Abstract
Advocates of the Green New Deal (GND) strive to change the way we approach a variety of problems facing society: climate change and destruction of our natural environment, rising inequality, and an economy that leaves too many with inadequate access to food, shelter, healthcare, and affordable education.
This chapter is a shorter version of the Working Paper No. 931 that was published by the Levy Economics Institute of Bard College in May 2019.
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Notes
- 1.
See Wray (2019). DeLong is wrong. American workers already pay Northern European levels of “taxation” if you use an inclusive measure: all the mandatory deductions from American paychecks (pensions and health insurance, including the Obamacare mandates, called “non-tax compulsory payments,” or NTCPs) add up to a greater burden than what our rich peer countries’ workers pay. For comparison purposes, Canadian workers pay an effective “tax” rate (including NTCPs) of just 11.5 percent; in Denmark they pay 26.7 percent; in Norway 32.4 percent; in Sweden 38.3 percent; and in the United States a whopping 43.2 percent (Bruenig 2019). In sum, we already pay higher taxes than the Swedes; we just don’t call them taxes, even though they are as mandatory as Swedish taxes. Take-home pay of Americans is already below that of Swedes, which is obvious to anyone who travels to northern Europe to envy the standard of living we do not enjoy.
- 2.
In this policy brief, we do not assess the technological feasibility of the part of the GND that is focused on reversing climate change. We will assume that the science and technology exist. We have no expertise in that area. Instead, we focus on resource availability.
- 3.
The JG wage will become the effective minimum wage—assumed to be $15 per hour plus benefits. Without a JG, a legal $15 minimum wage may not be an effective minimum wage, because those who cannot obtain a job in the formal labor market will not receive that wage (they might remain unemployed or be forced to work in informal labor markets at less than the minimum).
- 4.
These are high estimates, since the Levy simulation does not include likely cost reductions, such as lower spending on social programs and the penal system that would result from poverty reduction through job creation. We assumed some budgetary savings from lower Medicaid spending and reduction of the Earned Income Tax Credit—as program workers would have higher incomes that would raise them above program thresholds.
- 5.
Also note that Medicare-style healthcare as well as childcare coverage is included in this simulation of a JG program. With Medicare for All, JG workers would get healthcare through that program. Hence the spending on the JG itself would actually be lower than the Levy estimates if the entire package of GND programs was adopted.
- 6.
The Levy report (Wray et al. 2018) discusses the importance of respecting prevailing wage legislation and avoiding competition with union labor. Further, most public infrastructure projects will continue to be undertaken through contracts with private firms—hence, would not be performed by the JG program.
- 7.
We have chosen not to directly count the contribution of JG workers in “care” services as a net resource because we do not include an estimate of the resource costs of the care services. Thus, we are assuming that the JG care services essentially “pay for themselves” in terms of resource use; however, the JG care workers will consume 1 percent of GDP, so they are treated as a GND resource cost.
- 8.
While Table 5.3.5 (BEA 2019) does not provide a further breakdown between petroleum and natural gas and other mining, Table 5.4.5, “Private Fixed Investment in Structures by Type,” does. According to that table, oil and natural gas investment comprised about 93 percent of total investment in structures, while investment in other mining was less than 7 percent. We are using a 90/10 breakdown in our estimates.
- 9.
The OECD country with the next highest share of health spending is Switzerland, which spends a little over 12 percent of its GDP on healthcare. Canada, on the other hand, spends 10.4 percent of its GDP on healthcare (OECD 2019).
- 10.
- 11.
“Congress made history recently by passing a resolution that cuts off U.S. support for Saudi-led forces in the civil war in Yemen. This is the first time since Congress originally passed the War Powers Resolution in 1973 that we have used it to call on the president to withdraw from an undeclared war … It is time for Congress to ask whether, nearly 18 years after 9/11, we really want to continue to be involved in these wars for another 18 or more. According to a recent study by the Costs of War Project at Brown University, the War on Terror will have cost American taxpayers almost $5 trillion through Fiscal Year 2019. When taking into account future health care obligations for veterans injured in post-9/11 wars, the bill comes closer to $6 trillion” (Sanders and Lee 2019).
