Alaska has overwhelmingly voted twice for President Trump and Gov. Dunleavy. So, you would think they would treat us better. Not so, their economic ideology is more like a five-point plan to obliterate our economy.
Point 1: Trumps tariffs will obviously trigger counter-tariffs in Alaska’s export markets. These tariffs will directly cut into the profits of exporters who are more at risk. Historically, Alaska’s producers incur higher than average production costs and are more susceptible to market swings. This means the counter-tariffs will result in a loss of our export market share. Moreover, it is unlikely domestic markets can expand to offset the foreign losses. Tariffs are essentially taxes that are imposed by governments on foreign producers but are paid by consumers in the form of higher product prices. In other words, tariffs increase the cost of living without any commensurate increase in income. In turn, higher prices reduce the purchasing power of consumers and decreases and the demand for goods and services. So, Alaska may end up like Trump’s soybean farmers when he imposed tariffs against China during his first term. Farmers permanently lost their export markets as China simply shifted to other world producers. Substitute markets for U.S. farmers did not materialize and the federal government had to put the farmers on welfare. They are still struggling today.
Point 2: Like all U.S. residents, Alaska consumers will face a loss in purchasing power. Almost all Alaska consumer goods are imported and will be higher priced as the counter-tariffs will be imposed in response to Trump’s initial tariffs. Retailers/wholesalers have little choice but to pass as much of these added costs onto consumers. They also have to cope with reduced demand for their products due to higher prices. The impact is like increasing local sales tax rates from 5%-6% to 20% or more. Moreover, the impact multiplies as reduced purchasing power ripples through the economy.
Point 3: In just four days, the threat of Trump tariffs already triggered a $7-$10 trillion loss in global stock markets. Since stocks are one of the primary components of the Permanent Fund, these losses can decrease the corpus of the fund, plus eliminate any “surplus earnings” used to support state government and the PFDs.
Point 4: If the Goldman-Sachs economists are correct we are probably headed for an economic recession. Even a short recession will depress state oil revenues and make it more difficult to finance critical state services and PFDs. Cheaper energy will not be a consumer windfall as our political leaders suggest, but rather the reduced demand for energy within a contracting U.S. economy. So, it is entirely possible that both oil revenues and the Permanent Fund could take a hit at the same time.
Point 5: Both the president and governor are believers in a smaller federal government. Alaska federal spending per capita is one of the highest in the nation and represents 10%-15% of every dollar that changes hands in Alaska. Even with this massive federal infusion the Alaska economy has been anemic for about a decade. It is also experiencing prolonged net out-migration. Ironically our president and governor are silent as Elon Musk takes an indiscriminate meat axe to federal employees nationwide. The loss of steady federal incomes with benefits in Alaska will only worsen the worker exodus and increase the local tax burden to provide education, health and safety services.
So far, the campaign promises to champion Joe Six Pack have been just the opposite. Like trickle down we are told to be patient and wait for “benefits” that are small or non-existent. However, the hopes in the campaign promises are almost desperate and cult-like. If history repeats itself, the unfulfilled promises will fall disproportionally on the lower and middle-income families. Most important, unfulfilled promises will become undeniable to the general public only when much of the permanent damage has already occurred. I hope I’m wrong, but I’m betting I’m not.
• Joseph Mehrkens is a retired forest economist who lives in Juneau.
