The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (6.30.2025)
Welcome to The Weekly Top 3 — our look at the top 3 things on our mind here at Alaskans for Sustainable Budgets — for the week of June 30, 2025.
This week, our top 3 issues are these: 1) we discuss the hypocrisy of how Alaska leaders are governing at home compared to what they say at the national level (2:10 ); 2) we look at the actual returns the Permanent Fund Corporation is earning compared to its own benchmarks and other alternatives, something the PFC seldom does in its op-eds and press releases (17:00); and 3) we explain why PFD cuts should be counted as “skin in the game” in the same way as taxes (36:28).
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
Hi, this is Brad Keithley, managing Director of Alaskans for Sustainable Budgets. Welcome to the weekly top three the top three things on our mind here at Alaskans for Sustainable Budgets for the week of June 30th 2025. The weekly top three is a regular segment on the Michael Duke Show. The show broadcasts on both Facebook Live and YouTube Live as well as via streaming audio from the show's website. Weekdays from 6 to 8 am.
Speaker 1:I join Michael weekly in the first hour of Tuesday's show from 6 10 to 7 am for a discussion between the two of us about our three issues. We post the podcast of our discussion following the show on the Alaskans for Sustainable Budgets Facebook, youtube, soundcloud, spotify and Substack pages, also on the Alaskans for Sustainable Budgets website, as well as the projects page on national blog site mediumcom. You can find past episodes of the weekly top three also at the same locations. Keep in mind that, in addition to these podcasts during the week, you can also follow and participate in the discussion with us of these and other issues affecting Alaska's fiscal and economic condition by following us on the Alaskans for Sustainable Budgets Facebook page and through our posts on Twitter.
Speaker 1:This week, our top three issues are these First, we discuss the hypocrisy of what Alaska leaders are doing at home compared to what they say at the national level are doing at home compared to what they say at the national level. Second, we look at the returns the Permanent Fund Corporation is earning compared to its own benchmarks and other alternatives, something the PFC seldom does in its op-eds and press releases. And third, we discuss why PFD cuts should be counted as skin in the game in the same way as taxes. And now let's join Michael.
Speaker 2:All right, brad. Well, let's dive into it. You got some good stuff today, some stuff that I just I mean, I continue to shake my head at. But we're going to get started, and we're going to start off with one of our favorite topics, which is the hypocrisy that happens in Alaska every single day. It's astonishing. So get us started here.
Speaker 1:Well, what triggered me was the op-ed that Bryce Edgeman and Kathy Giesel wrote in the New York Times to try to motivate Lisa Murkowski to support maintaining Medicaid and SNAP food stamps benefits as the national bill went through. And Giesel and Edgeman's editorial was this long screed about how Alaska couldn't live without Medicaid and SNAP, that it would have all sorts of bad effects on Alaska and on Alaska middle and lower income Alaska families, non-alaska villages, and that the federal government had to maintain those programs at full speed, at least for Alaska, or else Alaska would basically just crumble and blow away. And as I read through this, well, there was a similar op-ed in the ADN by Representative Mina Genevieve Mina that the headline of which was Alaskans will lose under proposed SNAP and Medicaid cuts. It was just a sort of a full bore editorial onslaught by those in the legislature about the horrors of the federal government cutting back on those payments to Alaska. And as I read it I just couldn't. I just couldn't restrain myself just laughing at the hypocrisy that that Edgman and and and Giesel and Mina and others who have commented others from the legislature who have commented on this were displaying families.
