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Many of the Democrats running for President in 2020 support the Green New Deal that was introduced by Representative Alexandra Ocasio-Cortez of New York and Senator Markey of Massachusetts. The Green New Deal, however, would require a $10 tax increase on a single gallon of gas, according to a study by the CO2 Coalition. Key to the Green New Deal is the goal of eliminating gasoline-powered vehicles in favor of electric vehicles. But in order to make electric cars desirable to consumers gasoline prices would have to increase to $13 per gallon. Such a tax would undoubtedly harm consumers and the U.S. economy. CO2 Coalition Study The CO2 Coalition study entitled “The Social Cost of Carbon and Carbon Taxes” examines the social cost of carbon (SCC), which is an estimate of the discounted future costs to the world economy due to the atmospheric warming caused by a metric ton of carbon dioxide emissions, and the level of carbon taxes needed to encourage a major change in technology. To make decisions in the energy sector, the Obama administration established its own social cost of carbon. The Obama administration’s decision to look at costs to the world economy was contrary to official U.S. policy at the time because those estimates were supposed to be made only on the basis of the U.S. economy. This deviation allowed a much higher predicted cost of carbon than if they had followed protocol. The SCC used by the Obama administration was $42 per metric ton, while the SCC used by the Trump administration in regulatory rulemaking has been below $10. Carbon dioxide is a benign gas and is the byproduct of the conversion of fossil fuels into energy. There are many natural sources of carbon dioxide, which account for about 96 percent of annual contributions to the atmosphere. A gasoline-powered car emits about a metric ton of carbon dioxide every 2,500 miles. The SCC is often suggested as the logical starting point for a “carbon tax” to encourage the use of alternative sources of energy, such as transitioning from gasoline-powered vehicles to electric vehicles. The CO2 Coalition, as well as others, found that the government’s SCC is so sensitive to input assumptions that small and reasonable variations can produce almost any carbon tax. As a result, it is not a suitable tool for guiding public policy, including taxes on energy. The Cost of Transitioning to Electric Vehicles The authors of the study find that a carbon tax of about $1,000 per metric ton of carbon dioxide or roughly $10 per gallon of gasoline would be needed for electric cars to compete with conventional ICE vehicles based on the full cost of ownership and operation of the vehicle. They estimate that it costs about $2,700 more per year to use an electric car instead of a conventional car, which would save about 2,700 kilograms of carbon dioxide. As a result, each metric ton of carbon dioxide not emitted costs about $1,000. A $10 carbon tax on gasoline added to today‘s gasoline price of about $3 per gallon would make gasoline cost about $13 per gallon at the pump. Note that that price is two to three times what Europeans pay for petroleum-based transportation fuels, which on average total $5 to $6 per gallon for gasoline and $4 to $5 per gallon for diesel. Europeans typically drive somewhat smaller gasoline and diesel-powered cars than Americans. The Cost of Transitioning Electric Generation to Renewables The authors estimated the carbon tax needed to replace natural gas generation with wind or solar power. Assuming that electricity generated from natural gas costs about 4 cents per kilowatt hour, adding a $40 tax on carbon dioxide would increase the cost of natural gas generation by about 25 percent. A carbon tax of $40 per metric ton probably would reduce energy consumption slightly at the margin, but is nowhere near high enough to bring about a significant substitution of renewable fuels. To compete with natural gas for power generation, the authors find that onshore wind turbines would need a tax of around $200 per metric ton and solar PV power generation would require a tax of over $500 per metric ton. Conclusion The Green New Deal would cripple the U.S. economy by requiring carbon taxes ranging from $200 to $1000 per metric ton to spur replacement of current technologies in the transportation and electric generating sectors. If the United States were to implement carbon taxes of this nature, Americans would be devastated financially. And, given that the United States emits about 15 percent of global carbon dioxide emissions compared to China which emits 28 percent of the world total, U.S. reductions would have little impact on global atmospheric concentrations. According to China’s commitment to the Paris Climate agreement, the country will not begin to reduce carbon dioxide emissions until after the year 2030. Most Americans would find $13 per gallon gasoline unacceptable. The impacts on households and businesses of all kinds would be enormous. A quadrupling of gasoline prices would plunge the U.S. economy into a deep recession. Policymakers should understand the consequences of their proposals.

Dearly beloved, we are gathered here today to pay our final respects to the . We had such high hopes for it: hope that it would save our economy; hope that it would save our planet; and, most of all, hope that it would save our party from the coming .

What killed the Green New Deal?

Cathy Phifer’s March 20 letter shows a failure to see totality of problems. Nothing happens in a vacuum. Facts do not support blaming President Biden … alone. The Russian invasion has become a convenient talking point for blame stormers. Gasoline prices are a result of the Green New Deal, underpinnings of which started when oil was last at $100 per barrel in the Obama administration. It was that price point and ability to drill, lay pipelines and transport oil to market that solved those high prices. Today’s buzzword is “supply chain.” The oil and natural gas industry is the poster child for it. Biden granting leases to drill is hollow unless there is oil and gas there. It’s hollow unless drilling permits are awarded. It’s hollow unless oil can be piped to refiners and to distribution depots to be trucked to gas stations. “Drill baby drill” takes years of geological study, engineering and construction before gasoline is pumped. Remember the 2013 shale gas boom / bust that took years and billions of dollars to determine it wasn’t feasible here. The Keystone XL pipeline gets the headlines, but what about Mountain Valley, Penn East and Atlantic Coast pipelines, all killed by endless, ruthless litigation from Green New Dealers? Now they’re trying to stop using operating Enbridge No. 5 pipeline. Are you prepared for $75 gas, grill, propane fillup? Instead of completing pipelines, we ship billions of oil barrels on trains at inflated costs — until the next derailment and uproar. No one will drill and leave oil or gas stranded at the well. This forces prices up. Everything except your virgin cotton or wool sweater contains hydrocarbons, and virgin fabrics use gas and oil to weave and ship. Everything you eat, wear, watch, live in and drive on has hydrocarbon components. Teslas, Rivians and other “clean cars” have barrels of oil in plastics, paints, sealers and yes, batteries. Remember, we always need to consume fossil fuels to charge batteries and to make windmills and solar panels. If you saw the strip mining to harvest nickel and lithium needed to make “zero-emission” batteries, you’d rethink their cleanliness. Rare earth elements needed to make them and electronics / motors are so ecologically destructive to mine that 90 percent are mined in Third-World countries conveniently out of our sight and controlled by Russians and Chinese. The point is, dismantling the oil and gas industry is death by 1,000 paper cuts. We’re killing the lifeblood of this country by dismantling hydrocarbon-based economy without a suitable replacement. Wind and solar won’t cut it. Remember the outrage when we learned we couldn’t buy masks, syringes or aspirin made in USA? It will be the same if we destroy the oil and gas industry. This is your Green New Deal — it isn’t just high gas prices.

