Friday, July 5, 2019

To Reduce Political Fraud, Budgeting Needs its Own Social Movement (Updated with final Univ of Alaska Budget)

John Warner describes the catastrophic cuts to the University of Alaska as a swan song. The term suggests the end of a model, with a new model to follow. It's easy to be pessimistic about this.  Two economists from the UA-Fairbanks campus do a good job of telling Washington Post readers about the cuts' fiscally-unnecessary destruction. But they sound resigned.

We may default to the idea that an anti-government era is dying, but the new one is helpless to be born.  In fact, the new era is here, but we aren't giving it the help it needs to emerge.

That help includes recognizing that the 41 percent cut to the Alaska university system comes from a political script developed in the 1970s and perfected in the 1980s.  The script is a classic: the candidate buys votes by promising to give away public money.  Two 1970s and 1980s innovations were especially important.  First was the Reaganite claim that the real corruption was to let the public sector keep its money (government was waste, fraud, and abuse) while tax cuts (or Permanent Fund Dividend --PFD- increases, Alaska's version), restored money to its rightful owners.  Second was the construction of an implementation machinery-- a skilled, disciplined cadre of unknown technocratic operatives whose faceless previous deeds would not be subject to empirical assessment and accountability.  The combination of free money and operational obscurity will keep working, regardless of the opposing ideas of  Elizabeth Warren, Bernie Sanders, and a generation of debt and precarity sufferers if the general public--starting with academics--doesn't get involved in public budgeting.

I know less about the Alaska governor than I do about his newly-imported budget director, but it looks to me like maiming the state universities is the way Dunleavy can set himself up as the next Scott Walker by competing in a national Republican party gang initiation that requires the dead bodies of a few public services run by the liberal professions (teachers and caregivers bad; police good).  The hunter-teacher-principal with the Native wife is now working with a Koch brothers organization (see also a PR Watch report) and has gotten himself the national headlines that he couldn't have without causing a lot of pain.  He's made efforts to suppress public debate.  Still, he can't do it by himself--he needs at least one trained operative with unwavering ideological commitment who can seize governmental control points to awe the voters with overwhelming force.

That operative is Donna Arduin, pictured with Gov Dunleavy above.  He brought her to a state who had never heard of her before this spring--video of her first budget hearing starts with the committee chair cajoling her repeatedly to say a couple of things about who she is because nobody knows.  She finally said she has worked for seven governors in six states.  What she didn't add is that they were all far-right Republicans who were devoted to advancing their political careers by breaking government and giving its money to supporters. She started in Michican in the early 1990s with John Engler, who accelerated that state's downward slide, and worked for Jeb Bush and Marco Rubio in Florida.  She was then dispatched to California, where she helped a governor whom we all remember well.

She more recently worked as "rent-an-axe" for government hater Gov. Bruce Rauner in Illinois, who sowed chaos in part by holding the higher ed budget hostage for months at a time. 

Arduin was a central player in implementing Arnold Schwarzenegger's version of the far-right fiscal playbook.  The starting point is always to create a crisis. First, as noted above, claim current tax levels reflect waste, fraud, and abuse--an unjust taking of personal property like the Vehicle Licensing Fee in California or a reduced PFD distribution in Alaska--and promise big cuts.  Arnold waved brooms and knives to prove this point.  Second, repeat a fairy tale in which the same or better services--the legit ones--can be had for less tax money, along with more prosperity and jobs. This was the task of the "Laffer Curve" of Ronald Reagan fame, in which lower tax rates allegedly produce more business and therefore higher overall tax receipts, so the cuts pay for themselves and all the government stuff you want is still in place.  (Republicans used this line to demobilize opposition to their trillion-dollar tax cut for corporations and the wealthy in 2017.) Third, once you've won election with these paired claims, follow through with the large tax cut you promised, creating a sugar high in the base while also blowing up the budget deficit.  Fourth, use the big deficit to make huge destructive cuts, ideally big enough to change the agencies permanently.

The playbook can be modified while keeping its basic structure. Alaska is a great test case.  It is the third smallest state by population, and for several years has been getting smaller.  It has an extraction economy that depends on the price of oil and gas, and these prices are down from their previous highs.  The state government is dependent on extraction taxes and fees for 85% of its revenues, and now has a deficit that needs to be covered.  It sounds like a good opportunity to drown some government.