- 12.
Stiglitz and Bilmes (2010) argue the opportunity costs probably add more: “For instance, many have wondered aloud whether, absent the Iraq invasion, we would still be stuck in Afghanistan. And this is not the only ‘what if’ worth contemplating. We might also ask: If not for the war in Iraq, would oil prices have risen so rapidly? Would the federal debt be so high? Would the economic crisis have been so severe?” Nine years after that update, the “forever wars” continue.
- 13.
See the following for discussion of some of the difficulties involved: Dmitrieva, K. 2019. “The Green New Deal Progressives Really Are Coming for Your Beef.” Bloomberg. March 13. A summary of the best studies: https://ccafs.cgiar.org/bigfacts/#theme=food-emissions&subtheme=direct-agriculture; Gerber PJ, Steinfeld H, Henderson B, Mottet A, Opio C, Dijkman J, Falcucci A, Tempio G. 2013. Tackling climate change through livestock—A global assessment of emissions and mitigation opportunities. Rome: Food and Agriculture Organization of the United Nations. (Available from http://www.fao.org/docrep/018/i3437e/i3437e.pdf).
- 14.
- 15.
Note that we do assume that government will use other means to constrain prices, including cost controls in the single-payer system as well as prioritizing spending over the decade during which GND projects are phased in.
- 16.
They might reduce high-speed trading and the incentives to move profits offshore—and to the degree that they are effective, tax revenues from those sources fall anyway, so cannot be counted as a financial source of revenue in any case.
- 17.
We are not arguing against higher income and wealth taxes on the rich, which can be used to reduce inequality and restore democratic governance. However, we cannot think of these as a source of “financial” resources for the GND and consequently tie our ability to implement the GND to the taxes paid by the rich.
- 18.
Dean Baker (2019b) makes a similar argument.
- 19.
He includes progressive income tax rates, taxing capital gains and dividends at the same rate as income from work, limiting tax deductions for the rich, adjusting the estate tax, and savings from health tax expenditures. His total tax take is estimated at nearly $1.4 trillion annually. We are not including the other tax changes here, nor are we adopting the tax increase to raise revenues to “pay for” M4A. The purpose is to release resources—in this particular case, it is to postpone consumption by deferring income.
- 20.
The logic behind applying them to HI rather that to OASDI is not only that the base is larger but also that the tax is designed to offset some of the benefits of moving to a universal single payer.
- 21.
- 22.
The median wage is about $32,000. The average annual premium for family coverage is over $19,000, of which about $13,000 is paid by the employer and $6000 is paid by the employee. By contrast, the payroll tax surcharge would be $1472 on the median worker’s wage.
- 23.
We acknowledge that some of the resources released by the fossil fuel and healthcare sectors may not be appropriate for GND projects, although a good case can be made that a lot of the workers would be able to contribute to either working in GND projects or helping with administration.
- 24.
Includes student debt relief and free college, public infrastructure, and universal childcare (some of which is included in the JG resource requirement). While many of the “miscellaneous” GND projects (additional public infrastructure, free public colleges, job training, childcare) will require resources, by increasing productivity they will also supply resources—so we have assumed their resource use nets to zero. While this should be true over the long run, there could be a net demand for resources in the early years. Whether this is inflationary depends on whether they are phased in as resources are made available; that, in turn, requires careful planning.
- 25.
This helps to explain why the Fair model’s simulation of the JG program (see Wray et al. 2018)—which boosted employment by 19 million, raised wages to or above $15 per hour, and increased annual GDP by half a trillion dollars—projected almost no inflation pressure.
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Nersisyan, Y., Wray, L.R. (2022). Costing the Green New Deal in the United States: The Modern Money Theory Approach. In: Karagiannis, N., King, J.E. (eds) Visions and Strategies for a Sustainable Economy. Global Institute for Sustainable Prosperity. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-06493-7_7
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