The largest five stock market listed oil and gas companies spend nearly $200m (£153m) a year lobbying to delay, control or block policies to tackle climate change, according to a new report. Chevron, BP and ExxonMobil were the main companies leading the field in direct lobbying to push against a climate policy to tackle global warming, the report said. Increasingly they are using social media to successfully push their agenda to weaken and oppose any meaningful legislation to tackle global warming. In the run-up to the US midterm elections last year $2m was spent on targeted Facebook and Instagram ads by global oil giants and their industry bodies, promoting the benefits of increased fossil fuel production, according to the report published on Friday by InfluenceMap. Separately, BP donated $13m to a campaign, also supported by Chevron, that successfully stopped a carbon tax in Washington state – $1m of which was spent on social media ads, the research shows. Edward Collins, the report’s author, analysed corporate spending on lobbying, briefing and advertising, and assessed what proportion was dedicated to climate issues. He said: “Oil majors’ climate branding sounds increasingly hollow and their credibility is on the line. They publicly support climate action while lobbying against binding policy. They advocate low-carbon solutions but such investments are dwarfed by spending on expanding their fossil fuel business.” After the Paris climate agreement in 2015 the large integrated oil and gas companies said they supported a price on carbon and formed groups like the Oil and Gas Climate Initiative which promote voluntary measures. But, the report states, there is a glaring gap between their words and their actions. The five publicly listed oil majors – ExxonMobil, Shell, Chevron, BP and Total – now spend about $195m a year on branding campaigns suggesting they support action against climate change. But the report said these campaigns were misleading the public about the extent of the oil companies’ actions because while publicly endorsing the need to act, they are massively increasing investment in a huge expansion of oil and gas extraction. In 2019 their spending will increase to $115bn, with just 3% of that directed at low carbon projects. Shell said in a statement: “We firmly reject the premise of this report. We are very clear about our support for the Paris agreement, and the steps that we are taking to help meet society’s needs for more and cleaner energy. “We make no apology for talking to policymakers and regulators around the world to make our voice heard on crucial topics such as climate change and how to address it.” Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk Chevron said it disagreed with the report’s findings. “Chevron is taking prudent, cost-effective actions and is committed to working with policymakers to design balanced and transparent greenhouse gas emissions reductions policies that address environmental goals and ensure consumers have access to affordable, reliable and ever cleaner energy.” The successful lobbying and direct opposition to policy measures to tackle global warming have hindered governments globally in their efforts to implement policies after the Paris agreement to meet climate targets and keep warming below 1.5C. You've read 5 articles in the last year Article count on I hope you appreciated this article. Before you move on, I was hoping you would consider taking the step of supporting the Guardian’s journalism. From Elon Musk to Rupert Murdoch, a small number of billionaire owners have a powerful hold on so much of the information that reaches the public about what’s happening in the world. The Guardian is different. We have no billionaire owner or shareholders to consider. Our journalism is produced to serve the public interest – not profit motives. And we avoid the trap that befalls much US media – the tendency, born of a desire to please all sides, to engage in false equivalence in the name of neutrality. While fairness guides everything we do, we know there is a right and a wrong position in the fight against racism and for reproductive justice. When we report on issues like the climate crisis, we’re not afraid to name who is responsible. And as a global news organization, we’re able to provide a fresh, outsider perspective on US politics – one so often missing from the insular American media bubble. Around the world, readers can access the Guardian’s paywall-free journalism because of our unique reader-supported model. That’s because of people like you. Our readers keep us independent, beholden to no outside influence and accessible to everyone – whether they can afford to pay for news, or not.

In general, empirical assessment of the determinants of business confidence across countries is just budding, especially since the last decade. Moreover, the extant studies are more concentrated on macroeconomic variables (inflation, interest rates, output) and, to an insignificant extent, political factors, with strong evidences of their impacts accordingly established. Against limited evidence in the literature, however, we take a departure from extant studies by enquiring into the influencing role of economic policy uncertainty and oil shocks on business confidence in the Organisation for Economic Cooperation and Development (OECD) countries. While there is hardly any economic sector and business activity that seems to be disconnected from oil, the construction of the US economic policy uncertainty index in 2016 by Baker et al. [] has led researchers to reveal how it affects the macroeconomy which cuts across the economic, finance and business spheres. We suspect that these global factors would also matter for business confidence.

Mokolo and Seetharam [] note that uncertainty tends to linger in the sub-conscious mind of different business stakeholders including company executives, clients and policy makers in relation to the future outlook of business activities. The implication is that economic policy uncertainty could adversely affect prices, consumption and outputs (see Alam, []), all of which are strong determinants of overall business performance. More succinctly, increase in economic policy uncertainty creates a shady environment for business as investors’ risks tend to increase while business profitability has the likelihood of falling. On the other hand, oil serves as a critical production input and aid for business performance. However, due to frequent economic and financial turmoils, oil prices have been plagued with multiple shocks over time []. For instance, the two consecutive oil shocks in the 1970s, the global financial crisis of 2008 and the oil price collapse of 2014–2015, among others, have proven that risks arising from the crude oil market could have detrimental effects on economic activities and outcomes, business conditions and investors decisions (See [, , ]. Generally, a rise in oil price depresses economic activity as production and investment costs simultaneously rise. This further adversely affects consumers as they reduce consumption following high cost of goods and services induced by the higher price of oil []. The summation of these effects is that they create fears in market participants, thereby influencing the confidence investors and entrepreneurs have in businesses as regards future expectations.

