Monday, January 05, 2009

The Economy: Some Constructive Criticism for Governor Palin

Full Disclosure

This thread is going to offer some criticism I have with the Palin administration. Having said that, I will say two things. One, I voted for Palin, and two, I still support her and I want to see her succeed.

I say this because I come from a point of view that I understand how "pay to play" politics work in Alaska. This is not to say "pay to play" politics is only indigenous to Alaska politics. But recently Alaska has seen its fair share of public scrutiny and investigations on the corruption in Alaska. And the cronyism that takes place in Alaska, affects the free market economy in Alaska.

Because of this, Sarah Palin rode in on a perfect political storm and was elected Governor. Governor Palin, before she was elected, was on the oil and gas team for the State of Alaska.

Because of that position, she, through the local media, became popular. She became a champion of fighting the "machine" within the Alaska Republican Party.

So her claim to fame was borne.

For myself, in 1998, I ran under the Alaskan Independence Party and ran against a Republican. This was the first time I had ever entered the political arena, but what happened to me, opened my eyes to how "pay to play" politics is worked.

In short and without going into too much detail, I was approached by individuals within the Alaska Republican Party and I was asked to step aside and let a well known republican candidate fill the ticket and run against the other republican.

There were meetings at Denny's over my leaving the race and offers were made of a chief of staff position or help in the future with contributions if I did this. So I had my first taste of politics.

And because of this experience, I support Palin on this basis. I understand that you have to pick your cabinet members carefully and I understand that those who you have had a close relationship will be on the top list. They will be considered Outsiders.

That is not always a good thing, because cabinet members can bring about bad policy.

And it has happened in the Palin administration.


Because Palin was elected on a mandate of change that had a foundation of fighting corruption, the oil companies became a target by proxy to legislators caught taking bribes to keep oil taxes down.

The local media had a "tingle down their leg" moment and championed Palin's efforts on passing legislation that increased taxes on the oil companies. The legislation was called Alaska's Clear and Equitable Share.

In the public arena, there was a spirited debate. From radio host Dan Fagan promoting a consultant Pedro van Meurs, to consultant Daniel Johnston's testimony to the legislature that taxes could be increased without harm to the economy, it became a "free-for-all" debate.

The trouble is, the consultants weren't free but it made for controversey.

The Anchorage Daily News wrote:

Granted, the hearing offered dueling consultants with Daniel Johnston disputing Van Meurs' claim. But Johnston's resume pales in comparison to Van Meurs'.

The irony is you had Dan Fagan promoting Pedro van Meurs and criticising Palin's plan to raise the tax to 25%, all the while Pedro van Meurs was quoted in the press endorsing the 25% increase by saying it wouldn't hurt the economy.

The Anchorage Daily News writes:

Last week, van Meurs recommended that lawmakers not change the tax until 2011, when the law calls for a review. However, he also said Palin's proposal to raise the tax rate from 22.5 percent of oil company profits to 25 percent fits with what he recommended to Murkowski last year.

"That is perfect as far as I'm concerned," van Meurs said.

Van Meurs also said he sees no harm in Palin's plan to end tax credits for past oil field investments, and he sees no "great evidence" that oil field costs have risen as much on the North Slope as in other oil zones such as the Gulf of Mexico and Alberta.

Can you say "I want a refund."

Van Meurs cited Alberta as his proof that his comments were correct. Trouble is, he wasn't. Because the fun is over and it's time to get to work on the economy.

Trickle Down Economics

As stated before, I want to see Palin succeed. During a campaign event held by the Anchorage Women's Club, I watched Palin work the room and you could tell she was somewhat of an Outsider, then I listened to her speak about the issues.

Where she was most comfortable; she spoke about the Republican platform.

That was an issue she was clear and sincere about. On other issues you could tell she was not comfortable with them. And as a politician you move through a growing period on becoming comfortable with issues as the campaign continues.

Many have written and described Palin as a female version of Ronald Reagan. I would say she is inspired by him, but she has to learn the economic side of Reaganism. The trickle down side of economics.

When it comes to taxes, it's very simple. You raise taxes (and this means all taxes to include property taxes and sales taxes) on corporations or individuals, the tax increases trickle down into the pockets of all of the working class by driving up costs of business/goods and eliminating private sector jobs.

There is only one reason for an increase in taxes. To pay for an increase in the cost of government which has an inflation risk built in and to increase the size government or fund some crazy Ponzi scheme done under foolish mortage lending legislation.

In Alaska, the size and cost of government has grown and as a result of that perfect storm that Palin came in on, ACES was passed and an increase in taxes was placed on oil companies and the state coffers bulged with money for that "rainy day."

The trouble is, that "rainy day" is in the form of forty five dollars per barrel oil pouring down on a budget that needs over sixty dollars per barrel oil to break even.

Moreover, granted there was a budget surplus, but that is being quickly dissolved and one would have to ask, what size of a budget surplus would Reagan have approved. In effect, the government is taxing beyond its need.

So given the current situation in Alaska, we are quickly seeing the aftermath of increasing the taxes. Investment in Alaska's oil patch, is limping along and signs of a collapsing economy are near.

In today's Anchorage Daily News, it is reported that: FLINT HILLS: If it ceases operations, the railroad and the airport would be hit hard.

There is a lesson for Palin to learn on oil taxes.

Venezuela’s Chavez Scraps U.S. Heating Oil Program

For the Palin administration to even consider buying the Flint Hills Refinery, Ronald Reagan would be rolling over in his grave.

It's time for Palin to follow the trickle down economics of Reagan and cut taxes on the oil companies. The Alaska economy will demand it and so will her future political capital.


jasonthealaskan said...

You really do offer great insight on things, if Dan Fagan was as smart as you I would still listen to him. Glen Biegel still remains my favorite in the Alaska talk show landscape. I am glad you write this blog, I stumbled across it on Google and realized you were an Alaskan, just like me, who believes in the same connection between economic and political freedom. I read here every time something new is up

Tom said...

Jason, thanks for stopping by.

I am working at putting together a short blog radio show to talk about the issues.

The format has potential.

Keep up the blogging as I drop by and read what you have to say.


jasonthealaskan said...

well I look forward to it, and I think the format has definite potential.