The horizon is not so far as we can see, but as far as we can imagine

The Quick and Clean Guide to Fixing the Economy (Keynesian Stimulus #2)

dawnHow would one do a Keynesian stimulus properly today?  Remember, the preconditions for Keynesian stimulus to work are that it not overly aggravate bottlenecks (not send oil to $150/barrel, for example); that it not aggravate overused sinks (carbon); and that the money not pool uselessly at the top.  Keynesian stimulus must create widespread demand.  Further, in a world with bottleneck constraints, sink problems and overuse of even renewable resources, it should help resolve those problems.

Create Widespread Demand While Mitigating Sinks and Bottlenecks

1) Every federal building in America to go to energy neutral at least, or energy surplus ideally.  That’s a massive stimulus.

2) In order for a house to be “conforming” and thus qualify for federal loan guarantees it must be energy neutral at least, as well.

3) A subsidized waiver system for retrofitting civilian buildings to be energy neutral—the cost of which is paid back by savings, so homeowners pay nothing, and commercial guys pay little.  You can create a securities market for the certificates to bring private money online.

4) No mortgage can be conforming if any laws or homeowner agreements forbid the homeowner from growing their own food or selling it.

5) All new condominiums and apartment complexes must provide for growing food, through hydroponics or other means.  Without it, they are, again, not conforming or the income from them gets taxed higher.

6) Substantial tax breaks for telecommuting. (See section below for how to make corporations do this.)

7) Move to a high speed rail system, subsidize electric cars with certificates (buy one while turning in a non-electric car and the government pays half), and so on.

These actions give you a massive renewable buildout, fast.  Most of the jobs are domestic (even if panels are bought from China).  They reduce energy use significantly, including peak turbine oil use and they enable people to grow food when needed, reducing pressures on various carbon sinks and renewable resources.

(I am fundraising to determine how much I’ll write this year.  If you value my writing, and want more of it, please consider donating.)

Reform the Tax System

8) Move back to high marginal income tax rates.

9) Move back to high marginal corporate tax rates, to force companies to start spending their money and to make tax incentives work again: at 80% tax rates the corporations will be very happy to do whatever the government wants them to do in exchange for a 20% tax rebate.

10) Reform the tax code so money earned in the US cannot be moved overseas to avoid said taxes.

11) Make stock buybacks rare (again, to force corporations to spend their money or give it to shareholders).

12) A punitively high inheritance tax on any inheritance over 5 million or so, with no loopholes.

13) A carbon tax.  Imports from any country will be charged that carbon tax at the rate of their carbon expenditure. Countries which will not allow proper inspections to determine said tax rate will be hit with the highest rate.These actions both stop money from pooling at the top and bring money off the sidelines.  The rich can spend it or have it taxed away.

There are many other things one could (and should) do (property taxes being at least partially based on carbon production and energy use, for example), this is just an outline and high-points.  It doesn’t include “how to get there”, but it is important for people to know that there are other options that would work other than status-quo neo-liberalism. If people don’t believe better worlds are possible, they won’t fight to get to those worlds.

Nor would this program work for every country, it requires a powerful country with the ability to impose conditions.  It would, however, work for the US.


When Keynesian Stimulus Works


What the Melian Dialogue tells us about the End of Empire (Venezuelan security threat edition)


  1. jsn

    9) 0% Tax? or 100% Tax?

  2. Ian Welsh

    Woops. Corrected to 80%. Thanks.

  3. EmilianoZ

    There sure is a lotta things to do. But we consistently vote for the politicians that will not do them. I personally vote green. When I say that, my friends usually look condescendingly down on me, as if on some impractical naive simpleton. People who read Ian Welsh or Naked Capitalism are a tiny tiny minority. We are powerless. The masses do not change. What is outside the mainstream is just plain unthinkable for them.

  4. subgenius

    The poll results are in, and are consistently and overwhelmingly in favour of avoiding any of the actions required to even have a hope of managing the near future.

  5. subgenius

    …in fact, it is obvious that approximately nobody even wants to have a meaningful discussion about reality.

  6. DMC

    One thing they do here in the Czech Republic is that everybody gets what are essentially food stamps, whether you work or not. They’re more widely negotiable(many restruants take them for instance) and because its not just something for the poverty stricken there’s no stigma attached and the 1% don’t whine endlessly because it allows them to pay everybody a little bit less.

