A National Public Radio headline caught my attention the other day because it seemed part of a larger pattern:
“How Puerto Rico’s Debt Created a Perfect Storm Before the Storm. For years, the nation’s largest banks made millions off Puerto Rican debt as the island approached financial ruin.”
It called to mind decades of World Bank and other financial entities making, indeed insisting, with the help of political persuasion, on large loans to South American and other emerging countries. As these loans forced nations into greater internal stress, deals were struck regarding interest rates and the screws were tightened as the United States and other funding countries insisted on internal austerity measures so that the money could come back to the banks.
Writ large, the pattern remained unchanged right into the 21st century, with Greece, Portugal, and other members of the European Union embroiled in the social stress of “austerity” and the unyielding requirement to pay back development loans. There were any number of political crises points when debtor nations threatened or in fact did default on billions of western development funds. Here at home on a nationwide level, the bankers held their course with a loan-failure and house-repossession crisis driven by adjustable rate mortgages and property evaluations not supported by the reality of the assets.
Imagine my surprise when I discovered just hours ago that these barbarians are now at Alaska’s gates. This is taking the form of House Bill 331 and Senate Bill 176, mirror image bills that propose to create a shell corporation with no assets or revenue, the purpose of which is to sell up to $1 billion in bonds in order to pay bankers and oil companies for State of Alaska oil tax credits issued over the past decade. Although these credits were issued under “subject to appropriation” rules, it now seems that somebody thinks it imperative to pay the credits in a state financial climate where “appropriation” for such a thing is emphatically impossible. So — a bond sale maneuver to obtain the funds.
Setting aside the open question of the constitutionality of such a plan, what do we have? For 30 years the policy wonks and think tanks have been begging, pleading, imploring the Alaska State Legislature to recognize the financial curve of history and face the inevitable ‘hard landing’ visible in the future. And for those 30 years, the Legislature has not had the intellectual and political fortitude to deal with the evidence.
Between the weak structure of democracy and the poisonous structure of ideology, the Legislature is in the morally bankrupt position of having abandoned its long-term commitments. Standing square in the middle of the foretold hard landing, bearing responsibility for a bloodbath at the university, in the ranks of the ferry system, and elsewhere, they propose to increase the state’s bond indebtedness by roughly 50 percent with $1 billion in bond revenue in order to pay off a bunch of paper instruments to bankers and oil contractors. The citizens of the state will not have a single asset on the ground to show for this debt.
