The economy of the USA, like that of any other nation, depends on natural resources—minerals, timber, fossil fuels, land, and a host of other renewable and nonrenewable assets. It couldn’t function without these resources any more than you or I could survive without air. So you’d think that determining whether our country’s demand for natural resources exceeds the environment’s supply would be of the greatest importance to politicians.
But you’d be wrong.
In the USA, the federal government does not use any instrument to systematically measure the country’s stocks of natural resources, or our national demand for them. It has no comprehensive method for quantifying whether and to what degree the economy overshoots the environment’s capacity to sustain it.
A Better Way
So we are flying blind into the future, with the most important determinants of our economic prosperity—our jobs and incomes, our productivity and price stability, the competitiveness of our industries and the quality of our investments—at risk because of potential resource depletion or degradation. Already, environmental maladies from climate change to species extinction to water scarcity stand as evidence that heedless economic growth generates side effects that cross vital planetary boundaries, boundaries that seem not to capture the attention of our government.
To place the USA’s economy on a more rational resource footing, CASSE proposes that the Council of Economic Advisors (CEA) be required to include natural capital accounting in its work, which would allow it to analyze trends, programs, and policies related to natural resources. In CASSE’s vision, the CEA would analyze whether the U.S. economy’s use of natural resources falls within the environment’s ability to supply them (either because renewable resources are sustainably regenerated, or because stocks of nonrenewable material are adequate). As one of the chief sources of economic analysis for the president, the CEA is influential in setting the country’s economic direction; its annual report is a good place to set the economy in an environmental context.
We have drafted a bill, the “Economic Footprint Act,” to prescribe this new set of responsibilities for the CEA. With a revised mandate, the CEA can provide the president with the analysis needed to develop a flourishing and resilient economy that operates within boundaries set by nature.
Quantifying Natural Stocks
Most steady staters agree that the boundaries of an economy should be drawn based on nature’s capacity to supply natural resources and assimilate wastes. Transgressing these boundaries leads eventually to economic havoc. For example, overshooting the atmosphere’s capacity to absorb CO2 emissions generates feedback effects that reduce. And this doesn’t begin to account for other examples of economic overextension that produce crises like a mass extinction and “peak-everything.”
A growing number of countries are implementing natural capital accounting measures to determine whether, how, and their economies violate ecological boundaries and deplete metal and mineral stocks. Numerous resources exist for accomplishing either or both of these goals, including Ecological Footprint analysis, Planetary Boundaries research, and the DPSIR framework. One of the most widely used approaches, the U.N.-supported System of Environmental-Economic Accounting (SEEA), is currently implemented in over 90 countries. The U.S. government is signing on as well: More than 40 federal agencies are collaborating to produce a National Strategy to Develop Statistics for Environmental-Economic Decisions, and President Biden has signed an executive order for federal agencies to quantify climate-related financial risks.
Are we ecological debtors, or creditors? Natural capital accounting can help answer this. Photo credit: ahsanjaya.
Click the image to enlarge
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Unfortunately, most of these initiatives do not fully capture the dynamics essential to maintaining a steady state economy. Few measure whether stocks and flows of natural capital lie within the capacity of national ecosystems to supply, regenerate, and assimilate them, which is vital for assessing the long-term sustainability of our economy. Most do not analyze what drives our economy to overshoot the nation’s biocapacity (hint: the answer is growth). And few of these initiatives, with the notable exception of those that deal with climate change, trace the broader consequences for the economy of overall resource overuse.
Developing instruments that can measure these dynamics is only part of the challenge, however. Such instruments must also be effective, meaning they must provide information at the scale and level of detail relevant to policymaking. Moreover, the information must come from permanent, influential, and trustworthy government entities like cabinet-level departments, rather than from transitory and politicized sources like the partisan and temporary committees often used in Congress.
The Bill
Founded in 1946, the CEA is statutorily obligated to analyze and interpret economic trends in light of national goals around employment and productivity. These goals are now codified in the Full Employment and Balanced Growth Act of 1978. It follows that if eroding natural capital threatens these goals, the CEA is duty bound to analyze this danger by including the state of the USA’s ecological ecological footprint and biocapacity, along with the status of nonrenewable resources, in its reports.
President Kennedy standing with the Council of Economic Advisors. Photo credit: JFK Library. Click the image to enlarge
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To accomplish this, we propose that the CEA be required to incorporate into its annual report chapters related to natural resources and biocapacity. We envision a chapter that analyzes trends in the stocks and flow of natural resources into and out of the economy, as well as the ecosystem’s capacity to meet the economy’s demand for renewable and non-renewable resources over time. We imagine another chapter that analyzes how these trends interfere, or are likely to interfere, with the achievement of U.S. national economic goals. A third chapter would evaluate federal government activities to discern how they encourage or inhibit these trends. The final chapter would recommend to the president national policies that respond to these trends in ways that achieve national economic goals.
The bill would also require that the CEA work with the Secretary of the Interior in developing these reports. This will ensure the transmission of relevant data and Cabinet-level commitment to this project. It would also require that the CEA consult with relevant historically disadvantaged groups to ensure that questions of environmental justice and equity are included within the Council’s analysis.
Time to Act
Of course, the CEA’s power to influence the President, and federal policy more broadly, is limited. The President is free to take or disregard the Council’s advice. And the CEA is only one of four economic power centers of the federal government; the others are the Treasury Department, the Office of Management and Budget, and the Federal Reserve Board. Eventually, CASSE hopes to develop bills that embed steady state economy concerns within these agencies as well.
Nonetheless, the “Economic Footprint Act” provides a foundation for these future endeavors. Of all the federal agencies, the CEA has the clearest responsibility for briefing the president on issues of national economic security. Insofar as living within ecological boundaries and resource limits is vital to maintaining this security, it is proper that the CEA analyze the supply and demand of natural capital within the USA. This bill ensures that it will.
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