    Don’t know that I’d be too worried about those $150 barrels of oil at least for the next 2-3 years, with the Saudis and the rest of the “Low Production Cost Club” of oil producers that felt like too many chislers were breaking into the oil racket, with the unconvetional(high cost) types of recovery being pretty much target one. The leash was getting a bit too slack for some peoples taste. And really even those $100 barrels were only that expensive due to to all kinds of speculation, though it did serve the high cost producers(Venezuela, North Sea, tar sands and frackers) well.

  7. Flaser

    While I largely agree with your suggestions Ian, I’m afraid you’re giving renewables too much credit. There are several problems with them which I’ll try to succinctly list:

    1. It is difficult to generate the quantities of electricity that are as large as those produced by traditional fossil fuel generators. (Their energy density is simply too low).
    2. The above is aggravated by the possibly intermittent nature of renewable energy sources. You need energy *storage* to mitigate this. The only mature technology we have that could meet the actual demands is pumped water storage. Storing energy and retrieving it imposes a further “conversion efficiency tax”. (Batteries are getting better but yet can’t handle average household demand).
    3. Our electric grid was not designed to deal with energy going *both ways*, i.e. from nominal electricity consumers. (With wind, you also have resonance issues. Actually, you might be better off with an entirely new local grid, maybe even using DC instead AC for handling lots of small energy sources).

    The above boils down to some rather painful conclusions:

    1. Renewables are a lot more expensive than what “The Greens™” parrot on television.
    2. Renewables are not plug & play technology to replace our existing power infrastructure.
    3. Renewables lack the necessary power density (both in terms of space and $/kWh) to address our non-electric energy issues.

    Is there an alternative? Yes, nuclear.

    Isn’t that dangerous and >>insert some Greepeace fearmongering here<<? No. The dangers of nuclear energy have been grossly overrepresented. However our current nuclear reactors are nowhere near as safe and reliable as they could be, since they're Gen 2 and Gen 3 designs. Gen 4 designs have vastly better, *passive* safety features.

    Why didn't we phase out these plants if better alternatives are available? Because anti-nuclear sentiment has shut down *all* nuclear development and has lead to the NRA adopting policies that are downright in(s)ane:

    Why didn't the nuclear industry try and change this? Because our existing power-plants allow them to thrive (monetarily), since existing plants use the razor-blade model. If you have a Westinghouse or GE plant you can only buy your fuel from them… Innovation also would be more expensive and disruptive, potentially allowing others to challenge their choke-hold on the market.

    So nuclear development has been in a limbo for the last 50 years thanks to the collusion of public sentiment, entrenched industry and complicit government regulation that tries to fulfill the whims of the other two without any evidence based arbitration of what would be the *right* policy to follow.

    Couldn't nuclear energy be more than that? Yes, and there are several ideas on how. One of them is the LFTR, *lifter*, the liquid fluoride thorium reactor whose proponents have made a documentary on what nuclear power could be like if we stopped using technology developed in the '50:

  8. Ian Welsh

    Most of what I suggested involves buildings. Even in the late 90s it was possible to build them so they were energy neutral in some very cold environs — Natural Capitalism covers this very well. Retrofitting is less effective, to be sure, but still causes huge gains.

    In other words, much of it is not taken up by renewables, it is taken up by using natural light, and natural heating and cooling, and with such you make massive gains.

    I’m not anti-nuclear, and I think it’s a likely part of the solution, but it does worry me in the sense that I don’t think our society can handle it currently. Of course, a society which would do the things I have suggested would be a new society.

  9. Bruce Wilder

    Make stock buybacks rare (again, to force corporations to spend their money or give it to shareholders


  10. Ian Welsh

    Stock buybacks are when a company buys and retires its own stock. This raises the price of the stock. This is good for shareholders, but it’s better for executives with huge stock options. More to the point, stock buybacks are huge (at one point, they were about equal to all the public company borrowing, meaning that, net, they weren’t using any borrowed money to actually hire people, expand production, and whatnot. (Not sure if they still are.))

    Stock buybacks are now just another ponzi scheme, and the exectives who benefit don’t personally have to sell them back.

    Should probably make stock options illegal too, now that I think about it.

  11. Dan Lynch

    You made many good suggestions, Ian, and I agree with the general sentiment. A few small points:

    — since the 1976 Doha agreement, oil prices have been set by the Sauds, not by supply and demand. Exception being when the Shah was overthrown and the Sauds temporarily lost control of the price.

    — a carbon tax would be regressive and the rich would continue to fly their private planes and drive their big fancy cars and SUVs. Rationing would be more democratic, and have a more predictable outcome — if you wanted to reduce consumption to “X,” then only issue “X” ration tickets.

