Alaskans Learn About TANSTAAFL

It’s always awkward when the chickens come home to roost

Alaskans elected Mike Dunleavy as governor because he promised them big, fat permanent fund dividends. They voted their greed. Those chickens are now coming home to roost.¹

The problem Alaskans face is that the laws of economics are as harsh and unforgiving as the laws of physics. One of those laws is sometimes abbreviated TANSTAAFL. It stands for “There ain’t no such thing as a free lunch.” The bar that promises you a free lunch if you buy two beers has buried the cost of the lunch in the cost of the beers. The lunch isn’t free.²

In the economics of a closed system, like a state budget, it means that if you increase an expense you are going to have to increase revenue. In the much-abused phrase, it’s a zero-sum game.

To be even more specific, you can choose any two of the following three options:

Low/no taxes
Big PFDs
Decent services and a healthy state economy

Governor Dunleavy has chosen the first two.³ The result is a budget that has had a meat axe taken to it, crushing education, the ferry system, social services and public safety. The multiplier effect on the incomes lost from Dunleavy’s harsh cuts is going to be devastating for Alaska’s economy. And to the extent Dunleavy restricts municipal property tax revenues, forcing cuts in city and borough budgets, the economic multipliers are themselves gong to multiply. It’s certainly going to send the state back into a recession, quite possibly a more severe one than the one just starting to end.

Maybe the Alaska Legislature can muster enough votes to avoid the worst of Dunleavy’s bloody cuts. But remember Dunleavy has a line item veto, so to make the changes stick, the Legislature would have to meet in special session after the line item vetoes, and find enough votes to override. Not likely.

Especially with the message of the gubernatorial election still rattling around Juneau: this is what the voters think they want.

Of course, with half the state troopers gone, with road maintenance down, the marine highway collapsed, and half the university campuses closed the voters may re-think their decision. But it’s pretty clear a majority of Alaskan voters aren’t long-range thinkers. The state senate, in particular, is going to have that preying on their minds.

So the most likely outcome is another, more severe recession. The diminishment in the quality of life and public safety is going to lead to some emigration from Alaska, too.

For a long time – since the late 1970s, in fact – Alaska has been enjoying a ride on the back of oil revenues. That’s gone. The “free lunch” of Prudhoe Bay is over.

Because TANSTAAFL.

 

---

1. This is what happens when you elect a governor from Wasilla. You’d think Alaskans would learn. You’d be wrong. ↩
2. The term originated in the 1930s, but was popularized by Robert Heinlein in his novel, The Moon Is a Harsh Mistress. ↩
3. Of course, he’s also offered to deploy the Alaska National Guard on the Mexican border to address Trump’s bogus immigrant invasion. That’s a pretty big expense that doesn’t seem to be in his budget. But then as Ralph Waldo Emerson noted, “A foolish consistency is the hobgoblin of little minds.” ↩