Monday, November 19, 2007

Dan Fagan, Again

I've written a few posts about Dan Fagan's ADN columns. Last week I didn't have much time to even look at his column on the Supreme Court's decision on the Parental Consent Law. It begins this way:

Gas pipeline, who cares? Raise taxes on the oil industry, go ahead. Mat Maid, dogs on ball fields, the IM program, city budget, fireworks ban, irrelevant.

There is only one issue facing Alaskans and it is this. A 13-year-old girl can today walk into Planned Parenthood and get an abortion without her parents’ knowledge or permission.

Let me rephrase that. A 13-year-old girl can legally have her unborn baby killed without her parents ever knowing about it.

Either Fagan didn't read the Supreme Court ruling, he didn't understand it, or he just lied about it.

This is a contentious enough issue without totally misrepresenting what was decided. The court did strike down the requirement that the parents must give permission, but strongly affirmed that they must be informed. I posted about this case earlier this week.

But such looseness with the facts is evident again this week. And he seems to have changed his mind about the relevance of raising oil and gas taxes. I don't know how to write about this one without giving you the whole column along with my comments. I'll indent his column and put it in italics so it is clear what he says and what I say. (I would hope that would be clear if I did neither, but just in case.)

The anti-oil populist movement is not new to Alaska. The so-called “backbone” folks have always been with us. But now they are in charge. And that has led us to an all-out war with the oil industry.
“Anti-oil populist movement” what exactly does that mean? They are against oil? They are against oil companies? Populists are politicians who speak and work for the people as opposed to those who speak and work for the the power elite (like big oil companies.) So it would seem that being a populist isn’t such a bad thing. Though some have used the term to mean people who PRETEND to speak and work for the poor but really are working for the rich. I’m sure we have a number of fake populists in the legislature. Certainly Pete Kott, the hardwood floor installer (who happened to also be pulling Air Force retirement and had a masters degree;  I see nothing wrong with either of those things, but he was more than a blue collar working eking out a living) and sheet rocker Vic Kohring both offered a populist stance, but were working for their rich big oil friends. And Dan Fagan who talks on the radio like the salt of the earth, warts and all, is writing these articles that make big oil into a deity being abused by legislative ingrates, certainly seems to fit into that pseudo populist category.

"Now they are in charge." And whose been in charge for all these years until now? Finally people not owned by the oil companies are in charge. Why am I having a problem with Fagan's logic?

“All out war with the oil industry.” Come on Dan. You believe in the free market. As I said in a previous post, in an ideal free market there is a buyer and a seller. The state here, as the owner of the oil, is the seller. The oil companies are the buyers. They each negotiate the best deal they can. If the state blows it by taxing too high, the oil companies can walk away. If the people of Alaska are willing to support legislators who stand up to the oil companies a little bit more than our previous governor because they saw tapes of oil industry representatives giving money to legislators to vote for the oil industry’s preferred tax level, then the oil companies have only themselves to blame. They didn’t play their hand well. This is not war. This is simply the give and take of your sacred free market system. True, it does happen that one of the players is a government body, but each of the big three oil companies made net profits that were higher than the Alaska state budget last year. The oil companies are not victims. You even wrote a column about standing up to bullies. I would think most Alaskans see Sarah Palin as doing just that.

The first attack: The governor gets legislation passed shutting out the producers from the process of building the gas pipeline. This will end up hurting us more than them because the oil industry can go other places to get gas to market.

I’m not quite sure what action of our governor he is referring to since he only gives generalizations and no specifics. Even if Fagan's assertion is the true, is that worse than how the previous governor worked out the original PPT bill “in closed-door negotiations with the three major oil companies on a contract for fiscal terms for a pipeline” shutting out the legislature and the public?
But the governor’s second major offensive in her “Operation Oil Companies Bad” campaign will hit the industry hardest.
High school students make less slanted arguments than this. To see how another journalist writes about the Governor’s strategy team, read Tom Kizzia’s piece on Marty Rutherford, apparently one of the governor's ‘oil companies bad’ lackeys.

After the industry has already invested $50 billion in infrastructure in our state and pumped close to $80 billion into state coffers, the governor has cut them down at their knees.
Let me get this straight. Exxon’s annual net profit for 2006 was $39.5 billion, BP’s annual net profit for 2006 was $22 billion. And Conoco-Phillips’ was a mere $15.5 billion. Three of the largest corporations in the world have been cut down at their knees by a 43 year old former mayor of Wasilla, first term Republican governor who still hasn’t been able to oust Randy Ruedrich from the chair of the Alaska Republican party? I can see them hobbling around on their bloody stumps right now. Yeah, right Dan.

