Decarbonization must be the Democrats’ Recession Plan
By Mark Paul and Julian Brave NoiseCat
March marks the 127th consecutive month of economic expansion—the longest in United States history. But stability can’t last forever. Despite the S&P 500 reaching an all-time high in February, markets have plummeted, with both the S&P 500 and Dow falling double digits last week. Recession fears are mounting as coronavirus continues to spread rapidly across the US and around the world. While the Federal Reserve approved emergency measures last week, slashing rates by half a percentage point, it’s unlikely monetary policy can counteract the contraction of a global pandemic. Despite these measures, markets are cratering today, with global oil prices collapsing 30% and the 10-year Treasury yield reaching a new all-time low at .318%. Will a recession materialize? Nobody knows. After all, the stock market isn’t the real economy. But a recession will come, sooner or later.
As Democrats recalibrate after Super Tuesday, they need to do more to prepare for a potential economic downturn. And if Team Blue plans ahead, they might just turn the next recession into a generational opportunity. To do so, they must look beyond the financial gurus of yesteryear towards the grassroots activists who have already delivered a framework for the next fiscal stimulus: the Green New Deal.
But for Democrats to center the economic and climate ambitions of the Green New Deal in their fiscal policy, they will have to challenge central tenets of the Clinton and Obama years—namely fixation on monetary policy, fear of deficits and timidity in the face of planetary crisis.
In political terms, this means that Democrats need to do away with their obsession with “pay-fors”. When hawkish politicians send young Americans off to war, no one ever asks how we will pay for the carnage. And when Republicans raided the treasury to pass tax cuts for billionaires and corporations, they never had to explain how they were going to offset the loot. But, when it comes time to fight climate change and patch the threadbare social safety net, suddenly profligate conservative lawmakers become scrupulous auditors with their liberal counterparts happy to take on the role of faithful accountants. Despite lawmakers’ fears, Data for Progress polling has shown that the cost of a Green New Deal doesn’t impact public support for the policy: a $100 billion Green New Deal enjoys the same support as a $1 trillion package.
Deficit hawk logic can, and has been undone, recently. As journalist Michael Grunwald reminds us in his book, The New New Deal, Obama-era Democrats leveraged the last recovery to inject billions of dollars into green initiatives. Pundits, as Grunwald points out, don’t often remember the Obama stimulus this way. We would be wise, however, to recall and reclaim this history in the fight for a newer and hopefully substantially larger Green New Deal.
But the problem is Democrats have not been talking about the Green New Deal as fiscal policy—that is, as a package to run the economy hotter in order to bring the economy to full employment and put upward pressure on long stagnant wages when we experience lackluster aggregate demand, as we are right now, or as the answer to the next recession. Instead, America’s left party—including its progressive vanguard—keeps falling into the same old trap by prefacing each policy rollout by pointing to one-off revenue streams to assuage deficit hawks.
Joe Biden wants to reverse President Trump’s signature tax cuts to ‘pay for’ his $1.7 trillion plan to build a 100% clean energy economy by 2050. Even democratic socialist Bernie Sanders fell into the pay-for trap when, in February, he issued a “How Does Bernie Pay for His Major Plans?” memo to assuage fears about deficits. While these plans are a far cry from the small ball that still dominates the left side of the aisle on Capitol Hill, the Democrats are unnecessarily constraining themselves in ways that their conservative counterparts do not. While the care taken to write and account for ambitious policy priorities like climate change this cycle is laudable, progressives setting the agenda for the party must take care not to let old superstitions creep back in. This is especially important in the context of climate change, which will impose far greater costs on future generations than any deficit-spending now. We should think of climate policy and a Green New Deal the same way we think of other investments: as a down-payment on a safe and prosperous future.
The urgency of the climate crisis might just be the wake-up call Democrats need to break free of the macroeconomic sunken place in which the party has found itself the last forty years. With the next recession in the offing, a groundswell of support is growing for climate action, and grassroots forces are presenting the Democratic party with an opening. If done well, a Green New Deal could tackle both our climate and economic woes together. But to do so, it must be viewed through the lens of expansionary fiscal policy, and not just environmental taxation and regulation.
With Treasury yields at all time lows, it has literally never been cheaper to invest in our collective future. Now is the time to spend, and spend big.
Mark Paul is an assistant professor of economics and environmental studies at New College of Florida and a senior fellow at Data for Progress.
Julian Brave NoiseCat is Vice President of policy & strategy at Data for Progress.