http://en.wikipedia.org/wiki/New_Deal

Image350px-NewDeal

A GREEN NEW DEAL FOR THE USA

Darrell Prince, Jon Rynn, Ph.D. and Brian D’Agostino, Ph.D.
copyright 2014

More than four years after the U.S. economy entered a nominal recovery, unemployment and underemployment in 2014 in much of the country remains at recession levels. During these years, Hurricane Sandy and an epidemic of droughts, floods, and tornados have devastated much of the country, reminding everyone about the rising sea levels and extreme weather events being caused by climate change. Both of these crises—economic and environmental—have a common solution that is politically and financially feasible. In this paper, we outline a policy that can achieve this solution. It offers the single best program for any political leader wanting to deliver on campaign promises of providing economic relief to the middle class and poor, while investing in a sustainable future.
The Green New Deal we discuss involves a unique partnership between the public and private sectors and features a bold program of investment in energy efficiency. The main form of this investment would be refurbishing single family homes, for state of the art energy efficiency and energy generation. Such housing stock is currently the most energy inefficient of all housing, and thus “low hanging fruit” for any effort to reduce private energy costs and the nation’s carbon footprint while simultaneously creating millions of new jobs.
What currently prevents such investment from occurring on a large scale? According to the American Council for an Energy Efficient Economy (2013), financial institutions have ample funds to loan for such purposes and the economies that can be realized from such investment are indisputable. “By far the greatest obstacle identified by [lenders],” they write, “is a lack of customers actively seeking financing for energy efficiency investments.” This sounds like lack of a good old-fashioned, Madison Avenue demand generation marketing and advertising campaign, as well as a “tin men” style of door to door sales. The remainder of this paper discusses a public policy innovation that can greatly increase consumer demand for energy efficiency investment and open a vast flow of private capital, earmarked for such improvements to homeowners, creating millions of productive jobs and revitalizing American manufacturing.
The Green New Deal we envision involves two parts: 1. A national energy efficiency building code standard, set in place for seven years hence, and 2. the issuing of a $100 billion in high yield (4%) US backed bonds that would absorb private capital and make it available for a fixed total publicly administered lend loss fund. Making a conservative estimate of twice the current fail rate of such deals of 5%, a 10% coverage means such a program covers a trillion dollars in investment deals of this type. Assuming the US is able to capture 10% of this revenue back as taxes, interest rates on the bonds are easily covered by $100 billion in extra tax reciepts. Moreover, the number of buildings (100 million) in the US, means that conversion market will need 4-5 trillion before all is said and done, which will have a 10-12 year payback on energy savings—a lot of financing, on simple deals.

With this much money flowing that way; large scale demand generation, and product companies will develop quickly to take advantage of such a large emerging market; and big capital will move from plodding antagonist bent on protecting existing cash flows on fossil fuels to enthusiasts seeking to move into low-risk high volume plays, that will also yield several high risk, high reward new technology plays.
Rather than traditional bond markets; the bonds themselves would be targeted towards traditional commerical banks, with these bonds being eligible as “reserve capital”, thus ensuring buy-in from large institutions, though a disproportionate number would be earmarked for smaller banks. The bond sale would serve as “buzz” for the deals themselves. It’s also a huge PR boost to banks, headlines that read ”Wall Street saves the World,” is a little different than their current pariah status for most Americans.
The private financing would make ultralow interest home improvement loans intended to retrofit housing for energy efficiency, energy generation and remodeling. The program should be designed to require a bare minimum of paperwork from homeowners and no net increase in monthly costs. Once the improvements are made, the loan can be repaid entirely out of the savings resulting from lower costs for fuel and electricity.
This funding system uses public policy to create incentives for private lending by increasing consumer demand for investments in energy efficiency. The citizens earn interest on bonds, the lenders get larger, more stable reserves from customers, as well as high volume of low risk deals, the homeowners undertake the investment and realize long term cost savings as well as measurable status upgrades to their homes, and the US reaps the positive externalities of large scale job creation and a greatly reduced carbon footprint.
The job creation would occur through a multiplier effect—homeowners would employ contractors and their workers, who would purchase materials from local businesses, which in turn will need to be manufactured, spurring job growth in manufacturing as discussed by Rynn (2010). The program embodies the principle of “subsidiarity,” namely the use of government in a way that empowers, rather than pre-empts, action in the private sector (D’Agostino 2012).

REFERENCES

American Council for an Energy Efficient Economy. 2013. Engaging Small to Mid-Sized Lenders, Executive Summary.

D’Agostino, Brian. 2012. The Middle Class Fights Back: How Progressive Movements Can Restore Democracy in America. (Santa Barbara, CA: Praeger).

Rynn, Jon. 2010. Manufacturing Green Prosperity: the Power to Rebuild the American Middle Class. (Santa Barbara, CA: Praeger).

Advertisements

One Response to “”

  1. Thanks for this, well written and great view point

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: