Robert Hockett, Professor of Law and Professor of Public Policy at Cornell University, Senior Counsel at Westwood Capital and Fellow of The Century Foundation, writes at Forbes about the callouts from conservative pundits and scared politicians who would like to stop the Green New Deal in its tracks:
‘How will we pay for it?,’ they ask with pretend-incredulity, and ‘what about debt?’ ‘Won’t we have to raise taxes, and will that not crowd-out the job creators?’
Hockett notes that Green New Deal-backer Alexandria Ocasio-Cortez (D-NY), whose educational background is in economics, reveals the bad faith in these questions, asking why is it
… these questions arise only in connection with useful ideas, not wasteful ideas? Where were the ‘pay-fors’ for Bush’s $5 trillion wars and tax cuts, or for last year’s $2 trillion tax giveaway to billionaires? Why wasn’t financing those massive throwaways as scary as financing the rescue of our planet and middle class now seems to be to these naysayers?
The short answer to ‘how we will pay for’ the Green New Deal is easy. We’ll pay for it just as we pay for all else: Congress will authorize necessary spending, and Treasury will spend...
The money that’s spent, for its part, is never ‘raised’ first. To the contrary, federal spending is what brings that money into existence.
Hockett goes on to explain what backs our currency and our Treasury securities, the ‘full faith and credit’ of the federal government, stating
The money that Treasury spends is… jointly Fed- and Treasury-issued, not privately issued. That is to say it’s the citizenry’s issuance, not some single citizen’s issuance. It’s like a promise we make to each other.
This fact of public finance bears real consequences. Chief among them … is that ‘raising the money’ is never the relevant question for federal spending, any more than ‘finding the promises’ is a question for people who make and keep promises to one another.
The relevant question, rather, is what limits, if any, there are on the promises we can make and fulfill. How many promissory notes, in other words, can Fed and Treasury issue without ‘over-promising’? This is, effectively, the question of inflation – the question of promises’ outstripping capacity to redeem promises and hence losing credibility as promises
Hockett notes that Ocasio-Cortez
understands as few leaders seem to do that our problems of late have been problems of deflation, not inflation. She also knows well that both inequality and the loss of our middle class have both caused and been worsened by these deflationary trends, along with their mirror images in the financial markets: our asset price hyperinflations – ‘bubbles’ – and busts.
The Green New Deal, Hockett asserts, “aims to do nothing short of reversing this slow-motion national suicide.” It will
stoke massive production of a vast array of new products, from solar panels to windmills to new battery and charging station technologies to green power grids and hydroelectric power generation facilities. The new production and new productivity that renewed infrastructure will bring will be virtually unprecedented in our nation’s history. This will be more than enough to absorb all new money spent into our economy.
In re to inflation worries. Hockett explains that because the Green New Deal aims to reverse long-term deflationary trends, there is already reason to deem inflation fears a “silly canard.” Nevertheless, Hockett catalogues the theoretical, empirical, and policy instrument reasons to laugh such fears off, knowing the scare mongers will push that narrative anyway. Read the full article here.