Can we afford The green new deal?

1. Can we afford The green new deal? Yeva Nersisyan, Franklin & Marshall College L. Randall Wray, Levy Economics Institute & Bard College

2. Components of the GND • “Greening” the economy • Medicare for all (M4A) • Job Guarantee (JG) • Student debt relief, free public education, Universal childcare, etc. • Can we afford a GND? • Too expensive, government already broke, need to raise taxes. • Could be inflationary (Krugman, DeLong).

3. $93Trillion! • Focus on financial costs • Add the costs of various programs • Calculate potential tax increases

4. The MMT Approach • A country with sovereign currency has the financial wherewithal to afford whatever is technologically possible. • “Whatever is technologically possible is financially feasible”, J. FaggFoster • Assessing the economic feasibility of the GND must focus on resources and technological know-how, not dollar costs. • Some GND programs use resources, but others release them. • The real issue is how to mobilize underutilized resources and shift resources from destructive uses to avoid inflation.

5. Keynes, How to Pay for the War • Planning for the war is not a financial, but a real resource problem. • 1) How much output can we produce (including mobilizing underutilized resources) and net import? • 2) How much of that is needed for the war effort? • 3)  how much is left for worker consumption.

6. Keynes, How to Pay for the War • During war, production and incomes increase, but output available for consumption does not. • From time of plenty to time of scarcity; consumption limited. • How to constrain consumption/demand to avoid inflation? • Taxes, voluntary savings and deferred pay. • Voluntary savings inadequate, requires collective action. • Inflationary; windfall profits which are either consumed, taxed or saved. • Workers demand higher wages, which play catch up with prices.

7. Keynes, How to Pay for the War • How to reduce consumption/demand? • Taxes: must be directed to reduce use of resources; taxing the rich may not be sufficient. • Deferred pay (“forced” savings):workers earn deferred incomes. • No inflation and more equal distribution of financial wealth. • Increase consumption after the war, avoiding a post-war slump.

8. Use or Source of Resources? • Most of the GND costs are attributed to Medicare for All and the Job Guarantee. • JG represents a cost financially, but in real terms it is both a cost and a source of resources. • JG workers can be employed for many of the GND projects. • M4A can also be a source of resources in real terms. • The US spends more than 17% of GDP on healthcare, much higher than other developed countries. • Savings from 1.58% to 4.5% of GDP, depending on the assumptionsabout cost controls and admin savings.

9. “Greening” Estimates

11. Deferred Compensation • A 4.6% payroll surcharge on employees in exchange for a boost to social security payments in the future (deferred compensation). • NOTto “pay for” the GND, but to reduce aggregate demand in the present. • It is a sinking fund, not a source of “finance” for future Social Security spending.