Smart Growth: Three Simple Steps to Help the Economy and the Planet

As the Obama administration prepares to take on the worst economic crisis in 80 years this week, it is putting the emphasis on a promising new principle: don't just stimulate old, petroleum-hungry growth -- stimulate smart growth.

That won't be easy. It requires that we change old entrenched ideas on both the right and left in the nation's capital. But crisis is opportunity, and provides a rare chance for straight talk between Congress and the new administration: Don't just hyper-stimulate the economy with another shot of economic caffeine to drive one last consumptive push. Nourish the economy, with green growth that can be sustained for the next century. That means planting the seeds of new low-carbon technology, so that within a generation we can defeat our real enemy -- petroleum addiction -- and offer our children a future rich in economic, social, and environmental terms.

There are three ways we could do this:

First: Smart Economic Stimulus. Instead of pouring money into every old at-risk industry -- invest it by replacing our aging industrial infrastructure with low-carbon successors: LEED-certified (energy efficient) buildings, mass transit, an efficient energy grid and water infrastructure, and community redevelopment based on the principles of local smart growth -- high density, integrated development that enables people to live rich lives without being addicted to their cars.

Second: Smart Tax Reform. Taxes aren't just too high, they're too dumb. Whenever we put a tax on something, we get less of it. Yet, incomprehensibly, we continue to tax the things we want more of: income, jobs, and savings. Economists used to like that -- they thought taxing good things was "neutral." But it's not. In a resource-constrained world, it's much smarter to cut taxes on what we want -- like jobs -- and make up the difference by raising taxes on things we want less of: carbon, pollution, and waste.

Third, Smart Technologies. When people think of clean green technology, they usually think of solar energy, wind power, and electric cars. That's true, but just the tip of the iceberg. The real clean technology is the huge Information and Communications Technology (ICT) sector -- the Internet, web, data centers, servers, computers, software, cell phones, Facebook, Twitter and so on. It's also the emerging bio-economy, which is learning how to grow smart materials and fuels, rather than just spending down the global resource ATM. ICT and bio-based technologies cut the costs of traditional manufacturing, and can make our auto and other factories competitive again.

Sure, these technologies use energy and create pollution -- but as much as 80% less, per unit of value they create, than the systems they replace. If the U.S. can build on its leadership in ICT and the bio-economy, it can drive 5% or greater annual growth in energy and carbon productivity across the economy, all while saving money and creating real value. That alone, over the next 45 years, would drive down carbon per unit GDP by almost 90% -- and total carbon pollution by as much as 75%, depending on how fast the economy grows.

That's not as audacious as it sounds. Last century, faced with a shortage of labor, we drove a 40-fold gain in labor productivity. This century, to save the planet, we need an eight- or ten-fold growth in energy productivity, scientists say. It's doable -- and investors, students, and job seekers take note: there is a lot of money yet to be made in ICT, the bio-economy, and even the industrial economy, as we use these technologies to make it smarter.

Today's Luddites seem to think we have to grasp hold of all the oil we can, as it springs from the ground, just to keep our old 20th Century style affluence. They think petroleum is the basis of our economic prosperity, but it is not. Innovation is. A century ago, petroleum just happened to be a cheap source of energy, so we used it. But it's hardly the only elixir of wealth. Today it's the opposite: a drain on our wealth that drives conflict, threatens the planet, and stifles real growth, and the technologies that can sustain it.

By embracing smart spending, taxes, and technology, we can defeat our real enemy - petroleum addiction -- and enjoy green, sustainable growth.

Bill Shireman is President and CEO of Future 500, a network of corporate leaders who engage together and with stakeholders to develop collaborative solutions to economic, social, and environmental challenges. He can be reached at [e-mail], 1-800-655-2020, or www.future500.org.