    — the simplest way to implement Keynesian stimulus in the US was suggested by FDR’s Fed Chair, Marriner Eccles. Simply suspend the FICA tax, and “pay for” SS & Medicare with keystrokes instead. The FICA tax is a regressive tax, and a drag on the economy.

  12. zot23

    Excellent ideas Ian, I would love to see some of these bullet points pulled out, expanded, and turned into full posts. For example, the “selling certificates” for solar and then paying them off with savings. How exactly would that work?
    Thanks for posting it.

  13. Flaser

    The reason I brought up the nuclear issue Ian is because due the inherent energy density of your fuel, if properly tapped (our current PWR and BWR plants don’t quite do this), you have cheap and plentiful energy on your hand that eclipses what fossil fuels have brought us.

    Granted, nuclear won’t create widespread demand, since only a handful of people would be employed. (Albeit newer designs favor smaller, modular plants in the 250-500 MW output range that can be mass-produced instead the massive 1 GW plants that are the norm for modern plants today).

    Nuclear has the potential to be cheaper than coal. This allows the kind of engineering project that no sane economist would approve if they had to rely on existing power sources:

    01. Synthesizing carbon-neutral fuel from atmospheric CO2.
    02. Creating more drinking water in desalination plants.
    03. Massive electrification of transportation.
    +1. Massive electrification of …

    So while nuclear is not a direct solution for the issues that need addressing, it could potentially be an enabler technology to tackle our bottleneck (oil) without further aggraving the sinks (CO2).

  14. Lisa

    Flaser is correct, depending on geographical luck, you can’t get to zero carbon electricity generation without 30%-75% nuclear power (except in Iceland). The problem is energy storage so you can match demand to supply. Currently the only effective large scale energy storage is reverse hydro, back to geographical luck again as to how much you may have.

    However a building a whole new grid structure would be very effective investment spending (and generate lots of jobs). Included would be things like the ability to plug in electric cars for charging, storage and a source for short term demand matching. But the important thing would be supply smoothing from all the sources (rooftop solar, wind, solar thermal, geo, hydro, tidal, nuclear, etc, etc).

    One thing desperately needed is for Govt to split up their accounts into recurring spending and capita; investment spending. And can quite easily issue separate types of bonds for each. This eliminates the ‘shell game’ practised by so many, where total spending is reduced, but when you examine the numbers investment spending is always hit more.

    Recurring spending would be marked separately and expect (as per Keynes) to average to zero over time (deficits at times, surpluses at others). Social security (inc health) would be accounted for separately as well, reflecting the basic fact that these are really large scale compulsory insurance schemes, where their income has to generate the investments to pay future requirements. hence these funds would be (overall) funders of investments.

    So a Govt could (say) issue 20 years energy investment bonds with a slightly higher rate of interest, to soak up lots of that free cash going around (pension funds would love them). Ditto transport bonds and so on.

    The key to success with a carbon tax is to start low, but announce that it will increase in increments year by year, then actually do it, so peple and organisations can plan. All the money gained from it is put into a separate Govt account and recycled to energy saving and carbon free energy investment.

    To those who say “this is picking winners’, well the current system does that in spades. Financialisation is subsidised over manufacturing, fossil fuels are heavily subsidised directly and indirectly,malinvestment (speculation) is subsidised, inequality is subsidised (by tax laws), etc.

    So what you are doing is changing those ‘winners’ to achieve more productive outcomes.

  15. Lisa

    Wow, look at my speeling irrors, morning here in Australia..obviously not enough coffee….lol….

  16. Ian Welsh

    Yes, Lisa, agreed. The point about communal insurance is especially important.

  17. DMC

    Actually, large scale solar thermal entails building a thermal mass that actually heats the water that makes the steam. The only real trick is getting a sufficiently large and hot thermal mass that it lasts overnight. This is not to mention hydrgeon(crack it all day, burn it all night)technology. So the storage question is not entirely a red herring but is one rather easily dealt with. If you don’t believe me, look at where the Saudis are putting their money. Did I mention it’s infinitely scalable? Or wonder why a nuke plant hasn’t been built in the US since the ’80’s. Who’s going to throw that kind of money into a gaurenteed liability like a nuke plant and everything it produces? Ok, the Chinese in Pakistan but I bet they want it to keep their missles up to date

  18. Tony Wikrent

    EmilianoZ writes, “We are powerless.”

    Actually, we are not. We have the power of ideas.

