Green New Deal – Fantasy or Reality?

The Green New Deal debate may signal that issues like climate change and sustainability now have Washington’s attention.

The phrase “Green New Deal” has been widely discussed in the news in recent months. What is it? And how might it affect markets and investors?

Defining the Green New Deal
The Green New Deal is a turn of phrase that covers a range of new and evolving policy proposals related to climate change and economic inequality. It includes – but is not limited to – the Green New Deal Resolution released by Representative Alexandria Ocasio-Cortez of New York and Senator Ed Markey of Massachusetts.

A wide-ranging resolution
The Green New Deal Resolution packs a lot into 14 pages. It calls for a 10-year plan to establish a carbon-neutral US economy – remaking the electric grid from renewable and zero-emissions sources and overhauling factories, farms and transportation to eliminate greenhouse gas emissions.

The political background
The Green New Deal Resolution was co-sponsored by 68 Democratic House members and 10 Democratic senators - including the six that have announced a bid for the Democratic presidential nomination. Polling data in early primary states has suggested the resolution has the support of many Democratic voters.

One thing to note, however, is that the resolution contains very few details about how this immense re-envisioning of the US economy will be paid for. Republican critics of the bill have said it would only result in massive tax hikes and huge increases in energy costs for millions of American families.

It’s nearly impossible to imagine legislation of this scope passing in the current Congress, with Republicans controlling the Senate and the White House. However, Democrats have begun laying the groundwork for reforms, and if we see a shift in power in 2020 from the Republicans to the Democrats, it is not impossible to imagine that parts of this resolution could be implemented.

New talking points
So – what should we make of all this? Many members of the newly elected House Democratic majority – and Democratic senators – are using Green New Deal talking points to put a political stake in the ground and give them a voice in our government they felt was missing.

It helps them promote issues like climate change and economic inequality that resonate with much of their voting base, including younger voters. The party is preparing to challenge President Trump for the White House in 2020, which puts a lot of pressure on the six Democratic senators that supported the resolution. If they continue to stand by the principles of the GND, they may risk losing the moderate voter and give the Republicans an issue to use against them in the presidential primary. If they back away from the GND, they risk backlash from more progressive voters, which could hurt their support within their own party.

The path ahead
What’s important is that the conversation in Washington, DC around global warming, economic inequality, and sustainable economic development appears to have changed. It seems that a growing number of voters, industry leaders, and legislators are seeking policy responses designed to foster green business practices and diversify economic opportunity.

While we’re not likely to see a Green New Deal become law any time soon, both Democratic and Republican legislators can expect these issues to remain front and center as they work to meet the demands of their constituents and their parties.

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This material is provided for informational purposes only and should not be construed as investment advice.

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