Why a conservative Alaskan Governor promotes a Universal Basic Income
RJ | Apr 30, 2019
Topic category: The Social Debate
Basic Income Today

Facebook post showing support for a full PFD by Republicans in the Alaska House of Representatives.

In this opinion piece for The Alaska Landmine, guest contributor RJ makes the case that the new governor of Alaska, far-right Christian conservative Mike Dunleavy, won the race for governor with his promise to return the annual dividend to its full amount (plus what was withheld by the previous governor) because the people of Alaska have come to view their annual dividend as rightfully owed to them. He further suggests that for a UBI to be most successful at the federal level, Americans need to come to believe that they own a piece of the United States and are owed their share of the profits as citizen shareholders.

One of the most audacious ideas currently gaining favor among American progressives is the idea of a Universal Basic Income (UBI). UBI is a guarantee of money to every citizen in a population – no-strings attached.

The only UBI that exists in its purest form is in Alaska, where it is known as the Permanent Fund Dividend. In 1976, the State of Alaska began investing oil royalties into a rainy day fund. In 1980, the Alaska Legislature approved an annual dividend to all Alaskans from the earnings off of that fund, which continues to this day. There are no requirements, other than residency requirements, for receiving the dividend. Make six-figures? No problem, you get a dividend. Criminal record? Money for you too!

And who in Alaska defends this Universal Basic Income most vociferously? Moral and fiscal conservatives.

In 2015, facing a budget shortfall of a more than three billion dollars, then Independent Governor Bill Walker prudently capped the dividend payout, leaving the remainder of the dividend in the permanent fund. Alaska is the only state in the union with no state sales tax, no state income tax, no local income tax, and no state property tax. For years, ninety percent of the State’s government revenue came from oil royalties. This over-reliance on oil revenues, and thus oil prices, lead to wild swings in the State’s finances, with surpluses in some years and stark deficits in others.

By restricting the dividend payout, Governor Walker essentially ended his political career. The unrestricted payout of the dividend was the sacred cow in Alaska politics, and while Governor Walker did not kill it, he just milked it a little, but that was enough to cause a backlash.

During the 2018 election cycle, facing impossible odds and a scandal that caused his Lieutenant Governor Byron Mallott to resign, Governor Walker pulled out of the race. Dunleavy, the far-right Christian conservative, ran on a platform of budget cuts and full dividends PLUS the missing money that had been capped from previous years. He won with a 7% margin over his Democratic rival, Mark Begich, former US Senator and Anchorage mayor. Dunleavy won with 51% of the vote, the same amount Trump won in Alaska back in 2016.

Independent expenditure Dunleavy for Alaska campaign signs

So how does a mostly conservative state like Alaska embrace one of the most progressive policies of the Democratic Party’s left wing?

In previous efforts, testing the benefits of the Universal Basic Income in countries like Finland and Canada, and parts of California, the money has always been treated as a gift. Intentionally, there was no notion that the UBI must be earned. One day, there is free money.

The major difference with these experiments and the Alaska Permanent Fund Dividend is that Alaskans believe that the Dividend is owed to them. Unlike previous UBI experiments, Alaskans, like owners of stock in a corporation, believe they own a piece of Alaska, and the Dividend is their annual shareholder payout. This belief is rooted in both Alaska society and Alaska law; the Alaska Constitution declares that resources on State land shall be developed “for the maximum benefit of its people.”

And how do Alaskans earn those benefits? Simply by living there!

Loss Aversion & Ownership

In cognitive psychology, people will work harder to avoid losses than to acquire equivalent gains. Loss aversion is an important concept encapsulated in the expression “losses loom larger than gains” (Kahneman & Tversky, 1979). It is thought that the pain of losing is psychologically about twice as powerful as the pleasure of gaining.

In previous Universal Basic Income experiments, the money distributed was viewed as a gain. But in Alaska, the Dividend is framed as something Alaskans OWN. Shifting payments towards government services was seen by some as not just a loss, but as theft, plain and simple.

Internally, Alaska is joked to be a redneck socialist state by many. The reason that Alaskan politicians can often run on a political contradiction is because of “loss aversion.”

Governor Dunleavy wants a full dividend payout of $3,000 for 2019 PLUS over $3,600, spread out over three years, to pay back the previous years reduced dividends. The proposed 2019 dividend payout creates around a $1.6 billion deficit for the next fiscal year.