President Biden’s disastrous Green New Deal policies are stoking a trade war with key U.S. allies and will only result in skyrocketing energy costs, slowing economic growth, and a decrease in investment for American businesses. American families are already suffering in President Biden’s cruel economy, but the Biden Administration’s taxpayer-funded Green New Deal subsidies are liable to make them worse as they damage relations with key trading partners by essentially shutting American allies out of U.S. energy markets. READ: KEY TAKEAWAYS: The Biden Admin’s climate policies are damaging the U.S.’s relationships with major allies, stifling economic growth at home. Democrats’ $25 billion energy tax hikes will slash U.S. energy production and raise costs for families, according to analysis from the nonpartisan Congressional Budget Office (CBO). Prices at the pump will also go higher as the $12 billion superfund tax hike gets passed along to drivers. “The West’s climate policies are already harming consumers and slowing economic growth by raising energy prices and distorting investment. Now they are threatening a trade war that will cause more harm. The new climate protectionism won’t end well,” writes the Wall Street Journal editorial board, in . READ: Energy costs are skyrocketing with no end in sight. NBC News : “Nearly half of U.S. households use natural gas to heat their homes, and they will spend 28 percent more to do so this winter. […] Those who use heating oil […] will spend 27 percent more — barring a colder forecast — and homes that primarily use electricity and propane will pay 10 percent and five percent more.” The northeast U.S. is particularly vulnerable to higher heating costs, due to the region’s “limited gas pipeline capacity and [reliance] on diesel for heat.” National inventories stand at the lowest in 40 years, and prices for diesel have almost doubled in the last year. As reported by Bloomberg: “The U.S. has just a 26-day supply of heating oil to draw on, the smallest store for this time of year in at least three decades.” U.S. refineries are pumping out a million fewer gallons of diesel fuel with fewer refineries than before the pandemic, and the U.S. has not opened just one new oil refinery since 1977. READ: READ: Biden’s climate policies crush U.S. manufacturing jobs while giving handouts to green corporations. When President Biden rammed through $300 billion in higher taxes, the bulk of it fell on Made-in-America manufacturing. Independent experts have noted Biden’s so-called “Inflation Reduction Act” will have zero impact on inflation, instead allowing corporations to purchase new electric vehicles and trucks on taxpayers’ dime. Democrats are providing greenwashed big businesses with an exclusion from the book minimum tax, while the typical American manufacturer faces a higher tax bill.

The White House has launched a coordinated PR campaign to argue that it is not . That is a difficult argument to make when we look at the Administration’s record on energy. Time after time the Administration has acted to make it more difficult to produce energy domestically and they are actively seeking to make energy more expensive. This only makes an economic recovery more difficult.

The Administration’s Assault on Domestic Energy Production and the Use of Energy [Partial List]

Survey results for businesses — especially smaller firms — suggest regulatory changes are having some impact nonetheless: As shown in Figure 1 below, there is a link between the way small businesses view regulations and improvements in manufacturing sentiment.1 This is consistent with research that shows the impact of government regulations is greatest on small size firms. The environment is an extensive area of regulations to deal with externalities such as pollution. However, several studies suggest environmental regulations have become overly complex, and market-based solutions offer a more effective means for dealing with the problem of acid rain. Although several former Republican policymakers have proposed a carbon tax to combat global warming, President Trump believes the costs are too great for the economy. Another important area is financial services, where the principal challenge is to ensure stability without turning banks into quasi-utilities. It is too early to ascertain the impact of policy changes to lessen the impact of Dodd-Frank, but financial stocks have matched the overall stock market for the first time in several years after trailing the broad market consistently since 2008. Small Business Views on Regulation and ISM Manufacturing Sentiment chart Background: The Case for Deregulation One of the most controversial issues in public policy relates to the role of government regulation of the economy. This is an area in which many businesses have expressed frustrations over the past two decades. In a speech to the Economic Club of New York shortly before the November 2016 elections, Donald Trump mentioned that he frequently asks CEOs what they would pick if forced to choose between tax cuts or diminished regulations. According to him, nine out of ten executives would opt to have fewer regulations. The reason: companies can hire tax experts to navigate their way around the tax code, but it is more difficult to circumvent regulations. The regulatory burden is especially problematic for small businesses because the rules cause them to incur fixed costs, and the scale of operations is much smaller than for larger firms. For example, a study by Nicole Crain and Mark Crain of Lafayette College estimates the cost per employee of complying with federal regulations at $10.6 thousand for businesses with fewer than 20 employees compared with $7.8 thousand for those with more than 500 workers.2 The researchers also contend that government regulations make small business less competitive against foreign firms. Nor does the United States fare well when compared with many industrialized nations. A study by the Organization for Economic Cooperation and Development (OECD) undertaken a decade ago found the U.S. barriers had higher regulatory barriers to entrepreneurship, greater administrative burdens on small business owners, and higher barriers to competition than a number of other industrialized countries. An article in The Economist titled “Over-regulated America” (February 18, 2012) made the following observation: Americans love to laugh at ridiculous regulations…But the red tape in America is no laughing matter…Americans are supposed to be free to choose for better or worse. Yet for some time Americans have been straying from the ideal. How Costly Are Regulations? This begs the question about how costly regulations are for the economy as a whole. The problem is no one really knows.The federal government is not required to track regulatory costs, and most empirical studies have focused on a narrow set of industries. Federal agencies are only required to conduct cost-benefit analyses on rules deemed “economically significant,” which are defined as having an annual effect on the economy of at least $100 million. The Congressional Research Service, therefore, has warned that it is inherently difficult to estimate the total cost of regulations and that estimates “should be used with a great deal of caution”.3 What is clear is the Trump administration is serious about reducing regulatory burdens businesses face. It has done so by instituting a freeze that has slowed the number of new regulations considerably and by reinterpreting existing statutes to be more favorable to business than during the Obama administration. The Trump administration, in turn, has touted its pro-business stance as having contributed to the acceleration in economic growth over the past year to a 3% annual rate from 2% previously. Most economic analyses have credited the changes in tax legislation that were enacted at the end of 2017 rather than deregulation for this outcome. The consensus view, for example, is the stimulus from corporate and personal tax cuts were front-end loaded and will add the equivalent of 1% to 1.3% of GDP this year. By comparison, the impact on the economy over the long-term is estimated to be 0.1%-0.2% per annum, compared with 0.5% by the Trump administration. An alternative view is that of Mickey Levey, chief economist for Berenberg Capital Markets, who contends the easing of burdensome regulations has been a key factor driving U.S. business confidence, production, and capital spending: “While the deregulatory thrust has received far less attention than 2017’s tax reform deliberations or 2018’s skirmishes on trade policy, it is of utmost importance to business production processes and decisions about hiring, expansion plans, and investment strategy.” As evidence, Levy cites the latest survey by National Federation of Independent Business (NFIB), which shows that many small businesses have expressed reduced concerns about government requirements, and Levy links this to improved manufacturing sentiment in the ISM survey. Levy’s forecast for the U.S. economy over the long-term is upbeat: He believes the improved climate for business investment spending will help lift the potential growth rate of the economy from the Fed’s estimate of 1.8% per annum to at least 2% soon. In this regard, Levy contends that a “growing web of regulations imposed at the national, state and local level” after the 2008-09 financial crisis created policy-induced “supply constraints” that offset the Fed’s unprecedented monetary stimulus.4 At this juncture, it is too early to tell which view is correct. However, insofar as improved business sentiment translates into increased business capital spending, there is some corroboration for the view that burdensome regulations impeded economic growth after the financial crisis. Impact of Environmental Regulations Because of difficulty quantifying the impact of regulations on the overall economy, I have taken a closer look at two areas — the environment and financial services — where government regulation is especially important. With respect to the environment, the signature piece of legislation was the Clean Air Act that was enacted in 1970, which authorized the development of comprehensive federal and state regulations from both industrial sources and automobiles. It was followed by amendments to cover geographic areas that do not meet one or more of the federal quality standards in 1977 and legislation enacted in the early 1990s to deal with the problem of acid rain. Considerable progress has been achieved in battling air and water pollution, which has improved human health and the environment. Nonetheless, a prevalent view today is environmental policy is extremely complex, has led to ungainly bureaucracies, has incurred high costs, is politically polarized and is also very litigious.5 A report by the Brookings Institution on the 30th anniversary of the creation of the EPA, for example, acknowledged that U.S. companies were complaining about the high cost of compliance, and it cited two studies that estimated the annual cost in the late 1990s to range between $144 billion to $185 billion.6 Businesses have also complained the rules have outlived their usefulness, have resulted in job losses, and make American companies less competitive internationally.7

