When advocates of a Green New Deal are asked how the U.S. can afford its lavish promises of 100% renewable energy, millions of high-paid jobs and Medicare for all, they have a ready reply.

“We will pay for the Green New Deal the same way we paid for the original New Deal, World War II, the 2008 bank bailout, extended quantitative easing programs, all our current wars,” said a blog post that appeared earlier this month on the website of Rep. Alexandria Ocasio-Cortez (D., N.Y.). “The Federal Reserve can extend credit to power...