Economics and the Green New Deal

A successful Green New Deal won’t look like its namesake, the Depression era, Franklin D. Roosevelt coined, New Deal. The original new deal was a program tailor made to the specifications of British economist John Maynard Keynes who advocated government spending during a recession effectively making the government the buyer of last resort. Keynes’ formulation holds that putting money into the hands of the working and middle classes would stimulate a depressed economy by giving people the means to buy things. New Dealers liked to call this “pump priming.”

Giving money to working- and middle-class people supplements slack demand because these people spend all, or nearly all, of their income on living expenses while wealthier people don’t have to spend so much of their resources, keeping some in reserve. Thus, the thinking is that giving tax cuts to wealthy people is not as economically stimulative as providing unemployment insurance to those less well off.

Pump priming in action

After the economic collapse triggered by the mortgage crisis in 2007–08, Western Democracies performed a natural experiment. It wasn’t controlled the way a scientist would set up an experiment in a lab, but the practical effects were similar because two large economies decided to take very different strategies in the face of recession. The US applied a Keynesian stimulus, spending nearly one trillion dollars to keep the economy from going into recession. It bought things like infrastructure projects and while the…