Palin in Comparison: an Economic Enigma

If I had to choose a superhero to represent Governor Palin’s economic alter-ego, it would have to be confuse-o-nomic-(wo)man.  Because Palin’s background and record on things economic is a hodge-podge of half-starts and false-starts that are neither liberal nor conservative, neither supply-side nor demand-side, and far too slim a volume to write home about.  Which is not comforting when she is second-in-command to a candidate who has both confessed his own lack of knowledge on all things economic and surrounds himself with a posse of financial company backed yes-men.

Governor Palin received her degree in communications-journalism from the University of Idaho, where she also minored in political science.  Hardly much exposure to economic thought here.

In terms of fiscal responsibility, Governor Palin is just one big mess of contradictions.  On the one hand, as governor of Alaska, she vowed to cut spending for local projects approved by the Alaskan state legislature by 10%.  But on the other hand, as mayor for the tiny town of Wasilla (population: 5400), she managed to wrack up long-term debts of $20 million to “fund improvements,” an amount that works out to an over $3,500 in debt burden on each resident of Wasilla.

But even as she promised to cut government spending, Governor Palin pushed through the AGIA (Alaska Gas Inducement Act), which granted $500 million in state money to pipeline builder TransCanada (called "TC Alaska" by Palin to deemphasis the Canadianess of TransCanada) to build a pipeline from Alaska to the lower 48 states.  This despite the fact that a competing gasline, the Denali pipeline, was being actively pursued by ConocoPhillips and BP, which roughly followed the same route as the AGIA pipeline (and did not cost the state $500 million).

Now one might argue that long-term debt is not always bad (it isn’t) and that the $500 million for TransCanada may have come with better terms for Alaska.  But given the relative opacity of news coverage on both of these issues (whence did the money go, for example?)  I can offer no further analysis on whether these were dollars spent wisely.

However, in an opinion piece for the Anchorage Daily News advocating her position on AGIA, Governor Palin writes: “Our current lease agreements [under AGIA] allow for the resource developers to deduct transportation costs from royalty payments. In order to protect the value of our resources, we must be sure that the cost of transportation is not made unnecessarily expensive because that cuts the amount of royalties the state collects.  The AGIA protections guarantee the gas line will be financed with a debt-to-equity ratio that results in a fair transportation fee, while also providing a fair return for the pipeline builder.”  WTF?  I have absolutely no understanding of why requiring that the AGIA be financed without exceeding a set debt-to-equity ratio would affect, in any way, shape or form, the costs of transporting the gas through the pipeline.  A debt-to-equity limitation restricts the pipeline builder from using too much leverage to fund its construction, but costs are costs, and don’t get altered simply because a company takes on debt.  Palin’s attempt to obfuscate the issue by throwing in some semi-difficult to understand financial jargon does not bode well for her econo-aptitude.

And finally, whereas Governor Palin may be fiscally responsible when it comes to culling spending by other members of the government, such responsibility does not, apparently, apply to herself: last year she spent $400,000 of state money to “educate” Alaskans about the aerial shooting of wolves and efforts to reduce bears in some areas in advance of a state referendum on whether to ban aerial shooting and land-and-shoot hunting by private citizens.  (Let's not even get started on what kind of crazy it takes to think that this issue merits $400,000 of public funding.)

In terms of tax policy, during her tenure as governor, Sarah Palin has repealed the state’s 8-cents-a-gallon gasoline tax for one year and has voiced her support of repealing all sales taxes.  But in a seeming about-face, one of her most significant accomplishments as governor was passing a major tax increase on state oil production (effectively a windfall profit tax on oil revenue), which angered oil companies but raised billions of dollars in revenue for the state. In defense of the tax increase, Palin argued that the oil companies had previously bribed legislators to keep the taxes low. She subsequently championed legislation that would channel some of that money directly to Alaskans: about $1,200 per Alaskan.  Compare this to Barack Obama’s proposed windfall profits tax where he would require oil companies to take a reasonable share of their profits to provide direct relief worth $500 for an individual or $1000 for a married couple. 

I am not a fan of windfall profit taxes because I believe it gives an inordinate amount of discretionary taxing power to the government, which makes it both difficult for companies to plan for and susceptible to abuse.  If we are going to tax the oil companies, we should simply do it along the lines of a nuisance tax (basically sales tax, but on a specific product), where the oil companies are taxed based on the amount of gas sold, regardless of whether they have windfall profits or not (the very kind of tax that Governor Palin got rid of).  This is also more consistent with an overall policy of shifting away from reliance on carbon based fuels in that it would consistently keep the price of oil/gas high so as to make alternative energy sources more economically attractive.

But whereas Obama's windfall tax plan is entirely consistent within his economic framework, Palin's windfall tax is nothing but head-scratchingly inconsistent.  Since the standard conservo-Republican line is no taxes on corporation and McCain has gone out of his way to take a Corporation-friendly tone when it comes to corporate taxation, it seems odd that he would choose a politician who enacted such a Corporation-unfriendly tax in order to grease the pocketbooks of her constituents.

Who are you, Ms. Palin?  Are you a Republi-tightwad or a Spendocrat??  Will the real Sarah Palin please stand up?

Or maybe, just maybe, this is a woman who doesn’t know the first thing about economics, not only when it applies to the basics of commodities pricing or using taxation for behavior modification, but certainly not about the problems with FNMA, FHLMC, RMBS, ABS, CDS, etc... plaguing Wall Street and Main Street today.  And maybe, just maybe, when the McCain campaign is all hawking her “maverick” creds, they are really signaling to us that, yeah, she doesn’t really know what she’s doing at the helm of the jet that is America’s economy, and she’s about to fly us directly into the sun.

Kady is a maverick very occasionally at her personal site, Wonkess.

Comments

[Daisy]

Frightening. Thanks, Momocrats, for your thoughtfull analysis and research. She may look good on camera, but on paper? On an accurate spreadsheet? Not so good for any of us.

[Lawyer Mama]

Ooh, thanks, Kady, for this fabulous post!

[Kaylianne]

Okay this is a load of crap. Get over yourself and stop being judgmental. LEAVE HER ALONE!!

[Lawyer Mama]

Kaylianna - Ummmm...how exactly is discussing someone's professional qualifications for VICE PRESIDENT OF THE UNITED STATES judgmental?

How random. Did you read the post?

[Mom101]

Amazing post Kady. So thoughtful and well researched. No doubt you'd be up for a considered debate on her merits which doesn't include either the phrase "get over yourself" or "I know you are but what am I."