Alaska Bolstered Its Economy and Curbed Inequality
By Peter Barnes
After 30 years, the practice of paying every resident—including children—at least $1,000 has made Alaska one of the least unequal states in the U.S. Here's what the rest of us can learn.
There has long been a notion that, because money is a prerequisite for survival and security, everyone should be assured some income just for being alive. The notion has been advanced by liberals such as James Tobin, John Kenneth Galbraith and George McGovern, and by conservatives like Friedrich Hayek, Milton Friedman and Richard Nixon.
It’s embedded in the board game Monopoly, in which all players get equal payments when they pass Go. And yet, with one exception, Americans have been unable to agree on any plan that guarantees some income to everyone. The reasons lie mostly in the stories that surround such income. Is it welfare? Is it redistribution? Does it require higher taxes and bigger government?
But then, there’s the exception. 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.
Benefits to Alaskans
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 samesized dividends.) Paying such dividends regularly for more than thirty years has bolstered the state’s economy, reduced poverty and made Alaska one of the most equal states in the US.
The question that US-ers in the lower 48 might 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 us do the same?
Reasons to be inspired
One 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 second 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 the forum 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.
A third 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. 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 999 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. According to several surveys, most Alaskans consider their dividends to be their rightful share of their state’s natural wealth. 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.
How might a common wealth dividend system work at the national level? The easy part is distributing the dividends. As in Alaska, enrollment could be done online and payments
could be wired electronically at a cost of pennies per transaction. The Social Security Administration could set that up in a jiffy. The harder part is collecting the revenue. In
my latest book, “With Liberty and Dividends For All,” I show how, over time, we could generate enough revenue to pay dividends of up to $5,000 per person per year. Initially, a sizable chunk would come from selling a declining number of permits to dump carbon into our air.
Later, more revenue could flow from our monetary infrastructure, our patent and copyright systems and our electromagnetic airwaves. Consider what $5,000 per person, per year would mean. If a child’s dividends were saved and invested starting from birth, they’d yield enough to pay for a debt-free college education at a public university. In midlife, $5,000 per person would add 25 percent to the income of a family of four earning $80,000 a year. In late life, it would boost the average retiree’s Social Security benefit by about 30 percent. Thus, dividends from common wealth would provide a badly needed boost for poor and middle-class families during what promises to be a lasting shortage of good-paying jobs.
Thomas Paine would approve
Surprisingly, the core idea behind Alaska’s dividends is over two centuries old. In his 1796 essay “Agrarian Justice,” American patriot Thomas Paine distinguished between two kinds of property: “natural property, or that which comes to us from the Creator of the universe— such as the earth, air, water … [and] artificial or acquired property, the invention of men.” The first kind of property, Paine argued, belongs to everyone equally. It is the “legitimate birthright” of every man and woman, “not charity but a right.”
And Paine went further. He proposed a practical way to implement that right: create a
“National Fund” to pay every man and woman a lump sum (roughly $17,000 in today’s
money). Revenue would come from what Paine called “ground rent” paid by landowners. This was a remarkable feat of analysis and imagination, and it’s time to apply it broadly.
And here’s the best part. If Paine’s idea and Alaska’s model were applied at sufficient scale, the implications would be vast. The current tendencies of capitalism to widen inequality and devour nature would be self-corrected. Instead of plutocracy and climate change, our market economy would generate widely shared, earth-friendly prosperity. And it would achieve these goals automatically, without much need for government intervention.
Is this wild-eyed dreaming? Possibly, but no more so than universal suffrage or social insurance once were. Common wealth dividends could be the next step in our nation’s long march toward equal rights.
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