ANCHORAGE
Juneau may be the political capital of Alaska, but Anchorage is its power center. Almost half the state’s population lives within its metropolitan area, and all of its oil businesses are headquartered there. People in other parts of Alaska tend to describe Anchorage in terms that make it sound like a cross between Dubai and Gomorrah; a favorite joke is that the best thing about Anchorage is that it’s just thirty minutes from Alaska. Even more than Juneau, its big buildings can be dated to spikes in oil prices (future scholars of early-eighties Brutalism Lite architecture will find much to study), and the city bears more than a passing resemblance to its midsize peers like Wichita. Actually, because Anchorage is tucked between the Chugach Mountains and Cook Inlet, it looks like Wichita dropped on top of Chamonix if the Alps were fifteen miles from the Mediterranean. When the weather was clear, I could see Denali from my hotel room. “It might be a sorry town,” John McPhee wrote of Anchorage in the 1970s, “but it has the greatest out-of-town any town ever had.”
When I’d visited Anchorage in the spring, I met with Scott Goldsmith, an emeritus professor of economics at the University of Alaska at Anchorage (UAA). Now semiretired, he was wearing a very un-Alaska suit and tie for a board meeting later in the day at the university’s Institute of Social and Economic Research. Anchorage has matured into a much more livable town than it was when McPhee was here, and its downtown is filled with nice cafés. (For a taste of contemporary dystopian horrors, one must head an hour north to Sarah Palin country and the sprawl of Wasilla.) Goldsmith had agreed to meet for a cup of coffee because I wanted to ask him about a paper he’d written, “The Path to a Fiscal Solution: Use Earnings from All Our Assets.” In it, Goldsmith explained that the long-term situation in Alaska was potentially even more dire than the per-barrel price drops and budget deficit indicated. Alaskans had been conditioned to expect excellent state services and annual PFD checks during a period when the oil floating those checks was slowly running out. Production from the North Slope oil fields had peaked at around two million barrels per day in 1988 and had since declined to six hundred thousand per day.
The Permanent Fund was set up by Governor Jay Hammond shortly after oil started flowing through the Alaska Pipeline in the 1970s. “One part of the idea was ‘We need to put some of this money aside for when the oil’s gone,’” Goldsmith said. “The second part was ‘We need to put some of this money aside, otherwise we’re going to piss it all away.’”
That seemed like extraordinary foresight for a politician. Goldsmith and I had both grown up in Illinois, where stealing from taxpayers is considered a fringe benefit of holding public office.
“Right, it’s incredible. And then, shortly after the creation of the fund, Hammond pushed the idea of the Permanent Fund dividend.” This was the source of the magic checks that came dancing into Alaskan mailboxes each autumn. “Since its creation, the only thing the Permanent Fund has spent any money on has been the dividend, and so it’s been able to accumulate more than fifty billion dollars,” Goldsmith said. “That money is invested all over the world and throws off, after inflation, like two and a half billion a year.” Typically about half that amount is distributed in PFD checks.
Goldsmith compared Alaska, with its dependence on a single resource, to the tiny Pacific island of Nauru. A century ago, someone discovered that beneath Nauru’s lush tropical rainforests lay immense deposits of guano, bird shit deposited over centuries as a by-product of avian digestion. Guano is an excellent source of phosphate, which was a much-desired ingredient in fertilizer. (It supplanted an earlier bountiful fertilizer source that had run out: bone meal manufactured from the thousands of tons of buffalo skeletons left behind on the Great Plains.) Throughout the twentieth century, a series of colonial rulers and native leaders strip-mined the mineral as quickly as they could. For a time, Nauru’s per capita GDP was second only to Saudi Arabia’s. Today its phosphate reserves are exhausted, the country is bankrupt, and its once green forests are a lifeless, pitted wasteland.
