The beauty of a Green New Deal is that it would pay for itself

(The Guardian, 17 Sep 2019) Governments around the world don’t need to raise taxes in order to transform their economies and avert climate disaster.

In September 2007, as credit was “crunched” and the financial crisis began to unfold, a group of economists and environmentalists, including the future Green party MP Caroline Lucas, met regularly in my small London flat. Supping on comfort food and wine, we argued furiously while drafting a plan we hoped would transform the economy and protect the ecosystem. We called it the Green New Deal. Little did we know that the ideas we seeded then would be adopted by a shooting star of the Democratic party, Alexandria Ocasio-Cortez, as part of her bid for a New York congressional seat in 2018.

Fast forward to 2019 and the Green New Deal is now at the centre of the 2020 US presidential campaign. Bernie Sanders last week declared the climate crisis a national emergency and launched his version of the deal – a $16.3 trillion plan that includes massive investment in renewable energy, green infrastructure for climate resilience and money for research.

Sanders is vague about his financing plans. He suggests that cuts in military spending could generate cash, but also proposes a rise in tax for big corporations. These are welcome proposals, but our group has one quibble. Big transformational projects are not financed from taxation. Kennedy’s moonshot wasn’t, nor is Britain’s HS2 rail project. Suggesting that the deal can be paid for through tax (even from big corporations) will rightly raise suspicions. Ordinary taxpayers will assume – as they did during the US debate about inheritance tax (reframed by the right as “death taxes”) – that the burden of such a carbon levy will fall instead on their shoulders.

So where should the money come from? There are fundamentally only two sources of financing. The first is borrowing (credit). This is achieved by applying for a loan, or issuing a bond. The second is existing savings.

To raise the money for a green deal, governments would have to draw on their equivalent of a giant credit card, but would also be able to take advantage of investment by savers. Thankfully, the creation of millions of jobs will generate the income and tax revenues needed to repay any borrowing. As Sanders argues, the whole thing will pay for itself.

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The Guardian, 17 Sep 2019: The beauty of a Green New Deal is that it would pay for itself