Further ruminations on my Fairbanks tax vote post below have led me to come—for the umpteenth time—to the conclusion that Alaska is on its way to an unavoidable fiscal collapse that will reverberate throughout the state’s fragile economy and have repercussions far and wide and for many years.
In Alaska, the interests of the body politic have been totally and permanently distorted by a structurally irrational economic system that funds state government with revenues derived entirely outside the polity—that is, from corporations almost entirely owned outside the state. At first blush this seems like a great bargain for Alaskans themselves; they get a full plate of government services without having to pay taxes for them. This is an even more extreme than the situation at the level of the Fairbanks North Star Borough, where only property owners pay taxes directly to the borough, leaving non-property owners under the impression that they get government services for free.
Of course anytime locals pay taxes directly, the burden permeates the economy as the cost is passed on—businesses, of course, raise their prices to cover any increase in tax payments, and consumers who see their tax bills rising look for pay raises or find ways to cut back on their spending, with different but equally relevant results on the economy as a whole. Still, if those who pay for services are not substantially the same as those who use them, the result is a political division that sees one group fighting either to reduce the tax burden or to make the non-taxpayers share it, while the other side prefers the status quo and fights both to preserve it structurally and to increase the benefit they derive from it.
At the state level, the cost of government is borne by those who, in a proper understanding of a republic, don’t “own” it. This is not to say they have no political clout; their lobbyists actually benefit from the isolation of the state’s capital in virtually inaccessible Juneau; few of the state’s 600,000-plus residents have the means to attend legislative deliberations in person, and although the state provides extensive teleconference opportunities the impact of a disembodied voice simply doesn’t compare. And the state’s residents do not constitute a true fiscal constituency for the simple reason that they do not pay direct state taxes. Indirectly, the costs of government affect their livelihood (which is why the state’s economy is so fragile in the first place) but are so diffuse that they are only perceived in the abstract, and then only by a very few who are of such an inclination.
Therefore, although the body politic has consistently expressed a vague conception that state government costs too much, it has been unable to prioritize spending items, nor to direct legislators to prioritize spending items in an effective manner to bring about meaningful spending control. The state costs more per capita than nearly every other state in the union, and undoubtedly if the residents had to bear that cost there would be spending cuts on a massive scale in fairly short order.
The current “crisis” stems from the fact that the fiscal take from Alaska’s longtime cash cow—oil—is winding down. Congressional Democrats are resisting efforts to revive the oil industry in Alaska because of their allegiance to the environmental kook Left, and the capital outlays needed to inject new energy in other sectors (linking Alaska’s rails to the Lower 48 leap to mind) are prohibitive in the absence of massive new revenues. In fact, I expect that if ANWR were opened and those massive new revenues were to be forthcoming, Alaska would piss it away just like the Trans-Alaska Pipeline, bumper-stickers to the contrary notwithstanding. The whole fiscal structure up there discourages longterm planning for a cash-reduced future.
There are other problems up there that I remember from my years as an Alaskan, but I believe the root cause is the disconnect between benefiting from government spending on one hand, and bearing the burden for that spending on another. Outgoing Gov. Tony Knowles spent his two terms promising a “soft landing” for Alaska, but that’s simply not possible. He blames the failure to produce one on the Republicans to whom voters have entrusted the Legislature for the last ten years, and Republicans blame Knowles. Both are right, but what they get right is immaterial. Both are wrong, because they simply don’t think beyond the immediate problem. There could never be a soft landing for a state whose fiscal system is utterly irrational.
As for my throwaway comment below that maybe Joe Vogler was right, I must retract it. Independence for Alaska might have worked if it had been achieved in 1958, but if it happened today the result would be Third World chaos sooner rather than later.
