Alaska's eggs are all in the oil basket, like Norway, we have screwed up

Alaska’s Legislature and Governor like to point to Norway’s success with its savings account from Norway’s oil development. Over the last 50 years, Norway has managed to sock away $740 billion in the Norwegian Oil Fund (NOF), Norway’s savings account from oil development royalties. Is Norway’s fund truly the outstanding example of sound fiscal management pointed to by our politicians?

Jerome Vitenburg, an international political analyst, citing a 2011 study by Michael Hudson of the University of Missori, in the Washington Times says no, Norway has not been a good steward of the incredible wealth afforded by the oil boom. Bad investments, a rapidly expanding welfare state, and the failure to invest in Norway’s industry and infrastructure raise serious doubts about Norway’s financial future. Like Alaska, Norway has failed to invest wisely in itself.

Norway has failed to improve its non-oil related industrial infrastructure. Norway has invested heavily outside of Norway. Alaska has done the same.

There is no requirement under Alaska statutes for a percentage of Alaska’s Permanent Fund to be invested into Alaska. (AS 37.13)

Increased production threatens Norway’s oil revenues as oil prices are expected to fall with new production coming on-line in the U.S. and elsewhere from shale deposits and new technologies improving recovery. Alaska faces the same potentially draconian economic future.

Alaska is also particularly vulnerable to such a decrease in oil revenue. This year is expected to be the first year of deficits between spending and revenue, by -$500,000,000, since the precipitous drop in the price of oil in the 1980s and in 1999, when oil dropped to $20 per barrel. Delays in building a natural gas pipeline to tidewater further accelerates Alaska’s coming fiscal collapse, because of the failure of the Legislature to understand the LNG market and Governor Sean Parnell’s insistence in adhering to Sarah Palin’s failed AGIA policy until very recently.

Governor Parnell has finally closed the Alaska Gasline Incentive Act (AGIA) office. Prior to his Natural Resources Commissioner recently announcing that the State would consider a direct investment to secure 20% of the project ownership, Parnell steadfastly stood by Sarah Palin’s Alaska Gas Inducement Act (AGIA) guidelines. Now, it looks as if the Parnell Administration has realized that Bill Walker was correct in his promoting the State’s involvement in a major natural gas infrastructure investment.

Unfortunately for Alaska, Parnell has yet to ask the Legislature to provide the legislative authority to make such an investment and to set a time table for construction. Governor Parnell continues to wait for the oil companies to make that decision. Something that they have been extremely reluctant to do, as they do not want Alaska’s North Slope gas doing other than pressurizing the North Slope oil fields until technology can allow the recovery of most of the 20 billion barrels of oil from oil sands deposits under the surface of the North Slope. The "money" for the oil companies is in oil production, not natural gas production. They have plenty of natural gas from foreign sources and shale plays in the lower-48. They do not need nor want Alaska’s natural gas in the world market competing with these other interests.

There are serious conflicts of interest on the part of the oil companies with their foreign developments, which would compete with Alaska LNG for market share in Asia. TransCanda also has a conflict of interest with its contract with Shell for a natural gas pipeline to Kitmat, B.C., Alaska’s competition as an LNG export terminus. Unfortunately, the AGIA legislation and subsequent contract with TransCanada never required "conflict of interest" as a condition to justify cancellation by the State of Alaska. Only economic conditions are stated as a basis for cancellation by the State. An example of poor business judgement on the part of former Governor Sarah Palin.

Meanwhile, Japanese LNG customers are paying $16 per million British thermal units (MMbtus) for delivered LNG. In 2010, a study by Woodward MacKenzie demonstrated delivery of Alaska LNG to Japan could be done for approximately $8.50/MMbtus. Yet, in the intervening time period since the 2010 elections, the Parnell Administration failed to move any natural gas pipeline proposal forward, preferring instead to seemingly ignore the natural gas issues altogether, putting any lack of progress into the lap of the oil companies. The Legislature was given free reign by this governor to establish policy and direction. Parnell did manage to reduce the oil companies’ production taxes in a modification of Sarah Palin’s Alaska Clear and Equitable Share Act (ACES) of 2007.

What progress has been made on a pipeline proposal has been in favor of the Alaska Stand Alone Pipeline (ASAP), which is the former bullet line. In late 2012, Congress authorized a 7 mile right of way through Denali National Park using the Parks Highway right of way. This surprise on the part of the Obama Administration coincided with the oil companies (Exxon, Conoco and British Petroleum) decision to "study" a pipeline terminus at Nikkiski, rather than use the established TAPS corridor to Valdez for any natural gas pipeline to move North Slope natural gas to tidewater. The economic viability of the ASAP line has been debated since first proposed as the bullet line under then pipeline coordinator Harry Noah appointed by then Governor Sarah Palin. AGIA limits the volume to no more than 500 million cubic feet per day (MMcf/da), making the ASAP pipeline, like the bullet line, uneconomical. The interesting aspect is that the State would have to fully finance the construction.

Bill Walker was heavily criticized during the 2010 gubernatorial primary for suggesting even a partial State buy-in as part of his all-Alaska natural gas pipeline plan. Such a buy-in to control management and to set time lines was termed "socialism", even by Ralph Samuels who was a proponent of the to be 100% State financed bullet line scheme concocted under then Gov. Sarah Palin.

By contrast to Alaska’s lack of measurable new oil and gas exploration/development since the 2010 elections, Texas is now back up to 2 million barrels a day of oil production from shale deposits, doubling its production of two years ago. Texas expects to exceed that production and to see production rise to the levels of the 1960s and 1970s when oil production was well over 2 million barrels per day. As of December, 2012, oil production in North Dakota reached 770,000 barrels per day. North Dakota’s oil production now exceeds Alaska’s oil production. Alaska’s oil production is declining rapidly and is presently at 549,936 barrels of oil and natural gas liquids per day.

Improvements in production technology is resulting in the ability to recover more and more oil from shale plays and oil sands deposits. New technology is also allowing recovery from wells where production was reduced to the point of being uneconomical, because of paraffin impeding the oil flow. Increasing domestic U.S. oil production has led to demands by the oil companies for legislation allowing the export of crude oil from domestic U.S. production for the first time since the 1960s. For the first time in decades, energy independence is being spoken of with certainty in the U.S. The increasing supply should lead to a decline in oil prices.

Norway’s oil fund is limited to investing no more than 4% of its NOF in Norway. The bankers and accountants who consulted to the Norwegian government applied a model of immediate return. Ignored by this economic investment model are the major government-level investments that are designed to facilitate growth in industry, to insure an educated and motivated work force, and to provide the transportation infrastructure needed to support commercial growth. However, the bankers and accountants won out with the argument that to invest in Norway’s small economy beyond 4% would cause inflation that would eventually devastate the local economy. The Alaska Permanent Fund was set up using a similar, shortsighted philosophy.

