Skeptics of U.S. Rep. Alexandria Ocasio-Cortez’s promise of a Green New Deal were worried that the plan would be a Trojan Horse for unrealistic and ruinously expensive economic proposals that have little to do with stopping climate change. The unveiling of the plan gives them more reason for worry. Ocasio-Cortez, D-New York, appears to take every big spending idea that has emerged on the political left in recent years and combine them into one large package deal, with little notion of how to pay for them all.
The Green New Deal as introduced to Congress is in the form of a nonbinding resolution laying out a series of goals. The wording of the resolution is ambitious but vague. More concerning are the details of an online FAQ that appeared on Ocasio-Cortez’s website but was later taken down. The FAQ contained important details that are not included in the resolution itself. On Twitter, Ocasio-Cortez’s chief of staff, Saikat Chakrabarti, referred to the FAQ as a “bad copy,” and promised to release a revised version.
But the original FAQ may give insight into the Ocasio-Cortez camp’s true goals. And it shows that although the Green New Deal bills itself primarily as an environmental policy and jobs program, the most expensive items are enormous new entitlements paid for by unlimited deficit spending.
First, to be fair, it’s important to discuss the good ideas in the plan. The Green New Deal would retrofit all American buildings and factories to be carbon-neutral, electrify all transportation and switch the entire electrical grid to carbon-neutral energy sources. These goals are highly ambitious, but they’re good targets. Ocasio-Cortez’s plan correctly recognizes that carbon taxes wouldn’t be enough to prompt private companies to do all these things on their own and that large-scale government-funded infrastructure is required. Furthermore, a focus on scaling up clean energy would push the technology forward. That would help other countries — where most of the world’s carbon emissions are produced — to follow in America’s footsteps.
But these environmental policies, as sweeping as they would be, wouldn’t be the most costly items on the list. Among other things, the now-removed FAQ stipulates that every American would be guaranteed the following:
1. “A job with family-sustaining wages, family and medical leave, vacations, and retirement security”
2. “High-quality education, including higher education and trade schools”
3. “High-quality health care”
4. “Safe, affordable, adequate housing”
5. “Economic security to all who are unable or unwilling to work”
The plan thus appears to combine a federal job guarantee, free college and single-payer health care. Depending on how one interprets the guarantee of “economic security” to all those who are “unwilling to work,” it might also include a universal basic income — something that was mentioned in an earlier Green New Deal proposal. The guarantee of universal affordable housing is, to my knowledge, new.
How much would these proposals cost?
U.S. Sen. Bernie Sanders’ Medicare for All proposal was predicted to cost about $3.2 trillion a year.
Switching to renewable energy would conservatively cost more than $400 billion annually. Even though the cost is coming down as technology improves, net-zero emissions retrofits of every building in the country would be expensive — optimistically, perhaps $88,000 for a townhouse, and presumably much more for free-standing homes. Assuming $100,000 per home, that comes to about $1.4 trillion a year over a decade. Factories, office buildings, stores, etc. would cost much more per building, but there are far fewer of them — about 5.6 million. If each one costs $500,000 to retrofit, that’s about $300 billion more per year.
For universal basic income, the cost has been estimated at $3.8 trillion a year. A narrower program that only covered, say, one out of three Americans who are “unable or unwilling” to work, it would cost about $1.3 trillion. By comparison, free college would be cheap at about $47 billion a year. Affordable housing for the entire nation could cost a lot, depending on that means, but let’s ignore that for now.
So this quick, rough cost estimate — which doesn’t include all of the promises listed in the FAQ — adds up to about $6.6 trillion a year. That’s more than three times as much as the federal government collects in tax revenue, and equal to about 34 percent of the nation’s entire gross domestic product. And that’s assuming no cost overruns — infrastructure projects, especially in the U.S., are subject to cost bloat. Total government spending already accounts for about 38 percent of the economy, so if no other programs were cut to pay for the Green New Deal, it could mean that almost three-quarters of the economy would be spent via the government.
And all this is assuming that repurposing essentially all of the nation’s economic resources doesn’t cause any loss in economic efficiency. History and the experiences of other countries suggest that this wouldn’t be the case.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.