Speaker 1:Why are they using the revenue measure at home? Why, when they're at home, why are they using the revenue measure that has the largest adverse impact on middle and lower income Alaska families? Why are they using the revenue measure that, of all of the alternatives, is by far the most regressive, the most costly to Alaska families? Why are they using what Matt Berman Professor Matt Berman from ICER calls the most regressive tax ever proposed? Why are they using that at home if they're so concerned about middle and lower income Alaska families and the answer is they're not, they're really they're not concerned about middle and lower income Alaska families. What they're concerned they're really they're not concerned about middle and lower income Alaska families. What they're concerned about is maintaining these federal government programs that target certain categories of that, certain subsets of middle and lower income Alaska families, that target them for federal benefits, and what they're concerned about is that, if those federal programs are taken away, that they are then going to have to confront spending state money to maintain those programs and cutting state money back from other programs that they favor. So it is not about middle and lower income Alaska families. It is not about maintaining the fabric of Alaska's social system. I think, as one of these op-eds said, it is about maintaining federal government programs in order to preserve state money for other spending elsewhere, and the hypocrisy of them standing on going on the New York Times and talking about this was just rich. Now let me say this also that the hypocrisy isn't confined just to one side, isn't confined just to the liberal side on this, isn't confined just to the liberal side on this.
Speaker 1:Both Governor Dunleavy and Senator Sullivan have talked about how wonderful the One Big Beautiful Bill is and how we ought to support the One Big Beautiful Bill. In response to the op-ed in the New York Times by Giesel and Edgman, dunleavy posted on Twitter, issued a press release or something, talking about how we ought to support the president, ought to support the one big beautiful bill. Well, the one big beautiful bill puts the federal government more in debt $3 trillion additional in debt over the 10-year cycle and increases the amount of national debt and the amount of the percent of national debt as a share of the economy going forward. It expands the one big beautiful bill expands the debt limit by $5 trillion. Put that in perspective, the current debt's about $35 trillion, so it expands the debt limit by an additional $5 trillion about a seventh of the existing debt in one fell swoop. That's the biggest increase in the debt limit that we've ever seen in any legislation, the debt limit that we've ever seen in any legislation, and it's necessary in order to make room for this increase in national debt that's going to be caused increase in deficits and increase in national debt that's going to be caused by the one big beautiful bill.
Speaker 1:So there's hypocrisy going on on both sides. Dunleavy talks about himself being a rock-solid fiscal conservative. Solomon talks about himself being a rock-solid fiscal conservative, yet they're supporting a bill that substantially increases both the national debt and the debt limit. So the hypocrisy from both sides is just sort of astounding. It starts with Geisel and Edgeman railing on about how this is going to destroy the Alaska social fabric, when they themselves have done a lot to destroy the Alaska social fabric by cutting PFDs. But it extends over to the right as well, with the governor and and Senator, senator Sullivan, and we'll see. The latest rumor out of DC is Senator Murkowski's reached a deal to preserve Medicaid for Alaska and then she's going to vote for the bill. So she's going to vote for the debt increase as well. So we'll see if it extends to Murkowski as well. But the hypocrisy is just running rampant on both sides of the aisle over this.
Speaker 2:Well, and you know, what I found most interesting is that both in the New York Times article and in the article from Genevieve Mina, they both referenced the fact that you know talking about Medicaid in Alaska and the fact that one third of I mean they come right out and admit it, One third, one in three Alaskans are on Medicaid in one form or another and they see absolutely nothing wrong with the fact that that's where it's at, Like, it's, it's, it's a normal thing and we should be a dependency state. I mean, that's, that's a big thing. And then, as you said, on the other side and this has always been my problem with Republicans in Congress, and you know this is where I've said that both parties are really to blame for everything, at both the state and the national level, they have, you know, they'll say this is the only way, while they increase and spend us into oblivion. There is no fiscal restraint anymore, it's.
Speaker 2:I was talking with JD Tucheli from Reason Magazine last week and we both were were the same mind, came to the same conclusion they're going to drive us bus off the cliff one way or the other and it just I mean, they're just not, they're not slowing down. All the warning signs are there the klaxons, the bells and whistles, the big billboards, you know bridge out ahead, and it just doesn't matter. They're just going to keep going until we reach the end. It just doesn't. It doesn't matter. Either they don't believe it or they just don't care, as long as they get theirs between now and then.