One of the hardest hit industries certainly would be agriculture and agriculture-related industries, which in 2017 employed 435,000 Wisconsinites, or 11.8 percent of employed people in the state. Using metrics devised by environmentalists, farmers would be liable for $230 per metric ton of carbon dioxide released. In other words, this carbon tax would cost Wisconsin farmers $2,000 per cow. Yikes!  The average-size dairy farm in Wisconsin has 150 cows, which would result in a $300,000 annual tax to those farmers. Wisconsin also is home to large dairy farms, known as CAFOs (concentrated animal feeding operations), which are made up of 700 cows or more. For a CAFO of 700 cows, the tax would amount to $1.4 million per year. Even mass production facilities don’t have the type of margins it would take to swallow a tax that big. As for crop farming, WILL looked at corn and soybean production in Wisconsin, since those are two of the biggest crops in the state. Crop farmers will be hard hit by a move toward organic farming methods the Green New Deal would require. According to our study, because organic farming methods don’t use herbicides or pesticides and don’t genetically modify crops, the net crop yields would be greatly reduced. For example, Dutch researchers found that organic crop yields are, on average, about 11 percent less than crop yields from conventional farming methods. Applying that rate to Wisconsin soybean and corn crop yields alone would result in more than $200 million in annual losses for the industry. The Green New Deal also would hurt manufacturing in Wisconsin. According to Scott Manley, executive vice president of government relations at Wisconsin Manufacturers & Commerce, “Manufacturing is the number one sector of the Wisconsin economy. The Green New Deal would absolutely threaten the affordability and reliability of energy, and therefore the long-term success and viability of manufacturing and manufacturing jobs. From a macroeconomic level, it’s fundamentally a policy that will kill jobs and inflict significant harm and economic pain on middle-class families.”

Capitalists keep a firm grip on the state in at least two ways. First, they place their people into state positions, and influence other state officials through social ties, donations, and the lure of lucrative work after leaving office. Second, they threaten and carry out “capital strikes.” Whenever state managers adopt policies that slow or impede the flow of private profit, capitalists threaten to stop investing. When they do stop the flow of capital, the investors’ aim is to “” to tank popular support for progressive governments.

The fight for a GND will have to overcome these powers over the state, wielded by some of the most dangerously mighty corporations in history. For a measure of the Goliaths we’re up against, consider that ExxonMobil, the largest fossil fuel company in the US, had $237 billion in revenue in 2017. This wealth means power over our economy, and an enormous influence over our political system.

With the midterm victories in the House of Representatives, Congressional Democrats are likely to begin a full-court press on their most recent policy initiative: a federal jobs guarantee program. Senators Corey Booker, D-N.J., and Bernie Sanders, I-Vt., have advanced their own, and with the arrival in Congress of affirmed Democratic Socialists like Alexandra Ocasio-Cortez of New York and Rashida Tlaib of Michigan additional support seems likely. Several think tanks — including the Center on Budget and Policy Priorities (CBPP), Levy Economics Institute (LEI), PolicyLink, and the Center for American Progress — have proposed job guarantee plans. While there are minor differences between them, each essentially contemplates a massive, government-run program to provide work (at a predetermined wage) and benefits to enrollees on demand. Currently, individuals in the job market "sell" their labor to firms as much as firms "purchase" labor. Mutually, this transaction — employment — arises because both the employee and employer benefit; value is recognized reciprocally. With a federal jobs guarantee program, the government is inserted between the employee and the employer; the value proposition is limited at best. Centralized plans such as these forgo the most fundamental elements of markets — information, competition, and incentives — in favor of rote bureaucratic reckoning.

