Saturday, September 24, 2016

The two most important things to understand about the PFD cut ...

Click on table to enlarge.
To us, here are the two most important things to understand about the PFD cut.

First, it is a direct attack the overall Alaska economy. According to a study earlier this year from the University of Alaska-Anchorage Institute of Social and Economic Research (ISER), "the PFD cut ... has the largest adverse impact on the [overall Alaska] economy" of any of the fiscal options. https://goo.gl/ZxR1Hw at A-15.

Let that sink in for a moment, the "LARGEST ADVERSE IMPACT on the economy" of any of the options.

At a time when Alaska already is teetering on the edge of, if not already in a recession, our government itself is taking the very step that has the "largest adverse impact on the economy." In essence, our government is declaring economic war on the state's own economy.

Why? To preserve money for itself and for those that it chooses to benefit through continued government spending. Want to blame someone or something? Blame it on the "government knows best" mentality that has prevailed in both the executive and legislative branches since roughly 2010. That is what has led us directly to this point, and now that we are there, the government is choosing to continue going right on down the same road despite its impact on the overall Alaska economy.

Second, it undoes Governor Hammond's original and brilliantly conceived 50/50 split of earnings from the Permanent Fund. (Why "brilliantly conceived"? Because of the positive impact it has on the overall Alaska economy.)

Here is what Hammond said in "Diapering the Devil,"
I wanted to transform oil wells pumping oil for a finite period into money wells pumping money for infinity. … [Once the money wells were pumping,] [e]ach year one-half of the account’s earnings would be dispersed among Alaska residents …. The other half of the earnings could be used for essential government services. https://goo.gl/FFTi9M
With Walker's veto, this year less than 25% of earnings will go to Alaskans. Under a continuation of the plan as captured on the following table, by 2025 less than 15% of the earnings remaining after inflation proofing will go to Alaskans. The remaining 85%? It will go to government spending.

This is a sad, sad moment in Alaska's economic history. The important question is whether, looking back it will be a blip in time or it will become the point at which things became continually sad. This year's coming elections will have a lot to do with which road Alaska travels from here.