Americans like taxes on other people and magical economics

Americans like taxes on other people and magical economics
Image: LU Staff

Americans aren’t willing to spend even small amounts of their own money fighting climate change. But many are willing to have other people foot the bill. That is shown by their support for the incredibly expensive and impractical “Green New Deal.” To pay for that flaky proposal, its sponsors have proposed tax increases on utilities, borrowing vast amounts of new money, and having the government print trillions of dollars of new money to finance it. Printing money on that scale would ultimately result in hyperinflation.

A recent survey for the Associated Press and NORC shows that only 28% of Americans are willing to pay even $10 per month to fight climate change. Sixty-eight percent say they wouldn’t be willing to pay $10 per month in higher electric bills to combat climate change.

But many people, including most Democrats, support the wildly impractical “Green New Deal,” which would cost much, much more than $10 per month, in the name of fighting climate change. The Green New Deal’s cost has been variously estimated by think-tanks as up to $65,000 per household per year, or at least $50 trillion and possibly over $90 trillion (four times the size of the entire U.S. economy). Leading Democratic presidential contenders support the Green New Deal, such as Bernie Sanders, Kamala Harris, Cory Booker, and Elizabeth Warren.

Indeed, 43% of all Americans support the “Green New Deal” concept, according to a poll commissioned by the left-wing think-tank Data for Progress.

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Given its massive cost, why do so many Americans support it? Probably because they don’t think they themselves will pay its costs. They think other people will.

The poll was phrased in a way favorable to the Green New Deal, although not in a way that was deliberately misleading. The full question read: “Would you support or oppose a Green New Deal to end fossil fuel use in the United States and have the government create clean energy jobs? The plan would be paid for by raising taxes, including a tax on carbon emissions.”

The question doesn’t explain that the Green New Deal’s tax on carbon emissions would be passed on to consumers, since electric companies and other utilities are generally permitted by state law to pass on increased costs to their customers, and would go bankrupt if they couldn’t. The question also doesn’t explain that industries that emit carbon as part of the manufacturing process would have to pass on the carbon tax to consumers in the form of higher prices, since industrial companies’ profit margin is too small compared to their costs to absorb large cost increases without passing them on to customers. The public doesn’t realize this, because it falsely believes that the average corporate profit margin is a whopping 36%, even though the actual profit margin for industrial companies is just a small fraction of that: The average profit margin for companies that are not banks or financials is 6.9%; even if one adds in banks and financials, it’s still only 7.9%. And if the economy goes into a recession, those percentages will drop like a stone.

The public also tends not to think about the fact that citizens pay the price when corporate profits fall due to tax increases. Corporate profits generate the value of people’s pension fund or retirement plan: The value of the stocks and mutual funds held by your pension fund or retirement plan is based on the stream of profits companies make, so when corporate profits fall, so does the value of the stock and mutual funds that pay for your retirement. So even if companies paid for the Green New Deal’s carbon tax all out of corporate profits (which they won’t), Americans with a 401(k) or pension plan would still pay the price.

Even with large tax increases, there simply would not be enough tax revenue to pay for the Green New Deal’s potential cost of $65,000 per household per year. Its sponsors, such as Democratic Socialist Congresswoman Alexandria Ocasio-Cortez, have essentially admitted as much. So sponsors of the Green New Deal have proposed that the government borrow the money or just print new money to pay for it, using a crackpot left-wing economic theory known as Modern Monetary Theory (MMT), which says that the government can just print up whatever money is needed for new government spending.

In a February NPR interview, Ocasio-Cortez declared we also have to “break the mistaken idea that taxes pay for 100% of government expenditure.” She argued for a “combination of” taxes and deficit spending. Ocasio-Cortez also advocates paying for big new government spending like the Green New Deal using so-called “Modern Monetary Theory,” notes The Week: “The theory says that because governments can literally print money, ‘they can spend as much as they like.'”

The theory is wrong. In reality, when the government prints large amounts of money to pay for the cost of the government, it generally leads to hyperinflation and economic ruin. That is what happened in Venezuela, Zimbabwe, and Weimar Germany, where people’s money became worthless and the economy cratered after the government just ran the printing presses to pay for government spending.

The Green New Deal is as unrealistic as black magic. As Scott Greenfield has observed, it is as impractical as using unicorn droppings to produce electricity.

As we noted earlier, the Green New Deal would pay for many construction projects that are useless white elephants. The Green New Deal proposes “‘upgrading all existing buildings in the United States.’” In many cases, that work would consume more energy than it would save. Thomas J. Pyle of the Institute for Energy Research said the Green New Deal’s construction projects would increase pollution: “How much steel is this going to involve? How much concrete? Think about the sheer amount of CO2 emitted into the atmosphere for retrofitting alone.”

Writing in Forbes, Michael Shellenberger says the Green New Deal would “increase emissions” of greenhouse gases by shutting down nuclear plants, which emit no carbon dioxide or other greenhouse gases. It would shut them down even though they are essential for the stability and reliability of any low-carbon power grid, given how solar and wind power fluctuates with changes in the weather.

The Green New Deal would also shrink the economy by discouraging people from working, leaving the government with less money to finance clean energy. The original “Green New Deal” blueprint expressly provided “economic security”—that is, welfare — “for all” Americans who are “unwilling to work.” Rewarding unemployment leads to less tax revenue and more government welfare spending, driving up the budget deficit.

Hans Bader

Hans Bader

Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law. He also once worked in the Education Department. Hans writes for CNSNews.com and has appeared on C-SPAN’s “Washington Journal.”