"Of Ozone And Monetary Policy"
I don’t have any defense to offer of yesterday’s decision by President Obama to evade implementation of EPA recommended ozone regulations, but I do just want to make the point that this is the kind of thing you get in a recession. When the economy’s in a recession, voters care less about protecting the environment and politicians get paranoid about doing anything that could be perceived as stifling job creation.
You don’t have to like it, but you do have to understand that it’s the case. As a matter of practical politics, to make progress on the environment you need healthy macroeconomic conditions. Which is part of my case for why everyone on the left needs to care more about monetary policy. Monetary policy is not that important for the long-term welfare of the country. But it’s extremely important for short-term fluctuations in the job market. And short-term fluctuations drive the political system. They drive election outcomes. They drive public attitudes toward the environment, they drive public attitudes toward immigration, and they drive public attitudes about poverty and redistribution. If you want the political system to regulate polluters, be welcoming to foreigners, and be generous to the poor then you need employment. And precisely because it’s not true that environmental regulations are job killers, environmentalists need to care about the Federal Reserve. The job of the Federal Reserve is to produce full employment. When there’s full employment nobody blames environmental regulations for the lack of full employment because there’s no lack of full employment to pin. But when the leader of your political coalition doesn’t put in place a Fed team that delivers full employment, then everything full to pieces.