A lot of people in Alaska seemed to be hoping that the solution to the present crisis would be the same as it had been with previous ones. A coup in the Middle East or a strike in Nigeria would cause prices to spike, evening news shows in the rest of the United States would start interviewing angry motorists for segments titled “Pain at the Pump,” and everything in Alaska would return to normal. Goldsmith said those days were gone for good.
“In order to balance the budget now, as oil production continues to decline, the price has got to go back up to 115, 120 bucks,” he said. As we sat there, the price of oil was about forty-two dollars. Nobody wanted to cut services, and even if every state employee were fired, it still wouldn’t cover the deficit.
“Reminds me of the old Winston Churchill line that everybody wants a pound worth of services for ninety-five pence worth of taxes,” I said.
Goldsmith shook his head in disagreement. “Everybody wants a pound worth of services for no taxes.”
Alaska isn’t an entirely tax-free zone. The oil companies pay royalties and a production tax, and some municipalities levy sales and property taxes. Cruise ship passengers pay a per-head tax that is supposed to cover infrastructure costs related to tourism. I wondered if taxing other iconic Alaskan industries might help.
“I used to do analyses looking at how much you’d have to tax every salmon commercially caught in order to equal the taxes of the oil industry,” Goldsmith said. “It’d be something like ten bucks a salmon. Or how much would you have to tax each tourist in order to generate as much. It’d be like a thousand dollars per tourist.”
There was a woolly mammoth in the room that almost no Alaskan politician wanted to acknowledge. The same fossil fuels that pay for everything are the primary contributor to the changing climate that is already hitting Alaska harder than any place else in the United States. Strictly from an economic point of view, rising temperatures are likely to cause billions of dollars in damage. Alaska had just recorded its warmest spring on record. For the second consecutive year, the city of Anchorage needed to import a trainload of snow from Fairbanks for the start of the Iditarod sled dog race. Highways and building foundations constructed on permafrost were now buckling throughout the state as the ground thawed. Coastal erosion was threatening to dump villages into the rising sea; Natives who hunted on sea ice were increasingly cut off from traditional food sources that are a large part of their diet. Alaska has a state task force assigned to deal with moving coastal settlements to safer ground, an extremely expensive process. The cost of each relocation is estimated in the hundreds of millions of dollars.
I asked Goldsmith if there was any economic silver lining to climate change—lower heating bills, perhaps? “Well, a longer agricultural growing season, that’s one,” he said after a few seconds. For a hundred years, the U.S. Department of Agriculture has been trying to figure out how to grow crops in Alaska, an idea that’s not as crazy as it sounds. The soil in the Matanuska-Susitna Valley, north of Anchorage, is fertile and deep. Farmers in the region are known for raising beach-ball-size cabbages that thrive in its twenty hours of summer daylight. During the Great Depression, the federal government had transplanted two hundred farm families here from the Midwest, though most eventually moved back south. They may have departed too soon. During that hundred-year span, rising temperatures have greatly extended Alaska’s growing season; in Fairbanks, researchers found that the season had increased from 85 to 123 days between 1906 and 2002. Alaskans had recently voted to legalize marijuana, and there was some talk that the Mat-Su’s reputation as the state’s “pot cultivation capital” (per the Anchorage newspaper) might create more jobs.
Most attempts to diversify the Alaska economy have failed miserably. A fifty-million-dollar investment by the state development agency in an Anchorage seafood-processing plant flamed out, and the building is now occupied by, among other things, an extremely large nondenominational church. An appetite for megaprojects with the potential to strike it rich, usually tied to exploiting the state’s natural wealth, seems to be encoded in Alaska’s DNA. “You have all these schemes to develop the Alaskan infrastructure to make it easier to get access to minerals,” Goldsmith said. “It’s not just the Bridge to Nowhere; it’s the Road to Nowhere, or the Railroad to Nowhere. People say, ‘If only we had extended this railroad, or built a road to western Alaska, where there is one viable operating mine.’ Supposedly, the next boom after oil is coal. Because we have incredible reserves of coal up on the North Slope. But, A, how the hell are you going to get it out, and, B, who wants it? Other than that, it’s a great idea.”