This same mentality of a quick turn around for money, investment in financial schemes rather than creation of equity through manufacturing and building, resulted in the ponzi schemes of the 80s and 90s of the ".com" stock failures and the sub-prime mortgage disaster, leading to the current recession with the bailouts, quantitative easing by the Fed, and the incredible spending of our Congress and President to no good end.

Europe was doing its own version, and the economic fall out is continuing there like it is here, with high unemployment, currency inflation, and an ongoing recession. Asia, mainly the PRC, is feeling the pinch as well, as the West is the primary beneficiary of its cheap labor and communist controlled economy.

Yet, the historical precedent for the growth of the Western economies was based upon the idea that government facilitated such growth by investing in the public sectors of utilities, transportation, and education to give the private sector the tools necessary to grow the country’s economy. The Tennessee Valley Power Authority is a prime example of a national initiative to increase power production in the U.S. in the 30s.

Instead of growing Alaska, Alaska’s leaders of the time, as had Norway’s leaders previously, decided to grow government as the means of giving the greatest benefit to the people of Alaska. A government that soon tired of public projects, and devoted itself to keeping the ‘hands out’ crowd happy and complacent by increasing welfare gratuities and growing government to do so, thereby directly benefitting fewer and fewer people, largely government employees. "Can’t" has become the new Alaska State Government policy to excuse the continuing lack of infrastructure. The only thing created these days is more welfare spending programs and a bigger bureaucracy at every level of government.

There are people who worked in Alaska for a city government, vested, then vested with a borough government, then did the same with the State, as some local subdivisions required vestments of only five years. Once they retired from the State, they left the State with multiple retirement vestments from three levels of government, full life-time medical, and great retirement benefits. In other words, they raped us, and they are still doing this today.

Former Governor Jay Hammond, the father of Alaska’s Permanent Fund and Permanent Fund Dividend program, never intended that the PFD become an entitlement. It was always intended that either the PFD would be offset by an income tax, or discontinued when the oil production declined beyond a sustainable level for government to justify the payment to the people. The PF was to be used as a ‘rainy day’ fund, similar to the intent for the Norwegian Oil Fund. This flawed strategy is now coming home to Alaska’s current Legislature and Governor Sean Parnell. Neither is doing anything to prepare this State for a post oil economy.

In a 2011 analysis "What Does Norway Get Out of its Oil Fund, if Not More Strategic Infrastructure Investment", economist Michael Hudson warned of impending problems with the Norwegian Oil Fund investment strategy. Norway has been investing its National Oil Fund in Brazil, Russia, India, China, and in questionable real estate in Europe and the U.S. The investments in China, Brazil and India being used to create industry and infrastructure that will compete with Norway’s indigenous industries.

In the current world economic recession, such investments are questionable in the long term, given the economic uncertainties and the current penchant for currency inflation to make products more competitive by the aforementioned countries. The infrastructure investments that are the responsibility of government to keep Norway competitive in a changing global economy remain underdeveloped and ignored, while the social welfare burden continues to increase in the face of declining oil revenues. Even in the face of $740 billion in its NOF, Norway has managed to accrue $657 billion in foreign debt. Norway has borrowed money even with the NOF.

The United States became the economic power house that it did, because the government invested in the infrastructure to facilitate the growth of business and to access natural resources through roads, airports, harbors, schools, utilities, and regulatory oversight. Regulatory oversight at the time was designed to facilitate, not to impede growth. Part of the infrastructure created being necessary to the national defense. The U.S. interstate highway system is a good example of military necessity also serving the needs of commerce.

Mr. Hudson opined that 60% of the Norwegian Oil Fund should have been invested in Norway to build non-oil industry infrastructure to hedge against the competing oil production increases resulting from the U.S. and other foreign shale and normal production and improvements in recovery technologies. With the increased supply in the market, oil prices should decline. Norway’s investment in foreign growth is now paying a negative dividend to the future of the Norwegian economy.

Hudson gave the following example of the shortsightedness of the use of Norway’s oil fund money by comparing how those countries that benefitted from Norway’s investments are using their funds:

"While investing at home to improve their quality of life, China, Singapore and other nations manage their Sovereign Wealth Funds with an eye to shaping their economies for the next twenty, thirty or even fifty years. They are buying control of the key foreign technologies and raw materials deemed most critical to their long-term growth. This broad scope invests export earnings directly to make their economies more competitive while raising living standards."

Norway’s oil wealth has gone to the benefit of other countries through investment in business and in direct investment in infrastructure projects, all of which serves to build their economies at no direct benefit to Norway’s economic future. Foreign investment makes it easier for those governments to make the needed investments in their infrastructure, and to procure foreign raw materials sources for future growth, because the Western investor is paying for the growth of their companies, both private and state owned enterprises, without consideration of the long term impact upon their home countries’ economies.

Unfortunately, for Alaska and Alaskans, our Permanent Fund is largely doing the same: investing outside of Alaska without benefit other than a check once year to each Alaskan, the continued expansion of a bloated self-serving government, and an increasingly demanding welfare state that will collapse with the decrease in oil production in the very near future.

Alaska’s Regional Native Corporations follow the same strategy, which benefits a few, and pays off the many to keep them quiet with respect to seeing any benefit locally. However, they can sell their losses to solvent companies as a tax break to that company.

Norway, like Alaska is a literal one-trick pony, almost completely reliant upon oil for its revenue to run its government, and to meet its growing social welfare state obligations.

Alaska’s Permanent Fund (PF) does not invest in Alaska. Anywhere but Alaska seems to be the strategy. The PF investment goal is an increase of Fund assets by 5% per annum. Our Legislature and Governors have concluded that Alaska is a bad investment: do not use the PF to build roads into the Bush, to improve harbors and airstrips in Alaska to reduce the cost of living and to provide for the defense of Alaska, or to access our natural resources for development, to increase the exploration and development of our hydrocarbon resources, or to provide for the basic services that government is charged to do for all Alaskans. Our budget, State and Federal funds last year was over $10B. Yet, not one mile of new road was built, nor were the current roads improved or repaired. Meanwhile, the PF continues to invest in the stock market, which is literally gambling with Alaska’s oil wealth. As of this year, Alaska’s public indebtedness was $8.2 billion.

Norway is not the standard to be followed. The debt structure alone is enough to dissuade the prudent man from believing that Norway’s government has been a good steward of the benefits of its oil reserves. Norway’s debt of $657 billion is foreign held debt. Meaning, Norway has borrowed money in the face of their oil fund’s wealth.

Alaska is again issuing bonds to finance purchases.

Without diversification of Norway’s economy by government investment to build the infrastructure to support non-oil related industry, Norway is ill prepared to compete in a world market once the oil is gone. Norway will have to compete with those very economies in which Norway’s oil wealth has been invested. China, Russia, India and Brazil continue to garner more and more world market share across industry sectors, while Norway is frozen in the belief that it can continue to expand its welfare state without investing in its economic future.

