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Baked Alaska and the Fraser Institute: What changes, and what doesn't, when oil prices fall and the money melts

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Bill Walker

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Looks like Alaska is totally … baked. As in, done like dessert.

We're talking about the northernmost U.S. state, the one just north of British Columbia and west of the Yukon.

The State of Alaska, you see, has been following the Fraser Institute's advice on how to run an oil-rich jurisdiction, and what that has wrought now that oil prices have gone south, the New York Times explained on Christmas Day, is "a profound fiscal crisis."

"A state budget that was a point of Alaskan pride -- and envy from around the nation -- lies in tatters as revenue that flowed from selling crude oil from Prudhoe Bay over the past four decades has been swept away," the Times report stated.

These facts are important to Canadians because the Fraser Institute -- a market-fundamentalist "think tank" based in Vancouver -- is the Canadian media's go-to source for how to run a provincial or national economy.

And what the Fraser Institute constantly advises -- to sustained applause from the usual suspects in Canadian media and business circles -- is for oil-rich jurisdictions like Alberta and all of Canada to run things just like Alaska did.

What Albertans should have, asserted a Fraser Institute "study" published to the usual media accolades not long ago, back in the summer of 2014 when oil prices were already slipping downward, is "tax relief and the fruits of tax reform." (Emphasis added.)

The kind of tax reform the Fraser Institute had in mind, of course, is the kind that shrinks or eliminates corporate and income taxes, especially income taxes on the very rich, and shrinks government to a size that, as neoliberal patron saint Grover Norquist famously put it, it can be drowned in a bathtub.

So, as the boiler room for market-fundamentalist propaganda proclaimed back in '14, "when compared to the U.S. states analyzed in the study, Alberta’s tax rates are generally higher and its tax system markedly unique. For example, Alaska, Texas and Wyoming impose no personal income taxes, and Wyoming and Texas also impose no corporate income tax while relying more heavily on consumption taxes such as sales tax."

These Fraser factoids were contained in the document entitled An Economic and Fiscal Comparison of Alberta and Other North American Energy Producing Provinces and States. In it, the authors engaged in the usual games Fraserites love to play, including cherry-picking data, the better to reach the conclusions their ideology demands.

So the group compared Alberta only to nine other North American jurisdictions deemed by its propagandists to be "energy rich," while ignoring such oil-rich North American jurisdictions as California and New Mexico whose tax structures and economic outcomes did not support the "researchers'" predetermined conclusions.

Why these particular jurisdictions? Most likely because the two missing states’ governments were at the time in the hands of Democratic administrations, ideologically impure from the Fraser Institute's dogmatic perspective. Of the seven states considered for this comparison, all but Colorado were controlled by the Republican Party.

More seriously, the Fraser's factoid fabricators ignored all petroleum-rich jurisdictions outside North America, because that allowed the authors to concentrate on low-tax jurisdictions with mostly smaller energy sectors than Alberta's. This also gave their "researchers' additional ways to jostle the pinball machine in favour of their preordained conclusions.

Ignoring higher-tax, higher-royalty jurisdictions like Norway and the United Kingdom also allowed the Fraser Institute to evade the issue of appropriate levels for royalties, which was almost entirely ignored in that 66-page report, by not having to confront the fact that as long as oil prices remained high enough, corporations would extract the stuff regardless of tax rate or structure.

Well, whatever. The Fraser Institute is going to do what the Fraser Institute does, which is serve the economic agenda of the corporations that bankroll it by producing shoddy research and handing it out to lazy, uncritical journalists.

Now that oil prices are no longer high, the Times describes what that means for Alaska, with its economy organized on the very principles endorsed by the Fraser Institute. "With oil prices down along with oil production, the state is facing an Alaska-size shortfall," the Times explained. "Two-thirds of the revenue needed to cover this year’s $5.2 billion state budget cannot be collected."

What must Alaskans do? Say goodbye to the annual dividend cheques they have gotten used to receiving. So much for what the Fraser Institute calls the "fruits of tax reform."

Alaskans can also expect budget slashing so deep the government will barely be able to govern -- "in a deep first wave of budget cuts this year," noted the Times, "Alaska eliminated almost all capital spending."

Needless to say, this is not what's needed by an economy desperate for stimulus.

In addition, Alaskans are facing demands for higher taxes. Gov. Bill Walker, a former Republican who now styles himself an independent, has concocted a new tax scheme that will hit working class taxpayers hardest. But Walker wants corporations to pay a little bit more too. Not unexpectedly, the energy industry has vowed to fight that possibility to the bitter end.

Well, perhaps oil companies can bankroll a new political party and call it the Wildrose Party after the state's official flower. Mind you, with a name like that, who knows what kind of market-fundamentalist lunacy it might promote?

Just to restate the obvious, this is where the Fraser Institute's recommended policies get you. At least in Alberta and Canada, after years of much the same thing, citizens have elected governments prepared to run deficits and raise taxes if necessary to keep the ship of state afloat and the economy functioning.

Of course, none of this really matters to the Fraser Institute. Its job is to make the case for low taxes demanded by its corporate paymasters, no matter what the facts say. Now that oil prices are low, its arguments and the facts it cherry-picks may change, but the conclusions its "research" draws will remain the same.

This post also appears on David Climenhaga's blog, AlbertaPolitics.ca.

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