Monday, August 12, 2013

Short Takes| Someone needs to take the Twitter keys away from the @AlaskaDemocrats until they learn how to drive ...

The @AlaskaDemocrats are tweeting again.  It is clear that they didn't take my prior advice and go hire an economist.  It is going from bad to worse.

This time they are trying to make the case that -- in their prior incarnation as the Bi-Partisan Majority -- they deserve credit because some of the years during the time the majority ruled the Senate, they saved some money.  The problem is they didn't save nearly enough and, soon after saving even the amount they did, have started spending it away.

Understanding Alaska fiscal issues requires first understanding one fundamental point.  The revenue stream that Alaska is receiving today is being used to fund both the current generation and future ones.  That is because, unlike the remainder of the states, Alaska does not use any renewable sources of state revenue -- such as property, sales or income taxes -- to fund state government.  Instead, Alaska relies almost entirely on oil revenues.

As a result, until we find more, rational leaders must assume that the oil revenue stream we are receiving today and forecasting for tomorrow is all that there is going to be.  And unless they want to consign future generations to less revenue than the current generation is taking for itself, the current generation needs to set aside a portion of the current stream in savings for future generations.  To the extent we don't do that, the current generation is stealing from tomorrow's Alaskans, just as surely as most feel the federal government is doing the same by loading up on debt today that tomorrow's Americans will be required to pay.  We are leaving future generations with less revenue on which to operate than we grabbed for ourselves as it was going through our fingers.

Recently, the University of Alaska-Anchorage Institute of Social and Economic Research (ISER) calculated the amount that current Alaskans need to save -- and spend -- if we are to treat future Alaskans fairly.  The key number is $5.5 billion.  If current Alaskans restrain their spending to that level, there will be enough left over to put into savings, so that the income stream available to future Alaskans is the same (adjusted for inflation) as that available to current Alaskans.  In short, if current Alaskans spend no more than $5.5 billion, then future Alaskans will have the same amount for themselves.

As current Alaskans spend more, however, we are leaving future Alaskans with less.  If current Alaskans spend $6 billion instead of $5.5 billion, for example, at some point future Alaskans will have only $5 billion available to spend instead of $5.5 billion.  The higher the current spending levels, the lower the revenue levels available to future Alaskans.  Current Alaskans may have astro-turfed football stadiums to show for it, but not only will future Alaskans not have the money required to maintain the fields, they won't even be able to afford the coaches (or for that matter, teachers).

That is the fundamental point the @AlaskaDemocrats are missing.  They claim that the Bi-Partisan Majority did an excellent job managing state finances, yet it is that very body that approved spending $7.9 billion in the recently completed fiscal year.  That is $2.4 billion (40%) above sustainable levels; in turn, that is any number of fewer teachers, road repairs and covered health costs in 2025 as a result.

Guys (and gals), it isn't enough to "balance" current spending with revenue.  A calculable portion of that revenue needs to be set aside for future generations so that they can have the same amounts available for spending we are providing ourselves.  When you spend it all (achieve a "balanced budget"), you fail future generations.  When you don't save their proportionate share (and you haven't), you fail future generations.

I grew up from a fiscal policy standpoint in Bill Clinton's Arkansas and while Bill Clinton was President.  Say what you want about him on other issues (and I may join you some of the time), but on fiscal issues in both locations he was responsible, future minded and solid thinking.  He took it to heart when James Carville told him "its the economy, stupid."  The @AlaskaDemocrats need to find someone, and fast, that shares that understanding.

Today's tweets ...

@AlaskaDemocrats @arogers907 Revenue and spending grew but revenue outpaced spending, so we saved money. Now we need a balanced approach addressing both.

@bgkeithley #AKfiscal Wrong. Spent above sustainable levels "@AlaskaDemocrats: Revenue and spending grew but ... we saved money."

@AlaskaDemocrats @bgkeithley So balanced budgets aren't "sustainable?" Let's use math, not theology to make budgetary decisions.

@bgkeithley #AKfiscal Good lord, you still haven't read Goldsmith. Take a tweet off and do it @AlaskaDemocrats So balanced budgets aren't "sustainable?"

@AlaskaDemocrats @bgkeithley Read it long before you suggested it. We'll take $15 billion in savings over abstract targets and promises any day.

@bgkeithley #AKfiscal Which explains why a fiscal crisis is coming up fast @AlaskaDemocrats: We'll take [some past] savings over targets and promises

"Targets" are what will save future Alaskans.  Some savings -- less than the proportionate share due future generations -- won't.  Unsustainable spending -- which draws down even the deficient savings that did occur -- won't.  Someone needs to take the Twitter keys away from the @AlaskaDemocrats until they learn how to drive.