Sadly, Alaska follows this shortsighted course by our Governors’ (primarily Palin and Parnell) and the Legislature’s refusal to recognize the hydrocarbon market trends and act accordingly to invest in the infrastructure necessary to access and to support development of the tremendous resource wealth of this State. Instead of investing in Alaska, we have invested in our competitors’ economies, and in policies and regulations by a distant federal government through federal bonds that serve only to further restrict Alaska’s ability of self-determination. Alaska’s debt structure is not as far along as Norway’s, but our lack of a viable transportation infrastructure makes much of Alaska as remote and our resources as unreachable as in most of the third world. Only there, they do not have a hostile and interfering federal oversight that serves other interests to deny Alaska its rightful self-determination as a State in the Union of States.

Given Alaska’s $10B budgets of late, $8.2B in indebtedness, how long will our $50B in the PF last? The trend is ever larger State budgets in the face of an average 6% loss of North Slope oil production each year. If there is a drop in the price of oil below $80 a barrel, Alaska will be in serious financial straits. Further, it is doubtful that the TAPS can deliver oil when production reaches 300,000 barrels per day or less. That day is not long off, given the 549,936 barrel per day level of production at present.

The Parnell Administration has continued to ignore the construction of a natural gas pipeline to tidewater that would, with the right governor at the helm, increase State revenues slightly, but have the potential to do much more. The long term benefit of such a project would be to provide any remaining gas liquids for use in Alaska to create a petrochemical industry for the Interior, and use part of the gas transported with the export volume to provide cheap heat and power for Alaska’s communities in the Interior and in South Central Alaska. Such in-state use of North Slope natural gas would impact industry across the board, and enable kilns for timber, refridgeration for agriculture, and the creation of jobs across industry to provide opportunity beyond just building and maintaining a pipeline. There is the true benefit of our resources, not in a mere export scheme to feed a bloated and inefficient State government that benefits a few, and not the many.

Such an in-state energy infrastructure project would further enable increasing the available gas in Cook Inlet, until exploration and development could catch up with increasing demand. The LNG terminal at Nikkiski would continue to export Cook Inlet LNG to Japan, as is still being done after 43+ years, without concerns about shortfalls in supplies for home heating.

A good indication that increasing natural gas supplies will positively impact the State is the December, 2012 air quality permit by Agrium to restart the fertilizer plant at Nikkiski on the Kenai Penninsula. Agrium shut down its Nikkiski plant in November, 2005 resulting in the loss of 230 local jobs.

Long term, well paying jobs would be the benefit of the correct application of governmental responsibility and involvement in large scale infrastructure projects, the natural gas pipeline being such an example of potential State participation. 30% of Alaska’s private sector jobs are oil industry related. Such State support would increase the size of the private sector beyond just the oil/gas industry support and services. The all-Alaska natural gas pipeline proposed by the Alaska Gas Port Authority during Sarah Palin’s campaign of 2006, and again in 2010 during Bill Walker’s run for governor in the Republican Primary was such a project.

High oil prices have kept the wolves of recession away. This keeps a private sector that largely serves government from facing the reality of the current world recession. However, the fires of growth are cooling, contrary to our federal government’s protestations to the contrary. Like Norway, the prospect of lower oil prices, declining production, and an indifferent Governor and Legislature point to uncertain and turbulent times for Alaska’s economy.

In 1999, the price of oil hit $20 a barrel. Today, that would mean the Permanent Fund would have to be used to defray the costs of government until the price of oil returned to sustainable levels. Something that could take longer than the PF would last.

Alaska First must be the only policy on the part of our Legislature and Governor, or Alaska will be the last to the world LNG market party and the loser by virtue of a retiring, reluctant and recalcitrant State government that has failed to see the need to invest in Alaska First. Vision, courage, commitment and leadership must replace the "can’t" in the Governor’s vocabulary. That means a change in governor.

Norway’s example as a steward of its oil wealth for the benefit of its people is not a good example for Alaska. Once again, our leaders have been short sighted in their consideration of Alaska’s future.

For more information:

Alaska Statutes:

AS 37.13.020

http://www.apfc.org/home/Media/investments/20130523InvestmentPolicyD.pdf

Alaska Division of Oil and Gas, Dept. of Natural Resources, SOA

http://dog.dnr.alaska.gov/

Norway’s Sovereign Wealth Risk Vortex:

http://michael-hudson.com/2011/03/norways-sovereign-wealth-risk-vortex/

Alaska Public Debt 2012-2013

http://treasury.dor.alaska.gov/Portals/0/docs/debt_management/debt_book_2013.pdf



Michael Hudson is the President of the Institute for the Study of Long-Term Economic Trends (ISLET), Wall Street Financial analyst, Distinguished Research Professor of Economics at the U. of MO. http://michael-hudson.com/about/

http://www.bizjournals.com/bizjournals/on-numbers/scott-thomas/2012/05/governments-employ-20-percent-of.html

http://www.spokesman.com/stories/2012/may/15/north-dakota-now-no-2-oil-production/

http://homernews.com/stories/010605/news_0106new005.shtml

http://search.peninsulaclarion.com/fast-elements.php?querystring=%22FERTILIZER+PLANT%22&offset=0&hits=10&hc=y&type=standard&profile=kenai&tags=FERTILIZER+PLANT&addListings=true

http://peninsulaclarion.com/news/2013-06-27/agrium-inspecting-equipment-at-its-closed-plant-work-to-continue-through-fall

http://www.alaskajournal.com/Alaska-Journal-of-Commerce/December-Issue-3-2013/Agrium-Inc-applies-for-key-permit-to-allow-plant-restart/

Fiscal Cliff: Alaska's problems lie elsewhere

There is a great deal of press on the so called fiscal cliff that Congress has been wrestling with since 2011. After working on the issue for almost two years, no progress has been made. What is at stake, what is the potential impact upon Alaskans?

The fiscal cliff is a failure on the part of Congress and President Obama to reconcile the Administration’s desire to push the United States further into deficit spending and wealth redistribution with fiscal reality. The Obama Administration wanted a tax increase on those earning over $250,000 per year, without any reductions in spending. The Republican majority in the House had to this point refused any tax increases and had worked instead on spending cuts. The amount in contention with respect to the ‘fiscal cliff’ negotiations is about $600M. The total deficit for 2012 is approximately $1.1T.

The tax increase is an about face for President Obama who said in July, 2011 that no tax increases were necessary, that deductions and loopholes would provide the necessary revenues.

The United States is borrowing $4.8B per DAY to fund government. President Obama’s administration has accomplished the greatest expansion of government since FDR’s New Deal Administration in the 1930s. In the first two years of his adminstration, the federal government grew by 117,000 employees.



In 2011, an attempt was made to resolve the $1.6T in deficit spending for that year. Congress failed to reach a consensus and appointed a bipartisan supercommittee to negotiate a budget. The supercommittee failed. No budget was produced, and the federal government has been operating on debt limit increases since.

However, Congress did agree that if no budget was passed, sunset provisions would end the Bush tax cuts and a 10 year reduction in military spending termed sequestration would occur. The military budget would be cut 9% per year, or $55B per year, beginning in 2013, and continuing for another 9 years. Another $55B would be cut from domestic programs: social security and Medicare. Personal income taxes across the board would increase as the Bush tax cuts would also sunset.

