Green New Deal Cost Estimate

The “Green New Deal” (or GND) is the colloquial name of a collection of policy proposals made by Representative Alexandria Ocasio-Cortez and Senator Ed Markey on February 7, 2019. Pieces of it have been in discussion in Washington D.C. for about 15 years.

Do note that there are solid economic reasons to be opposed to most of this collection of programs, but its political support is quite good. That combination is not unusual.

This is a new cost estimate for the entire program, although I have posted this semester about other estimates in more piecemeal fashion. It comes from the American Action Forum, a Republican-oriented think tank.

Of critical note for this class, the president of this group is Douglas Holtz-Eakin. He was a professor of economics at Syracuse University, specializing in macroeconomics, with an extremely good citation record. Later he served Bush I’s Council of Economic Advisors, was director of the non-partisan Congressional Budget Office, and was chief economic advisor of John McCain’s 2008 presidential bid. So, yeah, he’s a Republican, but with a lot of D.C. experience, and definitely more macroeconomic chops than almost everyone else involved in policy-making in D.C. In short, not neutral, but way legit.

And their estimate of net costs is $52.6T to $94.5T over the 2020-2029 decade.

As ballpark figures, all levels of U.S. government combined currently outlay $7T/yr, the Federal government outlays $4T/yr, and the Federal government buys goods and services of roughly $2T/yr.

This is important: I don’t think it’s appropriate in a macroeconomics class to judge policy proposals just by their price tag. I would rather that we didn’t do this at all: either they are

• a good idea on net no matter what the cost (and should be pursued), or they are
• a bad idea on net no matter what the cost (and should be avoided).

Having said that, in this case it’s essential to run the numbers. If the U.S. Federal government

• Stopped buying everything (including salaries of employees) the GND would require spending 26-47 years worth of government in 10.
• Stopped buying everything and sending checks to people, the GND would require 13-23 years worth of spending in 10.
• Commanded all levels of all government to stop buying everything and sending checks to people, the GND would require 7-13 years of spending in 10.

Of course, do note that huge classes of things that we spend money on now would not require any spending in the future under this plan, like Medicare, Medicaid, and all welfare programs. Having said that, the GND does not propose eliminating social security or any current government employees … and those two are where most of the money goes.

Again, keep in mind, politicians are known for making policy proposals whose costs and benefits are not well-grounded

Having said that, and I do not like to have to write what follows, but the GND is a unicorn. It’s not merely unrealistic, it’s not feasible, and therefore probably not worthy of further discussion.

This is not a serious proposal from serious people. It’s bait.