Speaker 1:That's. That's the key, michael. I mean as long as they get theirs. Between between now and then, I mean the House bill increased the deficits, increased the long-term deficits, increased the national debt and so it was problematic when it came out of the House, the Senate. If you look at the Committee for Responsible Federal Budget Analysis, the Senate is increasing deficits, the deficits and the national debt beyond what the House did.
Speaker 1:It'll be interesting to see when this goes back to the House, if it gets out of the Senate. It'll be interesting when it goes back to the House what the response of the House Freedom Caucus is, because they have said all along that they went to their absolute limit. They were pushed to their absolute limit. Chip Roy and others said they were pushed to their absolute limit. Chip Roy and others said they were pushed to their absolute limit in the amount of deficits and national debt that was coming out of the House bill. They would not stand for another dime.
Speaker 1:It goes over to the Senate, gets larded up even more with more tax breaks that reduce revenue, with more spending that increases spending and with higher deficits. It'll be interesting to see when it comes back over to the House what they do. I mean the MO so far is that the fiscal conservatives have talked a good game but when push comes to shove they wilt and they vote for the bill. Ron Johnson, over on the Senate side, senator Ron Johnson from Wisconsin said you know he absolutely would not vote for increases, for increasing the deficit. He absolutely thought that this bill was wrong and that he didn't see how to get cleared by July 4th. There need to be a lot of work to get the to reduce the deficit impact of the bill. Yep. Last night he caved.
Speaker 2:Right, he reversed his vote. Yeah, no, it's. It's interesting to watch. We're rapidly approaching that point to where we're not going to be able to pull out of the nosedive because we just don't have enough glide path left to do that, which is unfortunate, especially since we can see it coming and we know, and it would be one thing to be, like I've said many times, not on the train eating popcorn watching it go over the tracks. Unfortunately, we're in the second car right behind the locomotive watching it go over the tracks, and that's a whole different, that's a whole different deal.
Speaker 1:And it's not like. It's not like there aren't people out there sticking to their position. Rand Paul is sticking to his position. He's a no vote. He said he's a no vote all along and his point is the increase in the debt limit by $5 trillion. So it's enough to stuff this bill in and then they continue spending on top of the continued deficits, on top of that. So I mean, rand Paul has put a stake in the ground and stands with it. It's people like Sullivan and Dunleavy and Ron Johnson and others who are just wandering off the reservation.
Speaker 2:You know this has been part of the problem, Brad. Overall, you know we had hoped that Doge would take a bigger bite out of government spending than it has. I mean, they did find some stuff, there's no doubt about it but it just didn't go far enough. It didn't go as far as the American people wanted and it was all the pushback of the powers that be Washington, the establishment, the bureaucracy. It was a continual fight against it. And again we've had all the warnings. We have all the warning signs that the bridge is out and we have to slow down.
Speaker 2:And even now the Republicans and I know that this is drawing some ire from the listeners when I say that but this bill is not great Let me just say that it is not great. Is it better than something that maybe Kamala Harris would have come up with? Absolutely, I mean. I'm not saying that it's not, but it's not great. And now we've even lost any other reason, now that they stripped out all the gun stuff and everything else. I've lost any interest in, you know, in this thing really moving forward, because again it's $3 trillion in costs. No matter how they try and run the accounting on it, it's still $3 trillion and it increases the debt and we're not facing the reality that we just can't spend what we don't have.
Speaker 1:Yeah, and the thing, the thing to keep to keep focusing on and I publish these numbers every Sunday morning the thing to keep focusing on is what's going on with the pricing of the bonds, government bonds, Government bonds used to be 2% or 1% or 2 and a fraction, but now they're consistently over 4% and that's an indication against inflation of about 2%. So you're pricing in a significant premium. These downgrades that the US has had, they're reflective of the problem. They're not creating the problem. They're reflective of the problem, and the problem is that the risk premium that is now being demanded in US government bonds is significant, and so you've got the fact that you're paying that in interest. Interest now outstrips the cost of interest, now outstrips the defense spending, and so what we're going to find is more and more.
