Fox News Praises the Alaska Model (from 2012)

by | May 23, 2018 | Opinion, The Indepentarian

This essay was originally published on Basic Income News in August 2012.

 

Last February two conservative commentators, Bill O’Reilly and Lou Dobbs, from the Fox News Network, praised the Alaska Dividend as “a perfect Model” of what America should be doing with its resources. It is amazing that prominent conservatives can praise a policy that redistributes income from the wealthiest Americans to all Americans unconditionally—without means test or work requirement.

O’Reilly began by saying, “It is my contention that we, the people, own the gas and oil discovered in America. It’s our land, and the government administers it in our name.”

Later, Dobbs added (as O’Reilly nodded and voiced agreement), “All of the vast energy reserves in this country belong to us, as you said. In Alaska, there’s a perfect model for what we should do as a nation. We should have—what it’s called there is a Permanent Trust. Let’s call it the American Trust. And the oil companies, that pay about $10 billion per year in fees and royalties—have that money go into this trust fund, not to be touched by the Treasury Department or any other federal agency, but simply for the investment on behalf of the American people (citizens). A couple things happen. One is, it reminds people whose oil this is, whose coal this is, and what the rights of an American citizen are. And it even puts a little money, a little dollar sign, next to what it’s worth to be a citizen. Have dividends disbursed and distributed every year. … [The other thing is] Peg [the royalties] to the price of gasoline … and that money go into that trust fund for the American people. I think you’d see a lot of people start to pay a little different attention to what people think and respect citizens a little more.”

It was a very good statement of what the Alaska model is for and how it ought to work.

But I doubt the two commentators realize how subversive their words were. If the government realized that the land belongs to all the people and truly began to administer it for everyone’s benefit, many changes would happen. If all the oil, coal, and natural gas of America belong to all Americans equally and unconditionally, so do all the gold, silver, bauxite, fish, timber, land, and groundwater. So do the atmosphere, the broadcast spectrum, and many other things worth an awful lot of money. If everybody who asserted private ownership of any of these things had to pay into the kind of public trust fund O’Reilly and Dobbs endorse, that fund would finance the most massive redistribution of wealth from rich to poor in the history of the United States (if not the world), and it could probably support a basic income large enough to permanently end poverty in America.
-Karl Widerquist, South Bend, Indiana, August 2012

Video of Bill O’Reilly and Lou Dobbs discussing the Alaska fund and dividend is online at: https://www.foxnews.com/on-air/oreilly/index.html#/v/1472237953001/government-

For more on the Alaska model, including cost estimates of the potential value of the natural resources the government gives away for free see the following two books:

Alaska’s Permanent Fund Dividend: Examining its Suitability as a Model, co-edited by Karl Widerquist and Michael W. Howard (Palgrave-MacMillan, 2012):

https://us.macmillan.com/book.aspx?isbn=9780230112070

Exporting the Alaska Model: Adapting the Permanent Fund Dividend for Reform around the World, co-edited by Karl Widerquist and Michael W. Howard (Palgrave-MacMillan, 2012)

https://us.macmillan.com/book.aspx?isbn=9781137006592

Or contact me: Karl Widerquist <Karl@widerquist.com>

Karl Widerquist’s Speaking Engagements Summer-Fall 2018

Karl Widerquist’s Speaking Engagements Summer-Fall 2018

by | May 17, 2018 | Opinion, The Indepentarian

This summer and fall I’ll give at least ten talks in seven cities in six countries including the United States, Canada, France, Scotland, Finland, and Lithuania. Here’s the information I have on each talk so far:

Friday, May 18, to Sunday, May 20, 2018, keynote speaker at “New Directions in Basic Income Workshop,” the University of Michigan, Ann Arbor, MI, presenting “The Devil’s in the Caveats: A Critical Discussion of Basic Income Experiments,” Sunday, 1:00 – 2:30pm.

Thursday, May 24, to Sunday, May 27, 2018, participant at “North American Basic Income Guarantee Congress,” McMaster University, Hamilton, Ontario, presenting “The Devil’s in the Caveats: A Critical Discussion of Basic Income Experiments,” Saturday 10:30 – 12:00pm, Room 1305/07.

