There are examples all over the US, showing what life in a welfare state is like. In fact, history proves that we are, indeed, doomed to repeat the mistakes of the past.
I could lay out the story abou the last big bust in our economic cycle here, but since it was in the mid 80s, most won't have a clear memory of how it came about.
So looking to the future, it's very grim indeed.
Let's just say that no progress is made in allowing any drilling in the Arctic or offshore. This is very probable, due to government moratoriums, burdensome regulations, onerous tax structure and so forth.
This means that the Trans Alaska Pipeline will have to shut down when it reaches it's minimum operating threshold. It is currently at about 600,000 barrels a day, but declining between four and six percent every year. In fact, Alyeska (the pipeline service company that operates the entire 800 mile length) is having difficulties due to the cooler temperatures of the crude. So, what does it mean to the state and the people that live here? The "oil patch" provides about 80 percent of state income from royalties and taxes. The industry is the biggest employer apart from the state itself. I am fairly sure there will be a small amount of work left up there, for monitoring those wells and the extensive infrastructure that has been built to transport it. Many people believe that the companies who have invested billions of dollars in Alaska, just won't walk away from it. I beg to differ, I am sure they will be forced to do so by pressure from their Boards and shareholders.
Once this is nearly upon us, our legislature will finally act to do something positive-but it will be way too late-they are always reactive instead of proactive anyway and most are thinking about nothing but their own personal power and how to get re-elected. As the revenues decline from the pipeline, there will be occasional bump from the oil futures trading market. Any time the price of oil runs up over $90, the state gets a big flush of cash. This will calm most peoples' fears as to a functioning state budget....but, about ten years from now, it will be time to pay the piper on those retirement plans. This is a huge liability, in the billions. Naturally, no one is thinking about forward funding these, so I am pretty sure they will end up raiding the Alaska Permanent Dividend fund-not just for budget shortfalls, but to meet those PERS and TERS obligations. It won't be popular, and there may even be a sales tax, or income tax passed to stave off the inevitable. But it will happen, eventually.
Every governor for the past couple of decades has added to the size of state government. Even our much maligned (or admired, take you pick) Sarah Palin, grew government at an astounding pace. Once these programs and positions are created, it's extremely difficult to pare it back. The rest of us will learn to live within our means, but governments large and small never do. If it were up to me, I would freeze all hiring. Delete any position currently unfilled for six months. And ask each and every department to show efficiences by reducing their budget allotments. (Good lord, I sound like an accountant, don't I?) Those departments that show a significant savings by would get a small performance bonus. In this way, we could reward the thrifty and pare down the size at the same time. There are a number of programs that should be eliminated, but these will be fought over and I foresee a lot of squabbles down the road over those that benefit few, instead of the many.
I am also certain we will have a two way exodus as well. Many will leave due to no work to be had, and others will arrive hoping to cash in on the generous welfare programs we currently have, and that oh so marvelous PFD every year. In general, I figure the state will lose residents, rather than continue its rapid growth. Lots of people will end up bankrupt (this is already happening, by the way) and will be forced to move south to start over near other relatives. Those of us who remain, will be the population that can be supported through limited state governments and what little industry remains. I grew up here in the 60s and 70s, and can tell you that life "pre pipeline" was not easy.
If we are exceptionally lucky, we'll still be employed at my household. As it is, I am not even sure of next month (oil field, of course) and may be facing some really tough choices in the next six months. Yet, even so, I can't imagine living anywhere else....and still plan on investing in Alaska's future with my greenhouse business. Even so, there is a real risk we could have some horrendous events take place that could slide us back to pre-WWII days. Thinking about my son's future here, I am very concerned that he will even have one.
When the money runs out, taxes are enacted which further strain the family budget, and economic activity essentially ceases....what then?
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