Defining Ideas

The Farcical “Green New Deal"

Tuesday, February 19, 2019
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Mopic, Shutterstock

The dominant source of energy for the foreseeable future for both the United States and the world will be fossil fuels, chiefly in the form of oil, natural gas, and coal. Throughout the world, many groups will push hard for massive subsidies to wind and solar energy. Yet, that attempt, no matter how bold, will fail to shift the overall balance of energy production toward green sources. The fatal drawback of wind and solar is their lack of storability. Solar works when the sun shines. Wind works when breezes blow. Both often provide energy when it is not needed and fail to provide it when required. Any legal diktat that puts these renewable sources first will only produce a prolonged economic dislocation. Pie-in-the-sky proposals like Rep. Alexandria Ocasio-Cortez’s Green New Deal, which stipulates 100 percent of energy needs be supplied by “clean, renewable, and zero emissions” sources, should be dead on arrival.

The major challenge of sound energy policy today is to find ways to make the production of fossil fuels both cheaper and safer. Fortunately, private-sector innovation has paid off handsomely such that the total social cost of fossil fuels has trended sharply downward and shows every indication of continuing to do so. The point is especially true with fracking, which has been driven by large cumulative improvements at every stage of the production process. Since 1950, carbon dioxide emissions have increased over fivefold, but, as policy analyst Marlo Lewis has demonstrated, it is difficult to link these emissions to any negative global consequences. After all, over the same period of time, there have been massive increases in life expectancy, crop yields, and wealth. In my view, the current scientific record offers no support for the claim that increases in CO2 emissions pose an immediate, let alone existential, threat. Indeed, global temperatures have declined 0.56 degrees Celsius between 2016 and 2018 for the largest two-year drop in the past century—a trend that has gone largely unremarked upon in the press.

Nor is the Green New Deal justified by any breakdown in the economic system. Notwithstanding Trump’s major blunders on foreign trade, the domestic economy has picked up from the slow-growth Obama years. Gross domestic product is up, along with employment levels and wages. The progressive trope was that only strong government regulation in the form of minimum wages, tough overtime rules, and strong support for labor unions could improve job opportunities and wages for individuals stuck at the bottom of the income ladder thanks to race, age, gender, disability, or criminal record. That wrong-headed prescription ignores that these supposedly protective measures function as barriers to entry for people locked outside the market.

It is also instructive to compare how the two New Deals—Roosevelt’s and Ocasio-Cortez’s—responded to their perceived problems. The Roosevelt confection was a mixed bag that did not represent any coherent philosophy. Many of its initiatives were triggered by immediate dangers that required firm action, including Roosevelt’s decision in March 1933 to declare a bank holiday shortly after taking office to slow down a potentially ruinous run on the banks. His introduction of the Federal Deposit Insurance Corporation that same year was surely a defensible approach to that same end, even if not beyond criticism. And the formation of the Securities and Exchange Commission in 1934 was a sensible, if controversial, action to prop up public confidence in the securities markets. On a different front, the use of government advisors to teach sound agricultural techniques to dust-bowl farmers through the Soil Conservation Service was a stroke of genius, as was the operation of the Civilian Conservation Corps for unemployed and unmarried men, which led to massive improvements in domestic infrastructure, including the construction of roads, dams, and the planting of some three billion trees.

On the debit side, FDR’s New Deal carried with it a very high price tag. Roosevelt is often credited for staving off socialism by his intervention in the labor, agriculture, and transportation markets. And Roosevelt should receive full marks for resisting government ownership of these operations. But two major blunders had lasting effects. First, Roosevelt did nothing to moderate the high progressive tax rates of the Hoover administration. Drying up private investment capital forced the government to prime the pump in order to facilitate capital improvements. But all too often, this approach gave priority to inefficient forms of public investment, driving out the more informed choices of private investors.

Worse still was Roosevelt’s infatuation with cartels, which allowed industry members to call on the government to curb output and raise prices. These cartels were formed for agriculture, ground transportation, airlines, labor, and many other activities. Their creation gave Roosevelt political running room to rail against various monopolists, real and imagined, for he well understood that cartels offered at least short-term assistance to large numbers of farmers and workers that helped forge his political coalition. But that master political stroke had strong negative economic consequences. It led to the burning of excessive agricultural produce to keep food prices artificially high, and to constant strikes and union actions which advanced the monopoly position conferred on them by the National Labor Relations Act. These legislative blunders, moreover, had considerable durability: the madcap systems, agricultural quotas, and collective bargaining system remain in place today, long after the short-term measures of the New Deal expired.

Whatever the economic problems the New Deal caused, they are child’s play in comparison with the Green New Deal, which will likely lead to massive government mandates by way of direct expenditures of dollars that cannot be raised by taxes or borrowing, but only through inflation. The initial blunder is to assume any such initiative, likely to wreck the economy, will have more than a negligible effect on CO2 levels. Two salient facts dictate the picture: right now China produces more CO2 emissions than the US and the EU combined, and emissions levels in the United States, which account for under 15 percent of total world emissions, have dropped by about 800 million annual tons since 2005.

Worse still, the Green New Deal seeks to implement a set of juvenile domestic proposals. One of the most welcome developments in the US has been the decline of union power over recent decades. In an odd reversal, the Green New Deal wants to give unions the whip hand in all labor negotiations. But strong unions lead in practice to artificial work rules that make it impossible to introduce sensible procedures for the most mundane of tasks, like changing light bulbs in union-managed public housing. Any proposal to implement the massive retrofitting of housing and transportation stock through union labor will consume so many resources that little private capital will be left for the high level of new investment required to sustain economic growth.

Nor will the situation improve when further distortions are imposed on the economy in the name of gender equity. One of the more puzzling aspects of the Green New Deal is its insistence that all occupational differences between men and women are somehow suspect. The one point that is perfectly clear on this front is that the defenders of that principle do not mean that all individuals should have the right to compete for whatever jobs they want in an open market. Rather, the objective of this movement is equality of outcome in the form of proportionate representation in key occupations, pay equalization across different job categories, equal representation of women on corporate boards, and an ever higher percentage of female CEOs. The underlying premise of this movement is that normal market forces necessarily undervalue the services of women. The likely outcome of this full-scale regulatory initiative is to introduce further distortions in labor markets, without addressing any climate change issue.

Finally, the defenders of the Green New Deal are also champions of the indigenous rights movement, including proposals to give various groups the right to veto development along the lines of the 2007 UN Declaration of the Rights of Indigenous People, which held that all nations must acquire from indigenous people “their free, prior and informed consent before adopting and implementing legislative or administrative measures that may affect them.” Read broadly, that position could give various Indian tribes veto power of the construction of new pipelines and facilities across the country, and do so at a time when the various legal obstacles to pipeline construction are now beginning to cause a serious tightening of energy supplies in the New York metropolitan area and elsewhere. The Green New Deal could fall victim to its own excessive ambition.

It is quite shocking that many Democrats have lined up in defense of this extreme proposal without the slightest knowledge or awareness of its deeply counterproductive features. They seem to have adopted the dangerous mindset that the outcomes produced by traditional markets and deliberative processes are necessarily corrupt. The progressive movement, and the nation as a whole, will be in far better shape if the harshest critics of the status quo took it upon themselves to understand the many tradeoffs and compromises that are needed to operate any complex system—before implementing an infantile proposal that will wreck the whole thing.