According to Tim Bradner in the Alaska Journal of Commerce “Wood Mackenzie, a prestigious London-based consulting group, has ranked Alaska 99th out of 103 petroleum-producing regions surveyed in terms of political stability in fiscal terms on oil and gas. Only Venezuela, Russia, Bolivia and Argentina ranked lower than Alaska” If this is true, then the oil companies have 98 other petroleum-producing regions to get their oil from. Cut off at the knees? Do you even believe that Dan?
The tax increase coming out of Juneau last week is enormous. It proves the governor’s strategy is now abundantly clear. Higher taxes, bigger government are the keys to our economic future.
Well, at least the governor does something right - she has a clear strategy. Is that bad? I think “higher taxes, bigger government” was Vic Kohring’s scare chant too. He’s the guy you accused of selling out in a column two weeks ago about which I said your writing had improved.

The governor has allies in the Legislature made up of three camps. There are those like the governor who believe some consultants who say higher taxes do not influence investment. The problem is these consultants come from the world of theories, not real life.

Dan, please give me the name of one legislator who believes that higher taxes do not influence investment. Just show me one quote where the governor says that. Show me the quote from the consultants you say said that. They don’t exist. They all know that taxes affect investment. They just don’t believe the sky-is-falling rhetoric that oil companies and their friends, like Dan Fagan, are spreading. They are looking at more than the investment climate rating and seeing that those other 98 places all have their downsides too. Fagan is now an expert on real life?

Politicians who fall into the taxes-don’t-affect-investment theory believe they are doing the right thing but are not real bright. The second camp is made up of pure socialists, those who think “corporate America bad, government good.”
How about some names here Dan ‘McCarthy’ Fagan? Who are the pure socialist legislators? Do you even know what a pure socialist is? Again, show me some evidence. And even if there were such simple minded legislators, how is that any less simplistic than your own chant of “Business is good, government is bad?” There has to be a balance between those two sectors, plus room for other organizations and individuals who don’t fit in either camp. Reasonable people understand this and they may debate about where the appropriate balance of power is. But they don’t chant either extreme.
Rep. Les Gara said on my talk show he thinks we should tax the oil companies at 80 percent.

Under the former PPT plan, the industry paid about 63 percent to government. The governor’s new PPT plan raised the rate to about 68 percent. But on Friday the Legislature’s version of the governor’s bill raised the government share to more than 70 percent. That leaves only one branch of government, the judiciary, to make Gara’s 80 percent rate dream come true. With this Supreme Court, anything is possible.
Huh? Can you explain how the judiciary can raise the rate proposed by the governor and set by the legislature? Why would you even say this? Maybe I’m missing something, but I can’t imagine any scenario where the Supreme Court could raise the tax. Please, spell out how this could happen. Can you say red herring?

The third camp of tax-and-spend politicians is the one that bothers me the most. They do it to increase their power. These panderers know the billions of extra cash they are transferring from the private sector to government will allow them to make the media and big labor happy by growing the operating budget even more.
Wait. Originally there were just “allies in the Legislature made up of three camps.” Now you are saying there are three camps of ‘tax and spend” spend politicians. It’s really hard for me to not get sarcastic here. In fact I've failed utterly to keep an objective tone. I’ve been criticized by a few for being too even handed and not explicitly spelling out my conclusions. It’s hard to not make those judgments here about what was written, but I certainly have nothing that would allow me to conclude what Dan Fagan’s motivation is. I can only make hypotheses based on the evidence. Does he truly believe what he’s writing? Is this simply talk show hyperbole to jack up ratings? Is he getting favors from the oil companies for these free screeds in the ADN now that the Voice of the Times is only on the web? I only know that this is as one-sided, simplistic, and full of unsubstantiated allegations that totally distort reality as any thing I can remember reading. That's pretty strong language for me, but that is why I'm going through this paragraph by paragraph. And now that I’ve gotten that out of my system, let me finish the rest of this.
This special session will end up being a windfall not for the public, but for the state’s public employee unions.

For the average Alaskan going to work every day, trying to support a family, hoping their kids’ kids will have a future here, this massive tax increase represents a huge risk.
Here’s Dan the populist coming out. It's those nasty state public employees who do nothing for the public. Who are these average Alaskans? Oil industry employees who might lose their jobs or get transferred to a part of the world with a more stable investment climate? Like Nigeria? Or Myanmar? Well, only about 3.5% of Alaska employees work in the oil and gas industry according to the Alaska Department of Labor. (Well you have to work the numbers, but they say there were 333,100 non-farm employees in September 2007 and of those there were 11,600 in the oil and gas industry. Go here then in the drop down window get "Alaska 2001 to present (excel file).")

What’s a huge risk for you Dan? Do you think the evidence that the oil companies will abandon Alaska because of the tax increase is greater than the risk of global warming due to human causes? If so, could you show me how you analyzed both?
The oil industry as a whole paid $1 billion in production taxes in fiscal year 2006. With the new PPT plan the industry will next year pay $4.5 billion dollars in production taxes.