Speaker 1:A not insignificant part of the reason for the $5 trillion increase in the debt limit is not as much spending in some of the three point. Whatever it is. Trillion increase in the 10-year deficit as a result of this bill is not solely confined to increased spending. It's increased interest costs that are coming from the jump from 2% to 4%. So as that continues to work through, costs continue to go up.
Speaker 2:We're going to spend $1.2 trillion on debt service this year. $1.2 trillion fully almost a quarter of our revenue on debt service. That's when you should really know that there's a problem going on. Brad Keithley, alaskans for Sustainable Budgets, is our guest and we are ready to jump into number two, which has the PFC. The Permanent Fund Corporation is now back in the news patting themselves on their own back doing a great job. That's what they say.
Speaker 1:Brad, what do you got here for me? So let's set the basics here, because I think it's increasingly important to understand the difference here. The permanent fund is a bunch of money, is a bunch of investments. That. It is a pot of money. The permanent fund corporation, which is what I'm going to be talking about mostly here, the permanent fund corporation is the manager of that fund. It's like your personal investment manager. They're the ones responsible for managing the fund. Permanent fund corporation is set up by the constitution. The board members are appointed by the governor. It is a government body, but what it's doing is managing the fund. The fund can be managed in a lot of different ways. That pot of money can be managed in a lot of different ways, some bad, some good. But it's the permanent fund corporation that's making the decisions on how to manage it, manage it.
Speaker 1:So this past couple of weeks, or this past week, we've had a couple of promotional pieces published by the permanent fund corporation about how great a job they're doing. One appears in Must Read Alaska. The headline is like a headline earlier well, last month now, since this is July 1st. But it's another headline says Alaska Permanent Fund sets another new all-time high. Second time month is the must-read piece, which basically is just a regurgitation of a press release issued by the Permanent Fund Corporation. And then Devin Mitchell, who's the executive director of the Permanent Fund Corporation, the manager of the investments made by the Permanent Fund or how the permanent fund is used, wrote an op-ed piece that is appearing in all the state's papers. This particular one that I've got up in front of me is from the Alaska Beacon, but it's also in the ADN, even down in the Ketchikan Daily News. The title of it is the Key to a Stronger Alaska Permanent Fund is Diversification. Is the key to a stronger Alaska permanent fund is diversification, and Devin also references the fact that the permanent fund is at a higher level than it has been previously. But what neither of these articles do is talk about the returns that the permanent fund corporation is achieving on its management of the permanent fund and compare those returns to either the benchmarks that the permanent fund corporation itself has set up or extrinsic external methods of looking at what the permanent fund, how the permanent fund corporation is performing, looking at various measures in the market. So we are doing that. Alaskans for Sustainable Budgets are doing that. Sustainable Budgets are doing that on an ongoing basis. And so let's look at those numbers.
Speaker 1:Let's flip to the other one first. Let's take this one second. Let's look at those numbers of how the Permanent Fund is doing. This is a chart that we do that looks at the permanent fund, the returns achieved by the permanent fund in the left-hand column and then the returns achieved by the S&P 500, investing in an S&P 500 exchange-traded fund in the second column. The total fund return objective is the objective necessary to produce the 5% earnings above inflation, the 5% earnings that are being used to calculate the POMB. So it's the amount necessary to generate the returns necessary to fund the POMB and make sure the POMB is staying on the positive side. And then on the right-hand column there's other PFC benchmarks, that, other benchmarks that the Permanent Fund Corporation establishes, and they are one of those. The passive index benchmark is one I'll talk about in a second.
