Wednesday, July 09, 2014

The atmosphere was quite "McCarthyistic," - I Don't Think So

It seems we're down to "Yes" or "No"; that we're down to ACES or SB 21.

That's not at all how we should be thinking about Alaska oil taxes.  ACES wasn't perfect, and SB 21 is far from perfect.  But it's just not either/or.  There is a wide range of options for tinkering with ACES that would take care of what people say is wrong with it - that it's too taxing at the high end.  But if that were the problem really, I'm guessing it would have been tinkered with already.  The real problem, as I see it, is that the oil companies, with their former attorney/lobbyist, Governor Parnell, representing the people of Alaska at the bargaining table, had enough power to get a big tax cut. 

Roger Marks is a retired state economist, who is also a friend.  When he published his article on ACES a couple of years ago, he sent me a copy, I read it carefully, and asked him questions.  Other things were going on and it just was too complicated for me to take the time I felt I needed to write about it well.  But basically, I found that his criticism of ACES seemed to boil down to the belief that when oil prices get really high ACES reduces incentives.  I asked at the time whether we couldn't leave things as they were for a while and see what happened and then make adjustments to ACES as needed.  Meanwhile we'd be getting a higher state return than with the alternatives.  I don't want to put words in Roger's mouth, but I recall that he did allow that as a viable option.

ACES can be adjusted.  It didn't need to be replaced, and certainly not with SB 21.  A yes vote on Alaska's Proposition 1 will most definitely lead to adjustments of ACES.  A no vote will most definitely give the oil companies most of what they wanted all along - back when Gov. Murkowski had private negotiations with them and tried to force the oil companies' tax bill on the legislature - events that led to an FBI investigation and a dozen or more people pleading or being convicted.

I cover this as a little historical perspective on the comments I'd like to make now on Roger Marks' Compass piece in the ADN Tuesday, entitled "History of ACES offers perspective." (At least in the print version it had that title.  Tuesday marked the day that the Anchorage Daily News and Alaska Dispatch websites merged, and while I can find an online copy,  its title is different from the print version.)  Marks wrote:

As ACES was going through the Legislature in the fall of 2007, much was unclear about the extent of the scandal. By early November 2007, juries had returned guilty verdicts against two legislators charged with VECO-related corruption. There were many rumors that other legislators, and perhaps the oil companies, might get charged. For example, a published report (a blog post from a KTUU reporter) suggested that 26 total people would be indicted. The public was enraged.
That kind of talk created anxiety for a number of legislators. The atmosphere was quite “McCarthyistic,” the implication being that if you did not support a large tax increase, you were corrupt. Paranoia spread as the bill went from committee to committee, and the tax rates kept escalating. The tax structure that became the final ACES bill passed the legislature on November 15.

Let's get this straight.  What happened in Juneau in 2007 wasn't anything even close to the McCarthy period.  'McCarthyistic' is NOT a synonym for "legislators were concerned about their reelection"  and "paranoia" is a mental health condition you can read about here.  It's not an accurate description of what was spreading in Juneau.

It's true that people often exaggerate and use such terms to make their points.  But Marks is writing as an expert.  His bio on the piece describes his professional background as a petroleum economist.  He's not writing just as a private citizen.    But when he strays into political science and psychology he uses these terms - McCarthyistic and paranoia - like a talk show host.

Let's look at what PBS says about McCarthyism:
Capitalizing on those concerns, a young Senator named Joseph McCarthy made a public accusation that more than two hundred “card-carrying” communists had infiltrated the United States government. Though eventually his accusations were proven to be untrue, and he was censured by the Senate for unbecoming conduct, his zealous campaigning ushered in one of the most repressive times in 20th-century American politics. . .
Known as McCarthyism, the paranoid hunt for infiltrators was notoriously difficult on writers and entertainers, many of whom were labeled communist sympathizers and were unable to continue working. Some had their passports taken away, while others were jailed for refusing to give the names of other communists. The trials, which were well publicized, could often destroy a career with a single unsubstantiated accusation. Among those well-known artists accused of communist sympathies or called before the committee were Dashiell Hammett, Waldo Salt, Lillian Hellman, Lena Horne, Paul Robeson, Elia Kazan, Arthur Miller, Aaron Copland, Leonard Bernstein, Charlie Chaplin and Group Theatre members Clifford Odets, Elia Kazan, and Stella Adler. In all, three hundred and twenty artists were blacklisted, and for many of them this meant the end of exceptional and promising careers.
In Juneau at that time, the FBI had recorded conversations in the hotel room of oil company support industry executive Bill Allen during the legislative session as he told legislators how to vote.  Juries convicted two Alaska state legislators based on tapes which showed that money was given to them for votes.  Others involved cooperated with the FBI and pled guilty without a trial.

No one held innocent people in terror, wrongfully deprived them of their livelihoods based on totally made up accusations.  If legislators were afraid that the voting public might think them corrupt, it might have had something to do with the amount of money they got from the oil industry and their votes on oil taxes, not on some totally false accusations.  Or maybe it was because they were hat carrying members of the Corrupt Bastards Club.

Comparing Juneau in 2007 with McCarthyism suggests ignorance of the facts of McCarthyism (or Juneau), a serious problem with analogies, a careless use of terms, or a combination of several or all.

