Sarah Palin's Economics Lesson, Part Two

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Via Chris Orr and Mudflats, here's a little taste of the exchange between Sarah Palin and Sean Hannity:

Hannity: ...The price of oil is going up again.  It's not quite at $140 a barrel, but it's on its way up to $70 and $80...

Palin: Yeah, well and I thank God it's not at $140. You know people say, "Hey, Alaska!  85% of your state budget is based on the price of a barrel of oil.  Aren't you glad the price is going up?" I say, "No!"  The fewer dollars that the state of Alaska government has, the fewer dollars we spend.  And that's good for our families and for the private sector.

Chris makes the excellent and obvious point about this: "Sarah Palin Prefers Her State Poor." If you're taxing the profits of the private sector, and suddenly the private sector is making a much smaller profit, it's not totally clear why this should be considered "good for our families and for the private sector." 

But, to scratch a little bit deeper, one might also note that if Palin really truly wanted to get rid of all that pesky revenue, she doesn't have to sit around waiting for the price of oil to fall and the revenue to drop. She could also ... lower Alaska's tax on oil. Palin, of course, did the exact opposite of this and enacted a huge windfall profits tax in 2007 that greatly increased the state's reliance on oil. Here's how it's changed:

alaska state oil revenue.pngIn fiscal year 2004 the state got 27.6% of its revenue from oil. In fiscal year 2008 the state got 86.26% of its revenue from oil. (The data is from the Alaska Department of Revenue sourcebook.)

A final point to make might be that Palin said the opposite of her line to Hannity two days ago in a press release put out on her own website: "History reminds us that high oil prices are a double-edged sword," Governor Palin said. "The state treasury may swell, but Alaskans will feel the pain at the pump and the pinch of higher energy prices."

Unless I am badly misunderstanding the sword metaphor, or unless "pain at the pump" is the happy edge of this particular sword, Palin is saying it's a good thing that the state treasury swells when oil prices go up.


Sarahcuda sighting via Wikimedia Commons
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Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism. He was previously a fellow at The Atlantic and an editor at The Guardian. More

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism, an economics blog that was recently published in book form by Simon and Schuster. He was previously a fellow at The Atlantic and an editor at The Guardian. He is also on Twitter.
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