Comments

[schatsie]

If you really want to stimulate energy savings, just see that everyone pays the same rates for electricity...that is the large corporations no longer buy electricity at 50% of the rate that residents are paying....They already get a tax writeoff for the electricity so the stimulus is not really there for them to save... If they paid the same rate the residents paid and had no tax writeoffs, you can bet your sweet bippy they would get right on this...

[DavidJames]

Bill,

This is a great argument for carbon dioxide emission fees. It is surprising how many insightful people think that carbon dioxide emission fees are the way to go. Yet for some reason the Washington consensus is to implement an infinitely more complicated cap and trade system. You would think those scam artists from Enron were still running things.

Emission fees of $200 per ton of carbon dioxide emitted, would certainly motivate green technology. Flat rebates of half of the revenue from the fees would eliminate the financial impact on households, which may be better than offsetting reductions in income taxes.

I wonder what the best schedule for ramping up emission fees would be. Over 10 years? 5?

Regards,

[Erdgeist]

"Whenever we put a tax on something, we get less of it. Yet, incomprehensibly, we continue to tax the things we want more of: income, jobs, and savings."

I agree. So why not go back to the revenue tariff that supported this country for well over a 120 years so we can cut some of the income tax by raising the personal deduction to no less that 20,000 dollars instead of the paltry, 3,400 dollars? Right now we have a modified Louis XIV, King of France, tax system, namely, tax the poor not the rich.

[ManwithaParachute]

I will support a 200% tax on any income over 2 million per year. Add a 200% deduction for charitible organizations which services those below the poverty level and I think I might like this country a little better.

[KillTheMessenger]

How do you collect a 200% tax? Anyone who makes $2 million would have to pay $4 million. Since they can't (you can't give the IRS more than you have), they would automatically go to prison, which means that they wouldn't make any money at all, and that would be the end of the tax, too.

:-)

[olephart]

"we continue to tax the things we want more of: income, jobs, and savings."

How about liquor, beer and cigarettes we tax those does that mean we want more of them? We also tax food, clothing and gasoline. Your statement is a non sequitur.


"Whenever we put a tax on something, we get less of it."

OK, let"s put a big tax on supply side economics and see if it works. It seems that the period between the supply side economics plans was better

[William Shireman]

That's a good example of what I'm talking about: We tax liquor, beer, and cigarettes, in part, to discourage people from using liquor, beer, and cigarettes. Tobacco taxes have played a major role in driving down consumption. But addiction gets in the way ... and these taxes can be regressive.

Why would we hurt the middle class and poor by taxing their PAYROLL, and their INCOME?
That's what I mean by "taxing jobs." Do we want the poor and middle class to be poorer? It makes much more sense to tax fuels, especially fossil fuels. That SUPPORTS jobs and people. We CAN avoid those taxes, simply by using people to be more innovative and use less fuel.

[olephart]

All of the tax cuts I've seen for the past 30 years have given 50+% to the top 1% and most of the rest to the next 10%. As to the poor, they don't even get to fight over the scraps that fell on the floor. You've heard the argument about if they don't pay income taxes they get nothing. This while they fought raising the minimum wage for 14 years. Hedge fund profits are taxed at 15% instead of 35% regardless of whether they're short term gains and they don't pay the payroll tax on them. That's half the middle class tax rate if you include the payroll tax. Millionaires get the tax cuts we get the shaft. Those writing tax laws have a bad track record.

[JBS]

Consider the source. This guy's "President and CEO of ... a network of corporate leaders", talkin' about doing away with income taxes.

That worked so well the last eight years. Government revenue boomed so much the trickle became a flood.

We should return to the GOLDEN AGE of U.S. Capitalism - Back to the 50s.

Set the top marginal rate back to 91% for incomes over $400,000 per year. Set the capital gains rate back to 25% and CORPORATE income tax back to 52%.

Only change I would make is remove the cap on income subject to withholding taxes.

[Agent420]

I agree.

[William Shireman]

You're making assumptions without much evidence, and that's JBS. Future 500 forges very unusual effective alliances between companies and groups that are often bitter adversaries on key issues. If you want to assert guilt-by-association, then you have to decide which of our associates and partners you want to focus on, and which to overlook, to prove your point.

