Saturday, October 8, 2016

Bill Walker is the "adult in the room" only for those worried more about the government economy than Alaska overall ...

SMH. From Friday's The Midnight Sun: 
"PFD Battle — Alaska Republicans continue to struggle to find a foothold in the battle over PFD funding after getting outflanked on both sides. Gov. Bill Walker securely holds the adult in the room “'using PFD money to fill the budget shortfall is the responsible thing to do” position ....'"
That may be the "adult in the room .... position" for those (a) in the roughly top 25% of Alaska incomes that are looking for someone else to shoulder the burden otherwise coming their way if current spending levels continue and the shortfall is covered through a mechanism which takes an equal percentage of income from all Alaskans, or are (b) more interested in bailing out the government economy than in protecting the state's overall economy.

But for the remainder of Alaskans -- which if the Moore poll reported deeper down in The Midnight Sun column is correct appears to be the majority -- the more likely "adult in the room" position is much different.  Here are the reasons why.

Alaska is in an economic recession. That's not an opinion; it's an economic fact applying the traditional test.  (See also "The Recession Arrives," (“'[With] the given caveat there is that there is no official (statement),' economist Dan Robinson, chief of the Research and Analysis Section the Alaska Department of Labor said Tuesday '... by any definition…basically, yes,' Alaska is in [a recession]."))

By taking money out of the economy, Walker's PFD cut is making it worse. Again, that is not an opinion; it's a fact applying traditional economic principles. ("Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation." By removing money from the economy, the PFD cut is the exact reverse.)

He is making it worse by a lot.  The PFD cut amounts to over 2% of Alaska total personal income, a non-trivial number in economic terms. The PFD cut takes Alaska's overall income level back to 2014 levels, at the very time Alaska is in a recession.

And there are other alternatives available to deal with the state's fiscal situation which have less of an impact on the state's overall economy. Again, that is not an opinion it's a fact. According to a study by the University of Alaska-Anchorage's Institute of Social and Economic Research earlier this year, "the PFD cut ... has the largest adverse impact on the [overall Alaska] economy" of any of the fiscal options. at A-15.

Given that, while those interested in protecting current government spending levels or in their own economic self-interest may argue Walker is the "adult in the room," for those interested more in the health of the overall Alaska economy he is not.  Instead, the PFD cuts simply pander to one segment of the economy at the expense of Alaska as a whole.

Some also argue that Walker is the "adult in the room" because he is the "only one with a plan." But that also is not true.  

This page and others have long advocated an alternative approach to developing a long-term sustainable budget.  Using the Goldsmith model as the starting point, the approach combines budget cuts, the use of the portion of the earnings from the Permanent Fund remaining after the PFD and some savings to work our way through the current down cycle in oil prices.  See "Alaska's Fiscal Situation:  Past, Present & Future,"

That approach is disliked (and disparaged) by those who are more concerned about the government economy than the overall economy because it results in deeper government spending cuts than if they are able successfully to convert a significant portion of the PFD to government revenues.

Thus, to them it doesn't count as "a plan" because it doesn't achieve their objective. 

But just because it is not a plan they like doesn't mean it isn't a plan.  In fact, it is the only plan that prioritizes the broader Alaska economy over just one segment.

Alaska needs a Governor -- and a plan -- that looks out for the overall economy, for Alaska overall.  Increasingly, Bill Walker does not appear to be that person or to represent that plan.

He may be the "adult in the room" among those focused on the government economy, but as the Moore poll appears to suggest, increasingly he isn't among those that think about more than that.