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We Need a Green Bailout for the People

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The US government’s response to the 2008 financial crash was this century’s greatest missed opportunity. On the one hand, $700 billion in bailout money went to prop up banks, insurers, and automakers through the Troubled Asset Relief Program, or TARP. On the other, the Obama administration’s stimulus program—formally, the American Recovery and Reinvestment Act—spent an estimated $831 billion to create jobs, spur buying, and in the process deliver the closest thing that we’ve seen thus far to a Green New Deal.

Among other things, the Recovery Act enabled tens of billions of dollars’ worth of investment in climate-related infrastructure as well as loan guarantees and cash grants to clean-energy companies. It was a turning point in making wind and solar cost-competitive. The stimulus program invested $90 billion in these technologies, and renewable power generation doubled over the course of Barack Obama’s first term.

Despite these successes, the investment was far too small. True, the administration conceded some ground to the idea that governments should spend their way out of a recession, thereby avoiding the full-blown austerity trap that continues to plague Europe. But by 2010, Obama returned to an attempt to cut the federal deficit, keeping the greatest accomplishments of the stimulus quiet.

What’s more, the banks helped to undermine whatever progress the Recovery Act might have made in curbing emissions through its proto–Green New Deal. Since 2016, JPMorgan Chase—which received $25 billion in TARP funds—has poured $196 billion into coal, oil, and gas projects around the world. Wells Fargo was given the same amount and has invested in new fossil fuel infrastructure to the tune of $152 billion, and together, major banks financed $1.9 trillion worth of fossil fuel investment over the same period. Combined with relatively high oil prices and cheap postcrash credit, the bailout’s infusion of cash into the financial system helped spur the natural gas boom.

Bailouts tend to get presented as a binary. Either let flailing firms fail or save them to prevent economic disruption. That’s a false choice. “The key thing to remember,” economist J.W. Mason says, “is that bailouts are not just handouts…. They are also moments when the government has maximum leverage over the private sector. If we are going to be paying the piper in the next crisis, we should be thinking now about what tunes we want to call.” In this view, the Obama administration’s response to the 2008 financial crisis offers a cautionary lesson: It was too heavy on carrots and too light on sticks.

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