Wednesday, June 13, Paris, France. Guest speaker at Science Po, presenting “Freedom as the Power to Say No.” Details TBA

Thursday, June 14, to Saturday, June 16, 2018, participant at “The Economic Ethics Network Conference.” Invitation only. University of Paris, presenting “Justice as the Pursuit of Accord.”

Sunday, June 17, Talk to Basic Income Activists on “Basic Income’s Third Wave,” Paris, France, details TBA

Monday, June 18, 3 to 5pm, guest speaker presenting “Prehistoric Myths in Modern Political Philosophy,” Ecole des Hautes Etudes en Sciences Sociales (EHESS), Paris, France

Friday, July 20, 2018, presenting “A Critical Discussion of Basic Income Experiments: The Devil’s in the Caveats,” Glasgow, Scotland

Friday, August 24 to Sunday, August 26, 2018, participant at Basic Income Earth Network Congress, University of Tampere, Tampere, Finland, presenting “Microsimulation Analysis of the Cost of Basic Income in the United Kingdom” (joint presentation with Georg Arndt).

Thursday, August 30, to Saturday, September 1, 2018, participant European Network for Social Policy Analysis Conference, Institute of Sociology and Social Work, Vilnius University, Vilnius, Lithuania, presenting “Basic Income’s Third Wave.”

Thursday, October 18, to Saturday, October 20, 2018, participant at Association for Political Theory, Haverford and Bryn Mawr Colleges, Pennsylvania, presenting, “The Prehistory of Private Property, Part 1: The Myth of Appropriation.”

How Alaska Can Avoid the Third Stage of the Resource Curse (from 2012)

by | May 16, 2018 | Opinion, The Indepentarian

This essay was originally published on Basic Income News in February 2012.

The resource curse, as I see it, comes in three different forms. Alaska has avoided the first two, but whether it avoids the third remains to be seen. The first-stage resource curse occurs when resource exports drive up the nation’s exchange rate and drive other industries out of business. The phrase “Dutch Disease” was coined to refer to this kind of resource curse. The second-stage resource curse occurs when the influx of cash from resource exports fosters corruption, graft, and sometimes dictatorship, so that all or most of the oil revenue is used against the people rather than for their benefit.

The third stage of the resource curse occurs when the resource windfall creates temporary prosperity for all or most of the people, only to lead to depression and economic deprivation as soon as the resource revenue disappears. A large number of factors can contribute to the third-stage resource curse. It can happen if the resource-exporting community invests in an infrastructure suited only to resource exports and is either too large or the wrong kind of infrastructure for the economy that will need to be in place when the resources are gone. Probably the most important reason for a third-stage resource curse is too much spending on immediate needs and not enough savings.

The first two forms of the resource curse will be apparent during the boom, and clearly Alaska has escaped them. But we cannot know for sure whether it has escaped the third stage until the resource is gone. How well is it doing to avoid the third-stage resource curse?

Three strategies to avoid this third kind of resource curse are savings, investment, and the hope that resource revenue will never end. Although Alaska oil production has been slowly and steadily declining for twenty years, the hope remains that natural gas, newly discovered oil reserves, or some other resource discovery will replace what is being lost. This hope will never die, but it can substitute for cautious preparation.

Alaska has made some good investment spending on schools and infrastructure, and it has managed to save some money. According to Commonwealth North, Alaska has saved $66 billion dollars: about $40 billion in the Alaska Permanent Fund (APF), $10 billion in the Constitutional Budget Reserve (CBR) and the rest in other funds and saving mechanisms. Compared to most other U.S. states, struggling with budget deficits, these saving figures are impressive, but they’re not as impressive compared to other resource exporters. After exporting similar amounts of oil, Norway has amassed a fund of $560 billion dollars.

