The Environment Deficit

As some asshole with a blog has noted, when you have real needs and resources that can be mobilized, currency should never be the rate-limiting step. At all (boldface mine):

Across America, calls for climate action are growing louder and more fervent. As Naomi Klein wrote this week, “[we have] been waiting a very long time for there to finally be a critical mass of politicians in power who understand not only the existential urgency of the climate crisis, but also the once-in-a-century opportunity it represents.”

We’re almost there…

To save the planet and fix historical inequities, however, we must change the way we approach the federal budget. We must give up our obsession with trying to “pay for” everything with new revenue or spending cuts.

Are taxes an important part of an aggressive climate plan? Sure. Taxes can shape incentives and help change behaviors within the private sector. Taxes should be raised to break up concentrations of wealth and income, and to punish polluters for the cost and consequences of their actions. In a period without federal leadership on the climate crisis, this is how many state and local governments are considering carbon pricing. That’s useful ― not because we “need to pay for it” but to end polluters’ harmful behavior.

The federal government can spend money on public priorities without raising revenue, and it won’t wreck the nation’s economy to do so. That may sound radical, but it’s not. It’s how the U.S. economy has been functioning for nearly half a century. That’s the power of the public purse.

As a monopoly supplier of U.S. currency with full financial sovereignty, the federal government is not like a household or even a business. When Congress authorizes spending, it sets off a sequence of actions. Federal agencies, such as the Department of Defense or Department of Energy, enter into contracts and begin spending. As the checks go out, the government’s bank ― the Federal Reserve ― clears the payments by crediting the seller’s bank account with digital dollars. In other words, Congress can pass any budget it chooses, and our government already pays for everything by creating new money.

This is precisely how we paid for the first New Deal. The government didn’t go out and collect money ― by taxing and borrowing ― because the economy had collapsed and no one had any money (except the oligarchs). The government hired millions of people across various New Deal programs and paid them with a massive infusion of new spending that Congress authorized in the budget. FDR didn’t need to “find the money,” he needed to find the votes. We can do the same for a Green New Deal.

Despite lawmakers’ stated fears, larger public deficits are not inherently inflationary. As long as government spending doesn’t cap out the full productive capacity of the economy ― what economists call “full employment” ― it won’t spin prices out of control. Inflation isn’t triggered by the amount of money the government creates but by the availability of biophysical resources that money tries to go out and buy ― like land, trees, water, minerals and human labor.

While I’m less optimistic about a serious global warming effort since people still haven’t wrapped their brains about what that would mean for transportation and housing, at the federal level, a supposed absence of dollars is a non-problem. Wages are still stuck, and there is work to be done. Inflation isn’t the problem*, global warming is.

*We are starting to see some ‘hidden’ inflation in urban housing markets, where tax cuts for the wealthy combined with very low housing supply are leading to higher housing prices. That is neither here nor there regarding a global warming initiative.

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