Be careful what you wish for ...

While having an appealing headline, the substance of a column in yesterday's Alaska Dispatch News deeply concerns us.

The headline of the Charles Wohlforth column is "Yes, put the dividend in the Alaska Constitution," but when you get down to the details (aka, "the fine print") this is what it argues for:

"A dividend of $1,100, close to the historic average, seems about right. It will do the good we need but is not enough to distort behavior and the economy. 

"A constitutional amendment should set the dividend at that amount permanently with a cost-of-living adjustment to keep it from eroding due to inflation."

See https://goo.gl/bi71BY.

The effect of the proposal?  It would cut the current PFD by more than half, then also cap it going forward by disconnecting it from the growth of the Permanent Fund and tying it instead to a COLA (cost-of-living adjustment). As Wohlforth admits in the piece, "history shows that over time, the Permanent Fund grows faster than inflation."

Essentially, it would turn what is now a personal individual investment account designed to realize a portion of the benefit, as it grows over time, from the monetization of the state's commonly held oil resource for current and all future Alaska citizens, into a forever frozen in time (in "real" terms) "UBI" ("universal basic income" guarantee).  Those are two entirely different things.
 
And although in the first couple of years the level appears about the same, because it would disconnect the PFD from the growth of the Permanent Fund, over time Wohlforth's approach would be substantially worse for the overall Alaska economy and families (especially future families) than even SB 26, the Senate's draconian approach this last session.
To put it bluntly, if this were the proposal to "Constitutionalize" the PFD that emerged from the coming legislative session we would oppose it as vigorously as we have the Governor's original proposal, SB 26 and HB 115, as doing much, much ... much more harm than good.

So, what is behind the proposal?  As usual, just follow the money.

Under Wohlforth's proposal, the other half of the current PFD and all future appreciation in the value of the fund would go to government, and through it, to those who government decided (instead of individual Alaskans) was worthy of the money.

Wohlforth really doesn't try to hide this, although the admission is buried deep in his column and has to be pieced together:

"It [his proposal] would allow increasing fund profits to accrue to ... public spending. As the fund's growth outstrips inflation, the portion left over after dividends would become ever larger. 

"It would remove the dividend from the fiscal debate. With the amount of the dividend set, legislators' choice would be between taxes [which they could put off for much, much longer even at higher spending levels] and spending ....

"... Finally, it would resolve a big piece of Alaska's painful adjustment to a new economy [by diverting to government even more private sector money]."

In short, the proposal's basically motivated by the same goals as drives the Alaska Journal of Commerce's Andrew Jensen -- to avoid substantial additional cuts in government spending and avoid raising so-called "new revenue" through taxes that would upset the donor class.

To be sure, Wohlforth's path to the same end result is likely different than Jensen's.  For example, Wohlforth likely wants to spend the extra money on different things than Jensen (social spending v. capital). And while Jensen wants to use PFD cuts rather than taxes to raise "new revenue" in order to minimize the impact on the Top 20%, Wohlforth's reason for wanting to avoid them likely is more that he realizes, at least in the near term, taxes would result in a significant push back on the type of spending he wants by those in position to affect it, while, once fixed and disconnected, a PFD cut no longer would.

But the end result is the same.  Some Alaskans would benefit while the overall economy and Alaska families would suffer.  With one exception, just as the current approaches of the Governor, Senate and House, Wohlforth's PFD cuts would also:

• Have "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;
• Be "by far the costliest measure for Alaska families," https://goo.gl/ivf9D2 at 1; and
• "[L]ikely increase the number of Alaskans below the poverty line by 12-15,000 (2% of Alaskans)," https://goo.gl/iuTjv2 at 14.

The exception is that, over time, Wohlforth's proposal would result in an even larger "adverse impact on the economy," be even more costly "for Alaska families," and increase poverty levels even more because, as a result of the conversion from following the growth of the Permanent Fund to inflation, the cuts would be far larger.

What does Wohlforth offer as a justification?  His opinion (because there is no study that supports it) that a larger "dividend could hurt Alaska, luring poor families north and discouraging work."

Personally, my response to that is the less polite form of saying "baloney."

And so is the conclusion of the available research on that assertion that has been done on UBI's (which are somewhat analogous on this limited point) elsewhere.  See "Finnish citizens given universal basic income report lower stress levels and greater incentive to work," https://goo.gl/eb8Fbe ("Finland has been giving 2,000 of its citizens an unconditional income for the last five months and some are already seeing the benefits, reporting decreased stress, greater incentives to find work and more time to pursue business ideas.")

Suffice it to say that until Wohlforth comes up with a detailed study that supports his seemingly off-the-cuff conclusion that a lower level "seems about right," the assertion is worth even less than the paper it's written on (because newsprint is fairly expensive these days).  It's more like the ragtag reasoning Sens. Peter Kelly, Peter Micciche, Anna MacKinnon, Kevin Meyer, John Coghill, Cathy Giessel, Mia Costello and the other Senate R's have used on the subject in their effort to protect the Top 20% than anything else.

But to us, Wohlforth's column does have one positive effect.

It points out that some proposals to "Constitutionalize" the PFD can be worse even than the current situation.

Frankly, what I would guess Wohlforth and others now contemplating similar proposals are counting on is that Alaskans, disappointed in the Supreme Court's decision last week, will grab at anything, literally anything, that proposes to "Constitutionalize the PFD."

But we, at least, will not.

Instead, we are going to hold out for the thing that we believe -- and the available evidence and studies support -- best serves the overall Alaska economy and Alaska families.  And that is Governor Hammond's vision for use of the earnings produced from the Permanent Fund outlined in Diapering the Devil, as enshrined in the Alaska statutes since the early 1980's:

"Each year one-half of the account’s earnings would be dispersed among Alaska residents …. The other half of the earnings could be used for essential government services.”

 Diapering the Devil,  https://goo.gl/FFTi9M  at 15, 19.

Once we see something along those lines we will support it.  Until then we intend to continue calling out those who are attempting to use the current situation to lead the overall Alaska economy and Alaska families into one even worse.