Speaker 1:But consistently, if you look at these numbers, what you're seeing is the permanent fund is earning returns that are below not only what the market calculations are, own benchmarks are telling it it should be earning and below what's necessary to pay for the POMV draw on an ongoing basis. If you look at down toward the bottom you'll see a line that says right above the gray that says FY25 fiscal year. To date, through the end of May, you'll see the PFCs earned a return of 6.59%. Over that same period, the S&P has earned a return of 9.39%. The total fund return objective, the amount necessary to fund the POMB, is 6.8989 more than what the permanent fund earned. The performance benchmark the benchmark that the permanent fund itself, permanent fund corporation itself, has set up to measure how it's doing compared to its peer groups, peer investors 6.64% more than what the permanent fund's earning.
Speaker 1:And if you look at the passive index benchmark which is, what if we just put all this on autopilot? What if we just invested it in passive investments that we don't have to day-to-day manage, we don't have to spend a lot of money to manage. They just sort of work on autopilot. Even looking at the passive index benchmark that the permanent fund uses as their own benchmark, they get to pick their benchmarks. They use this one. It's 9.6%, fully 3% more than the permanent fund's earnings.
Speaker 1:If you look at the averages, the five-year average, the permanent fund's earning less. The permanent fund corporation is earning less on the permanent fund than the S&P 500 would. It's earning less than what's necessary, than the total fund return objective, what's necessary to fund the POMB on a five-year basis. It's earning a little bit more in the performance benchmark and the passive index benchmark on a five-year basis. But if you look at the three-year average and the one-year average, the rolling 12 months to date, the Permanent Fund Corporation is behind, seriously behind, not only the Vanguard S&P 500, the ETF, but also behind what's necessary to fund the POMB, behind what the performance benchmark they used use and behind the passive index benchmark. And that continues on through the one year average. So what? What they carefully, what these press releases carefully talk about is, yes, we've hit a high and yes, we're doing great on our, on our, on our investment strategy, according to Devin. But they don't talk about these return numbers and you can see by these return numbers they aren't doing very well.
Speaker 1:Keep in mind the passive index benchmark and let's flip over to the second slide. This is the one that really drives me crazy. This is a calculation of how much the permanent fund corporation is spending in order to manage the permanent fund spending on its management and its fees compared to the passive index benchmark, what it would be earning if it wasn't managed, if it wasn't engaged in this active management. And you can see consistently over the last period of time that the permanent fund, even after spending all this money, the permanent fund is earning less than it would earn if it put the permanent fund on autopilot, used the passive index. It's spending and the calculations I don't have them on here but it's spending $880 million, nearly a billion dollars, on management and fees. 1% we have the percentages under the column management incentive fees is spending nearly 1% annually, nearly 1% of the funds to produce of the permanent fund to produce returns that are less than what it would produce if it didn't have management at all, if it was using the passive index benchmark. So it's spending a percent to earn less. It's spending $880 million to earn less than it would if it didn't have all this management and all this diversification that Devin talks about. We've calculated what that is, what the return on the fees is. Then If you look at how much return they're getting out of these fees for the last two years the 2023 and 2024, and so far, 11 months through the or on a rolling 12-month basis through the end of the third quarter, these are numbers through the third quarter, through March, and you look at on a rolling 12-month basis through the end of March, they're earning a negative return on the fees they're spending. The fees aren't even getting them back to break even with what they would earn against the passive benchmark. They're earning less than what they would against the passive benchmark. So we're spending a ton of money, spending $880 million a year, spending a percent of the permanent fund corpus. However you want to measure it, however you want to measure it, we're spending a ton of money to get substandard returns that are less than what we would get out of a passive index approach. So when you see these op-eds by the permanent fund, oh, we're higher than ever. Well, yeah, you're higher than ever, but you would be much, much higher. We'd be at $120 billion if we invested in the S&P, for example.
