THE BLOG

The End of Welfare as We Know It

06/19/2007 03:48 pm ET | Updated May 25, 2011

Anchorage, AK -- America's last welfare state is also its last frontier -- Alaska -- a state where, thanks to some progressive planning in the years when oil had been discovered but did not yet own the state, most of the royalty revenues from the North Slope have been kept in a Permanent Fund which, each year, pays every man, women and child resident in the state a welfare payment which this year runs about $1000 -- down about 50% from only a few years ago.

Alaska politicians, of course, have long since ceased being progressives in the vein of Ernest Gruening. This is not surprising -- the baleful impacts of oil wealth, the "resource curse," don't only apply to Africa or Iran. It has always been true in the US that states with very large oil revenues have seen their politics drift quickly to reaction and corruption -- think post-Huey Long Louisiana, or Texas after Spindletop. "Oil corrupts," as Tim Egan said in an opinion piece in last Sunday's Times, "and absolute oil corrupts absolutely."

Starting in 1994, Alaska found another way to keep itself on the government dole -- the state's small, but very influential congressional delegation. You see, once the Republicans captured Congress, Ted Stevens and Don Young became the masters of the appropriations universe. Billions of dollars of federal money started flowing to Alaska, in spite of the fact that the state's treasury was literally awash in oil money, and that Alaskans, far from being over-taxed, are actually paid by the state government.

From 1995-2004 federal appropriations for Alaska increased by $4.2 billion, or about $6000 per Alaskan. This rip-off largely passed unnoticed until 2005, when the Sierra Club helped expose two infamous "Bridges to Nowhere" which would have cost over $500 million dollars and provided almost no economic benefit, except to a handful of Alaskans, including then Governor Frank Murkowski and US Senator Lisa Murkowski, who owned property in "nowhere."

The Bridges to Nowhere scandal exposed Stevens and Young -- and while they were far from abashed, their fellow Republicans were unhappy. Newt Gingrich, in fact, blames the Republicans' loss of the House and Senate in 2006 to public disgust at Alaska's greed.

Whatever the role Alaskan pork played in the 2006 election, the results had a very bad impact on the special pipeline the state had enjoyed to federal dollars. Young and Stevens were now in the minority, and Democrats and Republicans were suddenly competing to expose the outrages of the "earmark" system. More ugly news was about to come out.

First, a major corruption scandal broke in Juneau, one in which the son of Sen. Ted Stevens, himself a state Senator, features prominently. In investigating the case, the FBI is probing deeply into the history of Senator Stevens' relationship with one of the biggest corruptors in the Alaska political game -- the oil and gas services corporation, VECO. The company's CEO, Bill Allen, was taped by the FBI as one legislator reported having had to "cheat, steal, beg, borrow and lie" to defeat a bill. Allen's response: "I own your ass." That ownership was apparently secured via hundred dollar bills; no awkward bank records there.

Next, the New York Times reported that one of Don Young's "earmarks" wasn't even for his own state. In 2006, as the loss of congressional majority loomed, Young earmarked $10 million for improvements to Coconut Road in Fort Myers, Florida. The local congressman didn't want the money, nor did the county, so Young wasn't just log-rolling -- exchanging favors with another Representative. No, the advocate and beneficiary of the money was a real estate developer, Daniel Aronoff, who had helped Young raise $40,000 in campaign cash at the Hyatt Coconut Point just a few days before he inserted the earmark. Young's dismissed the revelation as "recycled news," and gave the Times reporter the finger instead of a comment. Democrats began talking about running serious races against Young and even Stevens for the first time in decades.

Alaska's "new broom" Governor, Sarah Palin, is widely seen as a refreshing change, but she is confronting a challenging reality. As oil pumped from the North Slope declines, and as the streams of federal dollars that Stevens steered North dry up, what's next for the state? Governor Palin is hoping that a proposed new natural gas pipeline will be the next big boom, and she is joined by former Governor Wally Hickel, who freely admits that the state has lost its way. Senator Lisa Murkowski admits as much, telling the Times: "I think it's wise for us to talk kind of beyond the boom-and-bust path we've been on. Why does it have to be boom and bust? When will we get ourselves on a more sustainable path?"

Sadly, Murkowski staunchly defended the Bridges to Nowhere, and her big idea to solve Alaska's pending insolvency is to drill, yes, the Arctic Wildlife Refuge -- a boom and bust scenario if ever there was one.

The resource curse is not ready yet to let go of Alaska. But it will in time -- when the oil runs out -- and America's last welfare state will confront the 21st century, melting permafrost and all. The difficulty in the end is this: frontiers were never sustainable. And Alaska held on to its status as a frontier a few decades too long.