Alaska is the only state in the union with no state sales tax, no state income tax, no local income tax, and no state property tax. For the first time in decades, there is now a chorus of calls for a state income tax. Mind you, Alaska still has a $60+ billion Permanent Fund, which theoretically could continue to fund a good portion of State government off of earnings alone for the foreseeable future. But instead of milking the sacred cow to pay for government services, more Alaskans would rather pay taxes.

To have a Universal Basic Income adopted across the political spectrum, every American needs to be told that they OWN a piece of the United States and that they deserve a percentage of profits earned by businesses on that land. Suddenly, Americans will not just be residents, but owners. If Alaska has illustrated anything, it has shown that if a UBI becomes institutionalized in terms of property, citizens across the political spectrum will argue as to why they are entitled to it – no holds barred.

If progressives are serious about a Universal Basic Income, it needs to be framed in terms of ownership just like it is in Alaska, otherwise, the policy will never gain wide acceptance

Tags: Alaska, Republicans, Alaska Permanent Fund Dividend, Independent Governor Bill Walker, Lieutenant Governor Byron Mallott,
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This content explores the social debate surrounding the Alaska Permanent Fund Dividend. Brought to you by The Fund for Humanity
READ: The Alaska Permanent Fund Dividend: A Case Study in Implementation of a Basic Income Guarantee presented at 13th Basic Income Earth Network Congress University of Sao Paulo Sao Paulo, Brazil

I. Introduction: Some Background on Alaska

The Alaska Permanent Fund Dividend program has attracted considerable interest because it is a unique example of a BASIC INCOME GUARANTEE. In this paper, I describe the structure of the dividend program, its economic effects, some of its unintended consequences; and I close with a number of observations about how the dividend might be structured differently. My objective is to give the reader insights into the factors to consider in implementing a BASIC INCOME GUARANTEE in other places.

However, before beginning it is important to present a short description of Alaska because the structure of any BASIC INCOME program and its impacts are contingent upon the particular institutional, economic, political, and social environment in which it is located.

Alaska is the largest of the 50 United States measured by land area—but among the smallest measured by population. Its 700 thousand residents comprise only about two- tenths of one percent of the total U.S. population. As a state within the United States, its border is open to the rest of the nation for the free movement of goods and services, people, capital, and information. Furthermore, it is subject to the laws, regulations, and policies established by the federal government. As I will discuss below, these connections create some challenges for the dividend program because the state cannot totally control its own economic and political environment.

The state economy is driven by natural resource production and federal government spending. Petroleum is the dominant natural resource and accounts for one-third of all jobs, directly and indirectly. Furthermore, most of the growth in the economy since Alaska became a state in 1959 can be attributed to the development of its Arctic oil resources. Because of its small population, Northern location astride the Arctic Circle, and distance from markets, Alaska is sometimes characterized as having a frontier or island economy in the sense that its economic development prospects are limited to exploitation of its natural resources.

Presented at the 13th Basic Income Earth Network Congress University of Sao Paulo Sao Paulo, Brazil
Is the solution to extreme wealth inequality really – Alaska?

Grains piled on runways, parking lots, fields amid global glut” and “Famine looms in four countries as aid system struggles to cope, experts warn.” How can it be that human civilization is producing so much food we’re running out of places to put it, and at the same time famine is spreading? It’s a question like this that lies at the heart of the 21st century. It’s the question of inequality.

The future is already here – it's just not very evenly distributed.

— William Gibson

Something is wrong. If degrees of inequality can be thought of as degrees of temperature, climate change isn’t our only man-made heating problem. Our distributional thermostat appears to have broken decades ago, and as a result the world is now sweating profusely and looking at 72 degrees Fahrenheit (22 degrees Celsius) as some kind of utopian fantasy. Where economic inequality was once thought of as a way to drive innovation, the IMF and OECD among others now see too much inequality as pulling against economic growth.

It’s one thing to turn up the temperature a few degrees to get a bit more comfortable. It’s entirely something else for eight people on a planet of over 7 billion to own as much wealth as half the other 7 billion combined. How did it get this way and what can we do, if anything? The answer requires putting together a puzzle that includes three major pieces: land, the power to say no – and the state of Alaska.

