In this March 7, 2019 photo, Mouhcine Guettabi, associate professor of economics at the Institute of Social and Economic Research at the University of Alaska Anchorage, speaks to the Senate Finance Committee at the Capitol. (Michael Penn | Juneau Empire File)

In this March 7, 2019 photo, Mouhcine Guettabi, associate professor of economics at the Institute of Social and Economic Research at the University of Alaska Anchorage, speaks to the Senate Finance Committee at the Capitol. (Michael Penn | Juneau Empire File)

Opinion: Time for some budget humility

Economists are failing Gov. Dunleavy.

  • Sunday, May 19, 2019 7:00am
  • Opinion

Sooner or later, Gov. Mike Dunleavy will get a budget from lawmakers that doesn’t balance spending and revenue. “They’re kicking the deficit can down the road again,” he might say as he orders further cuts via line item vetoes. “It’s the definition of insanity.”

Both are expressions Dunleavy has used before to defend his economic solution to our protracted budget deficit. He’s right that the Legislature, in which he served, avoided the problem. And by ignoring the failed austerity experiments in two midwestern states, he might be writing his own story of budget insanity.

In the past decade, the governors of Kansas and Oklahoma enacted deep tax cuts to public education, health care and other services. They promised it would spur private sector growth. It never happened.

Dunleavy doesn’t have to cut taxes because we hardly pay any. But he has steadfastly refused to consider enacting any to close our budget gap. And he, too, envisions the private sector will revive our economy.

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To be fair, the Kansas and Oklahoma tax cuts don’t tell the whole story. But the spending by their predecessors didn’t either. Large economies are too complicated for such simple tales. That’s one reason why economists who prescribe shrinking the size of government as a cure for everything shouldn’t be trusted.

Robert J. Samuelson offers another.

“I have slowly and somewhat reluctantly come to the conclusion that many economists (and this applies across the political spectrum) often don’t know what they’re talking about,” he wrote in The Washington Post last week.

The evidence, he argues, is in their frequent failure “to foresee major economic trends” such as the recent plunge of interest rates, the 2008 financial crisis that initiated the Great Recession and double-digit inflation in the 1970s.

As a journalist covering the economy for almost 50 years, Samuelson qualifies his judgment by stating the obvious. “Most economists … are extremely smart and well-informed” and “a lot smarter” than him. The problem is “they exaggerate what they know and how much they can influence the economy.” And they usually do it “to gain and retain political relevance and power.”

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In the end though, he partially absolves them because “mere mortals, including economists, have never been very good at predicting the future.”

The first lesson here is that the application of well-established economic theory rarely produces the desired outcome. The bigger one is that people who aren’t trained in the field are even more likely not to know what they’re talking about.

That conclusion absolutely applies to me. But while my viewpoints are easily dismissed, a governor who isn’t much better qualified has an outsized influence on their state’s economic policy.

Sam Brownback became a lawyer, politician and governor of Kansas without ever applying his bachelor’s degree in agricultural economics. On her route to the Oklahoma’s governor mansion, Mary Fallin earned degrees in environmental sciences, family relations and child development.

Dunleavy’s economic resume is empty, too. He earned a bachelor’s degree in history, a master’s in education and had a career in Alaska’s public school system. But he’s convinced his prescription for Alaska will produce vastly different results than in Kansas and Oklahoma.

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That conviction is why he’s likely to set a record for line item vetoes. It’ll take 45 of our 60 legislators to override each one. And votes in the Senate will be the hardest to get.

The person I hope will lead that fight is Senate Finance Committee Co-Chair Natasha von Imhof, R-Anchorage. While I disagree with her approach to the budget, her MBA, job as a fiscal analyst and position on the board of three major nonprofits make her better equipped than most to understand the impacts of Dunleavy’s budget.

But more important to me is that she’s not in need of the final advice Samuelson offered to economists. “A little more humility might be in order,” he told them.

She’s not pretending her background makes her an expert. And she recognizes the future is uncertain no matter which way the debate ends.

Dunleavy, however, is trusting economists who are unlikely to tell him this late in the game that they aren’t sure how the economy will respond to his budget cuts. And we’re in for a rough ride as long as their lack of humility feeds his.

• Rich Moniak is a Juneau resident and retired civil engineer with more than 25 years of experience working in the public sector. He contributes a weekly “My Turn” to the Juneau Empire. My Turns and Letters to the Editor represent the view of the author, not the view of the Juneau Empire.

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