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Want To Jump-Start The Economy? Include A Green New Deal In The Stimulus Package

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This article is more than 4 years old.

It feels an awful lot like 2008. With the economy going off the cliff, then candidate-Obama had proffered a massive $1 trillion stimulus plan or about 4.5% of the gross domestic product. The critics went wild, calling it the epitome of big government and argued that free-market forces would realign the economy. 

That was then. But now that the Republicans control the White House, they too are trying to write a $1 trillion stimulus package — one that is 4.5% of the gross domestic product and one that could possibly bail out sick oil and gas producers. Such strategies have been anathema to their thinking; President Obama received no Republican votes for his 2009 tax package. 

But those financial injections are necessary during recessions and to avoid potential catastrophes. The question that both parties must resolve now is just where to infuse that capital: last evening, the president signed an emergency-aid bill to help those impacted by the coronavirus. Next up, though, is a stimulus plan to assist small business and large industry — monies that go to green energy and infrastructure.

The White House and the Congress already implemented a major tax cut that was worth at least $1 trillion, causing the federal debt to soar. At the same time, the Federal Reserve Board just lowered interest to 0% while also buying up bonds to inject liquidity into the economy and to increase consumer and business confidence. What that means is that there are not a lot of levers to pull. 

The coronavirus is spreading. The financial markets have taken a nosedive. And now governments around the world must act collectively to slow the transmission while ensuring consumers. In the United States, it means a multi-pronged stimulus plan.

“We’re going big,” Trump said. “We want to go big, go solid.”

On the table at present are about $500 billion in tax cuts or direct payments to hard-hit workers as well as $300 billion in small business loans. And the last leg of the package involves financial bailouts of up to $100 billion: the airline industry is ailing through no fault of its own. But an oversupply of oil coupled with the desire to curb carbon emissions does not qualify the fossil fuel sector for any relief. Consider that Chevron, ConocoPhillips, ExxonMobil and Royal Dutch Shell have armies of lobbyists roaming Capitol Hill to protect their tax breaks. 

Stepping on the Gas

The time may, therefore, be right for a Green New Deal. The Republicans can no longer argue that they are against government stimulus plans. The only thing they can debate is where to invest the public funds.

No doubt, the global community is slurping up shale gas. And it’s the ultimate paradox — that drillers are spending more on production than they are realizing from selling that fuel. But a bailout would only encourage irresponsible business management. On the other hand, thousands are employed by oil and gas producers and the fallout from job losses will be huge. 

The Sightline Institute along with the Institute for Energy Economics and Financial Analysis sounded the alarm bells with respect to current business practices: “Until fracking companies can demonstrate that they can produce cash as well as hydrocarbons cautious investors would be wise to view the fracking sector as a speculative enterprise with a weak outlook ...”

From 2010 through early 2019, the 29 oil and gas companies that they surveyed racked up aggregate negative cash flows of $184 billion — similar to what the International Energy Agency found: $200 billion negative free cash flows between 2010 and 2014.

A safer bet may be on the New Energy Economy. Trump is unlikely to do that. The probable Democratic nominee Joe Biden certainly would. Because the Democrats control the U.S. House, any final stimulus plan would not include plans to bail out troubled oil and gas producers. And because Republicans control the White House and Senate, a final measure may not include green energy measures. The November elections could, thus, be transformative.

A Green New Deal would invest more in wind and solar technologies, electric vehicles, energy efficiency, public transportation and smart grids that make more room for green electrons. The projects, meanwhile, would go into at-risk communities as well as those that are now dependent on coal. Consumer sentiment is already driving this movement. 

No Brainer

But those market forces are not enough to stave off the ill-effects of global warming. And given the attitude from up high to “go big,” there is no better time to act than right now. 

“This is a no-brainer that we need to reinvest in infrastructure, and then it has to be low-carbon,” Costa Samaras, the director of Carnegie Mellon’s Center for Engineering and Resilience for Climate Adaptation, told Earther. His group produced a report that outlines the infrastructure projects most immediately needed — a $2 trillion list that includes money for electricity, rails and water. 

For every $1 billion spent on infrastructure, it creates 13,000 jobs, adds the U.S. Chamber of Commerce and the American Petroleum Institute. 

The Republicans have long-touted “The Wealth of Nations” — a book by Adam Smith that argues the “invisible hand” of free enterprise will over time fix a sick economy. But the party appears to have evolved and now accepts Keynesian economics, which argues that unseen market forces are insufficient. Government intervention is thus essential to steer economies back on course. 

The two sides have ostensibly converged on this thinking. The question now is where to spend public resources. The coronavirus is at the top of the priority list along with helping troubled Americans and small businesses. Attention now, though, is turning to the stimulus — a real opportunity to accelerate the green energy economy while also calming markets and boosting confidence.

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