Feb 1, 2020
Bernie Sanders and Climate Change: Costs
Mr. Sanders’ website presents his proposals for dealing with climate change. It’s a long and admirably detailed prescription. It won’t work. Here’s why.
Cost: $16.3 trillion
Mr. Sanders proposes to spend $16.3 trillion to combat climate change. That number is staggeringly large. That is nearly four times the total federal budget. It amounts to $50,000 for every man, woman, and child in this country. It is almost as much as the entire GDP of the country.
Mr. Sanders explains that all this money will come from a variety of sources. First, he will punish fossil fuel companies by confiscating lots of their wealth. The problem here is that the total value of all American fossil fuel companies is less than $1 trillion. If Mr. Sanders is elected, then that value will plummet to almost nothing. Why? Because all that value comes from the oil rigs, tankers, oil reserves, and other fossil fuel assets of those companies. If we’re going to ban all fossil fuels, then fossil fuel assets aren’t worth a dime. Who’s going to buy an oil drilling rig when you can’t sell the oil? Thus, punishing the oil companies won’t make a dent in the $16.3 trillion bill.
The next source of money that Mr. Sanders will tap is the income tax from the 20 million jobs that he’ll create. This is a beautiful example of the same kind of voodoo economics that Mr. Reagan was so fond of. Mr. Reagan promised us that, by lowering taxes, he would encourage so much growth in the economy that we’d get more revenue from taxes on all the new economic activity. That was bull, and Mr. Sanders is selling the same snake oil. This time, he’s telling us that he’ll spend trillions of dollars creating 20 million new jobs, and then recover the money from the income taxes paid by those workers. “We’ll get rich on the taxes paid by the workers whose salaries we pay!” Yeah, right. Sure. Voodoo economics.
Next, Mr. Sanders will collect revenue by selling electricity from the new electrical power generation facilities that he’ll be building. This is even more voodoo economics. There are already lots of electric utilities selling electricity. If they thought that they could sell more electricity, they’d build more power plants. But they don’t, because the economics just doesn’t work out. Yet Mr. Sanders promises us that he’ll make trillions of dollars where the existing utilities can’t. On top of that, he promises that “after 2035 electricity will be virtually free, aside from operations and maintenance costs.” Yeah, right. Sure. Free electricity. Along with the free ice cream cones, right?
Mr. Sanders’ third idea for generating revenue is to reduce spending on the military. This is definitely a great idea. We spend $700 billion on our military every year, more than the top 10 next biggest spenders combined. We don’t need to have a military three times more powerful than China’s or Russia’s. We could cut our military spending in half and still have the world’s most powerful military. But doing so won’t generate anywhere near enough money: about $3.5 trillion over ten years. That leaves a $12.8 trillion hole in the budget.
Next, Mr. Sanders proposes that we’ll be able to reduce welfare spending because of those 20 million new jobs he’ll be creating. The problem here is that we can’t fill those 20 million new jobs. The unemployment rate is about 3%, which economists consider to be about as low as a real economy can get. Sure, we’ll gain some benefits from Mr. Sanders’ program, but we won’t gain trillions of dollars in savings that way. Nowhere near that much.
Lastly, Mr. Sanders proposes to make “the wealthy and large corporations pay their fair share.” There’s a lot of merit in this idea; the Gini Coefficient in this country is way too high and we definitely need to transfer wealth from the rich to the rest of the population. Heavy taxation on the wealthy is definitely beneficial. However, Mr. Sanders proposes to accomplish this by taxing their wealth. I have previously explained why his wealth tax won’t work. We could still raise a few trillion by increasing income tax on the wealthy — but nowhere near enough to pay Mr. Sanders’ bill.
Finally, there’s some simple, basic economics to consider: money doesn’t grow on trees. There’s no magic cornucopia that will supply us with extra goods and services. Our economy produces about $20 trillion worth of goods and services every year. If we redirect, say, $1 trillion of that output to combatting climate change, then we have $1 trillion less for other goods and services. It’s that simple. So if Mr. Sanders spends $16.3 trillion on new stuff to fight climate change, then Americans will have $16.3 trillion LESS for other things. Fewer burgers, fewer new houses, fewer movies, less of everything. You can’t have your cake and eat it, too. We really do have to make decisions requiring sacrifices.
There is one other partial justification for spending $16.3 trillion to combat climate change: to reduce the costs it imposes upon us. Right now, climate change is costing us a few hundred billion in damages every year. Every dollar we spend today to reduce climate change will save many dollars over the long run. But the problem is that we have to make the sacrifice TODAY to get the benefit in the FUTURE — and the future we’re talking about is decades away. All in all, it’s still a good investment, and we should definitely make that investment. But you don’t sell your house to get a new car. You take it in smaller steps that you can manage.
Mr. Sanders’ proposal for dealing with climate change makes no sense. The numbers don’t add up. It’s pie in the sky, grand promises that can never be fulfilled. Mr. Sanders is trying to buy votes by promising the moon and the stars, but he can’t give us the moon and the stars.
