Saturday, September 17, 2016

The point about the PFD that those who advocate cutting it ignore ...

We just kept shaking our head reading through the comments this morning on Facebook and elsewhere in response to Craig Medred's piece on the PFD.

What caught our attention the most? How so few understand the significance of the PFD to the overall Alaska economy.

Earlier this year UAA's Institute of Social and Economic Research did an analysis of the effect on the economy of the various fiscal options available to deal with the state's current situation. Here is what they said about the effect of cutting the PFD on the Alaska economy:
The impact of the PFD cut falls almost exclusively on residents, and it is highly regressive, so it has the largest adverse impact on the economy per dollar of revenues raised. at A-15.

Let that sink in for a moment. Of all the options, cutting the PFD "has the LARGEST ADVERSE IMPACT ON THE ECONOMY ...."

Some argue with that notion, saying they find it surprising. We don't.

The economies of most of the L48 producing states were built on oil royalties injected into the private economy through decisions made by individual landowners. The PFD is the Alaska equivalent of individual oil royalty checks, since individuals are not otherwise permitted to own mineral interests. It is not surprising at all that it has the same economic effect here. What is surprising is that some would expect it to be different.

Others argue that the PFD somehow is socialism and so its acceptable to ignore the economic ties because of that. Actually, its the exact opposite. Absent the PFD, government would keep the money and decide how it is spent. Government would control spending. The PFD puts the money in citizens' hands and lets them decide on where to spend it. It puts control over spending in the hands of the private sector.

Still others argue that cutting the PFD is necessary to avoid income or sales taxes. As we have suggested elsewhere, we don't believe that has to be the case. Our view instead is that those who argue that point simply are accepting the "Big Lie" that future revenues will never recover and/or spending can't be cut further.

We also understand that some argue that point out of enlightened self-interest, realizing that at their income bracket they likely will pay more in taxes than they receive in PFD's if taxes are used to fund government instead of the PFD. Wanting to justify their position as something other than naked self interest, most then attempt to wrap that position in the flag, motherhood and apple pie, by arguing variations on the theme that the PFD is somehow unearned or "free money," and thus, like "welfare," somehow deserves to be taken first before taxes.

To be honest, we sometimes wonder if they make the same argument when they are visiting relatives and friends in Texas that receive royalty checks.

But setting that aside, that doesn't reach the central point.

The central point is this: what is in the best interests of the overall Alaska economy -- which in turn is what is in the best interests of Alaska -- is retaining as strong an overall economy as we can.

Because cutting the PFD has the "LARGEST ADVERSE IMPACT ON THE ECONOMY," it is the very last thing we should do.

Those that argue for it as a way of avoiding paying taxes should go back to focusing on what is creating the underlying issue in the first place -- the level of government spending.

But we suppose its the nature of things that, like the 14 in the Senate that voted for SB 128,, and sponsored or supported its equivalent in the House, some won't and instead will continue their efforts to push off responsibility for funding the result on someone else, even if it is at the expense of Alaska's overall economy.

Our response to those? We suppose we simply could continue to shake our head and walk on.

But realistically, instead we are more likely to continue to do what we are doing here -- writing another column on the subject. And each time we do, we seem to turn a few more heads, get a few more "shares," "reposts" or "retweets". And that makes it worth the effort. Rome wasn't built in a day; this argument won't be won in one either. One heart and mind at a time is fine with us.