A Daunting Task

Providing people with access to jobs in areas that are struggling economically might sound like a good idea at first glance, but on closer examination it is deeply flawed and extraordinarily harmful. Creating a jobs guarantee program that would bankrupt our country, create unsustainable deficits, slow economic growth, and increase the government’s control over the labor market is one of the worst ideas radical Democrats have proposed Jobs guarantees effectively put government in charge of the labor market, by establishing baseline wages and benefits. Wherever there is a jobs guarantee program, private employers must pay at least what the government is willing to offer its employees and prospective employees through the jobs program. Because government does not need to worry about profits or operating efficiently, and because it often runs huge deficits, it has a large advantage over every business in the private sector, making it incredibly difficult for private companies to compete. That means job guarantees distort markets and drive employees out of productive businesses and into government jobs that might not even be needed. The proposal backed by Omar would be especially harmful, because it would incentivize local and state governments to enact policies that would increase unemployment rates. Doing so would provide them with access to job guarantee grants from the federal government. State and local governments with unemployment rates lower than 10 percent and less than double the national unemployment rate wouldn’t be eligible for the program. Over the long run, a jobs guarantee would also encourage governments to take over more parts of the economy. As more Americans sign up for the jobs program, additional new services would need to be offered by government to ensure its growing number of employees have work to do. This would slow the growth of the entire economy, because government is notoriously wasteful and inefficient. Take Amtrak, for example. In its nearly 50 years of operation, it has never broken even. In fiscal year 2019 it had one of its best years in history, but still lost more than $29 million. Job guarantees have become increasingly popular among Democrats as the party has shifted further to the left in recent years. In 2019, Sens. Cory Booker, D-N.J., and Kamala Harris, D-Calif., (now under consideration to be Joe Biden’s vice presidential running mate) introduced the Federal Jobs Guarantee Development Act, which would have created a three-year jobs guarantee pilot program. Rep. Alexandria Ocasio-Cortez, D-N.Y., a self-described socialist and close ally of Omar, included a federal jobs guarantee in her radical Green New Deal proposal, which was sponsored in the Senate by far-left Sen. Edward Markey, D-Mass. And in June socialist Sen. Bernie Sanders of Vermont joined far-left Rep. Ayanna Pressley, D-Mass., in supporting Renew New England, a coalition seeking to elect state-level candidates in the northeast who support regional Green New Deal policies, including a jobs guarantee. Of course, neither the federal government nor any state in New England has money available, even if taxes are raised, to pay for a costly jobs guarantee. The American Action Forum estimates the jobs guarantee included in AOC’s Green New Deal would cost from $6.8 trillion to $44.6 trillion over 10 years. No program in American history has ever been so expensive. Creating a jobs guarantee program that would bankrupt our country, create unsustainable deficits, slow economic growth, and increase the government’s control over the labor market is one of the worst ideas radical Democrats have proposed — and that’s saying a lot. Congress should instead enact policies that encourage people who lost their jobs due to the pandemic to get back to work in regions where it is safe to do so. Lawmakers should work with the president to reduce regulations to spur growth in key industries, and lower taxes for businesses that hire new employees or rehire existing employees. Programs like this will help our economy recover and reduce unemployment created by the coronavirus pandemic. Cutting government spending to offset costs associated with tax cuts, rather than creating new big-government programs, would be the right path forward. Americans don’t need an impossibly expensive far-left government program to turn our economy around. In fact, many of the programs being proposed now by Democrats like Omar, including her jobs guarantee, would have the opposite effect. These programs would stunt growth and make an economic recovery all but impossible. A strong private sector is the key to our prosperity and has made American the envy of the world. It can do this again as we recover from the pandemic. Socialism and communism have been economic disasters in every country foolish enough to adopt these systems, bringing needless suffering to billions of people around the world. The same would be true if make-work government employment proposals like those advanced by Omar and Ocasio-Cortez are enacted into law.

Democrats are plugging new energy into an old idea: a federal “Jobs Guarantee” program. Senator Cory Booker for a pilot in high unemployment communities. Now Senator guaranteeing a job or training paying $15 an hour and health‐​care benefits to every American worker “who wants or needs one,” in a host of public infrastructure, care giving and environmental upkeep projects. The scheme, seemingly based on , comes with grandiose purported benefits. It would, we are told, eliminate involuntary unemployment, deliver a living wage, boost GDP, reduce the cost of recessions, raise labor market standards, reduce environmental degradation, reduce racial inequality, and much else besides. If it sounds too good to be true, that’s because it is. There are severe problems with this idea, which can be loosely grouped under three “c’s”: costs, crowd out and corruption. Costs The Levy Economic Institute calculates up to 16 million could take part in such a program today (including the unemployed, those working part time seeking full time work and individuals currently inactive who might move into the labor market). Given the federal government would have to pay $15 an hour for full time jobs, plus benefits equal to 20 percent of wages, total labor costs per worker would be $37,440 per year. That’s before the cost of the materials for the programs and administration of the program itself. Even assuming some opt for part‐​time positions, and ignoring the non‐​labor program costs, we are talking about a gross cost of up to around 2.4 percent of GDP, significantly higher than the existing Medicaid program (2 percent of GDP). The net cost on these assumptions will be lower, of course. People who take jobs will require less in welfare payments and pay some back in taxes. Some might wisely consider it a risk for their employment fortunes to be tied to the whims of politicians and their willingness to fund this program, and so remain in the private sector. But even taking this into account, and assuming the policy generates the macroeconomic bounty that the Levy researchers expect, they still think the annual net cost will be between 0.8 and 2 percent of GDP, with the program employing up to 10 percent of the workforce. That would in itself be a huge new commitment to finance at a time when the long‐​term fiscal outlook is already dire, and the short‐​term deficit already expected to balloon to over 5 percent of GDP in the coming years. Crowd‐​out In reality, the fiscal costs are likely to be much, much higher, and the economic welfare losses even more significant, because in the labor market and broader economy, a public jobs guarantee program would significantly crowd out productive private sector activity. This type of policy will radically alter behavior of both workers and businesses, and so the supply and demand for labor. The , among those who worked in 2016, 70+ million Americans earned under $32,500 (the full‐​time job guarantee salary would be $31,200). Yes, not all of these would seek out positions on the jobs guarantee program. But a large proportion would, especially those employed in uncertain roles with low levels of job security. In fact, some even paid more than $31,200 might consider leaving their jobs to pursue guaranteed roles if they perceive better working conditions or an easier worklife (asked under what conditions someone would be fired from such a role, the Levy Institute paper suggests that you would be sacked for failing to go to work, but that your performance would not be judged by “private sector ‘efficiency criteria’”, for example.) It’s not inconceivable then that over 25 percent of the labor force could find itself part of the scheme. This crowd‐​out is likely to be particularly acute in low productivity regions, and (ironically) after economic downturns. A nationwide jobs guarantee program paying $15 an hour will be particularly attractive to workers in low wage regions, and by setting a de facto wage floor the program will prevent private investment in regions on the basis of cheap labor. Though no doubt there would be some demand spillovers from well‐​paid jobs, the net consequence is highly likely to be weaker private sector job creation in poor regions, which has been the experience of countries such as Britain with a nationwide minimum wages and public sector national pay bargaining. Proponents of the scheme see “higher labor standards” as a good thing, but absent productivity improvements, policies which raise labor costs significantly will reduce the quantity of workers demanded. There’s good reason to expect the policy will reduce the efficiency and productive potential of the economy too. Taxes will eventually need to be raised to cover the net cost of the program. In infrastructure and care giving provision, costs will rise – because nobody would now work in these directly substitutable sectors for less than the wage and conditions offered in the job guarantee program. This will waste resources, and there’s highly likely to be overinvestment in lots of relatively low value ventures and programs to ensure workers are employed, especially given the explicit aim is to provide employment rather than deliver projects at low cost. Throwing resources at regions with higher levels of unemployment and after recessions too will work directly against market signals and deter the mobility of labor (in geographic and industrial terms) and capital to its most productive uses given prevailing market conditions. This is important: yes, employment is highly likely to have some positive externalities; but the real driver of better living standards over time are productivity improvements, discovered by market‐​based activity. Proponents of this policy seem to put an enormous weight on the idea that time out of the labor market has huge scarring consequences which could be ameliorated by any type of temporary employment. But the literature on this shows that temporary jobs to improve longer‐​term labor market outcomes. Corruption and incentives As if all these consequences were not bad enough, such a program will be ripe for corruption and political interference at the government, provider and individual level. Senator Sanders’ plan would be administered by the Department for Labor, with local and state governments submitting projects to regional offices for consideration. There’s a huge question mark on whether projects will be considered on economic grounds, when there might be an incentive for make‐​work schemes to aid particular politicians or indeed to put resources towards “public good” causes or NGOs more in line with the ethos of the governing party. For Democrats this might be for environmental issues. For Republicans it might be, say, for a wall on the southern border. NGOs and local public bodies themselves will have incentives to apply for federal funds for projects that would otherwise have occurred anyway, and to maximize the number of applications. Pork barrel projects would proliferate. What is more, at the individual level, the guarantee coupled with the purported unwillingness to judge worker performance on a commercial basis will incentivize low levels of work effort on the margin. Conclusion The Jobs Guarantee then is an extremely large and costly endeavor, which would have major economic consequences and risk a large federal politicization of the labor market and public project delivery. The US does have serious labor market issues to contend with — not least depressed labor participation and a weak productivity outlook — but are things really so bad that they require such a risky and extensive policy response? Well‐​paid jobs and low levels of real unemployment are outcomes desired by all. But attempting to achieve that through this program amounts to cracking a nut with a sledgehammer, undermining what matters far more for living standards: efficiency and productivity.