The expected increase in taxes to the average middle class taxpayer is over $2,000 with the Obamacare increases in set to begin this coming year.

Bottom line is that the Republican Congress will most likely cave on the no tax position on the upper income bracket increase. However, that may not be enough for President Obama, as he does not want any decreases in spending. Therefore, it appears that the Republicans in Congress are in a no win situation, as the Obama Administration and the Democrats have them in a no win situation. If the Republicans cave on the tax increase on the upper income earners, there will be no accompanying decrease in spending and the deficit will continue to increase. If the Republicans hold their ground and House Speaker Boehner does not cave, then they will be blamed for the sequestration cuts, the end of the Bush tax cuts, and the negative impact upon the economy.



The reality is, that the Democrats have never failed to increase taxes when it suited their agenda. Therefore, they feel that they will not be the losers if there is a failure to remedy the ‘fiscal cliff’ scenario. They will simply blame the ‘intransigence’ of the Republicans.

The national debt figure that is admitted by the Obama Administration is estimated at $16T, an impossibly large number for most people to comprehend. However, that figure may be just an indicator, and nothing more. Former Representative Chris Cox, former Chair of the House Republican Policy Committee and the Securities and Exchange Commission, and former Representative Bill Archer, former Chair of the House Ways and Means Committee, both of whom served on President Clinton’s Bipartisan Commission on Entitlement and Tax Refore in 1994, wrote in the November 26, 2012 WSJ that the national debt is being purposefully understated to hide the true cost of government and the liabilities of entitlements to the people. They stated that were the federal government required to account for future and present liabilities to Social Security, Medicare and federal employees retirement benefits, these liabilities exceed $86.8T.

Corporations are required by law to report these liabilities, but not the federal government.

Former Reps Cox and Archer disclosed that U.S. liabilities are increasing at a rate of $8T per year. In order to reduce deficit spending, tax revenues of $8T would be required to balance the deficit. Unfortunately, the total adjusted gross income of all Americans earning more than $66,193 per year is $5.1T, leaving a deficit of $2.9T necessary to balance the budget. In otherwords, there is not enough money available/collectable by the IRS to balance the budget. Ever.

The truth is, the United States went over the ‘fiscal cliff’ years ago.

As America’s remote northwestern step-child, given the 222 million acres of federal lands to the approximately 103 million acres of State lands granted by the federal government at Statehood in 1959, Alaska is particularly vulnerable to any cuts in federal spending. 239 villages are largely dependent upon federal grants and other funding under BIA programs. Alaska further depends upon federal highway funding to repair and maintain existing roads, airports, and harbors, and to construct new infrastructure.

According to the Institute of Social and Economic Research, UAA, federal spending in Alaska in 2010 amounted to $10.9B. The federal government provided $3.5B in grants, $2.6B in payments to individuals (BIA), $3.3B in defense spending for wages and procurement in the State, and $1.5B in federal agency spending in wages and procurement. Governor Parnell’s budget for the same year was $10.5B in capital improvements and State operating budget.

Alaska is not like the rest of the United States in that Alaska came into the Union in 1959 as a largely undeveloped frontier State. It was recognized that the amount of money it would take to give Alaska parity in transportation and communications infrastructure exceeded the money available from federal resources. Congress gave Alaska a 90% royalty from any resource development as a means of self-funding needed roads, airports, and harbors. Today, most of Alaska is still accessible only by boat or airplane.

The State does not receive any royalty from development on federal lands, including offshore leasing for oil and gas development. Shell Oil Company’s off shore development in northwestern Alaska’s continental shelf will not produce any royalties for the State of Alaska. The benefit will be to the local villages that provide services and labor for the project.



The State of Alaska has managed to save approximately $45B in the State’s Permanent Fund (PF), largely invested in the stock market from royalties and taxes produced by the North Slope oil development. The PF is intended to fund State government should there be a severe economic downturn and declining State revenues. Every year, Alaskans enjoy a dividend check from the PF from a percentage of the PF’s earnings. This is one of the first programs that will go by the wayside, if federal expenditures and federal funding is sharply reduced. Especially, in the face of declining oil production. Expect to see legislation for a State income tax in the near future.

The PF is very exposed because of the amount of money invested in the stock market. During the dot.com massacre of 2000, the PF lost $10B in a matter of a few days. The money has since been restored, but the potential negative impact of severe downturns in the stock market is still there.

The oil industry revenues contribute approximately half of Alaska’s 374,000 jobs, largely State and local government. Directly, the oil companies account for 4,497 jobs, and another 8,410 jobs in the oil service sector. It is estimated that another 28,837 jobs are created through the trickle down of oil company Alaska wages and procurement. The oil industry has provided over $170B in revenues to the State since Statehood. (ISER 2010)

The reality of Alaska’s economy today is that it is oil driven. There is very little in the way of diversity in our economy. Alaska’s economy is oil and government and the retail and construction sector that support oil and government. Alaska has been fortunate to have a defense spending priority because of the strategic geographical position Alaska has with respect to Asia and the Pacific.

The defense initiatives benefitting Alaska has seen an increase in the number of National
Guard personnel on full time active duty.



The Alaska Air National Guard has seen a tremendous growth with a C17 heavy lift squadron and three aerospace rescue and recovery squadrons based at JBER near Anchorage, and a KC135 aerial tanker squadron at JBEW near Fairbanks. These are active duty squadrons with strategic support and war support missions.

The Army National Guard has seen some changes structurally with a new Military Police Battalion replacing an infantry battalion. The Alaska Army National Guard gained the security and operations responsibilities for the Ft. Greeley Missile Defense Base near Big Delta, Alaska. The Army National Guard in Alaska has a UH60 Blackhawk company and a C23 Sherpa company at JBER near Anchorage, an Eskimo scout battalion located in various villages throughout the interior and western Alaska, and a transportation battalion located in the Matanuska Valley. The AK ARNG is now organized as a battlefield surveillance brigade, rather than an infantry brigade consisting of cavalry, infantry, and organic air support.

The National Guard has pumped a lot of money into Alaska since 9-11 and provides jobs or an extra paycheck for part-timers for more than 2,000 Alaskans who serve in the National Guard in Alaska.

However, the USAF recently announced a 5,000 man reduction in manpower with some personnel to be transferred to the federal USAF, along with a reduction in ANG fighter squadrons nationwide. It is doubtful that Alaska’s ANG will be affected, as the ANG role of heavy airlift squadron and aerial refueling are strategic missions, and global in nature. Thus far, only midwestern States’ ANG fighter squadrons have been mentioned as being in jeopardy for the reduction or transfer of personnel and equipment to the USAF.

The U.S. Army has a Stryker Brigade at JBEW as it primary maneuver element in Alaska. The USAF has a squadron of F22 Raptors at JBER and a squadron of F16s at JBEW. Therefore, there is little impact locally with respect to any reduction in federal military forces in Alaska. It looks like the 9% reduction in the DOD’s budget, should sequestering happen on 31 December, will have little impact because of Alaska’s strategic geographical position.

