One of the favorite comebacks Rep. Alexandria Ocasio-Cortez, D-N.Y., has to anybody dismissing the ” Green New Deal” as an absurd fantasy is to point to large-scale projects in the past such as the New Deal, the highway system, and the moon landing.
For a long time, liberals have used a variation of the idea, “If we can land a man on the moon, we could surely [fill in the blank].” But pointing to “big things” we did in the past neglects to recognize two basic realities as to why the “Green New Deal” is something dramatically different that makes it laughable. One, it will be on a much larger scale than those past projects. And two, in prior eras, the cost of entitlement programs was significantly smaller, so there was more financial flexibility for such initiatives.
Let’s take a look at the potential cost of the “Green New Deal” and try to compare it to previous major government initiatives.
Green New Deal Would Cost Tens of Trillions of Dollars
At this time, there is no comprehensive cost estimate of the “Green New Deal”, as so far, it’s just a nonbinding resolution and it would aim to make dramatic changes that have not be contemplated before or estimated by outside groups. Remember, it isn’t just an environmental bill but a grand vision addressing a whole host of issues. Though we don’t have a full cost estimate, we do know how some aspects of the bill are likely to cost. For instance, the resolution calls for “providing all people in the United States” with “high-quality healthcare” and “affordable, safe, and adequate housing.” In addition, it includes a provision for free college, a job guarantee at a “family-sustaining wage,” and for a vast high-speed rail network.
So, here’s an idea of what some of that could cost. The 10-year cost of Sen. Bernie Sanders’ “Medicare for all” plan was pegged at $32 trillion in 2016 by the liberal Urban institute. A job guarantee at a $15 per hour minimum wage would cost about $409-$543 billion a year, according to an estimate from the Brookings Institute-affiliated Hamilton Project. Meaning, the 10-year cost could exceed $5 trillion. Sanders has estimated the cost of his free college program at $47 billion a year (or another half-trillion dollars over a decade). The Center for American Progress estimated its more targeted “Homes for All” program would “require a minimum of $20 billion in funding annually over the next five years,” but that estimate is only for construction costs and does not consider the cost of land acquisition. The California High Speed Rail project, which was first approved over a decade ago and is already above cost and behind schedule, is currently projected to cost $77 billion just to connect Los Angeles and San Francisco. The Green New Deal calls for the construction of high-speed rail across the country, “at a scale where air travel stops becoming necessary.”
As the program gets fleshed out, it’s inevitably going to morph. But even if it doesn’t “go big” in every single area, keep in mind that this analysis only takes into account a portion of all the provisions contained in the resolution — it does not include all the subsidies for clean energy initiatives, such as upgrading every single building in the U.S. to make them energy efficient, or moving the U.S. within 10 years from 17 percent renewable energy to 100 percent.
So, while we cannot put a specific price tag on a Christmas list, it’s quite safe to say if all of the provisions were carried out, the cost would be in the tens of trillions of dollars.
Now, let’s see how it stacks up against some other popular examples.
The FAQ put out in conjunction with the release of the “Green New Deal” said, “Americans love a challenge. This is our moonshot. When JFK said we’d go to the by the end of the decade, people said impossible.”
Even 50 years later, the story of U.S. astronauts stepping on the moon can awaken childlike wonder in all of us and convince us that anything is possible. But in terms of cost, the moon landing was relatively modest. The entire cost of the Apollo Program from 1960 to 1973 that culminated with the moon landings was $19.4 billion. The Congressional Budget Office later translated that to $170 billion in 2005 dollars, or about $225 billion in 2018 ( using the BLS inflation calculator). Another way of putting it in context is that at the time (1960-73), the moon project absorbed less than one percent of total federal revenue ( see table 1.1).