Even more troubling, there's the possibility that the guaranteed federal jobs could cannibalize the private sector and make the economy less productive. The New Deal jobs programs were undertaken at a time when the economy had a huge amount of unemployment, and there was little chance that workers with private-sector jobs would jump ship. But in the absence of very high unemployment like that of the Great Depression, a job guarantee will compete with private companies.

And the job guarantee would often win that competition. Modern proposals would require that the federally guaranteed jobs be good jobs, with good pay and benefits. For example, here is the relevant text from the Green New Deal resolution recently introduced by Rep. Alexandria Ocasio-Cortez: "guaranteeing a job with a family- sustaining wage, adequate family and medical leave, paid vacations, and retirement security to all people of the United States."

When it comes to the Federal Job Guarantee plan, Caponi’s discussed impacts show how a massive public sector work project can have many drawbacks to the private sector. In Greg Ip’s Wall Street Journal article titled The Problem with a Federal Jobs Guarantee (Hint: It's Not the Price Tag), Ip discusses the challenges that the private sector will face with wages, inflation, and technology after the implementation of the Federal Job Guarantee plan. First in order to keep many of the workers that make less than $15/hour, the private sector will see massive salary increases. Employers will be forced to raise the salaries of their workers, because they do not want to lose their labor, similar to a $15 minimum wage effect (Ip, 2018). This will lead the companies to potentially raise the private sector causing rise in customer costs to offset their short-term losses in revenue. This raised cost on customers will negatively impact certain businesses more than others (Ip, 2018). Policies such as this will positively impact labor in big firms like Wal-Mart that can afford offering health benefits or wage increases (Ip, 2018). But these policies will hurt smaller firms to a mega scale, that cannot offer the same benefits as the public sector would with Job Guarantee. Overall this may intensify the oligopoly market that we have in the country, because many small businesses or start-ups, will be unable to meet labor or revenue demands to stay afloat (Edwards, 2016). This would make many argue that the Job Guarantee plan will not be very positive for the private sector as a whole. It may force labor or employment changes against the market need, that may help some, but forced changes have mixed effects from unequal benefits. Whenever we add money to the market or change wage floors, we see various inflationary pressures that will reduce the value of the dollar in the short-term.

The deficit is at the top of the political agenda, and cuts to spending are certain to come, but how urgent is the deficit problem in reality? Is it important that we cut as much as we can as soon as we can, or is there time for a more patient and deliberative approach? The Good The first thing to recognize is that deficits are not always bad. When the economy goes into recession, deficit spending through tax cuts or the purchase of goods and services by the government can stop the downward spiral and help to turn the economy back around. Thus, deficits can help us to stabilize the economy. In addition, as the economy improves due to the deficit spending the outlook for businesses also improves, and this can lead to increased investment, an effect known as . Deficits also allow us to purchase infrastructure and spread the bills across time similar to the way households finance the purchase of a car or house, or the way local governments finance schools with bond issues. This allows us to purchase infrastructure that we might not be able to afford if it had to be financed all at once (this can also force future generations who benefit from the spending to share the construction costs). Finally, deficits can be used to finance wars, but whether this is a good or a bad depends upon your view of whether the war is just. So let's turn to the bad next. The Bad The main worry about deficits is . Crowding in was just described "it occurs when deficits cause output to go up and business confidence is increased. Crowding out comes about when deficit spending raises interest rates. There is a limited amount of funds available for investment, and when government competes with the private sector for a share of these funds to finance its deficit spending, it drives the cost of these funds" interest rates" higher. The increase in the interest rates causes investment to fall, and lower investment translates into lower output and lower economic growth. In addition, to the extent that the private sector is more efficient than the public sector, crowding out, i.e. more government spending and less private investment, can result in a less efficient use of resources (though in the case of government can be the more efficient provider, and hence it is not always the case that efficiency falls). Another worry about deficits is that they will be monetized leading to inflation. occurs when the Fed prints new money and uses it to purchase government bonds help by the private sector. This removes debt from the private sector and replaces it with money, and if the money is used to purchase goods and services, as it's likely to be, this can be inflationary (though when there is an excess supply of goods, as in a deep recession, inflation is unlikely to be a problem). The Ugly The worst outcome would be for the deficit to get so bad that the government chooses to default on debt payments (which could also lead to some other currency, or a basket of currencies, replacing the dollar as the and currency). I don't expect this to happen, particularly since we can always print money to pay off our debts. But printing money to pay off debt could be highly inflationary, it could lead to high interest rates as foreigners refuse to lend to us for fear we'll inflate the obligation away when it comes due, and the government could still choose to default if it is the least costly option among bad alternatives. Thus, it needs to be mentioned as a possibility. The Showdown Which of these concerns is most important? Notice that in the short-run, the consequences of deficits are mostly positive when the economy is in a recession. Deficits allow us to stabilize the economy (though it's important we pay the bills when times get better), deficit spending can stimulate investment through crowding in, and there's little danger that the spending will drive up interest rates or be inflationary due to the large amount of slack in the economy. But in the longer run deficits are mostly problematic. As the economy nears full employment deficits can lead to higher interest rates, crowding out, less investment, and slower growth. Inflation can also be a problem, and if the debt burden gets bad enough, outright default is a possibility. That's why economists who have supported the use of monetary and fiscal policy to ease the effects of the recession are recommending that we continue the stimulus for now, or at least that we don't make things worse by reducing spending or raising taxes before the economy is on better footing. We do have a deficit problem, and it must be addressed over the medium and longer term in order to avoid the negative effects described above. But reducing the deficit before the economy is on solid footing can be counterproductive" it could slow the recovery or even cause a setback. If we are smart" if we continue to help the economy now and implement a credible deficit reduction strategy over the longer term" the good can triumph over the bad and the ugly. Unfortunately, the way things look presently, with the deficit hawks demanding immediate action to stave off , and the inflation hawks pushing for interest rate increases to keep the at bay, there's no guarantee that good will prevail.