Speaker 1:Even a blind hog finds an acorn every once in a while, or whatever the phrase is. Yes, you're increasing some, but you're not increasing. You're not producing the returns anywhere near what you would be producing, even if you use your own passive index benchmark and shut down all of this management that you're claiming is necessary to run the fund. What's happened is the permanent fund corporation is turned into a bureaucracy, a self-sustaining bureaucracy who gets to pick what it spends, what it spends on what it does, and whose fund managers get paid sort of regardless. And it's just turned into another government bureaucracy that's producing substandard results, significantly substandard results.
Speaker 1:And so when you look at the future of the permanent fund, if you listen to the PFC, oh, it's going to keep going up. Yeah, it's going to keep going up a little bit. I mean, even the blind hog finds the acorn but it's not going up at the rate the market generally is going up or what it would be going up even if you use the passive index approach and you took out all of the management. So these articles are nice puff pieces. But when you look at them and you took out all of the management, so these articles are nice puff pieces. But when you look at them and you don't see hard numbers about the returns that the permanent fund is achieving, that's a red flag that something's going on. They don't want to talk about it because the numbers prove they aren't doing a job that's adequate even to the passive index benchmark.
Speaker 2:And I think it's interesting that the news media, all news media, nobody is asking this question. You know, nobody is asking this question. Nobody is looking at the S&P, the Vanguard 500, and saying, well, sure, it's a little bit more volatile, but in the long run it's pulling double the averages that the permanent fund has been pulling. In and of itself it may lose a little bit more in the short term, but it always gains a little bit more in the long term. I mean it's doing double the numbers that we're seeing in the managed fund. Why are we spending all this? I mean we had the commentary the other day about the Harvard Endowment Fund. It's pulling a nine plus percent return and it's just running off the S. Why are we spending a billion dollars a year managing a fund that's getting us a lesser return?
Speaker 1:And the answer is we're doing it because the Permanent Fund Corporation has turned into a bureaucracy and it's really. There's no control over the permanent fund corporation. The governor appoints the board. The board members don't even have to be approved by the legislature. The government appoints, the governor appoints the board, and the board members he's appointed are political appointees, not investment specialists that you find in other states. So we're producing very subpar returns on an asset that we desperately need to be producing very healthy returns on.
Speaker 2:Brian asked the question. Is anyone in the Juneau Clown Posse raising their oversized gloved hand to ask about the PFC question? And no, nobody's talking about this. Nobody is. Brad is the only person that I have seen that has talked about the returns on the permanent fund, and you can see the numbers right there in black and white folks. Look at the 10-year average 7.9% is what the fund has been returning. The S&P is almost 15% and even when you look at the five-year average, down at the bottom, nine and a half to almost 16, five and a half to almost 14.32% that's almost three times in a three-year average what the P of the Permanent Fund Corporation has been returning. But nobody's talking about this. They kept saying oh, we want it to be $100 billion and then everything will be okay. Well, it could have been $120 billion and yet here's where we sit.
Speaker 1:Yeah, the problem, michael? I mean, interestingly enough, we're leaving more money on the table in the permanent fund in terms of permanent fund returns. We're leaving more money on the table than we are with oil taxes. We're leaving more than, if you look over the next 10 years, we're going to have more money left behind by inadequate permanent fund returns than we are going to have left behind by substandard oil taxes.
Speaker 1:But the problem is you have to understand numbers and you have to build a spreadsheet and you have to look at the return, because the permanent fund corporation really isn't doing that for you. Uh, I mean, they put out a monthly report, uh, but you have to sort of parse through the monthly report to understand relative numbers and we evidently don't have anybody in Juneau, or have few in Juneau, that will dig into the numbers and understand. It's easy to castigate oil companies oh, oil companies aren't paying their fair share. Oh, oil companies aren't being fair to Alaska. Oh, we need to get more out of oil companies. It's easy to do that on a political level. It's harder on a political level to actually go through the numbers, understand the returns and say, oh, our own permanent fund corporation has turned into a bureaucratic nightmare that's producing these inadequate returns, and so you have to understand the numbers to be able to say that, and people, as you know, just aren't digging into the numbers.