The increased emphasis on the development of Arctic resources has seen the stationing of a U.S. Coast Guard cutter at Pt. Barrow and air patrols of the northern and northwestern coast of Alaska above Kotzebue. This has mean money and opportunity for the villages in the area used as support bases.



This year’s State budget is $12.5B. An incredible amount of money for a state with about 650,000 residents. Even with the incredible budgets beginning with Governor Frank Murkowski in 2003, Alaska’s leadership has failed to diversify since the first oil and gas lease sales on the North Slope in the late 60s. This has left Alaska in its present predicament of being largely a single source economy, fueling a bloated and socialist State government. Granted, the PF will keep the State afloat for three or four years post any shut down of the Trans Alaska Pipeline System (TAPS). Last years budget was declared unsustainable by Rep. Bill Stoltze, Co-Chair House Finance. Yet, an even larger budget was passed for 2013.

Whether it be Fiscal Cliff or the shut down of TAPS, Alaska has some hard times coming if the leadership of the Legislature and Governor Sean Parnell cannot come to grips with the long term implications of the failure to act on an in-state natural gas pipeline to tidewater and the inevitable increase in south central natural gas prices by at least 8%-13% due to the need to import natural gas into Cook Inlet. Since the early 1990s, some legislators and mayors of south central boroughs and cities have been warning of the shortfalls in the production of Cook Inlet gas insufficient to meet the needs of Alaskans during winter months. This coming year will see the first Russian LNG tanker loaded with LNG coming into Cook Inlet.

The bottom line is that it does not look like the federal government will cut spending in Alaska anytime soon. It is not the desire of the Obama Administration to cut government spending, but to increase spending and the to increase the size and reach of the federal government. What is inevitable, given the past history of democrat administrations, is that our taxes will go up. Given the incredible reality of a $86.8T debt, the U.S. is in serious, serious trouble financially. Eventually, this mess will impact Alaska’s economy in a very negative fashion. However, reality is not what Washington, D.C. is about. The worst is yet to come.

54% of Americans who voted, voted for a socialist expansion of government with the increase in deficit spending and increased liabilities that come with the lack of reality associated with socialism. They have given their future generations an incredible burden, but shirked their responsibility with Obama’s reelection.

Already, the Obama Administration is planning a carbon tax, which will certainly impact Alaska’s coal and diesel power generation costs and increase the cost of power to all Alaskans. Obamacare will increase medical costs to Alaskans, and restrict services.

Unfortunately, the Fiscal Cliff and Obamacare are not the real threat to Alaskan’s welfare or cost of living, as we are in the same boat there with the rest of Americans. The real threat to the economic well being of the State of Alaska and her people is the shortsightedness of our Governor and the Legislature to provide a sound, diversified economic base for the future with sufficient low cost energy to insure that future. 35 trillion cubic feet of the energy available is in natural gas under Alaska’s North Slope. After 35 years, that energy has yet to be tapped.

Parnell is briliant--he's going to reduce the size of Alaska!

Our new old Governor Sean Parnell is slowly steaming ahead with his agenda. I would have never given him credit for this, but . . . Gov. Parnell and the Legislature have come up with a pretty clever way to cut local government and the population of the State of Alaska by about 50% almost immediately! This plan is insidious in its brilliance.

Gov. Parnell’s economic plans should have included –by now—news of TransCanada and Exxon’s plans for a pipeline. Yet, all we hear from industry and other sources is that there will be no pipeline to Canada or to the U.S. for at least 20 years—per Larry Persily, the federal pipeline coordinator. Nor, will any LNG be sent to the U.S. from Alaska. It is just too cheap to ship all of that natural gas Exxon and Conoco converted in their LNG trains in Qattar 15,000 miles to the U.S. by LNG tanker, off load the LNG tanker, recondition the LNG, load it back onto the LNG tanker . . . and export it to Asia another 10,000 miles—and, still make a profit.

Yes, I remember Ralph Samuels sagely opining that it was just too expensive to ship North Slope gas 800 miles to Valdez by pipeline, convert it to LNG, and then ship it to a foreign market. Man, am I glad that we did not make that mistake! We would be just like all rest of those fools shipping LNG all over the world and making far more than the domestic price! Wow. We almost blew it, big time!

What would we do with all of those LNG tankers coming into Valdez to move 3 billion cubic feet of gas a day to market?! Not to mention that the gas liquids would have stayed in Alaska for fuels and industry, thereby creating more jobs. And, why would we build the 250 million cubic feet per day spur line from Glennallen to the Enstar Hub at Palmer to relieve the gas shortages in the Kenai/Cook Inlet gas fields? What would the pols have to commiserate over?! We did not need those jobs, either! Thank you Ralph and Sean!

Alaska did not need all of the jobs and businesses that would have been created by building the natural gas pipeline to Valdez. Remember, 138,000 Alaskans voted to build that pipeline. Just foolishness! Why, we don’t need to worry! We can all work for the State! Right, Gov?

After all, Conoco let the cat out of the bag just before the elections. The intent was to warehouse North Slope gas for at least another 20 years. Yet, Conoco is still going forward with Denali . . . ? Uh . . . some things are better left alone, I guess, otherwise it hurts your head trying to follow the logic.

Oh, you folks that opposed building the all-Alaska natural gas pipeline and shipping our gas to Asia markets were so sage. . . .

What was it Larry Persily opined? No pipeline for 20 years?

I guess that we are just supposed to forget that we have a gas shortage that will result in brown outs and a loss of heat and power for up to two years in south central if a compressor fails in the Kenai fields. What fun that promises!

Just think, over 300,000 Alaskans without heat and power during the coldest part of the winter, maybe two winters. And, most of them . . . armed. Uh, oh.

If that is a means to get property values down, that will do it, alright.

I guess we should also forget that during this last election, it was revealed that TAPS will reach a critical juncture much sooner than expected. The point at which TAPS cannot be restarted due to a shutdown is now much closer.

We were all fat dumb and happy thinking that TAPS would continue to transport oil down to 300,000 barrels per day production. Oh, no. This has been revised to 500,000 barrels per day. Meaning, that within the coming four years, we may see an end to TAPS moving our oil once production reaches 500,000 bpd or less, and there is a shutdown of the pipeline for any reason. With that shutdown ends 90% of the State’s revenue.

Do you think there will be an income tax, not to mention a State sales tax and, maybe even a State property tax proposed over the next two Legislative sessions?

Wait a minute.

We have the Permanent Fund! Let’s see, that’s about $35B or so. At a yearly budget of $11B growing by at least 10% per year, we can hold out for . . . 3 years? Then what? Don’t think about it, our legislators and governor aren’t, so why should we?

How long will the PFDs last? Anyone want to make a bet past 2013?

