Alaska Permanent Fund

Description

1. Tom Bowerman:

"The Alaska Permanent Fund is a direct dividend returned to all citizens of the State of Alaska derived from a rent against oil extraction. Although it generally fits the definition of a guaranteed basic income, in reality it falls short due to sizable annual fluctuations, low of $331 in 1984 to high of $3269 in 2008, $1305 in 2009. The fluctuation is caused by variations in investment returns from the $34 billion fund, which vary dramatically annually; the dividend would be $1300 / year if the find yielded a steady 6% annual return or about 3% of the average annual state income. Economist Scott Goldsmith gives a reasonable overview in: The Alaska Permanent Fund Dividend: A case study of implementation of a basic income guarantee (2010) (www.iser.uaa.alaska.edu/Publications/bien_xiii_ak_pfd_lessons.pdf). This study suggests two weaknesses for climate stability policy. First is that the oil revenue dividend is expended mainly as conventional consumption, and, second, it creates a citizen demand for more income and hence extraction of fossil fuel to keep the revenue dividend coming. There is no evidence of contribution to climate stability." (email August 2015)

2. Peter Barnes:

"Jay Hammond, the Republican governor of Alaska from 1974 to 1982, was an independent thinker who conceived of, and then persuaded Alaska’s legislators to adopt, the world’s first system for paying equal dividends to everyone. In Hammond’s model, the money comes not from taxes but from a common resource: North Slope oil. Using proceeds from that gift of nature, the Alaska Permanent Fund has paid equal yearly dividends to every resident, including children, ranging from about $1,000 to over $3,000. (Bear in mind that a family of four collects four same-sized dividends.) While this isn’t enough to live on, it nicely supplements Alaskans’ other earnings. And paying such dividends regularly for more than 30 years has bolstered the state’s economy, reduced poverty, and made Alaska one of the least unequal states in America.

The question Americans in the lower 48 should now ask is: Did Alaska find the right formula? If it can convert part of its common wealth into equal dividends for everyone, can the rest of America do the same?

There are many good reasons to ask this question. One is that America’s middle class is in steady decline. In the heyday of our middle class, jobs at IBM and General Motors were often jobs for life. Employers offered decent wages, health insurance, paid vacations and defined pensions. Nowadays, such jobs are rare.

It’s also unlikely that the jobs of the future will pay more (adjusted for inflation) than today’s. In unionized industries like autos and airlines, two-tier contracts are now the norm, with younger workers paid substantially less than older ones for doing the same work. Nor is the picture brighter in other industries. In the Labor Department’s latest list of occupations with the greatest projected job growth, only one out of six pays more than $60,000 a year. The implication is clear: without some form of supplementary non-labor income, we can kiss our middle class goodbye.

The second reason to ponder Alaska’s dividends is climate change. It might seem odd that dividends based on oil could presage a remedy for climate change, but such is the case. Imagine if we charged companies for using another common resource—our air—and distributed the revenue equally to all. If we did this, two things would follow. First, higher air pollution costs would lead to less fossil fuel burning and more investment in renewables. And second, households that used less dirty energy would gain (their dividends would exceed their higher costs) while households that used a lot of dirty energy would pay. This would spur both companies and households to do the right thing.

A third reason for considering Alaska’s model is our long-lasting economic stagnation. Not counting asset bubbles, our economy hasn’t sparkled for decades, and neither fiscal nor monetary policies have helped much. Tax cuts for the rich have benefited no one but the rich, and as Mark Blyth and Eric Lonergan recently wrote in Foreign Affairs, pumping trillions of dollars into banks hasn’t stimulated our economy either. What’s needed is a system that continually refreshes consumer demand from the middle out—something like periodic dividends to everyone that can be spent immediately.

One further reason for looking north to Alaska is the current stalemate in American politics. Solutions to all major problems are trapped in a tug-of-war between advocates of smaller and larger government. But dividends from common wealth bypass that bitter war. They require no new taxes or government programs; once set up, they’re purely market based. And because they send legitimate property income to everyone, they can’t be derided as welfare.

In this regard, it’s worth noting that Alaska’s dividends are immensely popular. Politicians in both parties sing their praises, as do the state’s voters. One attempt in 1999 to transfer money from the Permanent Fund to the state treasury was trounced in a referendum by 83 percent. Nationally, Alaska’s model has been lauded by Fox News commentators Bill O’Reilly and Lou Dobbs as well as liberals like Robert Reich.

The reasons for this popularity are pretty clear. Alaskans don’t see their dividends as welfare or redistribution. According to several surveys, most Alaskans consider their dividends to be their rightful share of their state’s natural wealth. There’s no stigma attached to them, and any attempt by politicians to reduce them is seen as an encroachment on legitimate property income.

Moreover, because the dividends are universal rather than means-tested, they unite, rather than divide, Alaskans. If only “losers” got them, “winners” would be resentful. Universality puts everyone in the same boat. No one is demonized and a broad constituency protects the dividends from political attack." (http://www.shareable.net/blog/how-to-save-the-middle-class-when-jobs-don%E2%80%99t-pay-enough)

Discussion

Robert Cook:

"We can find one small but extremely important example of Dividend Economics in the U.S. by examining the Alaska Permanent Fund, which paid every resident of Alaska a dividend of $3,269 in 2008 out of state resource revenues. The APF was set up in 1976 when Alaska voters passed a constitutional amendment calling for a direct payment to individuals rather than turning the money over to the state bureaucracy for “social services.”

Today the Alaska Permanent Fund is a shining—and rare—example of economic democracy at work. At first the APF made dividends incremental based on a person’s years of residency, but the U.S. Supreme Court declared this provision unconstitutional. The Alaska legislature responded by providing equal dividends to all residents of six-months or more. The first dividend, amounting to $1,000, was paid on June 14, 1982.

The APF dividend is not a welfare payment. It is a resident’s fair share of the bounty of the earth. There are no means tests, no lines to wait in, and no bureaucrats snooping around to find out what someone used the money for. The APF has not ruined the character of those who get it. A millionaire receives the same payment as a person living in poverty. Spent into circulation, the money becomes part of the lifeblood of the community without having to be repaid and with no interest being charged. Deposited into banks, the money capitalizes consumer borrowing and economic growth." (http://dandelionsalad.wordpress.com/2009/02/03/bailout-for-the-people-the-cook-plan-by-richard-c-cook-2/)