Goldsmith told me the state had a full slate of dubious megaprojects that it was studying, ranging in size from a highway connecting Juneau to Skagway (and the rest of North America) to an eight-hundred-mile natural gas pipeline that would cost at least forty-five billion dollars. These seem unambitious compared with some Alaska projects that never came to fruition. In the early 1950s, the U.S. Army Corps of Engineers proposed building a dam on the Yukon River that would have produced many times the electricity used by the entire state and created a freshwater reservoir bigger than Lake Erie. Project Chariot was a late-1950s plan to gouge out a deepwater port 250 miles north of Nome by detonating five nuclear devices. Though strongly supported by hydrogen-bomb mastermind Edward Teller and approved by Alaska’s new state legislature, Project Chariot was scrapped when the local Inupiat people objected. Their case was buttressed by the fact that no such port was actually needed.
My personal favorite megaproject is the Bering Strait crossing. This one could be traced back to the Harriman Expedition. In the years after Harriman’s death, in 1909, a story circulated that part of his motivation to visit Alaska had been to explore the possibility of building a round-the-world railroad. This trans-global line would include a tunnel beneath the Bering Strait. Considering that the longest railroad tunnel at the time was less than three miles long, and the Bering Strait is more than fifty miles wide at its narrowest point, the tale doesn’t quite hold up to scrutiny. Over the years, the idea has resurfaced in various guises, including one supported by the Reverend Sun Myung Moon, to foster world peace. One Anchorage businessman was still promoting the tunnel as a potential boon to the world economy.
Aside from tourism, there were a few non-oil sectors of the economy that were growing, Goldsmith said. One was air cargo, with companies like FedEx and UPS taking advantage of Anchorage’s central location between Asia, Europe, and North America to refuel planes and change crews. Another was senior citizens. Residents who in the past came up to make money and then departed now stick around because of the low taxes. “We’re not exactly Florida, but our senior population has experienced the fastest rate of growth of any state for the last couple decades,” he said.
There was another possible solution to Alaska’s budget problems being discussed, which was to drill for more oil. Alaska’s D.C. delegation—all pro-development Republicans—has been pushing for years to allow oil companies to develop petroleum reserves in the Arctic National Wildlife Refuge (ANWR), the largest protected wilderness in the United States. This enormous swath of land stretching north from the Brooks Range to the Beaufort Sea is one of the last intact landscapes of its size in the world. The area was initially preserved under President Dwight Eisenhower in 1960, and is home to so many animal species that it is often called “America’s Serengeti.”
One phrase heard constantly from Alaska politicians is “federal overreach.” The term refers to the belief, widely held in Alaska, that necessary development is strangled by the U.S. government’s ownership of 61 percent of Alaska’s land (including national parks, national forests, and millions of acres overseen by the Bureau of Land Management) and the regulations Washington imposes. Republicans up for election everywhere agitate about limiting the size of government, but Alaska’s officials have a special gift for making it sound as if the state’s citizenry were living under some sort of martial law imposed by the Environmental Protection Agency. When President Obama proposed that a slice of ANWR’s nineteen million acres that had been designated for potential oil and gas development—and, beneath it, an estimated ten billion barrels of oil—be set aside permanently, Senator Murkowski called the idea “a stunning attack on our sovereignty.”
The same officials who rail against federal overreach do not often mention that Alaska receives more money per capita from Washington than any other state—about $2.50 for every dollar it pays in taxes. Federal spending accounts for about one-third of all jobs in Alaska, about the same as from the oil industry.
“Everybody understands that the primary job of the congressional delegation is to get federal money,” UAA history professor Stephen Haycox told me. “Because Alaska is such a conservative place, you’ve got this bizarre disconnect between tenaciously clinging to this self-identification as rugged individuals—people who say to themselves, ‘I came here to be free of government regulation’—and the current and historical reality, which is dependence on the federal budget. It’s like living in a floodplain. People are just in total denial about it.”