Photo: greenforall.orgIn economic-policy circles, a debate rages around what medicine might cure the ailing economy. The topic doesn’t draw much attention in environmental media, but I would argue that the direction of economic policy is at least as important as the hopelessly vexed question of energy policy.
Before I get to the green implications, let’s look at how the economic-policy debate is playing out.
On one side, you’ve got the champions of fiscal austerity. They look at the national budget deficit — puffed up by war spending, the Bush tax cuts, the bank bailouts, and the ’09-’10 stimulus — and find the specter of inflation lurking just around the corner (even though inflation currently hovers at perilously low levels). They insist that the only way to treat to our economic ills is to slash the deficit. But raising taxes is taboo, as is cutting military expenditures. The answer is draconian cuts to social spending. The logic goes like this: you slash funds devoted to, say, education; the deficit falls a little; and, somehow, consumers and businesses gain confidence and a brisk economic recovery blooms.
On the other side, you’ve got the champions of stimulus packages. They see persistently high unemployment — Goldman Sachs recently projected near 10 percent unemployment at least through 2011 — and find the threat of stagnation upon us. High unemployment puts downward pressure on wages and breeds fear of job loss; low wages and job anxiety mean people spend less; less spending by consumers means lower business profits and less investment — and fewer jobs. It all leads to a vicious downward spiral. For the stimulus champions, the government must step in and spend where consumers and businesses won’t. High deficits today finance increased growth, and increased growth means lower deficits later.
Well, on intellectual merits, the stimulus side wins. The last time the nation faced such a grave and protracted slump, the economy plunged anew every time the government imposed austerity, and only gained real traction when the largest government-spending program in U.S. history, World War II, kicked into gear. Slashing government spending at times of high unemployment has historically proven disastrous, as the Nobel Prize-winning economist Paul Krugman shows in a string of recent New York Times columns. Can anyone point to an example of an ailing economy that has righted itself through austerity? The vaunted Reagan boom of the ’80s, coming off of what was then the worst recession since the Great Depression, thrived on massive budget deficits.
It’s time for environmentalists to stop being bored and baffled by economic policy, and demand a green stimulus — now.
Even mainstream economists reckon that Obama’s $787 billion 2009 stimulus package, as flawed as it was, saved 2.5 million jobs that would otherwise have vanished. And in reality, it doesn’t amount to much of a stimulus at all. As Washington Post writer Ezra Klein and others have pointed out, increased federal government spending has not even offset steep spending declines at the state and local levels. No wonder 10 percent unemployment has become a fact of life; and hundreds of thousands of public-school teachers — as many as one in 15 nationwide — will likely be laid off over the next few months.
Despite the grave situation, in the bare-knuckled world of D.C. politics, the forces of austerity are running roughshod. A week ago, an extremely modest jobs bill pushed by Obama died on the Senate floor. Just yesterday, an even less ambitious plan, this one to extend unemployment benefits to 1.2 million jobless Americans, fizzled as well.
Even as these too-modest measures fail and the “deficit hawks” gain control of public debate, environmental groups have been largely silent on the topic. That’s a mistake. A new low-carbon economy will require a new infrastructure. With an unemployment crisis blooming and interest rates on government borrowing at rock-bottom levels, now is the time to push a bold spending program, a kind of green stimulus designed to pull the economy out of its funk and create a new kind of growth: one that doesn’t rely on plundering natural resources and trashing ecosystems.
How to structure such a program?
Here’s my idea: Any project that gets green-stimulus cash should meet two tests: 1) it should provide an immediate job-creating jolt; and 2) it should pay dividends for years to come by putting the economy on a more sustainable path.The obvious area to start is mass transit. Conventional wisdom claims that Americans disdain mass transit and cling to their cars. But when gas prices surged north of $4 per gallon two years ago, people flocked to buses and trains, quickly exposing the deep dysfunction of our transit infrastructure. The price of gas has eased since then, but most observers expect it to maintain an upward arc going forward. Demand for mass transit may be slumbering now, but it won’t be for long.
Investment in transit passes my first test swimmingly. According to a recent study by Smart Growth America, every billion dollars spent on mass transit generates nearly 20,000 job-months — nearly double the level of equivalent spending on highway projects. As for the second test, think of the Europeans, who enjoy living standards at least as high as Americans but use half of the fossil energy per capita. Europe’s tradition of investing heavily in mass transit is a big reason. Money spent now to close the transit gap with Europe would go a long way to helping us slash petroleum use.
I recently spent a week in Detroit and Cleveland, which I’ll be writing about for Grist’s upcoming Feeding the City series. Both of those ailing metropolises suffer from high unemployment and hundreds of idle factory spaces. Why not pour stimulus cash into making train cars in spaces that once churned out automobiles and related products?
Another obvious area for public investment is my own hobbyhorse: supporting emerging sustainable food systems. In low-income areas of many cities across the country — Oakland, Brooklyn, Detroit, Milwaukee, to name a few — people are organizing to bring in fresh food where little exists, either by growing it or establishing markets for nearby farmers. Why not bolster these vital, often scantily funded projects with some federal stimulus cash, providing jobs now and improving public health while reducing fossil fuel use down the road?
When I asked urban farmers in Detroit and Cleveland what was the biggest obstacle to ramping up city agriculture, the most common response was soil fertility. Without much room for farm animals or cover crops, maintaining soil fertility on city plots is a challenge. Why not invest in municipal composting programs, which would reduce the stream of organic matter rotting uselessly in landfills, and give city farmers a rich and sustainable source of soil fertility?
Of course, there’s no shortage of un- or under-funded projects that could create jobs now and contribute to a green, decentralized, robust economic future. What’s scarce is political power for such programs — and political will. Paul Krugman warns convincingly that current economic policy has us on the path to a “third depression,” rivaling the Panic of 1873 and the Great Depression in scope. Meanwhile, our addiction to cheap gas and industrial food have us hurtling toward cataclysmic, irreversible environmental change.
Fiscal austerity now all but ensures further disaster down the road. It’s time for environmentalists to stop being bored and flummoxed by economic policy and demand a green stimulus — now. Our timidity and silence only empower the false prophets of austerity. The job you save could be your own — and the same applies to the ecosystem.
Note: For more information on this topic, see this brilliant, tightly argued, widely ignored recent Nation article, in which University of Massachusetts economist Robert Pollin does the math to show how a green-jobs program, similar to what I’ve laid out above, could rescue the economy from stagnation and self-immolating reliance on fossil fuels.