By ALEX GIMARC
One of the personally unpleasant tasks I undertake is to watch the political left, listen to what they say, try to understand what they want, and most importantly attempt to listen, however poorly, to how they intend to steal our money.
This week’s entry on that list is one putative Republican State Sen. Cathy Giessel. She started out as a reliable conservative but following a knockdown, drag-out slobber-knocker to defend her Senate seat from then-AFL/CIO Boss Vince Beltrami, she has swung hard left over the last half decade.
One of the things Sen. Giessel does is send out a weekly update on her thinking. While you might not like it, it behooves us all to read it and pay attention, for she is the Majority Leader of the Senate “bipartisan majority.”
Her latest missive is in defense of inflation proofing the Permanent Fund. Inflation proofing is based on the notion that whatever the Permanent Fund Corporation is doing investing the corpus of the fund is not sufficient to keep up with inflation, something which is a real indictment on the investing expertise of the rocket scientists in charge of the Permanent Fund Corporation.
Sen. Giessel would have us believe that unless we bury substantial amounts of money into the corpus of the Permanent Fund yearly, it will wither away and die on the vine not unlike a late-season tomato.
I find this to be laughable for a couple reasons. First, is that the average inflation rate over the last decade is 2.65%, not an awful number. On The Other Hand, the Standard & Poors Index over the last decade has been over 10%, more than twice as much. This would tell us that going full numbnuts and simply investing in an index fund would more than triple whatever damage inflation is doing to the Permanent Fund.
In short, Giessel is either economically illiterate or lying to us.
Given that she has spent a decade or so in the Alaska Legislature, I would assume that she is not an economic illiterate. If that isn’t true, why would she be lying to us?
There may be several reasons. First and most importantly, is given her hard left slide over the years, she is no longer a Permanent Fund dividend fan, as she has better plans for that money than disbursing it to us mere mortals.
Indeed, she has been leading the “minimize the PFD” crowd over the last decade.
Second, she has plans for money allocated to the PFD. This would be increases to the education foundation formula and moving state pensions from defined contribution to costly defined benefit.
Given a finite dollar availability, the more money you spend on union benefits, the less you have for the PFD. Inflation proofing the corpus of the Permanent Fund when a simple investing strategy would triple the returns becomes a way to further shrink that pool of money.
Gissel is trying to minimize the available dollars for the PFD while rewarding her new union supporters while flashing the shiny in our eyes of inflation proofing the corpus of the Permanent Fund. Try not to chase the shiny.
Two thoughts come to mind:
First, if the Smart Guys at the Permanent Fund Corporation can’t figure out how to invest in stuff that beats inflation and index funds, they need to resign and be replaced by machines that will simply invest in Index Funds.
Second is that Cathy Giessel is lying to us, something we need to be careful of as she reportedly has plans on being our next governor.
Try not to elect a liar.
Alex Gimarc lives in Anchorage since retiring from the military in 1997. His interests include science and technology, environment, energy, economics, military affairs, fishing and disabilities policies. His weekly column “Interesting Items” is a summary of news stories with substantive Alaska-themed topics. He was a small business owner and Information Technology professional.