Unlike other states, however, Alaska has a Permanent Fund that normally gives a couple of thousand dollars annually to every Alaska resident. In normal years, it partially offsets an elevated cost of living. This fund is currently valued at over $65 billion.  The previous governor cut the divided to use the rest to cover the state deficit.  Dunleavy could continue this policy until oil prices rise again.  He could raise taxes (the current total per capita AK load is about a half of Washington state's, and there is no sales, income, or property tax, so there's some headroom). Dunleavy wears his love for Alaska on his sleeve, so he could use also use PFD to address Alaska's college completion problem (it is 49th of 50 states, page 6), double Native college attendance rates, and similar things that might help move the state away from natural resource dependence.  Dunleavy could have ambitious goals and he has many fiscal options. In the real world, there are always many options. How, then, to get a crisis that can eliminate all options except for massive, destructive cuts?

With the Playbook. First, say the government has had its hand in the people's pockets: promise to restore the Permanent Fund Dividend to its statutory amount-and top up the shortfalls from previous years.  A local TV station made a handy graphic:

Second, say using a third of the PFD reserve in one year (with no new taxes) won't hurt a thing-- health care, schools, universities, ferries, law enforcement, etc.  At Reporting From Alaska, Dermot Cole has a good list of all the cuts Dunleavy promised not to make.  When people respond, well if you're going to spend less on government you'll have to cut something, invoke efficiencies and consolidations--or just make some bullshit up, like Dunleavy did.  He claimed that the state is spending $200 million on jobs that are "funded but not filled," and that there's thus $200 million is savings to be plucked from a tree. (He also trusted that voters are dumb or lazy enough to believe that the state cuts hundreds of checks every two weeks for jobs that don't have people in them.)  Third, once you're elected by promising voters free, painless money, give away public money while refusing to raise taxes.   Fourth, rather than admitting your plan was either dumb or evil, use the deficit to cut everything massively, particularly higher education.  Look familiar?

This is where Donna Arduin comes in.  She is a seasoned pro at seizing control over multiple agencies through a technical rhetoric of process optimization.  Her presentation began by announcing that she had centralized budget development in her office, which meant taking it away from the various state agencies who had long built and submitted their own budgets.  She didn't spell out the obvious implications; operating agencies lose control of their own budgeting, and their local knowledge is purged from the process. Having been in the state for a few weeks, Arduin captured the process and replaces its situated assumptions with her own.

Her assumptions are far-right boilerplate: the public sector is straight waste, all regulation hurts business, only the private sector creates value, government activity should be privatized, its services are for moochers.  One rare press investigation of her assumptions, by a newspaper in Saratoga, Florida, found that they invalidated a consultancy report's conclusions even in the eyes of the Republican politicians who had hired her.   Her goals are always the same, and her means entirely predictable.

I reported almost ten years ago on one of Arduin's impacts in California:
When Arnold Schwarzenegger became governor in 2003, in the middle of yet another three-year reduction in state higher education funding, his budget director, Donna Arduin, privately told university leaders that she would push for continued state funding cuts to force the University of California and the California State University to implement major hikes in tuition. Arduin got much of what she wanted. Partly inspired by fear, university leaders signed a “compact” with the Schwarzenegger administration that built in 7–10 percent annual tuition increases between 2005–06 and 2010–11. This meant that tuition would inevitably rise at two to three times the 3–4 percent increases targeted for state funds. 
Arduin was in California's Department of Finance for less than a year, but UCOP never fully recovered.  They got scared off talking about rebuilding public funding to restore or improve quality.  Now, after years of tuition freezes, they build state requests around promises to generate an extra 20,000 degrees or so per year for a decade, which will consume any new funds and more. The Arnold-Arduin shock doctrine has locked in privatization and stagnation.

Now it's deja vu all over again: "Alaska University System May ‘Never Recover’ From Governor’s Budget Cuts, Leaders Warn." Those leaders are right.

In the middle of various state chopping jobs, Arduin formed a consulting firm with curvemeister Laffer.  One of Laffer's main clients was the far-right Kansas governor Sam Brownbeck, who, following the script, promised that massive cuts in taxes and government would rocket the state economy into a new age of riches.  Laffer helped Kansas refute his own theory yet again.  Tax cuts did not stimulate business investment, job growth, and tax receipts.  They gave investors and businesses windfall revenues.  Along the way, the Brownbeck-Laffer crew raided state reserves to try to hide their failure. Brownback's Republican legislature finally reacted to the giant hole he blew in the budget by revolting against the model in 2017, after it was too late: Kansas will be digging itself out for years and years.  In June, to honor Laffer's lifetime achievement with wrecking governments, Donald Trump awarded him the Congressional Medal of Freedom.

The playbook is always the same.

How do the Charlie Browns stop running for the anti-tax football?

