Wednesday, July 19, 2017

There is nothing good about this, but some would make it even worse ...

There is nothing good about this news, but there are things some are suggesting in response that could make the situation even worse for the overall Alaska economy and Alaska families. "S&P joins Moody’s in downgrading state," https://goo.gl/ujtN24

The economic analyses published these last two years consistently have reached the undisputed conclusion that cutting the PFD, which seems to be the knee jerk reaction of some whenever the state's fiscal situation makes the headlines:
  • "Has the largest adverse impact on the economy [of all the new revenue options] per dollar of revenues raised," https://goo.gl/ZxR1Hw at A-15;
  • "[W]ill likely increase the number of Alaskans below the poverty line by12-15,000 (2% of Alaskans)," https://goo.gl/iuTjv2 at 14.
As we have said repeatedly on these pages, we don't believe any of the "tax and spend" programs some have proposed in response to the state's fiscal situation are necessary. Instead, we believe using the Hammond 50/50 approach Alaska is well positioned to ride out the current low in the oil price cycle without self-inflicting any further damage on its economy. See "The Special Session version of “Implementing Governor Hammond’s 50/50 Plan," https://goo.gl/nE15Eo.

But, as we also have said repeatedly if we nevertheless are headed down this road it should be done with the least damage and disproportionate effects possible. We believe that replacing both the Senate and House proposals (both the PFD cut and income tax components) with a single flat tax -- a tax that imposes an equal distributional burden regardless of income class -- does exactly that.

Neither S&P's nor Moody's have suggested that cutting the PFD is necessary, or even appropriate.  Frankly, they don't care what Alaska does to get its state finances back in order.  Their only concern is that we do.

But Alaskans should care because we have to live with the consequences.  And making the situation even worse for our overall economy and Alaska families is the last -- the very last -- thing that any should be thinking about doing.