Instead of saving the bulk of its oil revenue, Alaska has devoted almost all of it to current spending. This decision has put Alaskans at risk of the third kind of resource curse. If the state government had to draw on the interest of its savings to make up for a shortfall in oil revenues, all the funds together could not be counted on to cover even one-fourth of the state’s annual budget, and most of the interest on Alaska’s savings (after inflation-proofing and reinvestment) is already rightly dedicated to paying dividends. If and when oil exports come to an end, Alaskans will need and deserve the returns to their savings more than ever.

The Alaska Permanent Fund (APF) and Dividend are working just as intended. They are Alaska’s best savings plan. They constitute a model that other places should be following. When savings are most needed, the state shouldn’t abandon that model; it should build on it. If the fund was large enough, the interest on it could support both a substantial dividend and some or all of the state’s regular spending. The solution for Alaska is to save more money now, while oil prices are high and production is healthy and to treat more of its resources the way it treats oil. The state can’t save more for the future without making some sacrifices in the present, but I want to show you that a much larger fund is feasible.

First, let’s consider what might have been. When oil revenue started flowing into Alaska, one proposal was to save all of it and spend only the interest. Of course, we can’t change history now, but it is valuable to look back with the benefit of numbers that weren’t available looking forward. According to Gregg Erickson and Cliff Groh’s chapter in Alaska’s Permanent Fund Dividend: Examining Its Suitability as a Model, the state received a total of $103.5 billion in oil revenue by 2010 (adjusted for inflation). It invested $19.1 billion (18.2 percent of its oil revenue) in the APF. Most of the remaining $84.4 billion (81.8 percent) went to the general state budget. Even though the APF has paid 30 years of dividends, the principal has increased by a total of 217 percent to about $40 billion.

Suppose, for the sake of argument, that Alaska had saved all of its oil revenue into the APF, using half of it for regular revenue and half of it for the PFD. If this larger fund did just as well as the actual fund has over the last 35 years, the APF would now be worth about $225 billion. It would have $9 billion available this year. Suppose it used half dividends and half for spending. If all 700,000 Alaskans applied for the PFD, $4.5 billion would finance a dividend of more than $6,000 per person, or more than $24,000 for a family of four. The remaining $4.5 billion dollars would cover about 43 percent of the current state budget of $10.5 billion.

But this is not all that might have been. According to Erickson and Groh, oil produced in Alaska has generated more than $300 billion in total revenue, two-thirds of which has gone to oil companies. Although fees, royalties, and taxes on Alaska oil have recently been increased, they have historically been very low by world standards. Some nations capture as much as 80 percent of oil revenue. Even though the oil was discovered by state geologists on state land, and the oil companies were brought in only as hired help, the state has let the oil companies walk away with most of the profits. Had the state captured two-thirds of oil revenue instead of only one-third, and saved all of that, Alaska could now have an APF of $434.8 billion. It would have $17.4 billion available this year, $8.7 billion for the general budget and $8.7 billion for dividends. The share going to the state budget would cover 83 percent of state expenditure. The state would only need to raise only $1.8 billion in taxes to cover all other current spending. Assuming the population of Alaska remains unchanged at 700,000 (which is admittedly a very big assumption at such a large dividend level), every Alaskan would receive a dividend of more than $12,000 per year. Poverty would no longer exist in Alaska, and everyone, rich or poor, would have a large springboard for opportunity.

The figures could be even higher if the state had treated more resources the way it treats oil, but I think you get my point. Even if the state needed to spend some of that money as it came in on badly need projects, it has much greater capacity to save than it has taken advantage of. It could have waited to get rid of the income tax until was replaced by permanent returns to the state’s savings (rather than temporary oil revenue). It could have driven a harder bargain with the oil companies. And it could have treated more resources the way it treats oil and mining. It would now little to fear from the coming decline in the oil revenue.

We can’t change the past; where can we go from here? Alaska has increased taxes and fees on oil companies in recent years, and it needs to resist oil company pressure to reduce them. Several proposals on the table right now would increase the APF. Senator Johnny Ellis proposes moving $2 billion from the CBR to the APF, and Representative Mike Doogan proposes $10 billion. These proposals are a start, but it is not enough simply to protect some of the savings Alaska has accumulated. Alaska needs to save more — a lot more.

