The Biden administration is up and running, already beginning to implement its ‘Build Back Better’ agenda. And if Biden’s first actions are any indicator, that’s going to mean Build Back Greener.
From prohibiting new drilling on federal lands to establishing new White House climate positions and pledging to decarbonize the power sector by 2035, the new administration is facilitating the transition to a more just and sustainable economy.
But, going forward, it could get much more ‘bang for its buck’ by making a few simple tweaks to the US’s existing institutions of public finance from the onset. This will allow us to leverage what we already have to act faster – and smarter – in inventing and spreading the green industries of tomorrow.
Here, then, are four steps to take ‘with all deliberate speed’, which I have called the InvestAmerica Plan.
A National Reconstruction and Development Council
First, the Biden administration should configure all members of the White House Cabinet who have jurisdiction over the nation’s primary infrastructures and industries into a National Reconstruction and Development Council. The Council will be chaired ex officio by the president and vice-president, and officially by the federal reserve chair and secretary of the Treasury. Its task will be to formulate and regularly update a National Development Strategy (NDS) analogous to the National Defense Strategy updated each year by the nation’s defense and security agencies.
The NDS will identify the sustainable industries of tomorrow that are in need of jump-starting today, and will likewise identify the most polluted and left-behind regions of the country and segments of our citizenry in need of a green boost. It will earmark specific project fields and public investment projects – wind, solar, geothermal, electric – in which to invest (since incumbent carbon-committed firms won’t) to make national development both environmentally sustainable and once again never-ending.
A cardinal intellectual and policy blunder of the past 50 years has been both to segregate ‘national development’ from justice and sustainability, and to treat it as a one-off achievement instead of a perpetual process of technical and productive renewal. Going forward, we must remember the words of the great development economist Bob Dylan – “he not busy being born is busy dying” – and remind ourselves that these words are as true of societies as they are of individuals. The Council will be the embodiment of that recollection. And as a subset of the White House Cabinet, it will be both democratically accountable and able to plan our ongoing green development coherently instead of in siloed fashion.
An upgraded Federal Financing Bank
Second, the Biden administration should use the Treasury’s already-existing Federal Financing Bank (FFB) as the Council’s investment arm. Currently the FFB uses Congressionally appropriated funds to finance all our federal agencies through lending and credit support. Two simple tweaks, one at the intake and one at the output end, will transform FFB into a permanent and environmentally sensitive national development bank alongside the Council.
At the output end, authorize FFB to invest in sub-federal units of government, and in public-private development partnerships, as well as in federal agencies. Let it also take equity stakes in addition to credit instruments, where appropriate, as financing instruments. For in some cases boardroom ‘voice’ will be helpful in overseeing projects, and earned revenue will be welcome as well.
At the input end, authorize FFB also to issue its own credit instruments, and to form Special Purpose Trusts to fund fully diversified portfolios of specific project types. Let private sector investors purchase stakes in these funds too, so as both to add private to public capital in financing perpetual national development, and to give pension funds something more productive than Wall Street to invest in.
The First World War-era War Industries Board and War Finance Corporation, as well as the Second World War-era War Production Board and Reconstruction Finance Corporation, paired up much as I am envisaging the NRDC and the FFB pairing up here. The US had to finance and ramp up war production on an expedited timeline, and these institutions accordingly planned and financed both quick conversions of existing factories and the establishment of new ones to produce steel, rubber, jeeps, tanks, ships and planes – taking both debt and equity stakes in the relevant firms. They financed these operations, in turn, with public capital, private capital, and retained earnings.
Today we are faced not with war, but with what the American philosopher William James called “the moral equivalent of war”. Working together, the NRDC and upgraded FFB can, from the output end, plan and finance decarbonizing projects from municipal installation of electric vehicle charging ports at all parking meters, through the building of multiple battery and wind turbine factories in scores of impoverished communities, on down to the retrofitting of all sizable buildings in the country. And at the intake end they can form investment pools for all project types – such as a ‘solar fund’, a ‘battery fund’, and a ‘wind power fund’ – in which anyone can invest.
Spread the Fed
Third, Spread the Fed. Americans have forgotten that the Federal Reserve was initially established as a network of regional development banks. While today the regional Fed District Banks function mainly as think tanks, in the Fed’s early decades they purchased short-term commercial paper issued by small businesses and agricultural concerns. That assured adequate liquidity and short-term funding to our nation’s primary drivers of technological development and productivity growth. Today the Fed doesn’t operate like that, yet its enabling Act still authorizes this form of development support.
All that the Fed has to do is once again open its discount window to businesses of the kind that it used to support, while in this case prioritizing firms that the Council finds to be developing green technologies and practicing socially just labor practices – including worker ownership or codetermination. Socially just and environmentally friendly small firms all over the country – that is, in all 12 of the Fed’s Districts – would then benefit. A start-up firm developing new air – or water – treatment methods, for example, or perhaps better solar or battery technologies, would be the new paradigms of ‘productive’ for Fed lending purposes.
If the newly ‘spread Fed’ limits this revamped facility to financing only such Council-endorsed productive green projects in the Main Street economy rather than speculative gambles in the Wall Street economy, it will both more productively deploy the nation’s investment capital and take the wind out of overblown Wall Street sails. And since the Fed Chair will be co-chair of the aforementioned Development Council, they will have no trouble discerning what has been democratically determined to ‘count’ as justly and sustainably productive.
A Universal Digital Savings and Payments Platform
Lastly, the administration should provide smartphone-accessible digital banking to all citizens, businesses, and guests. Any American person or business already can open an account with the US Treasury through its TreasuryDirect (TD) system, out of which one can purchase and into which one can redeem Treasury Securities. All we need to do to convert TreasuryDirect into a socially inclusive universal savings and payments platform is firstly convert TD Accounts into inter-operable P2P digital wallets, and secondly allow digital dollar bills – that is, Federal Reserve Notes – to be held alongside the Treasury Bills and Notes now in those wallets.
The US Digital Service, an executive agency said to be loved by Vice-President Harris, avers it could do this upgrade by the summer. In time, we could then migrate the system over to the Fed to integrate into the Fed’s broader monetary policy apparatus. Fed helicopter drops or Universal Basic Income would then be easy. Moreover, all of the green public investing described above could be done through these wallets, as could the sending of relief checks and stimulus payments. An NRDC-mandated FFB investment in a new green-tech firm, for example, could be made instantly over the new digital platform. In effect this platform would be the full liability-side counterpart to the asset-side augmentation entailed by the first three planks just elaborated.
An opportunity to go big
I have designed all four planks of this plan to be implementable even without House or Senate majorities. The Biden administration could, in other words, do all of these things under existing authority. But since Democrats have those majorities, why not mandate what would otherwise be discretionary? It’s the easiest way to assure larger Democratic gains in 2022, and to Build Back Better – and greener – at an ever-accelerating, snowballing rate.
In case you are interested, Congress, here is a draft bill all ready.