She’s No Alexander Hamilton


The Antiplanner might be behind the times, but has anyone else noticed that it is the Democrats who are playing the role of Alexander Hamilton — the conservative who wanted to centralize government and concentrate power in New York banks — while the Republicans are playing the role of Thomas Jefferson — the civil libertarian who wanted to keep economic and political power decentralized? I always wondered why Lin-Manuel Miranda picked such a conservative historical figure to be the hero of his left-leaning musical.

Now we know. Alexandria Ocasio-Cortez’s Green New Deal is going to cost tens of trillions of dollars, but she just blithely says we’ll pay for it “the same way we paid for World War II”: “The Federal Reserve can extend credit to power these projects and investments and new public banks can be created to extend credit.”

That’s not how we paid for World War II. Instead, we borrowed money from banks and people that had money. Alexander Hamilton knew just creating a bank doesn’t suddenly give it credit; instead, there has to be assets or income backing up that credit.

At the end of World War II, the national debt briefly reached 113 percent of gross domestic product, which is the source of income that backs up American borrowing. Ocasio-Cortez’s plan would require the national debt to reach close to 300 percent of gross domestic product.

The Antiplanner isn’t a macroeconomist, but I know enough to know that you don’t want your national debt to grow to three times or even twice GDP as it slows growth, crowds out private investment, and risks inflation. Japan’s debt equals 236 percent of its GDP, the highest of any country, and its economy has been stagnating for nearly three decades. Second is Greece, at “just” 181 percent of GDP, and it is an economic basket case whose economy is propped up by Germany and other European nations in the Euro zone.

I estimate the 300 percent based on Ocasio-Cortez’s desire to eliminate all fossil fuel usage and build a high-speed rail network sufficient to replace all air travel. A few years ago someone estimated that replacing all fossil fuel sources of electricity with renewable power would cost $13 trillion (compared to a $1 trillion value of our current electrical power system). Assuming mass production of solar panels and other materials can significantly reduce costs, we’re still talking at least $7 trillion.

But only about 33 percent of our fossil fuel consumption is used to power the electrical grid. The rest goes to transportation, industry, and home and commercial heating. So the base cost of the Green New Deal will be at least $21 trillion.

On top of this is the cost of high-speed rail and other projects. Last week, I estimated that Ocasio-Cortez’s high-speed rail network would cost around $4 trillion, but that was based on an assumption that it would be about the same size as the Interstate Highway System. Then I realized that there are lots of commercial airports that are not within 50 miles of an interstate. To fully serve all communities now served by America’s 500 commercial airports (outside of Alaska and Hawaii) with high-speed rail would likely double my original estimate. Plus Ocasio-Cortez should demand at least a couple more trillion dollars in carbon offsets for the steel and concrete that goes into high-speed rail (not to mention windmill, etc.) construction, all of which emits huge amount of greenhouse gases that can’t be replaced by renewable energy.

Add in the $4.6 trillion that Ocasio-Cortez casually mentions is needed to “repair and upgrade U.S. infrastructure” along with other parts of the plan, and the Green New Deal is going to cost at least $35 trillion. Add this to our current debt of $22 trillion, plus whatever additional debt we routinely incur in the next few years, and the total debt will increase to more than $60 trillion. GDP data for 2018 aren’t in yet (thanks government shutdown), but it will be slightly more than $20 trillion.

There’s another phrase for Ocasio-Cortez’s proposal to rely on “Federal Reserve Bank credit”: printing money. The last time we tried to print money to pay for major programs — during the Viet Nam War — we ended up with terrible inflation. That inflation will make it harder to achieve Ocasio-Cortez’s goals, and if we continue printing money to reach those goals, the result will be hyperinflation, most recently known as Venezuela.

Ocasio-Cortez is clearly a believer in modern monetary theory, which essentially says government debt doesn’t matter because, to oversimplify, “we owe it to ourselves” so the government can print as much money as it wants to pay its debts. This is an insane idea that ignores the fact the incredible inflation that has afflicted countries that have tried to do this. After all, if everything a country produces stays the same, but the government prints twice as much money, then the money is going to be worth half as much.

Ocasio-Cortez thinks the Green New Deal will avoid this fate by increasing productivity. “We invested 40-50% of GDP into our economy during World War 2 and created the greatest middle class the US has seen.” Her grandparents apparently never told her about the daunting sacrifices American made during World War II. They gave up mobility so soldiers could get around. They gave up many foods at the dinner table so soldiers could eat. They gave up vacations — national parks effectively shut down. They gave up lots more. They saved money because they weren’t allowed to spend it for four years, and that savings is what helped build the post-war economy.

Yet Ocasio-Cortez is not asking Americans to sacrifice or save anything to achieve the Green New Deal, which is supposed to last ten years not four. Instead, she is specifically promising jobs with “vacations, and retirement security,” “healthy food,” and “high-quality health care.” Moreover, if you don’t want to work one of her jobs, you won’t have to: she promises “economic security for all who are unable or unwilling to work” (emphasis added). That’s really going to boost productivity!

Defensively, Ocasio-Cortez asserts, “If Eisenhower wanted to build the interstate highway system today, people would ask how we’d pay for it.” People did ask how we’d pay for it when he proposed it in the 1950s, and he said “100 percent from highway user fees.” Tennessee Senator Al Gore, Sr. — father of the former vice-president — responded, “Okay, Mr. President, but only on the condition that no one goes into debt based on the future value of those highway user fees.” In other words, Gore insisted that the interstate highways be built on a pay-as-you-go basis, something that cannot be done for any part of Ocasio-Cortez’s plan.

For example, Amtrak claims that its Northeast Corridor netted half a billion dollars last year. If we apply that to construction of a high-speed rail system the way we applied highway user fees to construction of the Interstate Highway System, we could build 2-1/2 miles of high-speed rail per year. At that rate, it would take tens of thousands of years to complete the system Ocasio-Cortez wants.

The big problem with this thought experiment is that Amtrak’s “profitable” Northeast Corridor suffers from a $51 billion maintenance backlog, so all of the “profits” it earns really need to go into that backlog, not towards building new lines (which in fact is where they are going, though they are only scratching the surface of the backlog).

Ocasio-Cortez points out that, “The interstate highway system has returned more than $6 in economic productivity for every $1 it cost.” Yet this is because the interstates replaced slow, expensive transportation with fast, economical transportation. Her plan would replace fast, low-cost transportation with slow, high-cost transportation. Airfares today average around 15 cents a passenger mile Amtrak’s Acela charges an average of 90 cents a passenger mile. Slower, high-cost transportation will result in negative economic productivity for every dollar spent on it.

Ocasio-Cortez’s faith in government would be funny if it were not so scary. It is notable that the United States is one of the few major nations that has not committed itself to reduce carbon emissions, yet it has reduced those emissions by more than any other country. It did so not through big-government programs but through capitalist innovation, namely the increased production of natural gas (which emits less carbon per unit of energy than coal or oil) through hydraulic fracturing.

So really, the Democrats aren’t playing Alexander Hamilton. They’re playing someone who wants Hamilton’s power but who has no understanding of how banking and the economy work. Needless to say, that’s a recipe for disaster.

This piece first appeared on The Antiplanner.

Randal O’Toole ( is a senior fellow with the Cato Institute and author of the new book, Romance of the Rails: Why the Passenger Trains We Love Are Not the Transportation We Need, which was released by the Cato Institute on October 10.

Photo: Senate Democrats [CC BY 2.0], via Wikimedia Commons