    I think there is a good argument to me made that ideas are actually the most powerful force in the universe. Think of a scientific revolution. When Copernicus described heliocentricity, when Joseph Priestley found and described the properties of oxygen, when Antony van Leeuwenhoek discovered bacteria, when Einstein conceived of relativity, what they knew and understood – their IDEA – existed only in their own mind. No other living being on the planet had that particular idea. Yet, here we are today, decades and centuries later, living in a world that has been fundamentally shaped by these ideas that reached fruition in the mind of a single human being. How did the spread of these ideas occur, to dominate what we today know as reality? These ideas must be spread from one single individual, to another, and to another, and so, until those ideas come to be “knowledge.”

    There is nothing Ian writes about what needs to be done, that I disagree with. What I disagree with, is an omission of his. There should be a price tag. A specific price tag: $100 trillion. One hundred trillion dollars. This is not my number. It is what scientists and engineers who have looked at what needs to be done to stop climate change, by a building a new world economy based on sustainable and renewable energy, say needs to be spent to do it.

    I believe “$100 trillion” is an idea that can come to dominate political discussion as the 2016 election in USA proceeds. It can come to dominate political discussion in any country in the world. Because it is a biological imperative. We either do it, or we die.

    We HAVE the technology needed to stop climate change. We need $100 trillion to build it, worldwide. Dear Dems: Give me $100 trillion and I’ll save your sorry ass.
    This is not that hard: the entire world economy produces $71 trillion in goods and services each year (of which the U.S. economy produces around $16 trillion). $100 trillion over 15 years is just under $7 trillion a year. That’s just a ten percent increase in world output, right now!
    Here’s what needs to be built:

    3.8 million 5-Mega-Watt wind turbines;
    49,000 300-Mega-Watt concentrated solar plants;
    40,000 300-Mega-Watt solar power plants;
    1.7 billion 3-kilo-Watt rooftop photvoltaic (PV) systems;
    5,350 100-Mega-Watt geothermal power plants;
    270 new 1,300-Mega-Watt  hydroelectric power plants;
    720,000 0.75-Mega-Watt  wave devices; and
    490,000 1-Mega-Watt tidal turbines.

    That is from the November 2009 article in Scientific American by Mark Z. Jacobson, at the Department of Civil and Environmental Engineering, Stanford University, and Mark A. Delucchi, at the Institute of Transportation Studies, University of California at Davis. In 2011, they posted two pdf files providing heavily footnoted details of their 2009 Scientific American article; the pdfs provide all the details you could want, including discussion of critical material shortages, such as rare earth elements, for a mass, crash program.
    Providing all global energy with wind, water, and solar power, Part I: Technologies, energy resources, quantities and areas of infrastructure, and materials
    Providing all global energy with wind, water, and solar power, Part II: Reliability, system and transmission costs, and policies.
    We also need a massive build-out of urban mass transit systems, all around the world, but especially in the U.S. I blogged about a U.S. urban mass transit program several years ago; the price tag is around $4 trillion.

    And in USA, a high speed rail system to replace air flights of 300 or 400 miles or less.

    And as Ian lays out above, a complete rebuilding / refurbishing of almost every building and house on the planet to be carbon neutral. Do you have any idea how many carpenters and construction workers that is going to require? There will not be enough people to fill all the jobs.

    OK, now for the hard part: where do we get the money. I address that at the end of my “Dear Dems” post. This is the problem Naomi Klein identifies in her new book, and which Ian has repeatedly emphasized here over the past years – we have to smash the political power of a relatively small number of very rich pricks.
    Why? Basically, we have to take away their monopoly on the creation and allocation of new money and credit. Because we can create all the money we want out of thin air:

    …if guys like Tony and I are going to run around telling folks that their only hope for survival lies in spending $100 trillion for infrastructure upgrades, we owe it to them to explain where all that money will come from.
    Actually, the source of that money is blindingly obvious—we will get those funds that same way modern society always gets those funds.  We will create them out of thin air.  But, scream the monetary Puritans, if you just create money willy-nilly out of thin air, what will stop us from becoming Zimbabwe with runaway inflation?  Again the answer is obvious—don’t create money will-nilly—only create money to pay for things that make the society richer.

