a bare minimum of what we need to do to successfully execute the Green New Deal.

The big question that something like this always raises is “How will it be paid for?” To understand the approach taken by Ocasio-Cortez and Markey, it is important to know something about an economic theory known as Modern Monetary Theory (MMT). I am not an economist and much of what I’ve read about MMT goes over my head. But it starts from a place that is important for all of us to recognize: the federal budget cannot be compared to your family budget. From there, Stephanie Kelton et al., explain some of the basics with this:

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.

Here’s how Robert Hockett explains it:

This is precisely why lawyers, accountants, and economists schooled in the simple mechanics of public finance always tell you the relevant constraint upon spending is not some non-existent ‘fundraising constraint,’ but ‘the inflation constraint,’ also known as ‘the resource constraint.’

The truth of the resource constraint is that money usually can be publicly issued and spent only at a rate commensurate with new goods and services supply. If the money supply grows too rapidly for goods and services to keep up, you get the old problem of ‘too many dollars chasing too few goods’ – inflation. If the money supply grows too slowly to keep up with productive capacity, you get the opposite problem – deflation, a far more serious threat, as we’ve seen since the crash of ‘08.

In other words, unless federal spending outweighs the new goods and services supply—which would trigger inflation—this theory holds that there is no problem with deficit spending, so questions about how to pay for it all are pointless. Economists I tend to trust, like Paul Krugman and Jared Bernstein, agree that there is some merit to MMT, but suggest that there are limits to its viability.

Perhaps the more powerful argument for the environmental measures outlined in the Green New Deal is to contemplate the cost of doing nothing.

A common argument made against climate-change mitigation is that it’s bad for the economy. A new US government report released Friday (Nov. 23) says it will be much worse for America’s economic health to do nothing.

The Fourth National Climate Assessment, a 1,600-page, Congress-mandated study, is a detailed tally of the economic devastation climate change has already inflicted on the US, and the billion-dollar losses that Americans can expect in the future if they don’t reduce their greenhouse gas emissions. It predicts the cascading effects could severely impact human health, the environment, and economic growth.

It is important to keep in mind that what Ocasio-Cortez and Markey have released is a non-binding resolution which, even if it passed, wouldn’t create any new programs. Instead, it is meant to affirm the sense of the House that these things should be done in the coming years. It certainly gives us all something to consider and discuss.

Nancy LeTourneau

Follow Nancy on Twitter @Smartypants60.