Climate Change

How Much Will the Green New Deal Cost?

June 11, 2019  • Doug Holtz-Eakin

Doug Holtz-Eakin is an academic, policy adviser, and strategist. He’s president of American Action Forum, a non-profit center-right think tank. Previously, he served as Chief Economist of the President’s Council of Economic Advisers, director of the Congressional Budget Office, and director of Domestic and Economic Policy for the John McCain presidential campaign.

He will speak in the Defining Economic Progress track at the 2019 Aspen Ideas Festival. We spoke with him about the Green New Deal, economic growth, and the widening wealth gap.

Earlier this year, Rep. Alexandria Ocasio-Cortez (D-NY) and Sen. Ed Markey (D-Mass.) introduced the Green New Deal, legislation that aims to eliminate US carbon emissions and remake the US economy. Your organization, American Action Forum, analyzed the policy plan. What is the biggest takeaway?

The Green New Deal (GND) is a sweeping policy plan setting out ambitious objectives for energy and economic policy. In keeping with the American Action Forum’s (AAF) mission to analyze, evaluate, and educate on issues of important public policy, a group of its experts, myself included, published a report exploring the potential cost of six elements of the GND: (1) a Low-Carbon Electricity Grid, (2) a Net Zero Emissions Transportation System, (3) Guaranteed Jobs, (4) Universal Health Care, (5) Guaranteed Green Housing, and (6) Food Security. We provided a range of estimates for each element. If one adds up the low end of the range, the total is $52 trillion (over the next 10 years); at the high end it is $93 trillion.

The goal of AAF’s report was not to get an estimate correct down to the second decimal place. Instead, the basic question is whether the GND will cost tens of millions of dollars, tens of billions of dollars, or tens of trillions of dollars. It is safe to say its cost will be tens of trillions of dollars.

You found the cost of the GND could be enormous. Given the climate change threat and an unjust economic picture, is the investment worthwhile?

The GND is really two separate proposals. One set of projects is about the climate and clean energy — a national electricity grid powered by renewable fuels, a zero-emissions transportation network, and complete retrofitting of US buildings to a high standard of energy efficiency. That’s the “Green” portion. The “New Deal” portion is a set of social programs that includes universal health care coverage, a federally guaranteed jobs program, guaranteed housing, and a food security program. It also has free college, which AAF did not include in its analysis.

The bulk of the estimated cost is in the New Deal programs ($80 trillion upper bound for universal health care and guaranteed jobs) and not for the Green initiatives. Nevertheless, even the latter has a substantial price tag.

The investment is worthwhile if the benefits exceed the ultimate price tag, which will depend crucially on two issues: (a) how much the world mimics the United States and reduces greenhouse gas emissions, and (b) how much weight is put on the improved climate for future generations. The AAF report was not a full benefit-cost analysis, but rather focused on costs alone.

You write that the social upheaval of such a plan would be even larger than the price tag. How would society change under such a policy?

The GND envisions a 10-year “mobilization” in pursuit of its goals. That mobilization would include new government processes “led by frontline and vulnerable communities and workers to plan, implement, and administer the Green New Deal mobilization at the local level”; a large labor market intervention that “creates high-quality union jobs that pay prevailing wages, hires local workers, offers training and advancement opportunities, and guarantees wage and benefit parity for workers affected by the transition”; new trade and purchasing rules (“enacting and enforcing trade rules, procurement standards, and border adjustments with strong labor and environmental protections”); and other broad reordering of economic and social arrangements.

It seeks far more than a cleaner environment.

At Aspen Ideas, you’re speaking in our track, Defining Economic Progress. How do you define economic progress in the modern era? Does growth equal economic progress?

Economic progress is a rise in the broad well-being of the citizenry. Obviously, an increase in material well-being –- “economic growth” –- does not guarantee this outcome if it yields undesirable work conditions, a polluted environment, emotional duress or any other non-material setback. It is my continued belief, however, that economic growth is a necessary condition because it provides the resources needed to address these other considerations.

Another problem we’ll examine at the Festival is the widening wealth gap. From your view, how can we solve, or lessen, economic inequality?

The United States must improve the performance of its K-12 education system. The continued, large-scale failure to educate –- the most recent National Assessment of Educational Progress shows 25 to 33 percent of 4th and 8th graders seriously deficient in math and reading skills. This failure will only perpetuate a strong divide between the “haves” and “have-nots.” Nothing is more important than education.

The views and opinions of the author are his own and do not necessarily reflect those of the Aspen Institute.

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