Clark (1939) believes there is some truth to Keynes’s claim that deficit-spending can stimulate demand an output, even arguing that it might “produce an industrial expansion,” but the effect would likely “dwindle rapidly and disappear if the deficit spending stops.” “It is highly improbable,” he wrote, “that this form of stimulus can itself serve to initiate a revival that will endure after the stimulus is removed.” In fact, he maintains that “indefinite deficit spending is not an endurably workable remedy for chronic, partial stagnation of an economic system like our own.” Instead of Keynes’s socialization of investment, Clark believes that “a free flow of private investment” is the “prime requisite of success,” and if anything, deficit-spending tends to displace or undermine private investment, by diminishing business confidence. “If businessmen expect the public deficit to continue for a long time and in large volume, they will be affected by fear of ultimate impaired public credit, or of inflation, or, if not these, then at least by fear of burdensome taxes in the future.” For Clark “these are all retarding forces,” and worse, are caused by the same deficit-spending and debt accumulation policies that Keynes wrongly asserted would prove ameliorative. On the other hand, in support of Keynes, Clark denies that public borrowing in the 1930s is crowding out other credit; private sector loan demand and interest rates are too low, he says, to support such a claim. He also denies that the public debt is a net burden to the economy, yet is attentive to disaggregating the effects, a method typical of later public choice analysts; for Clark, while “there is nothing self-limiting about the debt the government is piling up,” and it may seem troubling that the debt “goes on increasing without limit,” nevertheless “it does not represent a net burden of this amount on the economic system as a whole.” Our real concern, he says, should be for the way the public debt “does represent an obligation on Americans as taxpayers to transfer ever-increasing sums to Americans as bondholders.” Oddly, his concern begins only after bondholders have transferred their capital to taxpayers, via the state. But concurring with many prior debt theorists, Clark believes public bondholders are unproductive, or at best, passive financiers of an unproductive entity (government), so any larger role they assume in credit markets due to purchases and portfolio accumulations of public debt “will retard business activity materially.” Clark does not suspect that financiers may be lending to the state only because business activity already is retarded or unsafe. Paying some attention to the actual spending that deficit-spending entails (as did Keynes, who insisted that outlays be restricted mainly to public capital projects, not to mere consumptive transfers), Clark (1939) warns that infrastructure projects are not so easily or quickly launched, nor are they typically sufficient in number or of financial magnitude to make a material difference in a large economy, and worse, they are prone to political patronage and invite wasteful rent-seeking. In short, Clark presciently identifies many of the same risks that seem to bedevil “stimulus” spending schemes to this day. “We have not reached the limit of our debt-bearing power,” Clark contends, “but we do seem to have reached a point at which the piling up of public deficits is a deterrent to private capital outlays,” and unfortunately, the likelihood now (in 1939) is that the Treasury “will be treated as a bottom-less grab bag for pressure-group interests.” Despite voicing this public choice theme (rent-seeking), Clark concludes by tentatively endorsing the usual grab bag of Keynesian ideas – including keeping wage rates “as high as possible” (despite a sky-high jobless rate), ensuring “low interest rates” (even as public bondholders are reluctant to take risks), and imposing confiscatory tax rates to curb “high profits” and preclude “a top-heavy scale of income distribution.” A professor at Harvard since the early 1920s, John H. Williams specialized in trade and monetary theory, but in his 1941 article, “Deficit Spending,” he tackled, for the first time publicly, what seemed to be the linchpin of the Keynesian policy for recovery from depression in the 1930s. The problem, by 1939, was that no real recovery was either visible or foreseeable, despite record peace-time deficit-spending. Keynesians began to argue that recovery was elusive because too small a dose of the new fiscal medicine had been administered, or because, in the phrase of Alvin Hansen (the “American Keynes”), capitalism now suffer from “secular stagnation,” which no mere counter-cyclical fiscal or monetary policy could effectively forestall. More drastic (interventionist) measures would be required, and some Keynesians and FDR New Dealers viewed Europe as a model for new veins of state intervention, including the Continent’s penchant for war. Indeed, Keynes had said, in his General Theory (1936), that war could cure an economic depression, for it could simultaneously lower the jobless rate by conscripting the idle and sending them abroad, eradicate “over-production” by overt wealth destruction, and absorb “excess saving” by huge state borrowing and spending on projects of dissipation. In 1937 Williams had recruited Hansen from the University of Minnesota to Harvard, and the two organized and taught the famous Fiscal Policy Seminar, attended by students, academics, and policymakers, at the new Harvard Graduate School of Public Administration, where Williams served as dean from 1937 to 1947. Although Williams generally opposed Keynesian policies, he also helped Hansen achieve influence and fame, such that he became a world-renowned Keynesian. In “Deficit Spending,” Williams (1941) seems like a proto-public choice theorist, for he treats not only the economics of deficit-spending but the politics behind it (plus the politics resulting from it). He contends that deficit-spending lacks coherence, both logically and economically, that it only became official “policy” by default, in the aftermath of the failure of the Federal Reserve’s earlier low-interest-rate policy, which sought to foster a lasting recovery; now, he argues, deficit-spending is being pursued mainly to rationalize a more expansive economic role for government, and perhaps a more expansive role as well, within government, for its advocates and their interests, within the state, a common aspiration for many academic economists in the 1930s.

