The most stunning thing about Charles Wohlforth's two columns ...

Charles Wohlforth, an Alaska Dispatch News columnist, wrote two pieces last week about the Alaska economy.  

Both, however, completely omit key facts critical to their subjects, resulting in hugely misleading assessments about what is happening in the state's overall economy and the effect on Alaska families of various fiscal options.

The most stunning thing about the columns was what wasn't included.  For those interested we explain here.

The overall economy

Wohlforth's first piece was entitled "Alaska’s economy hasn’t hit bottom yet. But you can see it from here," https://goo.gl/U5XBvW.
In writing about it, however, he omitted steps currently being taken by the Administration and legislature that are making the situation worse.

Over the last two years first the Administration, and this year the legislature cut the PFD in half.  That has made Alaska's overall economic situation worse.

Why is that?  According to detailed economic analyses published last year by the University of Alaska Anchorage Institute of Social and Economic Research, cutting the PFD:

• 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; 

• Is "by far the costliest measure for Alaska families," https://goo.gl/ivf9D2 at 1; and 

• "[L]ikely increase[s] the number of Alaskans below the poverty line by 12-15,000 (2% of Alaskans)," https://goo.gl/iuTjv2 at 14.

In addition, according to ISER's 2016 study, cutting the PFD has the largest adverse effect on overall state income of all of the state's fiscal options, including cutting state spending.  

Especially in the middle of a recession that's an important consideration because, while jobs are important, income translates more directly into economic activity levels. See Why we believe cutting the PFD has the largest adverse impact on the overall Alaska economy, https://goo.gl/yIsaOv.

But none -- none -- of those facts are in either of Wohlforth's pieces.

What is in Wohlforth's piece?

Some discussion, among others, with Top 20%'ers Jim Jansen (Chairman of Lynden Inc.) and Ron Duncan (Chairman of GCI), and with "high-end restaurant" (Wohlforth's words) owner, Laile Fairbairn, about the effect of the recession on their businesses.

The conclusion from those discussions?  

For the most part, losses of high-wage workers are over, economists said. ... But lower-wage workers are still losing their jobs as the decline filters outward. The course of the recession continues to follow projections by economists last year, who said the decline would ultimately take 6 percent of jobs.

 In short, for those in the Top 20% of Alaska's economic strata -- for whom the PFD is a relatively small part of their income -- life is stabilizing, but for the Remaining 80% -- those whose family economics are most affected by PFD cuts -- the negative impacts of the recession are expected to continue and, indeed, deepen.

The problem is, a large part of the overall economy is driven by the Remaining 80%.  And as ISER concluded, cutting the PFD has the "largest adverse impact" on that.

Wohlforth's article completely misses that boat and in doing so, paints a completely misleading picture of both the current and future economy. Yes, it may be stabilizing for those in the Top 20% -- those to whom Wohlforth apparently talked.

But the state is digging the hole deeper for the Remaining 80% and through them, the overall Alaska economy.

The effect on individual Alaskans

Wohlforth's second piece carries the title, "Here’s how the state’s fiscal gap could affect your finances," https://goo.gl/YKGRjH.

As we have repeatedly discussed on these pages, because of the regressive impact of PFD cuts, all of the the fiscal options currently being pushed by the Governor, Senate and House take significantly more from the income of an archetypical family of four in the middle and lower income brackets than they do from those in the Top 20%.

Indeed, under all three options 40% of such Alaska families face more than a 10% reduction in their income and the bottom 20% face a reduction of roughly 25% or more.  The following chart summarizes the effect.

Those effects are highly relevant to the question of how the "state's fiscal gap could affect" the finances of the ADN's readers.

Essentially, all of the proposals divide the state along income lines into Two Alaskas.

The Top 20% -- those whose economic situation is stabilizing -- come off almost completely unscathed.  The Remaining 80% -- those already and projected to continue reeling from the state's recession -- face increasingly deep cuts.

But again, none -- none -- of those facts are in Wohlforth's pieces.  

And neither column contains any discussion of alternatives to cutting the PFD.  Both columns assume it as a given.

A better way

Had Wohlforth taken the time to look beyond the effect on the Top 20%, he might have stumbled on to the fact that there is a better way forward for both Alaska's overall economy and individual Alaska families. 

Taking $750 million out of the private sector and diverting it to government through a PFD cut has such a significant adverse impact on the overall Alaska economy because the vast bulk of it comes out of the pockets of middle and lower income Alaskans.

As ISER explains in its 2016 report: 

Lower-income Alaskans typically spend a higher share of their income than higher-income Alaskans do, so more regressive measures will have a larger adverse effect on expenditures. 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.

See Short-run Economic Impacts Of Alaska Fiscal Options, https://goo.gl/ZxR1Hw at A-15.

Spreading the impact more evenly over a broader base will significantly improve both the impact on the overall economy and Alaska families.

Because it will leave more money in the pockets of the Remaining 80% and those families typically spend a higher share of the money in their pocket than the Top 20%, that will put more money into the overall economy, dampening the effect of the recession.

The broadest possible base is to spread the impact over Adjusted Gross Income (AGI).  Grossed up to reflect the amount of additional income received in Alaska by non-residents, that amounts to about $27 billion.  The tax rate required to raise $750 million from that base is about 2.75%.

And doing exactly that, assessing the tax at a flat rate of 2.75% will spread the impact more evenly.  Both the Top 20% and Remaining 80% will feel the impact to the same degree; neither will be required to bear the brunt of funding government -- or suffer reductions in their purchasing power -- disproportionately.

Because it is spread evenly, the Remaining 80% will have more money in their pockets to spend, improving the condition of the overall economy.  The Top 20% will bear the costs of government to the same degree.

In short, if we need to raise so-called "new revenues," doing so through a flat tax has both the softest impact on the overall economy and on individual Alaska families.

Those facts would seem to be highly relevant to two columns focused on Alaska's overall economy and the impact of the state's fiscal gap on the finances of Alaska's families.

But you won't find any of that in Wolhforth's pieces.  He is too busy chronicling the impact only on the Top 20%.