After the benefit of a week to uncover the details of the new Fiscal Cliff deal brokered by Congress in the first hours of 2013, it’s clear that the deal has mixed implications for the future of Green Economics in America. From traditional economic thinking to sustainability concerns, this convoluted package raises some red flags.
The Basics
At its heart, the current Fiscal Cliff agreement is about taxes. The deal will see tax rates rise for people who earn more than $400,000 each year (for individuals) or $450,000 each year (for families). That’s higher than the $250,000 pledged by the President, but still a big step towards compromise for formerly immovable Tea Party Republicans.
The deal also ends the payroll tax holiday. Excluding that change, most families would see no change in their taxes in 2013, according to USA Today’s Fiscal Cliff article on Sac & Co. With the inclusion of that change, 77 percent of families will see their taxes rise, potentially threatening the health of individual family finances and business interests in the upcoming year. That rise in taxes is unlikely to translate to an increase in funds for social programs, given the sequestration question still on the table.
At the same time, the deal included extensions of existing tax breaks for businesses and industries that had expired in 2012—to the tune of about $67.9 billion in breaks for special interests in 2013 alone, according to Congress’ Joint Committee on Taxation (as reported by NBC News).
The ongoing debate on spending cuts will now continue for two more months, along with the question of whether to move the debt ceiling. These two major political and economic concerns still hang in the air, a grey pall impacting the future of a Green Economy—or any economy—for our country.
Green Economics
Economists in recent years have turned toward theory and research advancements pertaining to the possibility of a “greener” economy—one that is sustainable for the planet and the people on it. That shifts the balance away from a mindset of continual growth as the measure of a successful economy. Instead, a green economy would still maximize potential profit, but within a framework of social and ecological responsibility that recognizes the importance of ecological health for human health (and long-term economic health).
The Fiscal Cliff deal has both positive and negative impacts on various aspects of the emerging Green Economy—but all of them are complicated.
Farm Bill Extension a “Disaster for Farmers”
SustainableAgriculture.net calls the Farm Bill provisions tied to the Fiscal Cliff fandango a “disaster for farmers and the American people” and “blatantly anti-reform”. The deal entailed a nine-month extension measure with some provisions extending as far out as a year, including massive direct payment subsidies. While those $5 billion in subsidies for Big Ag stay locked in, smaller programs targeted to fund reforms in the food system and support for rural jobs were left on the chopping block, while limiting farmers’ abilities to protect soil and water through enrollment in the Conservation Stewardship Program.
Renewable Energy Gets a Boost
Renewable energy interests were pleased with the fiscal cliff deal—and renewable energy is, somewhat questionably, considered integral to “green economics”. (More on that in another article.) The bill extends a major wind power tax credit for one year and supports biodiesel research and production in the upcoming year through tax credits and depreciation rules, as well as the revival of a biodiesel tax credit that expired at the end of 2011, according to The Energy Collective.
One caveat: The bill also treats coal from Native American lands as an “alternative energy resource”. The production tax credit applies to more than renewable resources like wind—Section 406 subsidizes coal produced on Native American lands at about $2 per ton. There’s not a massive financial impact here, but it is important to realize that the “Green Energy” provisions in this bill aren’t entirely clean and green.
Is the “Eco-Cliff” More Dangerous Than The Fiscal Cliff?
Yes.
On the Inspired Economist, Glenn Croston writes that the “Eco-Cliff” is at least as much of a concern as the Fiscal Cliff. Separating our concerns about money from our concerns about the conservation of the world around us is symptomatic of some myopic and potentially dangerous world views. We worry about leaving the results of our financial improprieties to our children, while driving the planet headlong toward an Eco-Cliff that will be much more all-encompassing than an economic recession.
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