The state government takes in about $9 billion in oil revenue per year. Suppose the state saved $8 billion of that each year for the next 10 years and its investments do as well over those years as the APF has on average in the past. If so, by 2022, that savings alone would accumulate to more than $90 billion. The APF would grow to $50 billion, or $62 billion dollars with Rep. Doogan’s additional $10 billion were moved from the CBR. Combining that savings would make the APF balance $152 billion. It would produce $6 billion dollars of returns ready for use. If all of that revenue were devoted to the PFD, each Alaskan would receive a dividend of more than $8,000. If half of it were devoted to the PFD, it would have $3 billion dollars per year of permanent income to relieve pressure on the state budget, and it would still be able to pay dividends of more than $4,000 per person per year.

Such an ambitious short-term savings plan is probably not politically possible, but it is possible to move in that direction. Continuing to live off temporary revenue will leave the state vulnerable to the third-stage resource curse. Even $1 billion a year in additional savings would be a good start in protecting Alaska’s future.

No Time for Austerity (from 2011)

by | May 9, 2018 | Opinion, The Indepentarian

This essay was originally published on Basic Income News in December 2011.

I can’t believe the news. We are in the midst of the worst global depression in 70 years, and the governments of almost every major industrialized country are talking about austerity. They’re cutting government services; laying off public sector workers; cutting pay, pensions, and benefits for public employees—all in the name of austerity and balanced budgets.

This astounds me because we’ve been through it before. We’ve seen what works, and we know that austerity is not the way out of a major depression. Austerity makes depressions worse. To get out of a depression, the government needs to spend money—and lots of it. The lessons of history are clear, and the reading of history I’m going to discuss to make my point is not terribly controversial among economists. Let me explain.

In a depression (or a deep recession or whatever you want to call it), we get stuck at the bottom. People can’t spend as much because they’re not making as much, but they aren’t making as much because people aren’t spending as much. Debt is a related problem, and so, I believe, is the real estate market, but there’s no room in this editorial for a full explanation. If you understand the idea of getting stuck at the bottom because of the feedback between spending and income, you get the essence of it. This kind of unemployment is pure waste. Human resources (not to mention idle shops and factories) are simply going to waste unused. We can wait for all that to work itself out on its own—as Japan has been waiting since 1989—or the government can take action.

Austerity is a reasonable response to—say—finding half of our industrial capacity destroyed by aerial bombardment. If our physical capacity to produce goods has fallen, then we’ll all have to make do with a little less for a while. But austerity is the worst possible response to an economy in a depression, because a depression economy is no less able to produce goods than before; it’s simply letting productive capacity go to waste. And that waste exists because people aren’t spending as much. If the governments of the world respond by spending less as well, they simply exacerbate the problem.

We learned how to take action in a big way at the outset of World War II. I wrote a few years ago about “the economic lesson of 1938” (August 2009). Today’s editorial could as well be called “the economic lesson of 1941.” The accompanying graph (at the bottom) shows U.S. per capita GDP for the years 1929 to 1947—from the stock market crash at the beginning of the Great Depression to the bottom of the post-war recession. Per capita GDP is the income of the average American. The figures are in “inflation-adjusted” 2008 dollars, meaning they’re multiplied by an index to show the purchasing power that the incomes of the time would have at today’s prices. No inflation adjustment is perfect, but they give you a rough idea. In general the graph shows we were much poorer back then, but it shows much more about the times.

The austerity years were 1929 to 1933. In addition to many other mistakes, the government responded to reduced tax revenue caused by declining economic activity by reducing its own activity to match. Average income went down from over $11,000 to less than $8,000—a loss of more than 25 percent. You can think of everybody getting a 25 percent pay cut at the same time or of 75 percent of people keeping their entire income while 25 percent of people lose their entire incomes. What actually happened was somewhere in between, a little bit of both. Unemployment went up to 20 percent, and in that sense the Great Depression was roughly twice as bad as what we’re going through now.