You can "prove" we're radical activists by pointing to the 100+ activist groups we've worked with - some of the hardest-core, most passionate and committed around. And since I'm a PIRGer, you can "prove" my personal guilt.

Or you can "prove" we're corporate conservatives by pointing to the almost 100 companies that we work with, in the US, China, and Japan. You may not like them - but there they are. Combined with the power of NGOs, we've been able to protect forests and climate, promote recycling, respect factory workers rights, etc.

The reality is - believe it or not - if you can get to the SYSTEMIC ROOT of problems (rather than just demonize the left/right/activists/corporates or whatever our ideologies tell us to demonize) you can find extraordinary pockets of common ground.

Taxing carbon, promoting infill and mixed communities instead of car-addicted industrial sprawl, driving down the energy needed to deliver value to people, and cultivating values that focus less on consumption and more on what's important - these are all areas where common ground can be found. Always? No. Sometimes? Definitely. Strategically? That's where the real gains come.

[schatsie]

and don't tax unemployment payments for people with income less than the 60 grand (60% of this country lives on 60 grand or less)

[Smithenergy]

The real key is what can we do now? The 'drill baby drill' crowd were educated about the realities of when off-shore domestic oil would actually hit the market. So too the wind industry is hitting some comparable realities - off-shore is 10 years away and major wind farms are often too far from load centers which means long transmission lines will also be required at vast additional expense.
What's we need to move the renewable energy needle is an 'energy internet' or distributed network of 1000's of renewable facilities producing 5-10MW or less, and they need to be sited near loads - i.e. within the communities where the facility is located. To accomplish this in the short-term we need communities to proactively support development. Period. Opponents to wind farms are well organized, informed (well...), and active in town meetings showing up all in the same t-shirt and saying the same things. Proponents need to be likewise organized if project developers have a chance of building facilities that will make the immediate impact we need.
The time has come to build baby build.
Show your support - go to buildbabybuild.net.

[ScottontheSpot]

Yes!! Finally, someone has a sensible tax reform. Of course, the economist Henry George advocated this first in his classic book, "Progress and Poverty." Tax the "Land" not the fruits of labor and capital. George believed that capital and labor are NOT natural enemies. It is simply the people who have a monopoly on land (as classically defined as all the world's resources), who make it impossible for laborers and capitalists to make anything but the most meager living. He argued that the resources really belong to all of us (after all, Exxon didn't CREATE the oil in the ground, they just drilled for it; they have a right to profit from its extraction, but they should pay the community for the oil itself). If we did this kind of reform, we would see pollution go down along with resource use, while productivity went up, as things do when taxes are lowered.

[leduck]

smart growth?

no such thing

[William Shireman]

Growth of knowledge, efficiency, innovation, sustainability, the solar sector, the infosphere ...

Growth that doesn't require consumption of more resources - growth that enables us to do more with less.

You think of growth in old, industrial era, physical terms. Think of growth the way nature grows - not mostly bigger, but better.

Saying there's no smart growth is a guaranteed way to be an ineffective martyr, a fake activist more interested in looking righteous than doing what's right. That's not what you mean, I trust.

[leduck]

Growth of knowledge, efficiency, innovation?

Obviously, i don't believe an increase in knowledge is a bad thing
innovation is a good thing

didn't really think i had to be spell things out

just refering to the increased use of limited resources
urban sprawl
and an ever growing population

[research]

High top income tax, is the only tax that is safe in a depression.

In fact, it appears that lowering the top marginal tax to around 25%

Causes Manic Depression: bubbles and crashes.

High top marginal income tax discourages unbridled greed.