The only “pipeline plan” being discussed publically is the idea of building a 36 inch or 48 inch natural gas pipeline from the North Slope to Fairbanks. After that . . . who knows? Indecision reigns supreme. Gone is any mention of the “bullet line” from Fairbanks to Anchorage. Avoided like the black plague is any mention of the all-Alaska natural gas pipeline to Valdez. Now, all we hear is that importing natural gas to Cook Inlet is inevitable.

In Canada, poly pipelines are being installed year round for gas distribution to market. You see it all over the west. Just awesome their expansion and aggressive development of their NG resources. The Canadian government just approved the MacKenzie River Delta 1.5 bcf natural gas pipeline project. In the mean time, the success of the LNG export facility at Kittimat, B.C. is no longer doubted by any here or there.

The MacKenzie River Delta pipeline is going ahead, the national energy board in Ottawa said it needs to be done, all the aboriginal malarkey is settled, and it is and will always be . . . Canada first. That project will pretty much see an end to the hot air expounded over any idea of moving our gas to Canada. We won’t be able to give our gas away if this dodo bird attitude on the part of those in Juneau continues regarding LNG exports and instate use of the gas liquids.

Yet, in Alaska . . . well, the sage heads in the Legislature and the Governor’s office have decided that in about 5 years or so the Grinch is going to visit all of us, if not before. “Before” may be a compressor failure on the Kenai, or the inability to restart TAPS after a maintenance or leak shut down. Then what? The silence has been deafening.

The Alaska Legislature and our governors have been very successful in ignoring the obvious. We have to trust them to keep doing just that. After all, a little misery and cold never hurt anyone. Right? Just suck it up and keep moving, soldier.

Enjoy heat and lights while we have ‘em!

And, then, when we all get cold enough and angry enough, let’s enjoy tar and feathering the legislators and the governors who served from 2002 forward who ignored our will. There will still be diesel to heat the tar.

Sarah looks good in black, too.

Just before we do Parnell, we should give him an award for the success of his brilliant plan. After we finish tar and feathering him, we will send him to Washington to advise President Obama on resource development, cutting government, and population control.

Is ACES the problem?

I think something is being overlooked in this discussion. It is easy to blame taxes. And, one has to give a minor kudos to Parnell who alluded to a potential decrease in the State's royalty taxes. However, there is more here than just taxes.

One of the primary issues is the state of the national economy. There has to be a market to sustain the exploration and development. That the market is in decline due to Obama/Pelosi/Reid's disasterous attempt to rewrite the national economy paradigm. Yeah, GWB had his part in the making of this mess.

That situation definitely has an impact on what happens where with any industry, much less oil and gas.An indicator of the impact of the national economy is Shell's pulling back from oil tar sands recovery expansion from a planned 700,000bpd to 225,000bpd, including putting on hold a potential technology pilot project for insitu recovery. Cost of production is up--and it is here also, a 68% increase in operations costs on the NS from 2001. Therefore, it stands to reason that the oil companies are shifting their focus to portions of world that do not have the regulatory baggage--read nimby/greenie lawsuit--where it is cheaper to operate, even if the return is lower. Exxon and others bid on Iraqi concessions for around $1.40pb.

Shell is going forward with its offshore exploration, something the Parnell Administration seems to be hyping as the new oil rush. State gov't does not get as much directly out that development, but will gain from the jobs and infrastructure in the communities where support bases will be established. Unfortunately, the State is used to a "trickle down" economy where the revenue goes to the State directly and is then distributed to the smaller communities. This type of development, as well as mining will start to put the State back in its place and give new economic power to the communities impacted by the resource development--as it should be instead of this socialist state and colonial economy that is Alaska.

Given the reduction in the tar sands expansion on the part of Shell, it appears that AGIA and Denali may have lost a great deal of their appeal to the Canucks. I doubt those big pipe projects will survive.

This means that ACES is important to maintaining a bloated State gov't, which also feeds bloated local gov'ts. Reducing ACES is going to be a fight, given declining production on the NS.Should ACES be reduced?

Ireland reduced their taxes and boomed economically. Alberta and Saskatchewan played tug of war with the oil industry when Alberta increased its production royalties, and the oil companies bailed for Saskatchewan. Alberta figured the situation out quickly, and made up for lost drilling by lowering the royalty tax. Lowering taxes and royalties cannot be understated in terms of demonstrated positive impact.

Yet, when Parnell in his State of the State suggested that the State's royalty tax may be reduced, a good conservative pundit howled like a striped ape. Why, we just cannot do that!

The reality is that taxes are only one part of the problem in attracting the oil industry back to the State.

Taxes alone will not bring attention back to Alaska, a redress of regulatory impediments must also happen. Marathon Oil did not complain to the Anchorage Chamber of Commerce about taxes, they complained about the regulatory burden in aquiring the permits to drill new exploratory wells.

Calling for a reduction of ACES is only one aspect of what is needed to create a favorable environment for the oil/gas industry to reinvest in Alaska. A reduction in the royalty tax should also be looked at and weighed. However, the primary focus should be on the regulatory impediments. That's where the delays and the real money is lost to the oil companies and any resource development business trying to do business in Alaska.

In the mean time, we need to elect a governor who can move the State forward in the face of declining oil revenues and that candidate is Bill Walker. The all-Alaska pipeline will provide revenue, jobs and infrastructure that would allow the State to reconsider its policies regarding oil and gas development from a position of not having to knee jerk to demands that may be well intended, but might not have the end result desired.

Parnell's gotta go . . .

Governor Parnell’s new budget sticker price is a shocker. $10.5B. That’s billion with an explosive “B”. The size of this figure should give rise to fear and trepidation into the hearts of every conservative Alaskan out there, and the rest, also. Out of $10.5B, less than point 5 percent builds anything. The rest goes to State government to maintain the social State that Alaska has become while drunk on oil revenues.

When has there been any desire to build anything since Bill Eagan’s second term in the early 1970s? All State government does now is grow, and make excuses for why we cannot do anything anymore.

Worse, why has the State government grown with the Palin/Parnell Administration? As it turns out, Sarah was no conservative. She sold us a load of bilge on that promise, and Parnell has yet to pump out the bilge water that is the growth in State government since Palin/Parnell came to power. The current increase of 8.6% over Palin’s last budget shows that Parnell is no fiscal conservative.

An example of the expansion of State government is Palin/Parnell’s Climate Change Sub-Cabinet. A State executive cabinet that is managed by a federal EPA employee. This management is contrary to the Palin/Parnell stance and rhetoric in Sean’s State of the State address about maintaining and protecting the State’s sovereignty. This cabinet is no longer needed with the admission of climate change being manufactured science to a political end. This sub-cabinet is also an expansion of government whose function was already covered by DEC, DNR, DMVA on the emergency response side, and other State agencies. Worse, it is administered by Climate Change Strategies, an NGO that promotes the false science of man-made global warming.

Another duplication of effort and money, to the tune of $7 million this year, was the creation of the Pipeline Czar position under Palin and continued by Parnell. We created ANGDA in 2002 by an overwhelming majority to do exactly what Noah and now Bob Swenson were appointed to do. Why is this bureaucracy and expense necessary? What does it do that ANGDA could not do, especially in the face of former Sen. Gene Therriault’s appointment as the governor’s oil and gas advisor. Seems to me that between Therriault and ANGDA, the situation regarding gas pipelines was covered.