Through a few things:

--Remembering what happened to the ball last time.  This means history and journalism, in circulation.  The short AFL-CIO video I linked to is a good example of user-friendly critique.  There needs to be serious, consistent coverage of the actual results of hatchet-people like Arduin--of what they have actually wrought.  And when coverage does happen, people need actually to read it.  Reading articles will help people like this guy, who, living on an island, was surprised that Dunleavy cut the ferry system after promising not to cut the ferry system.   Dude, you seem to have missed the last fifty years of American politics. But one article can bring you up to speed.

--Massed theoretical assault on the stupid theory that government produces no value-- is a dead weight except for people that need handouts.  The stupid theory has all sorts of social and ethical problems--it is grounded in racism and sexism, for starters--and gross political bias.  But it also needs to be shown to be factually wrong, across the full range of cases, and those results need to be distributed.  In reality, public goods are the majority of value in a society, and make private production possible.  In Alaska, as elsewhere, public goods are the main, really the sole source of decolonized resource use, racial justice, sustainable environmental policies, and progress in human welfare.  Bankrupt far-right economics needs to be replaced with a completely different model.  The work is underway, but it needs to go faster.

--Confrontational, persistent political pressure on politicians like Dunleavy to stop lying.  His fiscal claims during the campaign were fraudulent. They should be described as such, in the same way that journalists can now write sentences like "Today Donald Trump falsely claimed that . . ." The big lovable bear of a man dodged and weaved and minimized and evaded and lied his way through the campaign.  He should have been pressed hard then.  He continues to lie about the non-effects of his cuts -- "we can't continue to be all things to all people," or "it will be tough for a while but we'll get through this."  Call him out.  Raise the political cost of lying to people's faces over and over.  Only then will it will happen less often.

--Progressives are also going to have to bite the bullet and fight for mass scale budget literacy.  Budgets are a dominant language of political life.  Public systems and choices are more complicated than they were in the heyday of the party system, and people's educations haven't caught up.  Nor have their desires to educate themselves about how public money makes things happen. Not knowing that Dunleavy's budget vetoes would wreck higher ed, ferries, some forms of health care, etc. is a form of entitlement.  Not guessing that his evasions meant cuts know is a kind of privilege.  You sometimes hear leftists patronizing people who can "follow the arithmetic."  Well we can stay dumb about budgets--and stay Charlie Brown.

But nobody has to.

On August 13, 2019, the governor of Alaska and University of Alaska officials announced a deal to reduce the budget cut by about half, and spread the cut over three years.  The University president made the mistake of calling this a "pivot to the positive," when it may well have been the cut Gov. Dunleavy wanted from the start.  The Board of Regents did lift their Declaration of Financial Exigency, which was excellent news for UA employees. Dermot Cole gets behind the news coverage: on August 16, he pointed out that, "There is no hint in the so-called compact that the regents have to follow Dunleavy’s orders, which is appropriate because the Alaska Constitution says the regents are not subservient to the governor."  He suggested that Dunleavy reduced the cut because of a growing recall campaign. 

 Cole concludes,
As soon as the state budget is signed, the university will be free from the Dunleavy blackmail plan and the regents should begin the task of seeking the funding level UA needs from the Legislature, ignoring the antics of a governor on the run from a recall. 
The Dunleavy blackmail attempt, if he decides to continue with it, will do nothing but boost the recall campaign.
I hope that is true. Other directly related posts are dated August 13th and September 18 
(reporting on internal University feuding that may break up the UA system in spite of the reduced budget cuts).

And you'll be shocked to learn that Donna Arduin has left the building.


  1. Very interesting but your numbers are wrong and our budget is massively bloated...A little cutting won't hurt and even if it did we will be better for it. Time to not steal from the People anymore..

  2. Steven Wright: you are wrong. Mr. Newfield's argument is replete with historically verifiable facts. Your own comment offers no evidence at all other than the anecdotal statement that the Alaska budget is "massively bloated" and the false assertion that the State of Alaska has been stealing from the people. Your comment is nonsense.

  3. This is the best analysis of the deep genealogies behind this draconian effort.

  4. Thanks for this, which I will share widely. Just ignore the Dumbleavy Faux News Kool-Aid drinkers. They are mostly selfish post-Pipeline carpetbaggers who have never paid taxes here and want free money. They are not the Real Alaskans who take care of each other, and who will be here long after these selfish idiots get tired of ruining everything here and leave. It can't be too soon.

  5. Trimming the fat is not done with a meat cleaver. The governor's cuts (and Ms Arduins) are not to cut fat, but to shrink government to a small size and outsource government functions to for profit companies (w. no quality control and minimal oversite). Our senior friend who is disabled will lose 25% of her income with the cut of the senior support. She does not have the health or stamina to hold a job. What is she to do?

  6. another backgrounder on Arduin is here. Not much new, however.


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