When people make comparisons to Nazi Germany, there tends to be a strong pushback, even if the comparison is accurate and limited to a specific aspect of Nazi Germany, such as their propaganda machine.   I don't think my reaction here is that kind of pushback.  I just think that McCarthy was a far more significant threat to many, many more people, plus the details of the McCarthy hearings have no counterparts in what happened in Juneau.  I don't see any part of McCarthyism that fits here:
  • the level of fear wasn't the same
  • the people affected weren't innocent members of the public
  • any danger to the Alaska legislators came from the electorate
  • no tribunal was set up to persecute innocent people 
  • people didn't lose jobs simply because their name was on a blacklist
  • there were no false accusations that were totally made up
  • those who were accused could have a fair hearing in a federal courtroom
I'm just saying that, unlike the McCarthy period, if legislators were worried about their reelection, they probably had good reason to be based on their own behavior, and the legislators were totally unlike the private citizens who lost their jobs because of McCarthy's baseless accusations.

Legislators are threatened all the time by private interests if they vote 'wrong' on an issue.  The targeting of candidates by people and groups like the Koch brothers, Karl Rove, or the NRA cause a lot more election angst than any of the Alaska legislators could even remotely have felt, yet no one compares that to McCarthyism.  And they shouldn't.  In fact, when Sen. Harry Reid called the Koch brothers 'un-American,' Mother Jones editor, Daniel Schulman, responded:
You know, I think it’s a very dicey strategy by Reid. He has actually come out and called the Koch Brothers un-American. Now, that’s kind of an absurd thing to say. And it’s almost McCarthyite rhetoric.
But he very specifically linked Reid's use of the word 'un-American' here - the key word that McCarthy used and the name of his Senate committee.

Marks also writes:
ACES passed by the same three-to-one margin that PPT did a year earlier, with the legislature 80 percent the same people. The difference between PPT and ACES can be characterized as displaced VECO frenzy and vengeance.
I'm not saying here that legislators who were afraid of crossing oil company executives when they voted for PPT, a year later were not afraid of crossing voters.  I am saying that any fear of voters' wrath that caused them to vote for ACES was no more McCarthylike than was their fear of the loss of oil company support the year before.  But people take the power of the oil companies as the normal state of affairs here.
FBI surveillance was exhaustive. At the end of the day four legislators were found guilty of felonies related to the VECO scandal: 56 out of 60 were not. Most likely those four did not affect the outcome in 2006; they were not the most influential lawmakers. There was no evidence of taxpayer (oil company) culpability.
The FBI surveillance may have been exhausting but it wasn't exhaustive.  It was surveillance of one hotel room in Juneau during one legislative session and a few folks wearing wires for a short time.  No one was recording in oil company boardrooms or even oil company phones that we know of.  And, in fact, there was some evidence of "taxpayer (oil company) culpability."    There was a mention of Bill Allen making a report of how he was doing with legislative votes to an oil executive, but that didn't get followed up.

Finally, I'd note that Marks also writes:
SB 21 will bring in more revenues than PPT or the original ACES.
We keep hearing from the governor and all the others who are campaigning against Proposition 1 (the repeal of SB 21, which would have us revert to ACES), that SB 21 will generate more oil production and more revenue for the state.

On June 10  Senators Wielechowski and French challenged the governor.  They cited the state's own forecasts of lower production.  They wanted the governor to put up or shut up essentially.  Their challenge was new legislation that would require:
"If by 2018, SB 21 does not increase oil production by 1 barrel or increase revenue by $1, then ACES would be applied to oil companies retroactively."
They agreed to withdraw support for Proposition 1 if such legislation were passed.  If the governor and those supporting him were as certain that the state (and not just the oil companies) would do better under SB 21 than under ACES, they would have no trouble taking up this challenge.  And they could stop spending the millions they have dedicated to defeating Prop. 1. 

I've really focused on semantics here (the use of 'McCarthyistic') rather than substance.  That's mainly because getting into the nitty gritty of the two tax measures is very complicated.

But I'd note that both Scott Goldsmith (who recently published a report saying SB 21 was a better deal for the state than ACES) and Marks are economists whose analysis is totally focused on numbers, many provided by the oil companies, and based on assumptions about oil production and prices they can't be certain of.

In my conclusions, I'm also factoring in the history of the oil industry around the world, the redistricting that broke the bi-partisan coalition, the oil corruption trials of 2007 and 2008, and the knowledge that we (the people of Alaska, the state of Alaska, and the economists) simply do not know the actual numbers necessary to make the predictions.  And we don't know to what extent the oil companies held off investments before SB 21 passed and to what extent they're doing things on the oil fields now to improve numbers to help defeat Prop. 1.  What we do know is that they are investing a lot of money to convince the voters of Alaska to vote no.  And they've made no guarantees whatsoever about production levels or the tax revenues the state might expect to receive.  No reasonable person would risk their own money based on the lopsided availability of information and guarantees that Gov. Parnell and the legislature accepted from the oil companies.  And the people of Alaska have to wonder how well the governor, who used to come to Juneau as an oil company attorney and lobbyist, understood and represented the people of Alaska in negotiations with his former employers.  So, yes, I'm adding politics, sociology, psychology, history, and the study of power to the mix in addition to economics when I conclude that Prop. 1 should pass. 

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