DMVA continues an interesting structure that is contrary to our republican tradition in government. The military always has a civilian head. In Alaska, under former Gov. Frank Murkowski, an experiment was tried. The Commissioner DMVA and the position of the Adjutant General were combined. The purpose was to put the two top jobs, military and civilian under one hat. While good in theory, it put the military in control of DMVA, or more particularly, the National Guard Bureau (NGB). The reorganization also resulted in the two top positions being out of State at the same time. With then MG Craig Campbell’s numerous trips to Mongolia, Iraq, and Afghanistan as TAG, DMVA’s remaining leadership was incapable of making any decisions while the Commissioner/TAG was out of town. The Commissioner DMVA should be a civilian, and the TAG should be military, as two separate positions. NGB fuels DMVA. The combination of TAG and Commissioner under one hat gives the feds too much influence. Parnell, as a long time legislator, should have had the moxy to correct this situation. The military should always have civilian leadership. Even the Russians know better.

Under Parnell, we have bigger not better government. We have more money spent with less to show for it. We are in a recession, not a period of growth. There is no pipeline or other major construction on the Parnell plate with an anticipated start date planned. It is time to wipe the slate clean of Palin/Parnell and elect a new governor.

Check out the Div. of Elections website to see who is running. Then, go the candidates’ websites and read up on them.

We cannot afford another round of Palin/Parnell.

Sarah's lackluster legislative session

Governor Sarah Palin's third legislative session has ended. Her disputes with the legislature kept things interesting, but non-productive. Juneau still does not have a replacement for Sen. Kim Elton, who resigned to take a position with the Obama Administration. The governor still does not have a solution for ameiorating the coming crisis regarding south central's declining natural gas supply.
Gov. Palin has once again nominated former Sen. Tim Grussendorf to replace Elton. This choice was rejected by the democrats and will be rejected once again. This situation is not of the Governor's making. The democrats had the responsibility to provide the governor with three names, instead, they have continually promoted Rep. Bev Kertulla.
Kertulla's family has long been involved in Alaska's Legislature. Her father, former Sen. Jalmar Kertulla is a former senator and representative from the Palmer side of the Matanuska Valley where I live. Appointing Rep. Beverly Kertulla would then create another vacancy that would reset the controversy back to square one with the need to appoint a replacement for her seat.
I can understand why Sarah Palin would want to avoid creating another vacancy by filling the current senate vacancy with a sitting represnative.
Given the conduct of the democrats, Juneau cannot blame the vacancy on the governor.
The real disappointment is the failure for the Legislature and the Governor to devote the time and effort necessary to evaluate and to reach a consensus to head off the specter of the State of Alaska, with 35 trillion cubic feet of natural gas reserves proven and estimated, having to suffer the situaiton of having to import natural gas at the LNG port facility at Nikkiski.
At present, the Nikkiski facility exports natural gas to Japan. However, the facility will be converted into a receiving trane in 2012 unless sufficient production can be achieved through additional exploration in Cook Inlet's gas fields.
The difference in philosophy betwee the Governor and the Legislature continues unresolved regarding the so called stimulus funds. Palin does not want to further encumber the State with expanded federal programs under this package that would reqauire the State to continue that expansion at its own expense once the federal funds are expended. The dems and some republicans in the Legislature want all of the money, irrespective of the final cost to the State.
One area of disagreement is the impact upon education funding. Gov. Palin wants the federal stimulus funds to replace State funds proposed the same purpose. The Legislature want their cake and eat it too by adding the federal funds to the State monies in the budget.
Apparently, Alaska's Legislature, and yes, the Governor too, forget that monies in the stimulus will need to be repaid and the bill in the form of inflation has yet to be totaled. Our kids and their kids will repay the Obama Administration's excess.
The Governor has a problem on the North Slope that must be addressed in the form of additional oversight over BP's transport pipe infrastructure. This system has failed not less than 3 times in the last three years resulting in hundreds of millions of dollars in lost production due to a failure to maintain the pipe. Todd Palin works for BP, which makes me wonder if Sarah is not coming down on BP has hard as she should, because of his job situation?
AGIA still has not produced a start date for construction of a natural gas pipeline. This is a situation that is of concern, as Alaska will lag on the impact of the recession for another 6 months or so. Alaska's economic cycle is usually contra-cyclical to that of the lower 48 States.
The only real impact of Sarah Palin's Administration to date has been to provide a spectacle over the pregancy of the oldest daughter and her boyfriend being kicked out of the Palin fold, the spectacle of the Governor's office officials incompetence creating Troopergate. Otherwise, Sarah has managed to outspend her predecessors of both parties.
I am still hoping that the fiscal conservative will show her head and begin the process of cutting back Alaska's bloated and outrageously expensive State government. However, that person may not be Sarah Palin. The Sarah Palin in the office of the Governor of the State of Alaska is not the person we elected.
Alaska is facing the impact of the economic meltdown that is still coming in spite of the spin put on the situation by the Obama Administration and the fools in the Congress. Spending one's way to prosperity does not work and will not work to cure the ils of overspending, bad management, and stupidity on the part of elected officials opening the doors to housing locans loans to people who could not possibily pay them back.
For the first time since the program's inception, the decision to end the Alaska Permanent Fund Dividend Program may have to be made for economic reasons.
We cannot keep spending like drunken sailors and expect to continue to receive the largess of the oil production in the face of a production that is steadily declining, is interrupted by BP's leaking transportation pipe infrastructure, and uncertain oil prices and a Legislature and a Governor who are all too willing to try to outspend each other.
Note: I am still on a project in Canada and will try to update as time allows. My apologies the lack of regular posts.--LDW

VAT tax cut results in increase in consumer confidence

Once again, a reduction in taxes had accomplished what all the spending by gov't could not.

The ER cut its Value Added Tax by 2.5% late last year. Already, this cut has resulted in an increase in retail sales of an estimated $2.1B Euros.

Unfortunately, in the U.S., the only thing Washington can do is to take away from one sector and give it to another. Not to mention ensure that our taxes will be raised in every sector.

God help us, if the Europeans can figure it out, why can't our leadership in Washington, D.C.?

http://news.bbc.co.uk/2/hi/business/7995850.stm

Nancy Pelosi--where do we get these people?!!!

Check this out.

Pelosi claims that 500,000,000 Americans lose their jobs per month!

What a moron!

See it here: http://www.youtube.com/watch?v=x8hMJVXt09E

One has to wonder. . . .

Cicero was right.

The lesson of history is clear. All we have to do is to read.
See http://www.thealaskastandard.com/?q=node/333

Pelosi' Solution for Fixing the Economy: Abortion

If you are looking for new ideas with respect to the state of the economy and social issues, look no further than http://www.whitehouse.gov/. There, you will not find any new ideas, but you will find a blueprint for change that is definitely socialist and nothing new.

