Monday, August 8, 2011

The Credit Downgrade and the Green Economy

In the wake of the US credit downgrade entitlement reform may be the only hope for the green economy. Many believe that the battle against climate change cannot be fought with a weakened economy. The credit downgrade will increase pressure to resist any new government investments particularly those related to combating climate change.

America's downgrade from AAA to AA+ will cost the US an additional 100 billion per year in increased interest charges to service their debt. There is also the psychological impact, the full effects of which are unknown.

The credit downgrade in the US is also exacerbating economic fears around the world. Concerns about the global economy caused Asian stock markets to fall on Monday, extending one of the worst sells offs in recent years. Japan's main Nikkei 225 index and South Korea's Kospi both dropped significantly when markets opened on Monday morning. Predictably, gold, the heaven of nervous investors, gained in Asian trading.

Conventional conservative dogma would have us believe that governments should not invest in the economy. Even before the downgrade, Republicans opposed any new government investments, particularly those that involve the green economy. Republicans even resisted the government's Recovery and Reinvestment Act that prevented a total economic collapse.

On the debt ceiling, Republican obstructionism made compromise impossible. Republicans refused to allow the President to levy taxes on the wealthiest 2 percent of the American population and corporations. In the absence of new taxes, another way to manage the burgeoning debt is to increase revenues through growth. Sadly, Republicans appear blind to the fact that there is no more significant growth opportunity then the one afforded by the green economy.

Republicans fault Obama and Democratic lawmakers for not doing more to create jobs. The truth is the GOP is to blame for thwarting all efforts to invest in a green economy which could create jobs and make America more competitive. The logic is overwhelming as the costs of preventing climate change are a fraction of the crippling costs we will incur if we continue with business as usual.

According to an analysis by Google, failure to move aggressively to implement a clean energy economy will cost the US GDP “trillions” over just the next five years. In 2009, the International Institute for Environment and Development (IIED) published a report authored by the co-chair of the IPCC and other climate science experts, revealing that the net present value of climate change impacts, i.e. the costs to civilization, are US$1,240 trillion under our current emission path and $410 trillion if we manage to stabilize atmospheric carbon at 450ppm. Most climate scientists would like to see that number at 350ppm or less.

Despite the overarching concern of climate change, Republicans and some Democrats, put self-interest ahead of national-interest. In 2012 we will see what happens to those who put their political ambitions ahead of the interests of the nation.

Although Republicans position themselves as the party of business, there are many in the business community who are opposed to Republican anti-environmentalism. Even though the nation’s leading business lobbying group consistently disagreed with the White House on the issue of climate change, there are a growing number of businesses with a different point of view. Some businesses see the wisdom of seizing the opportunity to grow the green economy and prevent full blown climate change while we still can. Several high-profile members, including Apple and Nike, left the Chamber of Commerce because of the organization's resistance to Obama’s pursuit of climate change legislation.

A congressional committee must make even deeper cuts to avoid further downgrades. While most believe further budget cuts are necessary, no one wants to see cuts in programs that impact them. How different is that from the Greeks or the Spaniards who vociferously resist much needed austerity measures? Austerity is what it will take to tackle climate change, and short term pain, although difficult, will lead to long term gain. The alternative is a nation in decline.

The Republican strategy can be best summarized as my way or the highway. President Obama and Democratic lawmakers listened to Republicans and upheld former President George W. Bush’s tax cuts. Rather than make concessions of their own, Republicans launched an all out assault on the environment. On the debt ceiling, President Obama and the Democrats conceded to cuts to the EPA and other important environmental programs. For their part, Republicans refused to compromise on the issue of new taxes and forced major cuts to environmental initiatives. The debt ceiling agreement should be the last time the White House offers something for nothing, going forward Obama must demand quid pro quo.

Although it is unpopular with Democrats and their supporters, entitlement reform may have to be on the table. In return for entitlement reform, Congress must be encouraged to support the green economy and the jobs that come with it. If, as expected, Republicans continue to be obstructionist, voters will decide the issue in 2012.

© 2011, Richard Matthews. All rights reserved.

Related Posts
Environmental Implications of the Credit Ceiling Agreement
The US Debt Ceiling Crisis and the Green Economy
Let Boehner Know that US Competitiveness Should not be Compromised
Republican Obstructionism on the Debt Ceiling Risks Global Environmental Collapse
EDF Campaign Opposing US Anti-Environment Bill
Republican Assault on the Environment
Gerry Connolly Video: Climate Disasters And GOP Denial
Blumenauer Video: 'The Jihad Against Climate Change Continues'
Chu Video: The Worst Anti-Environmental Bill of her Career

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