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Green New Deal

Sigma Investment Counselors

February 19, 2019

According to Wikipedia, the Green New Deal (GND) is any of several proposed economic stimulus programs in the U.S. that aim to address both economic inequality and climate change.  The name refers to the New Deal, a combination of social and economic reforms and public works projects undertaken by President Franklin D. Roosevelt in response to the Great Depression.  Supporters of a GND advocate a combination of Roosevelt’s economic approach with modern ideas such as renewable energy and resource efficiency.  While the GND is still being debated, the U.S. has implemented several of its broad features since the idea was introduced in 2007.

Investors should look at each component of the overall concept of GND as more specific proposals move toward legislation.  This is not an idea that should be either universally embraced or dismissed out of hand.

Consider:

Unlike the Great Depression, the U.S. economy is currently strong, there is no unemployment problem, wages are improving and employers are reporting difficulties in attracting enough additional personnel.

Proposals to turn the entire U.S. energy system into 100% renewable are confronted by the limits of current technology.

Air quality and other environmental considerations are important, but cannot be effectively addressed in a vacuum.  U.S. carbon dioxide emissions have been declining, as natural gas replaces coal, while those of India and China have skyrocketed.

Investors should take particular note of costs.  Making the U.S. less competitive is not going to do anything good for the people that proponents of GND claim to be seeking to help.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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