Saturday, August 25, 2018

Alaska - A Living Experiment in Guaranteed Annual Income

Folks on the Left have posited that we should give everyone a sum of money every year, regardless of their circumstances.  Suppose this was actually done?  Turns out, it already has been.

Alaska is an interesting place in a number of ways.  And one of them is that instead of paying income taxes to the State, the State pays you.  It is called the Alaska Permanent Fund, and it is based on investments from oil revenues, the dividends of which are paid to Alaska residents.  If you are an Alaskan (by dint of living here for x years) you get a check every year.  Pretty sweet, no?

Of course, the problem is, the cost of living in Alaska is like the cost of living in California, plus some.   Yes, houses and land are somewhat cheaper here, but gas is at least 50 cents to a buck-a-gallon more than in the "lower 48".  And things like eggs and cheese are at Canadian-like prices.  We crossed the border in Minnesota and bought 18 eggs for a dollar in the US.  In Canada, it was more like $4 a dozen, and in Alaska, perhaps $3.   Everything is a little more expensive here.   Not a lot more, just a little more.

How much more?  About as much as the dollar amount of your Alaska Permanent Fund check you receive every year.  You see, by throwing "funny money" (free money) into the economy, it doesn't make Alaskans richer, it only raises the prices of everything, since everyone can afford more.  It is the same reason why housing prices skyrocked in Fairfax county in 1989 and why they are skyrocketing in San Francisco today.  You throw money at people (in the form of high salaries for tech jobs) and prices of everything rises as a result.  People can afford to pay more, so prices rise accordingly.

While various Canadian provinces and some Scandinavian countries "experiment" with ideas like "Guaranteed Annual Income" (for a random sample of the population), Alaska has been implementing this idea for decades, and not for a sample population, but for the entire State.  Yet, decades later, poverty exists.  Homeless addicts still loiter in Anchorage.   People still live at "subsistence" levels.  There are still homeless people in Alaska (an awful lot, even in small towns!) and there are still poor people or people living at "subsistence" levels, who are allowed to hunt and fish out of season as some sort of consolation prize.

Why didn't this guaranteed annual income solve these problems?  After all, Leftists argue that if crack whores were given $10,000 a year in guaranteed annual income, they would stop being prostitutes and apply to Harvard - and become lawyers or something.    The truth is, the amount of money this scheme provides isn't enough to change anyone's life.   In fact, since the economy is flooded with such money, it merely means that "zero" has been moved up ten grand.

And that is exactly what is happening in Alaska.   You can't buy basic grocery items in this State at all.  For some reason, Swiss cheese is almost impossible to find here.   Why not?   Well, since the cost of everything is so high, it is easier to import things from California or Washington State, and then just raise the prices.   And since prices are so high, competition is nil and selection is low.  You want cheese, be prepared to pay - and get a brick of orange cheese in the deal.

So why wouldn't Alaskans import cows and make their own cheese?  They make their own micro-brews (boy, howdy, do they!) and their own marijuana (a dispensary in every town!).   But cheese?  Well, it seems that the locals are content with their "subsistence living" and Permanent Fund checks, and don't seem motivated to start a dairy in this State (the weather being the other reason).   The Permanent Fund ends up being a dis-incentive to work.   Why work, when you get a check for free?

So when you go to a bar, or a restaurant, or a tourist attraction, you meet servers and waiters and tour guides who are not from Alaska.  They work a few months here in the summer, and then go to Hawaii or Arizona or Florida for the winter to work the tourist trade there.  Why?  Well, that's where the tips are, and you can make a lot of money on tips if you hump, and if - as the Hooter's employee manual famously suggests - "pretend to take an interest in the customer's life and stories".

These out-of-staters don't get a free check from the government.  They haven't been Alaska residents for x years - and never will be - so they don't get a free check.  So they work, and they migrate with the seasons, which is good, because the thriving tourist town in July is a snowed-over wasteland in February.

The other problem with this "free money" experiment is what happens when the money runs out?  This is a real concern, as last year - for the first time - the government of Alaska had to cut the amount paid to each resident.  You are born and raised to expect a check from the gub-ment for $X, and then you get one for $Y, where Y is far less than X.

The same problem would occur if this cockamamie scheme were enacted for the entire USA.   We would run out of money rather quickly, and either have print more (which has worked out so well for Venezuela) or cut back on payments, as has happened in Alaska, as the tar sands and fracking fields of Canada and the lower 48 cut into oil revenues up here.

The Alaska Permanent Fund was funded by oil revenues, which everyone thought would go on forever - even though the oil from Prudhoe bay was thought to last 20 years at best.  When the oil goes away, the money goes away as well.

And maybe that would be a good thing.  Since people would have less money, prices would drop down to normal levels.  Since people would have less money, they would be incentivized to work more - jobs that typically go to out-of-staters might be filled by locals.  Locals might decide to start businesses to provide the products and services which currently are imported at high prices.

Perhaps.  Or perhaps Alaska is a special case, due to its remote location and climate and whatnot.  Although, in terms of location, it really isn't that far from Seattle, or indeed, Hawaii - whose hurricane weather has socked in most of its sister State to the North (and direct North).

It does seem odd, but Alaska is due North of Hawaii and parts of it are further West.  Indeed, parts of Alaska - the Aleutian Islands - stretch across the 180º line of Longitude, into the Eastern Hemisphere, and thus Alaska is the most Western, Eastern, and Northern State in the Union.  It is far away, but not all that far away - it is part and parcel of the Pacific rim.  Hence all the Chinese tourists.

But I digress.   The point is, this "guaranteed annual income" concept and other ideas of the "Socialist Democrats" are going to ruin the Democratic party.  If the election in 2020 comes down to Trump versus Bernie Sanders, who are you going to vote for?  Or will you just stay home in disgust?

Socialism - paying people not to work - is an idea that has been shown, time and time again to destroy countries and economies.   It creates distortions in the marketplace.  In the case of Alaska, these distortions can be propped up by oil money - up to a point.   For the rest of the United States, we don't have a Dutch Uncle named "Exxon" to pay the tab.