A strong fiscal outlook is an essential foundation for a growing, thriving economy. Putting our nation on a sustainable fiscal path creates a positive environment for growth, opportunity, and prosperity. With a strong fiscal foundation, the nation will have increased access to capital, more resources for future public and private investments, improved consumer and business confidence, and a stronger safety net. However, if we fail to act, the opposite is also true. If our long-term fiscal challenges remain unaddressed, our economic environment weakens as confidence suffers, access to capital is reduced, interest costs crowd out key investments in our future, the conditions for growth deteriorate, and our nation is put at greater risk of economic crisis. If our long-term fiscal imbalance is not addressed, our future economy will be diminished, with fewer economic opportunities for individuals and families and less fiscal flexibility to respond to future crises. Rising debt threatens America’s future in a number of critical ways: Reduced Public Investment. As the federal debt mounts, the government will spend more of its budget on interest costs, increasingly crowding out public investments. Over the next 10 years, the Congressional Budget Office (CBO) estimates that interest costs will total $10.5 trillion under current law. Currently, the United States spends over $1.3 billion per day on interest payments. As more federal resources are diverted to interest payments, there will be less available to invest in areas that are important for economic growth. With interest rates currently higher than they have been for the past decade, the federal government's borrowing costs will increase markedly. Within 30 years, CBO projects that and would be more than three times what the federal government has historically spent on R&D, non-defense infrastructure, and education combined. Reduced Private Investment. Federal borrowing competes for funds in the nation’s capital markets, thereby raising interest rates and crowding out new investment in business equipment and structures. Entrepreneurs face a higher cost of capital, potentially stifling innovation and slowing the advancement of new breakthroughs that could improve our lives. At some point, investors might begin to doubt the government’s ability to repay debt and could demand even higher interest rates — further raising the cost of borrowing for businesses and households. Over time, lower confidence and reduced investment would slow the growth of productivity and wages of American workers. Fewer Economic Opportunities for Americans. Growing debt also has a direct effect on the economic opportunities available to every American. If high levels of debt crowd out private investments in capital goods, workers would have less to use in their jobs, which would translate to lower productivity and, therefore, lower wages. On the other hand, reducing federal borrowing would counter such effects; according to CBO, by 2050 if we were to reduce our debt to 79 percent of the size of the economy by that year. In addition, high levels of debt would affect many other aspects of the economy in the future. For example, higher interest rates resulting from increased federal borrowing would make it harder for families to buy homes, finance car payments, or pay for college. Fewer education and training opportunities stemming from lower investment would leave workers without the skills to keep up with the demands of a more technology-based, global economy. Faltering support for research and development would make it harder for American businesses to remain on the cutting edge of innovation, and would hurt wage growth in the United States. Furthermore, slower economic growth generally would also make our fiscal challenges even worse, as lower incomes lead to smaller tax collections and put the federal budget further out of balance. Vital safety net programs would come under even greater budgetary pressure, threatening support for those who need them most. Greater Risk of a Fiscal Crisis. If investors lose confidence in the nation’s fiscal position, interest rates on federal borrowing could rise as higher yields would be demanded to purchase such securities. A rapid increase in Treasury rates could also lead to higher rates of inflation, which would reduce the value of outstanding government securities and result in losses by holders of those securities — including mutual funds, pension funds, insurance companies, and banks — which could further destabilize the U.S. economy and erode confidence in U.S. currency on an international scale. Challenges to National Security. Our fiscal security is also closely linked to our national security and ability to maintain a leading role in the world. As Admiral Mullen, former Chairman of the Joint Chiefs of Staff, put it: “The most significant threat to our national security is our debt.” As the national debt grows, not only are we more beholden to creditors around the globe, but we have fewer resources to invest in strength at home. Imperiling the Safety Net. America’s high debt jeopardizes the safety net and the most vulnerable in our society. If our government does not have the resources and stability of a sustainable budget, those essential programs, and the individuals who need them most, are put in jeopardy.

The climate challenge requires the immediate implementation of ambitious climate policies. However, global and national financial institutions have expressed concerns that an abrupt and coordinated increase in carbon prices could lead to major shocks to the stock market, with the potential for systemic risk. Some assets will lose part of their value, others all of it, and hence become “stranded”. If the markets are not ready to absorb the shock, a financial crisis could follow. The number of jurisdictions pricing carbon has increased substantially over the last few years, mainly following the Paris Agreement, to reach 57 jurisdictions and a coverage of about 20 % of global greenhouse gas emissions (World Bank 2019). Very recently, the World Bank’s Highlevel Commission on Carbon Prices called for a global carbon price in the order of $40 to $80 per ton of CO2 (Stiglitz et al. 2017). While the increase in coverage and stringency of carbon pricing should be good news for climate change mitigation, in a recent and very influential speech Bank of England’s governor Mark Carney expressed strong concerns for the potential role that stranded assets could play in destabilizing the global economy (Carney 2015).

A global financial crisis caused by climate policy would not only disrupt the lives of millions of people, but also represent a major setback for climate action. Macroprudential measures, such as climate stress tests, have become part of the policy options considered by institutes such as the European Systemic Risk Board (ESRB 2016), and are under consideration in Canada, France, Italy, the Netherlands, Sweden, and the United Kingdom (Caldecott et al. 2016; Campiglio et al. 2017, 2018). In the United Kingdom, the Streamlined Energy and Carbon Reporting regulations seek to mandate carbon disclosure for all quoted as well as large unquoted companies. In the United States, Senator Elizabeth Warren sponsored the Climate Risk Disclosure Act, a bill requiring public companies to disclose critical information about their exposure to climate-related risks.

We develop a point-in-time index to approximate changes in transition risk from climate-related news events. By explicitly considering news to signal an increase or a decrease in the external pressure towards a shift to a lower-carbon economy, we overcome the assumption that “no news is good news on climate” inherent in previous research. We evaluate the return sensitivity of publicly available climate portfolios that apply different approaches to measure a firm’s environmental performance based on investors’ objectives. Our results show that short-term transition risk tends to affect returns of stock portfolios based on firms’ business activity but not emissions.