Speaking at an event held yesterday to honor Martin Luther King, Jr., Rep. Alexandria Ocasio-Cortez (D–N.Y.) explained why she believes younger Americans are in favor of radical action when it comes to combating climate change:
"Millennials and people, you know, Gen Z and all these folks that will come after us are looking up and we're like: 'The world is gonna end in 12 years if we don't address climate change and your biggest issue is how are we gonna pay for it?'" Ocasio-Cortez told interviewer Tanehisi Coates at an "MLK Now" event in New York.
She continued: "This is our World War II."
Ocasio-Cortez's 12-years-til-the-Apocalypse timeline is likely inspired by a United Nations Intergovernmental Panel on Climate Change (IPCC) report released last fall which argued that unless carbon-based fuels were completely abandoned by 2030, global temperatures would increase more than 1.5°C above pre-industrial levels agreed upon in the Paris Climate Agreement. That report doesn't say the world will end if temperatures increase more than that, but it does estimate damage to global GDP (more on that in a moment).
Here's an interesting fact about World War II: We did in fact pay for it directly and in all sorts of ways, including rationing of goods, near-complete federal control of the economy and resources, massive tax hikes, and the sale of war bonds.
As Peter Schiff (via Marginal Revolution) explains:
To a degree that will surprise many, the US funded its World War II effort largely by raising taxes and tapping into Americans' personal savings. Both of those avenues are nowhere near as promising today as they were in 1941. Current tax burdens are now much higher than they were before the War, so raising taxes today would be much more difficult. The "Victory Tax" of 1942 sharply raised income tax rates and allowed, for the first time in our nation's history, taxes to be withheld directly from paychecks. The hikes were originally intended to be temporary but have, of course, far outlasted their purpose. It would be unlikely that Americans would accept higher taxes today to fund a real war, let alone a pretend one.
That leaves savings, which was the War's primary source of funding. During the War, Americans purchased approximately $186 billion worth of war bonds, accounting for nearly three quarters of total federal spending from 1941-1945. Today, we don't have the savings to pay for our current spending, let alone any significant expansions.
In 1944, writes Cecil Bohannon for the Mercatus Center, government spending accounted for a record-high 55 percent of GDP.
All of which might help explain why Ocasio-Cortez consistently shies away from talking about the cost of her big-ticket plans. Discussing her calls for Medicare-for-All, forgiveness of student debt, free college for all, and a federal jobs guarantee—a package estimated to cost $40 trillion over 10 years—Ocasio-Cortez brushed aside any serious discussion of costs in a recent interview with CNN's Jake Tapper and refused to explain where the money would come from. Last fall, in an interview with Jorge Ramos, she said:
People often say, like, how are you going to pay for it and I find the question so puzzling because 'How do you pay for something that's more affordable? How do you pay for cheaper rent?' You just pay for it."
When it comes to paying for her "Green New Deal," which would include government-financed projects to speed up and enforce the transition to renewable energy (though not nuclear) along with tag-along favorites such as a universal basic income, she is equally vague.
The draft text of her legislation includes a section answering the question "How will government pay for these investments?":
- Many will say, "Massive government investment! How in the world can we pay for this?" The answer is: in the same ways that we paid for the 2008 bank bailout and extended quantitative easing programs, the same ways we paid for World War II and many other wars. The Federal Reserve can extend credit to power these projects and investments, new public banks can be created (as in WWII) to extend credit and a combination of various taxation tools (including taxes on carbon and other emissions and progressive wealth taxes) can be employed.
- In addition to traditional debt tools, there is also a space for the government to take an equity role in projects, as several government and government-affiliated institutions already do.
Quartz, which is sympathetic to Ocasio-Cortez's agenda, notes that "Green Party leader Jill Stein estimated that her version of the Green New Deal, which is less ambitious than the one presented by Ocasio-Cortez, would cost $700 billion to $1 trillion annually."
Ocasio-Cortez is hardly alone in not even pretending to care about paying for her favored plans. In the 21st century, both Republican and Democratic majorities have at various points hidden the costs of their spending and both parties are dedicated to endless borrowing to cover any year's expenses (call it "Government by Groupon"). Mounting debt is surely one of the factors in our generally slower-than-usual economic growth and the worst parts of the bill are still ahead of us.
If Ocasio-Cortez waves away questions of how to pay for her plans to avert the end of the world, she is also exaggerating the threat posed by the effects of climate change. Climate change is not World War II and we should resist and refute the analogy, with its strong implication not simply of massive increases in government spending and taxes but the regimentation of all aspects of day-to-day life.
As Ronald Bailey wrote last fall when the IPCC report came out, fears about the impact of sea-level rises, increases in extinctions and extreme weather events, and more have generally been overstated. So have the economic benefits of keeping global warming below 2°C:
So what, according the IPCC report, will it cost to transition from fossil fuels to wind and solar? "Global model pathways limiting global warming to 1.5°C are projected to involve the annual average investment needs in the energy system of around $2.4 trillion [in 2010 U.S. dollars] between 2016 and 2035 representing about 2.5% of the world GDP," states the report. For comparison, the International Energy Agency recently observed that "total energy investment worldwide in 2016 was just over $1.7 trillion, accounting for 2.2 percent of global GDP." Of that, only $297 billion was spent on renewable energy sources.
So how much economic damage will pursuing the IPCC's fast transition to a no-carbon energy system spare us? The report asserts that if no policies aimed specifically at reducing carbon dioxide emissions are adopted, then average global temperature is projected to rise by 3.66°C by 2100, resulting in global GDP loss of 2.6 percent from what it would otherwise have been. Comparatively speaking, in the 2°C and 1.5°C scenarios, global GDP would only be reduced by 0.5 percent or 0.3 percent respectively.
Concretely, the global GDP of $80 trillion, growing at 3 percent annually, would rise to $903 trillion by 2100. A 2.6 percent reduction means that it would only be $880 trillion by 2100. A 0.3 percent decrease implies a loss of $2.7 trillion resulting in a global GDP of $900 trillion. Note that the IPCC is recommending that the world spend between now and 2035 more than $45 trillion in order to endow $2.7 trillion more in annual income on people living three generations hence. Assuming the worst case loss of 2.6 percent of GDP in world with a population of 10 billion that would mean that they would have to scrape by on an average income of just $88,000 per year (the average global GDP per capita now is $10,500.)
Bailey further notes that since the Paris accords are voluntary, it's unlikely any signatory will stand by them in the face of economic adversity. Catastrophic climate change is possible and can be hedged against without cratering the economy or refusing to name the cost of one's preferred path forward.