Palin's Republicanism

A fascinating piece in today's NYT details the very peculiar dynamics of Alaska's economy and polity and provides a clearer picture of how Palin became so popular. First off, she's been presiding over a massive boom because of oil prices - like Chavez, Putin, Texans, Canadians, and Maliki:

Thirty-one other states are projecting shortfalls in their state budgets. Alaska is expecting $5 billion more than it can spend in a state with only 680,000 people.

So it's a very different kind of place than most states these days. So the question is: how well did she shepherd that windfall? She did two big things - she's only been in office for a little over the year so her scant record is not in any way a negative, in my mind. She pushed for a big tax increase on oil companies and she then gave much of the surplus back to Alaskans in the form of oil-bounty checks. So 680,000 Alaskans got a summer Christmas present of three quarters of a billion dollars. There's a pretty obvious reason why she's so popular. And it doesn't seem like a bad idea to me, as long as the state government is being run properly and all contingencies are accounted for. But they may not be:

A debate is on now as to whether Ms. Palin’s policies will be wise for the state in the long run. Some economists have questioned, for example, whether the three-quarters of a billion dollars or so given to Alaskans this summer in the oil-bounty checks (a bill passed this summer with Democratic support in the Legislature), might have been better used in the state’s rainy-day fund.

And the oil tax overhaul, which linked state payments to net profits from the oil companies, rather than gross revenue, also exposes the state to potentially deep hits when oil prices decline. There are no neighboring states or regional economies to provide an alternative if the local economy dries up, nor is there a state income tax to fall back on.

“The state has always been exposed, but now it’s even more so because the state is now sharing the market risks more with the industry,” said Matthew Berman, a professor of economics at the Institute of Social and Economic Research at the University of Alaska, Anchorage. What might happen if commodity prices plunge is untested territory, he said.

“Nobody knows how the Palin administration is going to react to that, because they haven’t faced that problem yet,” Mr. Berman said.

Tax and spend now - worry about the bills later. And stay right out there in the edge of what's possible now. It's the American way for the past decade. But one wonders whether it isn't terribly short-sighted.