OPINION — In the final debate of the 2010 British general election, Conservative Party leader David Cameron told his Labour Party rival, Prime Minister Gordon Brown, that “Labour seem to confuse the economy with the government.” A month later, Cameron had Brown’s job.
Given the proposals in the Democrats’ Green New Deal — whose bungled release last week made for some sorely needed comic moments in an otherwise grim Washington — their leading economist, Alexandria Ocasio-Cortez, could learn something important from Cameron’s spot-on observation about what drives a successful economy. A hint: It isn’t government.
According to AOC and her Senate partner Edward Markey of Massachusetts, “It is the duty of the Federal Government to create a Green New Deal” that covers the waterfront from net-zero greenhouse gas emissions to creating “millions of good, high-wage jobs” and ensuring “economic security for all the people of the United States.” Apparently, those willing and unwilling to work.
The Green New Deal goes on with a laundry list of demands for government to overhaul whole industries or retrofit all buildings to be energy efficient, and provide high-quality health care for all, affordable housing, clean water and air, education for all, healthy, affordable food, and access to nature.
The plan’s vision of a great liberal mobilization to totally transform the country into a giant utopian commune overseen by a benevolent federal government is about as realistic as rounding up unicorns.
Also watch: Trump says Green New Deal sounds like a ‘high school term paper that got a low mark’
Learning from history
Yes, the nation faces problems, some very serious. However, if history is any kind of teacher — and it usually is — a bigger, more intrusive government isn’t going to solve America’s tough challenges; the private sector is. Even a cursory look at the original New Deal, clearly admired by AOC and her progressive compatriots, reveals that FDR’s progressive economic strategy, grounded in government intervention and government-funded jobs, achieved only limited progress in righting the nation’s spiraling economy.
In reality, the New Deal spent billions of dollars, and seven years into this experiment in centralized planning, in 1939, the country was still struggling in the Great Depression.
When Roosevelt took office in March 1933, unemployment in the prior year had been 23.6 percent — an almost unimaginable number today. One of his first New Deal programs, the National Industrial Recovery Act, or NIRA, limited competition and put wage and price controls in place on a number of industries — all in the name of putting people back to work. But the results tell a different story.
By 1935, unemployment had only dipped to 20.1 percent. It got as low as 14.3 percent in 1937 and then began climbing back to 17.2 percent in 1939. It was only America’s entry into World War II that saw unemployment drop significantly as those in the Armed services rose from 540,000 in 1940 to 11.4 million by 1944. The New Deal didn’t revive the American economy; WWII did.
Whether it was the NIRA or many other programs like the Civilian Conservation Corps or the Works Progress Administration, designed to create government-funded jobs, the programs did provide some employment, if temporary, for some people. But in the end, it took World War II to finally get unemployment to mid single digits. The debate over the New Deal and its impact continues today, but looking at its record of creating real jobs, it’s fair to question what would have happened in 1933, or 2009 for that matter, if the federal government’s approach to unemployment had reflected a belief in the ability of the private sector, not the public sector, to create jobs?
More broken promises
In February 2009, newly inaugurated President Barack Obama and the Democrat-controlled Congress passed a stimulus bill to address what at that point was an unemployment rate of 8.3 percent. People were promised “shovel-ready” projects that would create plenty of new jobs. They were promised a focus on government “investment” in green energy. They were promised an economic turnaround.
What they got was a record-breaking 30 straight months of unemployment at 9 percent or higher — the longest streak of 9 percent-plus unemployment since monthly jobs reporting began in 1948.
What happened? The economy was confused with the government.
Obama learned the hard way that maybe his administration didn’t have as many shovel-ready projects as predicted. And the green energy revolution that was going to transform America? That question can be answered in one word — Solyndra.
As the Obama administration picked green energy winners and losers for government guarantees, it hailed Solyndra as a poster child for public-private partnerships that would change energy production as we know it. Department of Energy bureaucrats approved a $535 million federal loan guarantee despite a raft of financial red flags flying over the highly touted “green” company. But two years later, Solyndra was bankrupt, 1,100 jobs were lost, and taxpayers got stiffed with a $528 million bill.
Every American taxpayer ought to think twice before putting the kind of power, represented by the Green New Deal, into the hands of a government that brought us Solyndra, the rollout of the Affordable Care Act, incompetent care at the VA, and billions of dollars wasted every year on outdated technology and ineffective programs.
So should every Democrat — presidential candidate or otherwise — before jumping on Ocasio-Cortez’s Green New Deal and her “great leap forward” into socialism and central planning. Apparently, senators will soon have to make that choice thanks to Majority Leader Mitch McConnell.
Mark Perry, a University of Michigan economics professor and American Enterprise Institute scholar, argues that socialism always fails because “it is not consistent with fundamental principles of human behavior.”
“The failure of socialism … can be traced to one critical defect: It is a system that ignores incentives,” he wrote in a 1995 essay, before adding, “The main difference between capitalism and socialism is this: Capitalism works.”
I would respectfully add that Perry’s incentive factor, missing in government, is also what drives innovation. And in the long run, it is private-sector innovation, not government, that delivers real economic leaps forward.
Ocasio-Cortez once said, “I don’t think most of Congress understands how economics works.”
I’m guessing Margaret Thatcher might have answered her this way: “The problem with socialism is that you eventually run out of other peoples’ money.”
Today’s Green New Deal shares many of FDR’s original goals, but like the old New Deal, it reflects an economic philosophy that has a long track record of promising much and producing less. Today, one party thinks government is the answer to people’s problems. The other rightly thinks only the private sector can create the kind of economic opportunity and growth that helps ensure “prosperity and economic security for all.”
What Ocasio-Cortez needs to realize is that without the private sector’s incentives and innovation, the resources to fund government simply won’t be there at all.
David Winston is the president of The Winston Group and a longtime adviser to congressional Republicans. He previously served as the director of planning for Speaker Newt Gingrich. He advises Fortune 100 companies, foundations, and nonprofit organizations on strategic planning and public policy issues, and is an election analyst for CBS News.