- The Green New Deal is a vital way to address the social threat of climate change.
- Some GND advocates want to make the idea more palatable by relying on indirect financing like public-private partnerships or loans to private companies.
- While the ideas are designed to make the Green New Deal more politically palatable, indirect financing will also blunt the changes made by the GND.
- Therefore the government should pay for the entirety of the Green New Deal.
- Raúl Carrillo is the director of the Modern Money Network. Nathan Tankus is the research director for the Modern Money Network. Andrés Bernal is a lecturer at CUNY Queens College Department of Urban Studies.
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Although its seeds are freshly planted, the Green New Deal (GND) resolution has already regenerated the US policy landscape.
By coupling concrete, evidence-based goals with policy proposals that explicitly support these goals, Green New Dealers have shown not only courage but savvy.
Advocates of the GND reject “soft denialist” suggestions that the climate crisis is merely a technical problem we can fix by “unrigging” old markets, manufacturing new markets, or implementing isolated taxes. This recognition has helped shift the discussion toward ambition — and toward survival.
In support of this evolution, most advocates embrace another cold, hard truth: Only the federal government holds the fiscal tools powerful enough to achieve a just transition.
Accordingly, people who truly want to see a GND in our time should fully embrace the power of the public purse. Instead of focusing on financial returns or relying on failed ideas like public-private partnerships, the GND should be financed through public spending and nothing else.
From the onset, Rep. Alexandria Ocasio-Cortez — one of the GND’s most visible supporters — has demanded our elected officials approach the crisis as straightforwardly as possible, just as policymakers responded to World War II.
The analogy is on point. During the war, Treasury economists learned an important lesson: Ultimately, the US federal government is constrained not by financial resources but by the physical resources (like labor and machinery) that it can marshal with its spending.
It doesn’t mean elected officials should ignore the effects of new spending; rather, Congress should appropriate as much public money as necessary to accomplish GND projects, while avoiding the widespread shortages of goods and services that may result from the creation of excess purchasing power. This framework aligns with the actual goals of the GND rather than distractions — like boosting financial returns on investment.
Trying to make a Green New Deal more ‘politically palatable’ is a mistake
Some GND advocates want the explicitly transformational agenda to appear less costly and less “invasive.” Whether they do this out of concern for the “price tag,” a “socialist label,” or both, matters little. They want to “leverage markets,” “unlock the potential” of private capital, and otherwise minimize the ostensible burden of the GND on government balance sheets.
Their proposals typically involve the federal government either substituting public spending for public “lending,” via a national development bank or a network of public banks, or taking “equity stakes” in private companies (thereby granting the federal government the right to a percentage of future profits, as well as influence, but not ownership, over the private businesses.)
At first blush, these approaches bear a certain “political lightness.” The public has been told that cost-sharing with corporations is necessary to sell the GND to moderates and conservatives. It is difficult to say whether this is true or just another case of policy entrepreneurs appealing to a tiny deficit-obsessed constituency.
And while public banking is rightly popular at the local and state levels for offering an alternative to extractive investment and financial services, we do not think it makes sense to tether that important mission to an entirely different transformative endeavor.
We are also not convinced the country is clamoring for more public-private partnerships — many of which could involve the very corporations that created the climate crisis in the first place.
In any case, the chief issue is crystal clear: The potential for federal lending and investment — or “indirect” financing — proposals to transform our economy pales in comparison to more direct proposals. Worse, the indirect plans would reorient the GND toward financial rather than social goals.
Indirect financing could blunt the GND’s impact
Although advocates of indirect approaches like to cast loans and equity stakes as scalpels compared to the sledgehammer of spending, previous attempts to wield the tools of private finance under the guise of public finance suggest the opposite. Indeed, loans and equity stakes necessarily force companies to scramble to service loans or keep equity values high to the detriment of other priorities.
The negative consequences are illustrated well by the move to financing US higher education through lending rather than grants. When students cannot pay back their loans, their debt becomes an albatross. For students who succeed at getting high-paying jobs, having to pay down their debts does little to restrain their high income. Meanwhile, the move to federal lending hasn’t reduced higher education spending or inflation. In other words, this policy change has increased inequalities and worsened higher education while misdirecting labor.
There is no reason to think a similar approach will succeed at accomplishing the Green New Deal. In contrast to the private-equity mantra, loading companies with debt doesn’t make them more efficient.
Oddly, many of the same people attracted to the GND lending approach are also cheering on federal student-debt cancellation. If we claim public education is too important to accomplish through lending rather than spending, then why don’t we say the same about the GND?
Politically speaking, indirect financing proposals create longer and more complex chains of decision-making responsibilities. Subsidized loans or equity stakes provide very little leverage over companies relative to grants and procurement contracts. Relevant private decision-makers would be incentivized to meet financial metrics, which can conflict with meeting more important social metrics such as labor protections, decarbonization, and innovation.
Indeed, the indirect approaches abdicate the federal government’s duty to meet the social goals of the GND. Members of Congress seeking to steer the GND would be reduced to lobbying private executives and pounding the table for returns.
Ultimately, the emphasis on profitability perversely shifts our attention toward a perpetually renewable resource (money) and away from currently bottlenecked resources (labor, natural resources, green technology). The contradictions are clear: How would GND decision makers prioritize between the financial and social goals? More succinctly — when would one kind of “green” take priority over the other?
The push for profit would hurt cooperation
Indirect financing approaches also reinforce flawed metrics of value: They suggest the US government is a corporation that must prioritize its bottom line. Above all, the profit desire would pressure us to compete precisely when we must cooperate.
We can already see this risk unfolding in real time, as politicians like Sen. Elizabeth Warren drive the equity stake approach into explicitly nationalistic territory. While Warren is better on the Green New Deal than many candidates, her GND proposals articulate the need for US firms to “be the leaders and the owners” of the “$23 trillion market coming for green products.” If her vision were to come true, US-based multinationals would continue to hoard intellectual property and keep species-saving research to themselves.
We contend that decarbonization technology is too important to humanity to hide it behind US patents and trade secrets. To confront the crisis equitably and efficiently, we should publicly fund technological development and share the research with the world free. The GND should usher in a global ecological commons, not more profit-centric competitions over “scarce resources.”
The GND challenge undoubtedly presents us with difficult choices about the use of physical resources. But we cannot make those choices clearly when we are afraid of a big budget or balance sheet number. Neither should we set ourselves up to abandon valuable green projects because they fail the test of narrow profitability.
If we’re genuinely concerned about the effects of expansive fiscal policy on inequality and price stability, we can impose a whole suite of tax-policy changes and a comprehensive suite of labor, environmental, financial, corporate, and competition law reforms.
The indirect approaches to financing a GND cannot deliver the outcomes we need on the timeline we require. If we’ve learned anything from the run-up to the climate crisis, it’s that we should not concede the necessity of “market”-driven finance or “public-private partnerships” to achieve core public goals.
Ultimately, there’s a simple guiding principle: If it’s necessary for the collective good, the public should take responsibility, and political credit. No money mazes, no middlemen. For the GND, it means the federal government must appropriate public money with an eye toward our singular objective: collectively and justly combating climate change.
Raúl Carrillo is the director of the Modern Money Network.
Andrés Bernal is a lecturer at CUNY Queens College Department of Urban Studies and an advisor to Rep. Alexandria Ocasio Cortez.
Nathan Tankus is a research fellow at the Clarke Business Law Institute’s Program on the Law and Regulation of Financial Institutions and Markets at Cornell Law School and is the research director at the Modern Money Network.