Lessons on wealth distribution from the most equal of all US states
WATCH: VPRO Backlight Documentary, Sharing The Wealth

People no longer believe in centrally organised long-term planning: change can only be brought about by bottom-up small-scale social experiments. Advocates of redistributing our prosperity and disconnecting work and income are fighting for this. In many places and using many different methods they are experimenting with handing out free money.

Michael Bohmeyer, a young German, has started a crowdfunding campaign for an unconditional basic income. With every 12,000 euros raised, one person gets an income of 1000 euros per month for a year. So far, eight people have been receiving this basic income. There are no obligations other than to submit themselves to research into how this effects their lives. In New York, Michael meets venture investor Albert Wenger who has been thinking about basic income for years. With his company he invested in many internet companies and with these investments he has helped young internet geniuses get well-paid jobs. But Wenger also sees that digitalisation has caused many people to their jobs. Embracing the development toward a basic income, he argues a new perspective on work.

British economist Guy Standing may be one of the greatest advocates of a thorough renewal of the social system. He has conducted basic income experiments in India and Namibia. He sees a growing economic class of flex workers and independent contractors with so little perspective that something needs to be done in order to prevent extensive social unrest. Earlier this year, Guy Standing was in Groningen on invitation by people from MIES (Association for Innovation of Economy and Society). Here, he had a conversation with Matthias Gijsbertsen, the alderman of Social Affairs of the city of Groningen. The alderman was inspired by the idea of a basic income and suggested to offer citizens of Groningen who are on social security the opportunity to earn extra money without lowering social security payments.

Since 1982, all inhabitants of Alaska have received yearly dividends from the revenues of the oil and gas industry without any obligation whatsoever.

VPRO Backlight talks about the need for social security experiments to give people the opportunity to make the most of their own talents and qualities.

READ: Alaska shows even people in the most conservative states prefer a basic income to lower taxes

The Economic Security Project (ESP), a group backing efforts to collect data on unconditional cash stipends, recently commissioned a survey of 1,004 Alaskan voters to see how they felt about the Alaska Permanent Fund, a $60.1 billion state fund established in 1976 to collect revenue from Alaska’s oil and mineral leases. The money provides an annual stipend to Alaskans, as well as general revenue. Each October, the fund sends a dividend check to every Alaskan resident of up to $2,072 per person, or $8,288 for a family of four (it was reduced last year amid a budget crisis).

The survey by the ESP illustrates how a more robust basic income—a guaranteed minimum payment for all citizens—might play out in the rest of the country. Public support for the program has deepened in the last generation, despite the prospect of raising taxes.

In 1984, a survey of Alaskans found 71% would prefer to end the dividend if it meant raising taxes. By 2017, that ratio had nearly reversed with only 36% of residents agreeing with that position. “Alaskans have become committed to the notion of dividends so much so that they are willing to pay taxes to preserve the Permenant Fund Dividend (PFD) system,” the survey states. The study found no major differences in views from respondents’ political views or income levels.

The Economic Security Project (ESP), a group backing efforts to collect data on unconditional cash stipends, recently commissioned a survey of 1,004 Alaskan voters to see how they felt about the Alaska Permanent Fund, a $60.1 billion state fund established in 1976 to collect revenue from Alaska’s oil and mineral leases.
READ THE PAPER: The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund

Since 1982, all Alaskan residents have been entitled to a yearly cash dividend from the Alaska Permanent Fund. Using data from the Current Population Survey and a synthetic control method, we show that the dividend had no effect on employment, and increased part-time work by 1.8 percentage points (17 percent). Although theory and prior empirical research suggests that individual cash transfers decrease household labor supply, we interpret our results as evidence that general equilibrium effects of widespread and permanent transfers tend to offset this effect, at least on the extensive margin. Consistent with this story, we show suggestive evidence that tradable sectors experience employment reductions, while non-tradable sectors do not. Overall, our results suggest that a universal and permanent cash transfer does not significantly decrease aggregate employment.

BY Damon Jones, University of Chicago - Irving B. Harris Graduate School of Public Policy Studies and Ioana Elena Marinescu, University of Pennsylvania - School of Social Policy & Practice; National Bureau of Economic Research (NBER)