In 1933, Franklin Roosevelt was elected and we started spending money to stimulate the economy. He called it “priming the pump.” Years later Keynesian economists would call it “simulating aggregate demand.” Whatever you call it, Roosevelt took what, at the time, looked like big action, spending money trying to help people, to get the economy moving again. And he had several years of success until he returned to austerity measures in 1937 and 1938, suddenly trying to balance the budget. I wrote about that problem in my earlier editorial. Except for that year progress was slow but steady. Yet, by 1941 unemployment was still at 9.67%. After 12 years of waiting for an end to the depression, more Americans were unemployed in 1941 than they are now in the forth year of our depression.

But in 1941 the Japanese bombed Pearl Harbor. The United States entered World War II. And the depression ended virtually over night. We went from a 10-percent labor surplus to a labor shortage in a matter of months. The demand for labor was so great that women entered the labor force in unprecedented numbers. They found good high-paying jobs waiting for them. Average income shot up to $20,000 per year—two and a half times what it was after four years of austerity in 1933.

The depression disappeared because the government spent money and massive amounts of it. The government hired the idle labor (and more) as soldiers and support workers. The government hired the idle shipyards to build boats, the idle automobile plants to build jeeps and tanks, and so on. It was good for people, and it was good for business. The entire New Deal—it turned out—was far too small.

There are dangers to stimulating the economy in the wrong way, at the wrong time, or in the wrong amounts. You can end up with unacceptable debt, inflation, or a delayed depression. This is why I have never thought of myself as a Keynesian, and I do not think that massive stimulus is the best response to a garden-variety recession like most of the ones experienced between World War II and today. I’ve argued in this series (May 2009) that the most important thing government can do during a downturn is the same as during a boom: make sure everyone’s basic needs are met. If that is done, we can often let recessions work themselves out. I guess I’m a last-resort Keynesian. I think most non-Keynesian economists are, although they probably disagree a lot in how bad things have to get before they’ll take up their last resort.

I don’t think we should wait any longer because the possible dangers of a government stimulus can be overblown. None of them manifested themselves during or after the Second World War. Except for the obvious losses to war, the spending was good for people. After the war people got married; they used the money they saved to make down payments on houses, to start families, and to build better lives than they had in the 1930s.

The depression never came back. This is why I end the graph in the recession year of 1947. That year was as bad as the economy got after the war, but yet, per capita income was still nearly $15,000, not quite twice what it was after four years of austerity in 1933 and still 25 percent higher than it was in the boom year of 1929. After 1947 we got good healthy growth punctuated by short, forgettable, recessions. It was one of the best periods of economic growth in American history. The Second Word War spending worked, and there was no post-stimulus hangover, not in the short, not in the long run. The most massive government stimulus we’ve ever had—perhaps the largest in world history—did not cause any significant problems with debt, inflation, or delayed depression.

You can look at the income and unemployment figures for almost every industrialized, capitalist nation at the time, and you will see the same pattern: as soon as they began massive war spending, the depression ended in their country. But we don’t need a war to stimulate the economy. We just need to break the political obsession with austerity and start spending money.
Without the need to spend a stimulus on war, we can spend on schools, bridges, public transits, infrastructure, or on services to help the needy through a basic income guarantee or through something else. What we spend on is less important for stimulating the economy than the need to spend. The basic income guarantee movement now needs to be part of broader movement around the world against the austerity craze. This is one reason I support the Occupy Movement in the United States and the anti-austerity movement in Europe. We must focus the world’s attention on the need for government to spend money to help people. Once we open that door, the possibilities are great. But until then, we practice austerity against the lessons of our history.
-Karl Widerquist (karl@widerquist.com), the Second Cup Café, Doha, Qatar, December 2011

YouTube Interview with Michael Tubbs

YouTube Interview with Michael Tubbs

by | Apr 18, 2018 | News

A recent YouTube video from The Young Turks, a left-wing news-based channel with close to 4 million subscribers, focuses on the universal basic income (UBI) pilot project currently being planned in Stockton, California.

The video consists of an interview with Michael Tubbs, Mayor of Stockton, the youngest Mayor in Stockton history. He discusses the nature of the project, and what he hopes it will achieve.

The project has previously been covered in some detail by Basic Income News.

 

YouTube player