Worse, House Speaker Nancy Pelosi has let the cat out of the bag. One of the major solutions to the economic downturn is . . . abortion.

Killing the unborn will save the states money over the life of that child. Therefore, rather than pay for child care, health care, and education, the solution is to kill the kid before the baby is born. (http://www.drudgereport.com/flashpbc.htm, http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=87161)

Hitler had a similar solution.

Stalin had such a solution.

Pol Pot and Rwanda were the most recent examples of this solution.

Killing while still in womb makes it easier to kill once out of the womb.

Yes, grandma Pelosi, let us continue to encourage the killing of someone else's kid. Not yours.

Yes, Pres. Obama, you pat your daughters on the head and smile in pride, but condone the killing of the unborn of others.

Too many white, black and latino from unwed moms who bought into the idea of sexual freedom at the bidding of your party, Mr. Pres and Madam Pelosi. Too many underage. Unprepared. Lacking maturity and judgment for their actions, but encouraged and sold out by adults seeking to use their misery to build power.

I am disgusted and angered that the leadership of this country could embrace such an abhorrent act as abortion as a solution to an economic downturn.

I further believe that this is an example of the "change" and the "new ideas" of the Obama crew, God help us.

There is nothing new here. Just more death and misery.

Save, don't spend.

Went to Japan on business in 1999, after participating in a State of Alaska sponsored environmental trade services mission to Korea. This was a year after the big bubble burst there that George Soros precipitated with the run on the Bank of Thailand the previous year.

I saw people in Korea begging on street corners. In Osaka, I saw families living under park bridges. Not since the end of WWII had Japan seen so many homeless.

What did Japan do to respond to the economic mess created by over borrowing and bad loans to the zaibatsu? They did what they always do. They tightened their belts, spent as little as they had to, and saved the rest. In three years, Japan was in much better shape, and there was hope and industry began to move back into profitability.

Japan did not try to spend its way out of a recession. The average Japanese sacrificed. They scrimped, saved, and spent only what they had to. The banks became solvent from the savings of their customers, not from government buying into them.

Businesses suffered, but they repaid their loans, and the government of Japan recovered from the scandals that rocked Japan when the banks began to fail.

We gaijin are not so disciplined. Although, I think most of us understand that one does not spend one's way out of the proverbial hole, we are an undisciplined bunch of immediate gratification freaks who demand an instant solution without any pain. The dems filled the void with promises of immediate massive government spending, and messages alluding to an undefined "change" in something. What is to change, other than removing all barriers to spending, has yet to be disclosed by Pres. Obama.

Instead of letting the free market determine the survival of the fittest, government under Bush stepped in to restore solvency to the insolvent. I guess we had to ensure that the Saudis and the PRC did not lose any money.

The gaffs of government had contributed to the undermining of free market principles with the sub prime mortgage insanity--largely a liberal attempt to show poor folks who could not otherwise own houses that even if they could not really afford to do so, that they could own a house. The strategy, I am certain, was cynical and designed to get them to vote dem in gratitude.

Rather than let this situation sort itself out, Congress, which created this mess in the first place, along with a President who had forgotten the principles of his Harvard MBA, misappropriated massive amounts of the tax payers' money to no good end. The moguls on Wall Street and the real estate speculators had their butts bailed out with little cost to themselves. No pain. Instant gratification. Why, the mere appearance of inconvenience was enough to cause billions to be poured into the need to attend spas and retreats to undo the stress of mismanagement on a scale not seen in modern times. The bail out is entering phase II with the dems and Obama's $1Trillion package.

By howling continually about how bad the economy is, all Bush's fault, of course, the main stream media has fueled fear and uncertainty and played this mess right into Pelosi et al's hands in Congress and a win in the Presidency. What was going to be an unpleasant situation, but not a full blown crisis, became exactly that with the media's help. Convincing the instant gratification crowd who questioned not what they were being fed by the liberal press through the generation of fear was wildly successful.

All of sudden, this economic down turn, which has been on the horizon for some time, for many reasons--the inflated price of oil was one, the overvaluation of real estate another, and government excess certainly a contributor--became the worst financial downturn since the Great Depression of the 20s and 30s.

Bovine offal.

Again, the propagandists fed the fear--you are broke, we are all broke, we are going to be homeless, we are going to starve!; unless we all vote for . . . Obama.

Yes, we can! Change!

Change what and do what?

The reality is that Jimmy Carter was the worst President we have ever had, and 18% INFLATION happened on his watch. That period was far worse than what might happen during this mess. And, if anything is made worse, this go, it will because of the attempt to spend our way out of the inconvenience of spending less and saving more.

One of the consequences of the Obama/Pelosi $Trillion plan, is inflation. Print more money, and the money is worth less. Takes more to buy everything.

The only good thing to come out of this mess is that FINALLY after 8 years, the Republican Congress is starting to sound like Republicans and starting to QUESTION this excess by government! 8 years too late! However, at least it is happening.

In two years, we the people will have the chance to change the face of Congress. By then, the impact of the $1Trillion feel good extravagance will be felt in terms of interest rates and inflation. Those who voted for "change" will begin to understand that the change referred to was spend more and tax more, and to heck with consequences.

There are two opposing viewpoints as to how all of this will play out with respect to the dems and Rs. Phyllis Schafley wrote that her belief is that this is similar to the Clinton win of 1993 and the subsequent reversal of Congress to an R majority in 1996 due to the spending of the Clinton Administration. After which, Clinton became centrist. Dick Morris in his recent opinion feels that the strategic impact of any amnesty, the massive federal spending, and the transfer of wealth from the haves to the newly amnestied have nots along with everything that we naturalized citizens cannot get until we reach 65 will entrench the dems for the long haul, that the R party is now relegated to the bin of history for all practical purposes. Morris' article was disturbing in its downbeat, but excellent in its setting forth the strategy.

I am hoping Schafley is more right than wrong.

I do agree with her assessment that we as a country are more conservative than Obama's win and the dem win in Congress demonstrate, that this win was a backlash.

One thing is certain in my mind. The dems will fail in their economic stimulus, as spending and transfer of wealth is not the way to respond to what's happened. Overspending, over extending, and giving homes to those who could not pay for them was the catalyst. Now, the response is overspend, overtax, and take the money from those that still have any, and give to those who are here illegally by making them legal through amnesty, thereby inflating the money supply and cheapening our citizenship. And, let those who could not pay for their house, keep the house, anyway. How does any of that make sense?

Taxes depress industry and penalize self initiative. Government takes in more money when taxes are reduced. Even the Russians figured that one out.

Taking money from the guy who works and giving to the guy who does not, will not work, either.

Me and mine. We gonna pay things off, save, invest in firearms and ammo, and work on the garden.

In the mean time, I suggest the R party figure this out, keep acting like Rs in Congress, and elect only Rs that promise to uphold the party platform.

The dems are on a course to bankrupt this country and to spread our illusion of wealth to those undeserving.

Thank you God, I ain't got any to spread around!