Diary

Michael Kinsley's idiotic new column

I won’t bother quoting from Michal Kinsley’s new column because I don’t want to dignify it. Kinsley won a reputation in the 1980’s and 90’s as one of the most influential and thoughtful voices of the American left. That’s why it’s a shame to see him perform a hack job like this.

The essential argument of the column is as follows:

1) Alaska is the new Texas. It is a fundamentally evil economic and political entity that exploits the rest of us for its own advantage.

2) Anyone remotely associated with Alaskan politics is, ipso facto, also an evil person. That goes double for Sarah Palin, who is practically the embodiment of all the evil things that Alaska represents.

3) Alaska is responsible for high oil and gas prices the rest of us pay because, unlike the other major oil producing states, does forces the oil companies to pay a substantial share of its oil profits in taxes to the state. This amounts to a tax “on the rest of us,” for the benefit of those evil Alaskans.

4) Alaska also takes way more than its own share of federal revenue; it receives more federal revenue per person than any other state. Apparently, this too is Sarah Palin’s fault.

There are a number of common sense responses one might make to Kinsley’s argument. It is fundamental economic ignorance to argue that Alaska’s profit-sharing agreement amounts to a “tax” on the rest of the country. While oil and natural gas are the backbone of the Alaskan economy, the state is still relatively minor player in the international oil market. Right now the state produces about 650,000 barrels per day (bbls). That’s not peanuts, but its hardly massive. For example, Texas produces about 907,000 bbls. The United States as a whole produced some 8.3 million bbls in 2006. That means Alaska’s share of domestic oil production is only about 8 percent of domestic oil production. Even that figure exaggerates Alaska’s impact on oil and gas prices in the United States because America imports far more oil (about 12.3 million bbls) than it produces. In this highly competitive international market it takes far more than Alaska with its 650,000 bbls to shift the price of gas at your local gas station.

The key difference between Alaska and the other oil producing states is that in Alaska the oil companies are forced to take a much smaller percentage of the profits. They still make out quite nicely, but the people of Alaska get about 75% of the oil revenue after the cost of production is taken out. If the oil companies attempt to raise the price of their product to recoup some of that lost profit, the laws of the market kick in. If their prices go too high they get undersold by producers in Kuwait, Saudi Arabia, or Texas. Alaskans think this arrangement is only fair. After all, it’s their land and their oil which the oil companies only lease.

As for the argument that Alaska gets more than its fair share of federal revenue, it’s true but the disparity is not as severe as Kinsey alleges. Some of the money flowing into Alaska goes to help the state cope with its extreme climate , or military installations, or other necessary functions. According to a 2003 report published by the University of Alaska at Anchorage, a variety of factors account for the large chunk of federal cash spent in Alaska. First, construction costs in Alaska are a lot higher because so much of the state lives in remote rural areas. Second, Alaska has an aging population with many young workers moving out of the state. As a result, a high proportion of its residents receive Social Security benefits, as well as Medicare. Third, about 20% of Alaska’s population are Native Americans, to whom the Federal Government has significant financial obligations. By contrast, only about 1% of the rest of the country is Native American.

Nonetheless, it’s true that a sizable portion of the federal largess spent in Alaska is just plain old pork of the Ted Stevens variety. But all this has been going on for a long time before Palin ever got there, and one of the major aspects of Palin’s domestic agenda has been to reduce Alaska’s dependence on federal subsidies. But in order to do that you need to find alternate revenue streams. That’s why she negotiated for a multi-billion dollar deal to build a natural gas pipelinefrom Alaska to the lower 48. That’s also why she supports drilling in ANWR (which McCain opposes, alas!), and expanding oil production elsewhere. Liberals like Kinsey usually oppose these things, which means they oppose the very measures necessary to get Alaska off the dole.

Even though I have tried to respond to Kinsey’s arguments with reason and goodwill, his bitter and ugly words do not merit such courtesy. If his column is any indication, one of the standard liberal attack lines this fall will be to go after, not just Sarah Palin herself, but the whole state of Alaska. Rather than challenge her directly, they will attack the reputation and integrity of a great American state hoping to tarnish her by association. Democrats have long been masters of the art of class warfare. Now it seems they have added geographical warfare to their repertoire.