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Home Publications Blogs Beat the Press A Weak Economy Is the Perfect Time to Spend Money to Combat Global Warming

A Weak Economy Is the Perfect Time to Spend Money to Combat Global Warming

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Monday, 05 May 2014 07:02

The Post had a major front page article reporting that President Obama plans to focus on global warming in the remaining years of his presidency. At one point it tells readers;

"during his first term the president’s top aides were sharply divided on how aggressively to push climate policy at a time when Americans were anxious about the economy."

This is a striking statement since the main problem facing the economy, insufficient demand, could have been effectively addressed by measures to slow global warming. Insofar as the government spent money on clean energy and/or conservation it would create more demand in the economy and lead to more jobs. In this sense, environmental measures are virtually costless in a period of inadequate demand and high unemployment. It is striking that there is so little recognition of this fact.

Comments (5)Add Comment
Debt service at the lower bound
written by Bruce Webb, May 05, 2014 9:26
Dean I have a question at least tangentialy connected. I have been for some time now asking smarter people than me at various Econoblogs to give real estimates of actual cost of debt service to the U.S. in the light of 10 year rates stuck at the lower bound combined with several rounds of the Fed buying up older and higher rate Treasuries via QE. As I understand it the Fed returns all 'profits' to the Treasury and so to the degree that all those $85 billion down to $60 billion or other monthly purchases of Treasuries and other guaranteed instruments now have interest payments effectively rebated back to Treasury it would seem that 'real debt service' (if that is even a term or art) has been discounted. That is not only can the Treasury essentially borrow money for free, the Fed has been busily buying up the debt it used to have to pay for in real terms.

I know the numbers as they relate to the holdings of Social Security, with the Trust Funds holding $2.8 trillion out of around $14 trillion in total Public Debt. But it seems that the amount of Public Debt sucked up by the Fed is still counted on the ledger of 'Debt Held by the Public' which Treasury reported was exactly $12,493,671,588,747.78 as of close of business Thursday as opposed to the $4,980,642,496,665.47 of 'Intragovernmental Holdings' which includes the SocSec Trust Funds. So sure the U.S. has $17,474,314,085,413.25 in debt going into this last weekend. But how much of that is actually being serviced to holders outside the U.S. Government and the Fed? To the degree they are separate? And at what average rate?

Surely somebody out there has numbers on the 'TRUE' U.S. debt held by non-U.S. government entities and its yield curves and so the implications of further borrowing on 'REAL debt service'. But no one seems willing to throw me that bone. And it is not as simple as just looking for the 'Debt Service' line in federal accounts. Or if it was as simple as just dividing $17 trillion by average yield even I could do it. But the data just doesn't slice that easily and since my set of data slicing tools is basically confined to a rubber mallet I am not the person to do the fine work here.

What is the 'real debt' of the U.S.? And at what average rate? Can any Beat the Press commenters throw this mangy dog a bone here?
how can you lose what you never had?
written by Squeezed Turnip, May 05, 2014 10:45
You mean:
It is striking that there is so little recognition of this fact.

Interest on debt
written by Dean, May 05, 2014 11:35
Bruce,

Probably the fairest calculation would be to take the annual net interest payment on government debt (subtracting out the portion refunded to the Treasury) as a percent of publicly held debt. You can do this going forward since CBO projects the size of the refund in future years. You can adjust the CBO numbers if you think they are too high or too low.

Anyhow, this seems a simple and straightforward way to calculate an interest rate.
Deeper analysis needed
written by keenan, May 06, 2014 4:48
Dean says that the main problem facing the economy is “insufficient demand.” A far bigger problem facing the economy – and the human species – is global warming.

Dean suggests in his post that you can combat both these problems simultaneously. You channel money toward a green economy thereby creating demand and boosting employment, while slowing global warming.

Dean says this will “effectively” address the demand problem. But will it effectively address the global warming problem? Is this “slowing” enough? And will the effects of an accelerated world economy (more jobs, more productivity, more consumption, etc.) outweigh the effects of the green measures? In other words, can the world economy go on as it is – with just a few cosmetic changes to make it greener – or are more fundamental changes required?

It would be nice if CEPR would do an in-depth analysis of this question. It is too easy to say “we need more money spent on green measures,” and act as though you’ve solved global warming.
I wish the US could be great again
written by Dave, May 06, 2014 2:47
Wasn't it great when the US was great? It really was great once upon a time.

If the US could lead on green energy, it would once again be great. The world's hope would be placed in us once again. The promise that anything is achievable would be renewed in US efforts.

The only thing that stops this is the dominance of old energy companies over our politics. Not for long…

This will happen…

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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