Let me ask you a simple question. Would a 400 percent tax increase affect your ability to invest your money? This is not brain surgery, folks.
Everything is simple to you Dan, isn’t it? It also depends on how you play with the numbers. 400 percent is pretty impressive. But there are other ways to think about those numbers. How about comparing their tax burden (I’ll accept your numbers for this exercise) to their net profit last year? $1 billion divided by $77 billion. That’s just the big three. I know you’ll complain that I didn’t isolate their Alaska profits from their worldwide profits, but you know where that will lead, don’t you? To the fact that Exxon won’t tell us their Alaska profits. But since you’re so cozy with these guys, maybe you can ask them for the rest of us. Besides, this is NET profit, what they made AFTER taxes. OK, this isn’t perfect, but it’s the best I can do for the moment and it is close enough to make my point. So their taxes will go from 1.3% ($1 billion tax on $77 billion net profit) to 5.8% ($4.5 billion tax on $77 billion net profit). Looking at it that way it’s only a 5% increase. Now I’ll grant you that their Alaska gross income might not be $77 billion, but even if it were only $30 billion their tax would go from 3.3% to 15%. A 12% increase is certainly not anything close to a 400% increase. We can all play with numbers. And I have no idea where you got the $1 billion and $4.5 billion figures to start with. We do know that the PPT tax this year was raised from 22.5% to 25%. That is a 2.5% increase in the last year. So, Dan, there are lots of ways to figure out the percentage increase and each side will come up with numbers that make their argument sound better. But the wisest heads will know which ones are pure whimsy and which ones make some sense.
But the worst part of the new PPT plan is the standard deduction. It severely limits the industry from deducting expenses, making future projects far less attractive. But that’s not what this is all about anyway: future investments. It’s nothing more than a money grab. With this new plan, the state is expected to bring in a total of almost $8 billion in revenue from the industry in fiscal year 2008.

You think the governor is popular now, wait until she starts divvying up all those billions to those with their hands out. Public employee unions may erect a Sarah Palin shrine. They can place it next to the one the media built.

Of course when the oil industry bargains in private meetings with the former governor to come up with a plan they like and then buys legislators to push the plan through the legislature and blankets the state with misleading advertisements that's not a money grab. That's, what, Dan, just doing business? And how about all the private sector company employees that work on contract for the state, building roads, bridges, schools, doing oil forecasts, unsuccessfully lobbying Congress to open ANWR year after year,etc.?

But I believe history will prove this shortsighted tax-increasing frenzy will lead to real pain and heartache down the road. I know this is a radical concept anymore in America, but the truth is that taxes do deter investment. Taxation is the power to destroy. I am confident we will someday reverse what was done last week in the Legislature. The only question is, will it be in time to save our economy?

Well, Dan, at least here we partially agree - in a few years we’ll be able to see whether your dire predictions come true. Maybe. There are lots of factors that go into this that have nothing to do with this tax plan. Ultimately, we will not be able to parse out what would have happened if.... But we will see if the oil companies pack up their marbles and leave Dodge.


  1. Steve,

    Not only did you beat me to this one, you outdid what I had in mind. Excellent! Maybe I'll take on the subject of Fagan's meretricious writing again, anyway.

  2. Very well done. I read Mr. Fagan's piece through at least three times trying to tease out all the contradictions, illogical inconsistencies, puffed up rhetoric, ad hominem attacks, etc.

    I was left breathless and my head was spinning. I appreciate your articulate deconstruction.

  3. Phil, go ahead and write it. There is so much there I could only catch some of it.

    There is limited space for people to write in the ADN. It's not that he should be censored, but rather others should be able to compete for the space and they should pick the pieces that actually make a positive contribution to the public debate. When he writes about oil the only thing that is original is how he says it.

  4. Great post. I hadn't understood this.

    I lean Republican, but you know, at our meetings, crap like what Dan said gets said enough (by people who are not informed?) until EVERYONE believes it.

    Personally, I think that parents don't have to live with the consequences. Many of the people who speak out on abortion and believe in abstinence until marriage are the kinds of people who don't need to worry about it. They are unattractive people who think that sitting around reading a Bible is fun whereas for me, too much Bible reading (too much of anything, sex, hiking, whatever) gets to be Hell on Earth.

  5. Thank you for this cogent analysis of Dan Fagan's column. He is simply an apologist for the oil companies, like they needed any more apologists. While I don't pretend to understand the whole issue of the ppt and taxes on the oil companies, I find their crying and whining to be pretty pitiful in the face of their record profits. Give me a break, Big Oil. I just paid over $3 a gallon for gasoline - I'll bet a lot of that is profit for you. Dan Fagan needs his head examined. Or his computer taken away from him.

  6. You seem to be infatuated with Dan Fagan.


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