Interstate Highway Program
“If Eisenhower wanted to build the interstate highway system today, people would ask how we’d pay for it,” the FAQ asserts. This is a completely distorted presentation of history. At the time, financing the highway system was a significant roadblock to making it a reality. The history section of the Federal Highway Administration’s website notes that, “President Eisenhower insisted that the financing mechanism for the Interstate System be ‘self-liquidating,’ so that it could not add to the national debt.” And elsewhere the site notes, “Legislation failed in 1955 because of the financing issue.” In 1956, it passed after a compromise that created the Highway Trust Fund and increased the gas tax. In terms of cost, it’s a more difficult number to pin down, because the spending occurred over the course of decades. But there are a few numbers that can give us a sense of scale. The final estimate of the cost of the system delivered in 1991 was $128.9 billion. A 2006 USA Today estimate pinned the cost of the program at $425 billion in 2006 dollars (which would be about $540 billion today). Another way of looking at it is the spending on the program as a percentage of GDP. At its peak during the 1960s, highway spending reached 0.56 percent of GDP (author’s calculations based on tables 1.2 & 9.6, see also here). Translated in terms of the 2018 GDP of $20.2 trillion, that would be the equivalent of about $113 billion. So even peak levels for a full decade would only be just over $1 trillion in comparable terms.
The New Deal
The New Deal is the clearest inspiration for both the name and spirit of the “Green New Deal.” Ocasio-Cortez told NBC’s Chuck Todd, “We need to return to our FDR roots as a party.” But even the New Deal would look small compared to the sweep of its modern successor. The St. Louis Federal Reserve did an analysis that looked at several ways to try and translate the cost of the New Deal in today’s context. On a purely inflation-adjusted basis, the cost was $653 billion in 2009. Taking into account population growth, that would be $5,231 per capita (which would translate into about $1.7 trillion). Put another way, the entire New Deal cost 40 percent of 1929 GDP, which would be the equivalent of $8 trillion when translated to today’s GDP. So, even the high-end estimates of the New Deal are quite modest in comparison to the cost of the “Green New Deal” if it were actually implemented as currently conceived.
A note about World War II
Another example that has been brought up has been World War II. Between 1941 and 1946, the U.S. spent the equivalent of $3.3 trillion on national defense in constant 2009 dollars. But clearly, as a percentage of GDP, the cost was staggering. For three peak years, defense spending as a share of GDP ranged from 36 percent to 37 percent, or about $7 trillion a year. While this starts to approach the scale conceived of the “Green New Deal,” an important distinction is that World War II was a specific event that required an extraordinary amount of spending for several years, but then the war ended, and spending dropped significantly, reaching 3.5 percent by 1948. But for a brief spike in the 1950s when after the Korean War it peaked at 13.8 percent, defense spending never reached double digits through decades of the Cold War and currently is about 3 percent. In contrast, many of the programs envisioned by the Green New Deal would be permanent, imposing massive costs forever.
Entitlements: Or, Why we can’t do big things
When liberals like to talk about the halcyon days when government could take on ambitious major projects, what they neglect to mention is that the underlying burden of government used to be significantly smaller, giving lawmakers more flexibility to take on big things. When the New Deal was launched, Social Security hadn’t been created yet, and it didn’t start paying out benefits until 1940. When the program was in its infancy during World War II, there were a relatively small number of retirees compared with the number of workers. The ratio was 159.4 workers for every beneficiary in 1940 and still 41.9 for every one by 1945, when the war ended. By comparison, the number was 2.8-to-1 in 2013. In the 1950s, when the highway system was being built, Medicare and Medicaid didn’t exist yet, and they were just starting out when men landed on the moon. In 1948, the cost of Social Security, Medicare, and other payments to individuals equaled 3.4 percent of GDP. In 2017, it took up 15 percent of GDP. ( See table 14.5). As the retired population swells and healthcare costs rise, that number heading significantly higher.
Looking at debt since America’s founding in this CBO chart, we see that but for the short-term spike during World War II, it has never been higher. Only unlike World War II, it isn’t a short-lived spike. Absent action, the debt is going to exceed the World War II record and never look back. And that’s before a penny is spent on any “Green New Deal.”