Gets folks thinking about their companies instead.

http://www.huffingtonpost.com/larry-beinhart/time-for-tax-hikes_b_156423.html?show_comment_id=19557991#comment_19557991

[Haditup2here]

I am glad that you mentioned this. I have submitted a proposal on the Obama Website www.change.gov detailing how the lower income brackets pay a higher ratio of taxes to their income than the top tax bracket and how to change this. Too look this up:
1. Go to www.change.gov
2. Sign up with a login and password
3. Click on citizen's briefing book
4. In the search box type "Reform Federal Income Tax Process and Marginal Tax Now" (It will not come up under the word "tax" alone.Therefore, you must type the entire phrase.
5. Click on "Reform the Federal Income Tax Process and Marginal Tax Rate Now !! (Please Read!)" and vote it up if you agree with the proposal.

[Haditup2here]

correction: The site is //change.gov not www.change.gov

[research]

Help ,me out here. I don't see the citizen briefing reference after I log in.

[davusan]

Aren't these the very things that Obama has already talked about doing?

[Samalabear]

Haven't heard him say anything about getting rid of the income tax. The people who wouldn't like this sort of thing would be, of course, lawyers and accountants.

[sheila]

the smartest thing we could do for the economy and the planet is to provide loans to all of us who want to install solar, microwind and efficiency improvements to our own properties (business and residential) and then to PAY us for clean,local power we generate and do not consume. LOANS can be repaid through property tax assessments (see CA AB 811), and feed in tariffs are both the fairest, fastest and cheapest way to ramp up LOTS of clean energy generation and increase conservation enormously.

is it stockholm syndrome or total lack of vision that makes us believe that a "sustainable" "green" energy future rests on Big Energy monopolists increasing their slaughter of the wilderness, forcing families from their homes, re-centralizing a grid based on wind and sun which are everywhere, and manipulating energy supplies and pricing, while increasing GHG emissions? and those are the Wind and Solar guys, never mind Coal and Gas. THINK BIGGER. we need to greatly DEcentralize energy production, stabilize and decongest the grid, and reward individuals who are willing to invest in that process. Feed in tariffs and Renewable Energy loans and incentives to US, not Them!!

[Ben Dixon]

By and large you hit the nail on the head, we need a large increase in energy productivity for the future. Where you fail though is you fall in to the usual liberal trap of thinking that "renewable" energy, ie solar, wind, hydro, etc, will remove our need for oil. This would be true if we ONLY used oil as a fuel source. The fact of the matter is we will continue to use millions of barrels of oil a day for all of the other industrial uses we derive from it, ie plastics, chemicals, lubicrants.

[joebaggadonuts]

I agree that Bill has hit the nail on the head. Nailed it, so to speak. Taxation is the key to appropriate industrial/social policy and that we NEED to use it and use it wisely going forward.

I disagree with your nit - that we will continue to use oil. So... with proper energy policy we will reduce pollution from burning fossil fuels and that is what is most important right now.

[William Shireman]

Yep, probably will "need" oil for another century, but for narrower and narrower niches. Biofuels can replace most of our oil, but to really get THERE we need to deal with the underlying issues of industrial agriculture, plus drive cellulosic breakthroughs, etc. etc. So, you're right, we'll need oil. But we'll need a LOT less of it. And if we've got a 100 year supply of oil, and increase our efficiency only 1% a year, we'll still have a 100 year supply in 100 years. We've got time, but ONLY if we start aggressively now. And a lot more than 1% a year.

[Chavez08]

All around the world, the foreign media outlets are openly discussing what system will replace Capitalism that failed so miserably.

..but not here in the U.S., no sir. The media establishment and their academic Friedman-cult silos are still trying to repair it, inferring 30 years of cultural and economic damage can be reversed by tweaking a legislative screw or adding a layer of bureacratic checks on money changers......reminiscent the fictional emotional doctor who's hands are clenched to the paddles as he refuses to declare "Time of Death" for his deceased friend.

Neoliberal Capitalism is dead, trying to hold onto it is as naive as it dangerous. Social Democracy is calling.

[cam]

Good article - a manifesto of sorts.