A game of psychological manipulation is afoot.
A game of psychological manipulation is afoot.
The outgoing administration and its allies appear to have embarked on an effort to intimidate incoming Trump administration officials out of paring back federal support for the so-called “green economy.” Their logic is simple: public-sector incentives and subsidies stimulate activity, and you wouldn’t want anything to happen to that activity, would you?
On Monday, Axios contributed to this project by promoting its “exclusive” look at a Biden administration memo that claims “$1 trillion of private sector money put toward clean technology and manufacturing” is attributable to climate-change-related legislation and executive action. “If future Administrations continue to implement at the pace we have, people across the country will enjoy the benefits of safer water, cleaner air, faster internet, and smoother commutes,” White House deputy chief of staff Natalie Quillian warned.
The New York Times, too, put in the work. “Many car buyers have come to rely on a $7,500 federal tax credit on electric vehicles to soften the blow of their high prices,” a Monday dispatch read. “But those credits could disappear after President-elect Donald J. Trump takes office, leading to an almost immediate drop in sales of the cars and trucks.”
“Electric car sales could fall 27 percent if consumers lose the tax break,” the report continued. “Other countries that eliminated such subsidies have seen similar drops — in Germany, electric vehicle sales tumbled 27 percent in the first 10 months of the year, after the government last December abruptly canceled an incentive worth $4,900.”
It’s possible — indeed, even likely — that electric-car sales decline when taxpayers don’t subsidize their purchase because consumers do not prefer electric vehicles to their gas-powered counterparts. Indeed, even with these subsidies in place, electric-vehicle sales have declined markedly because of the headaches associated with their maintenance and limited mileage.
Much the same could be said of the “green economy” in general. “In one recent survey, 65% said they want to buy purpose-driven brands that advocate sustainability, yet only about 26% actually do so,” the Harvard Business Review observed a few years back. Subsequent studies have found that “when the elasticity of substitution between green and brown goods increases,” voters are more likely to substitute a conventional product for a “green” one. When there are no tradeoffs, consumers are happy to go “green.” But there are tradeoffs. Consumers have noticed and are voting for the status quo ante with their wallets.
When you throw taxpayer funds at products and initiatives that are otherwise unattractive to consumers, the Biden administration notes, you get more of those inefficient and unloved products. That’s hardly a revelation. But that also means that the administration is creating an inefficient allocation of capital. In the absence of those inducements, consumers would reward producers who create things people want to buy and use, providing those consumers with additional capital to invest in their already productive enterprise.
The Biden administration hopes the incoming Trump Team will be sufficiently spooked by the prospect of lost economic activity that it will give up on its own best economic instincts. But artificially generated economic activity that cannot survive in the absence of federal support is not sustainable and hardly preferable. It’s unlikely that this last desperate gasp will intimidate Trump’s appointees into acquiescence, but it was worth a try. After all, the numbers certainly don’t speak for themselves.