    I invite you to especially look at the comments in that post, to see some of the most stubborn, bone-headed clinging to neo-liberal conservative economic doctrine you are ever going to see. Because the fact is: SOMEONE has to create money. It can either be the government, or it can be the banksters. It really shouldn’t matter, as long as the creation of money and credit was guided by a clear sense of public purpose to serve the general welfare. But I suggest that at this point, almost everyone in banking and in finance is so tainted and so trained to ignore the general welfare, that they are worse than useless.
    And make no mistake about this: we NEED industry and industrial enterprises. How else are you going to build 3.8 million wind turbines and 1.7 billion rooftop PV systems?

    If you think through what a $100 trillion program requires, I think you will see that it totally upsets the elites’ rigged games. There will be severe shortages of labor, so wage rates will have to skyrocket. The elites will argue there is not enough money, so the process of how money and credit is created and allocated will come under examination. An inevitable question: why are there negative interest rates? Why are there trillions of dollars sitting around the world doing NOTHING? Which leads, inevitably, to the realization that the role of government is to set rules and regulations such that doing what needs to be done is profitable, while speculation, usury, and economic rent are not profitable. Or if they are, those profits are taken away by taxes, because we need to fund a $100 trillion program SO WE DON’T DIE.

    Politically, the ramifications of forcing through the idea of a $100 trillion program, are, I think, little short of revolutionary. At The Nation, and old polulist warrior, William Greider, has a great article But Is Hillary Ready for Us?, in which he expresses skepticism about the recent conversion of Larry Summers and Hillary Clinton to economic populism. Greider points out that what Summers and Clinton are now talking about, is nothing more than the focus-group tested populist rhetoric of Bill Clinton’s 1992 campaign.

    I have been advising people to ignore the USA Presidential race. The oligarchy / plutocracy has a solid lock on the Oval Office; no one is going to become President who is not acceptable to a large enough majority of the TPTB. If you really want to change things, you need to focus on getting more radical progressives into Congress, and state and local governments. Greider rightly observes that the Democratic Party in USA “has a weak bench because for a generation its promising young people were excluded from governing ranks—systematically screened out by both Clinton and Obama administrations—if they showed telltale signs of leaning leftward…” I think this means that there must be opportunities to force ourselves onto that bench. That is what I want to do, with my presentations on how government actions built the US economy, and the $100 trillion program.

    And you need to push something that will dominate the political discussion moving forward into the USA 2016 election. Something like $100 trillion or we die. Because all we have is the power of ideas.

  19. Flaser

    @DMC: I suggest you read up on the experiences of current solar-thermal energy plants. They’re running into efficiency problems and as a result have to burn more gas than expected to compensate. Granted, it’s not as bad as anti-solar pundits would make it but it’s neither as good as what solar believers say it is.

    I also suggest checking out the videos I linked above about Gen 4, liquid salt nuclear power-plants. What you’ve been told about nuclear power is half-truths and outright lies. If we’re to assume that the efficiency of renewable energy sources can improve by leaps and bounds, why can’t the same hold true for nuclear energy sources?

    The highlights of what molten salt reactors could be:

    Fuel & Waste:
    1. Almost total fuel burn-up. (99% vs. 2-3% in current LWR reactors).
    2. Drastically reduced waste stream (1/35th if you only count spent fuel, 1/250th if you also count depleted uranium)
    3. Reduced waste hazard (within 10 years 83% of fission products are stable, 17% need storage for only 300 years instead the thousands current waste needs).
    4. Can be used to burn up existing nuclear waste. (Burn up refers to getting rid of the trans uranics by burning them in the reactor that cause the need for the thousands year long waste storage).

    5. No melt-downs. (The fuel is already melted and the whole reactor designed to deal with that).
    6. No high pressure containment. (No explosions like in Chernobyl and Fukushima, since the system doesn’t use high pressure).
    7. No loss of coolant. (Water is not used to cool the reactor, liquid salts act as both fuel, working fluid and coolant. These can’t flash to steam as their evaporation temperature is thousands of degrees above working temperatures).
    8. Passive safety. (The reactor is self-regulating through thermal expansion of the salt. In the event of catastrophic loss of power – i.e. no pumping – convection can maintain cooling, and a freeze plug ensures that the reactor automatically shuts down and renders its fuel inert without human intervention).

  20. DMC

    We know solar is getting cheaper by leaps and bounds because the cost per kWh has been steadily dropping over the last 40 years and the rate of decrease in price has been accelerating. Can you say the same about these hypothetical nuke plants? Solar will be cheaper than coal inside of 8 years with none of the externalities. Hell, we could have had thorium based plants since the early ’70’s but they didn’t produce weapons grade fissionables so no dice. That and thorium is common as dirt(literally!) so no scarcity based monopoly profits.

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