The Not so New Green Deal

The Green New Deal will have the same bad outcomes as the old New Deal.

It’s been eviscerated by economists, pounded by political analysts, and sunk in the Senate. Yet the Green New Deal is still part of the public discourse and is still lending political traction to Rep. Alexandria Ocasio-Cortez.

In that context, the very title “Green New Deal” reveals the economic and political dangers of such an initiative.

The main reason for this is that climate alarmism remains a useful tool for vote-seeking politicians and virtue-signaling activists. But the Green New Deal also plays into the 1930s narrative of the wise government saving America being in dire times. Only within the past decade has that version of history been strongly challenged by economic historians, who argue that the market interventions made by Presidents Herbert Hoover and Franklin Roosevelt exacerbated and prolonged the Great Depression. In that context, the very title “Green New Deal” reveals the economic and political dangers of such an initiative.

False Narrative

The Great Depression started on October 29, 1929, now known as Black Tuesday, when the stock market crashed. In November, President Hoover met with American business and trade union leaders and, in a strategy that anticipated John Maynard Keynes’s playbook, persuaded them that demand for goods and services had to be kept high in order to spur economic recovery.

In November 1932, when he was elected president, Roosevelt published a collection of speeches titled Looking Forward.

Despite these historical and statistical facts, the narrative still claims Hoover made the depression worse by insufficient intervention. Yet his political rival Franklin Delano Roosevelt won the 1932 election by promising to reduce government interference and adhere to market principles. Once in office, however, Roosevelt did exactly the opposite.

In November 1932, when he was elected president, Roosevelt published a collection of speeches titled Looking Forward. The phrase “New Deal” came from this and was defined as “a changed concept of the duty and responsibility of government towards economic life [wherein] business must think less of its own profit and more of the national function it performs.”

Same Old, Same New

Not only does Ocasio-Cortez’s rhetoric channel this exact sentiment, but there are also more than a few parallels between FDR’s policies and her 21st-century recommendations. Consider the following extracts from Roosevelt’s speeches and Ocasio-Cortez’s Green New Deal:

FDR in 1938:

I asked for certain appropriations which are intended to keep the Government expenditures for work relief and similar purposes during the coming fiscal year at the same rate of expenditure as at present…These appropriations, made necessary by increased unemployment, will cost about a billion and a quarter dollars more than the estimates which I sent to the Congress on the third of January last.

AOC: "The Green New Deal will be paid for with federal funds appropriated by Congress and will cost approximately $10 trillion."

FDR: 

The administration proposes to make additional bank reserves available for the credit needs of the country. About $1.4 billion of gold now in the Treasury will be used to pay these additional expenses of the Government, and $750 billion of additional credit will be made available to the banks by reducing the reserves now required by the Federal Reserve Board.

AOC: Provide and leverage

in a way that ensures that the public receives appropriate ownership stakes and returns on investment, adequate capital (including through community grants, public banks, and other public financing), technical expertise, supporting policies, and other forms of assistance to communities, organizations, Federal, State, and local government agencies, and businesses working on the Green New Deal mobilization.

FDR: The Housing Authority will “undertake the immediate construction of about $300 million worth of additional slum clearance projects”; a $1 billion public works program of “needed permanent public improvements in our states, their counties and cities.”

AOC: Upgrade

all existing buildings in the United States and build new buildings to achieve maximal energy efficiency, water efficiency, safety, affordability, comfort, and durability, including through electrification.

FDR: "Add $100 million to the estimate for Federal aid highways in excess of the amount I recommended in January."

AOC: Overhaul

transportation systems in the United States to eliminate pollution and greenhouse gas emissions from the transportation sector as much as is technologically feasible, including through investment in (i) zero-emission vehicle infrastructure and manufacturing; (ii) clean, affordable, and accessible public transportation; and (iii) high-speed rail.

FDR: "We must spend large sums of money to conserve our land from further erosion and our forests from further depletion."

AOC: Generate 100 percent of the nation’s power from renewable sources, making all buildings energy efficient and eliminating carbon dioxide and other greenhouse gas emissions from the transportation sector and industry.

FDR: 

If all employers will act together to shorten hours and raise wages we can put people back to work. No employer will suffer, because the relative level of competitive cost will advance by the same amount for all.

AOC: Strengthen and enforce “labor, workplace health and safety, anti-discrimination, and wage and hour standards across all employers, industries, and sectors.”

Depression Outcomes

The bad effects of Roosevelt’s interventionism, built on the policies set in motion by his predecessor Hoover, are now well documented. Between 1929 and 1933, consumer prices fell by nearly 25 percent, and wages dropped by 15 percent, pricing workers out of the labor market and so increasing unemployment.

National production fell by half, disposable income declined 28 percent, investment spending dropped 80 percent and consumer spending by 40 percent, stock prices declined to 10 percent of pre-crash value, trade decreased by 60 percent, and the number of unemployed people went from 1.6 million (three percent of the labor force) to 12.6 million (25 percent of labor force).

Past president of FEE Lawrence W. Reed, in his book Great Myths of the Great Depression, writes:

The genesis of the Great Depression lay in the irresponsible monetary and fiscal policies of the U.S. government in the late 1920s and early 1930s. These policies included a litany of political missteps: central bank mismanagement, trade-crushing tariffs, incentive-swapping taxes, mind-numbing controls on production and competition, senseless destruction of crops and cattle, and coercive labor laws.

Nearly all these measures are in Ocasio-Cortez’s manifesto.

Reed concludes:

The nation managed to survive both Hoover’s activism and Roosevelt’s New Deal quackery, and now the American heritage of freedom awaits a rediscovery by a new generation of citizens. This time we have nothing to fear but myths and misconceptions.

Unfortunately, the very title of the Green New Deal shows these myths and misconceptions are very much alive and ill.