By CHRIS NYMAN
As I reflect on our situation post-pandemic and wonder “what the heck just happened? Was it worth all this suffering to defeat President Trump?” I also see that inflation is now an undeniable statistic.
We’ve been told that it didn’t exist before due to the new way they measure it – even though prices were increasing for average Americans. It is great that the stock market has been performing so well for investors, but it may also portend increases in consumer prices.
Which brings me to the subject of the national debt. It has always seemed to me that the only way out of this massive debt is inflation is to make the money we owe worth less. But in theory inflation causes interest rates to rise, which would increase the interest on the national debt to horrific levels and perhaps cause taxes to rise in order to sustain the federal kleptocracy. Alternatively, interest rates can never rise due to this conundrum and inflation will eat us alive. This is the downside of not balancing the budget and printing “money” at will.
The politicians always say, “Future growth will pay our way out of this.” That might be true only if the economy grows faster than the rate of government growth.
Which brings me to our own fiscal situation: the State of Alaska budget.
I read the opinion letter from Speaker Louise Stutes. She seems sensible and in touch with our fiscal reality (although I will never forget she once supported income taxes to continue paying deficit dividends). I do appreciate the House’s position on this to not over-draw the Permanent Fund Earnings Account. So the usual range of options is there for us: Reduce the dividend, impose new income and/or sales taxes, or increase taxes on our most valuable industry. We are fortunate that oil prices have recovered somewhat so the situation is not as bad as it could be.
Nonetheless, the choice could not be more clear: The dividend must be ”suspended” until our fiscal accounts are in order. For instance, we have depleted our emergency reserve account the Constitutional Budget Reserve. The Alaska Constitution requires that we repay those borrowed funds. Do you think the Alaska Supreme Court will allow us to continue borrowing money from any source to continue dividends?
Regarding new taxes the ultimate issue would be whether the dividend is a legitimate “public purpose” (Re: Alaska Constitution Article 9 Paragraph 6: Public Purpose) on a par with basic services such as public safety and economic development, I don’t think so.
The reality is the Legislature will likely figure out some way to pay a reduced “dividend” by sleight of hand or an honest assessment of what we can actually afford.
In the long run, suspending the dividend for a few years would be best. We are not that far away from getting our accounts in order and having sustainable revenue from our oil-derived trust fund (the Permanent Fund) to have surplus funds for a dividend of some type again.