Speaker 2:Yeah, and that's a real problem. I mean, we're, like you said, leaving tons of money on the table with no other answers and nobody else is bothering to bring this up. I brought it up. I brought it up to Bridget Wilson's campaign people I don't know if they've reached out to you or not, I don't know if they've reached out to you or not, but I mean I why? Why aren't more people asking it? Why isn't Suzanne Dowling asking it? Why isn't it, you know, nat Herz or or James Brooks or somebody at the? You know, why aren't these people asking this question? I mean, you've been out there talking about it long enough. We've been talking about this for 10 months now, I think is when you first brought this up 10 months, a year ago. We've been talking about it the whole time. Why are we? You know, why is nobody else asking this question?
Speaker 1:Cause you have to dig into the numbers and people you know it's easier to numbers.
Speaker 2:I'm just going to say you've done the math for them. They can look at that and work backwards from that. They don't have to spend 15 hours pulling the numbers out. They could spend an hour confirming the numbers that you pulled out, right? I mean, you've already done the hard work. I just don't understand this.
Speaker 1:Yeah. Well, it's a mystery to me too. But you get the op-eds that say I mean they're able to say, oh, it's higher now than it's ever been. Well, yeah, it's higher now than it's ever been. It could have been 50% higher if you would have invested it right, yes, it is higher. Blind hog finds an acorn. You've struggled up a little bit but you could be much higher.
Speaker 1:It's easy to say these things that Suzanne picks up on. Or it's easy to write the op-ed that Devin wrote about oh, we've diversified the funds to protect against risk and we wouldn't want to do anything that's risky, even has a little bit of risk. We want this solid, secure. It's solid mediocrity. What they've made permanent, what they've done is make sure they're mediocre on a permanent basis.
Speaker 1:This broad diversification investment program they've been on makes sure that everything cancels out everything else and it just stays. You know, sort of flat lines in terms of, in terms of returns over time Doesn't, doesn't even keep up with the with the POMV draw over time, doesn't keep up with their own passive index over time. But, but you know it, it's not very variable, it just sort of flatlines across time. And so he writes this op-ed that talks about oh you know, we just diversify our protection against risk. Tell me about your returns. Tell me about your returns compared to even your own passive index. Tell me about your returns compared to the OMB draw. Tell me about the returns compared to the OMV draw. Tell me about the returns compared to market measures like S&P 500. Nobody asked him to do that. They just all sort of accept. Oh yeah, diversification. Okay, we accept being mediocre.
Speaker 2:It's like more buzzwords. That's all it is is more buzzwords. Brad Keithley is our guest. The Weekly Top Three continues. Final segment for today. Um, and uh, it's uh all about, uh, some of these articles, brad. Uh well, you gotta have skin in the game, you know, you gotta. You gotta put up or shut up, you gotta. You know all these kind of phrase phrases that we see here, um, and and of course, they never account for. Uh like, tell me how the cutting the pfd isn't skin in the game. Tell me how losing out on the economy isn't skin in the game. Tell me how all this stuff works, but this is the phraseology that's being used. What uh give me? Your, your thoughts here on skin in the game here.
Speaker 1:Well, charles bettisworth, who's a? Who's a well-known fairbanks uh, and well-respected for good reason, a Fairbanks businessman, wrote an op-ed in the Fairbanks News Minor, the title of which is if you want to invest in the business of Alaska, you better have skin in the game. And basically what the article is is we need people who are actively involved in the management of Alaska and to get their attention. Basically, we need taxes to generate the revenues and to have them start following what's going on in Alaska and start pushing back on Alaska and start articulating where they want better, articulating where they want Alaska to go, because they have skin in the game and it's important to have skin in the game to make these investments. I'm not going to argue with that point. I sometimes make the same point in a different way. I sometimes make the same point in a different way when I talk about if we want to push back on spending, we need to have all Alaskans, including the top 20 percent and the oil companies and non-resident industries, tourism and fishing. We need all of them pushing back on spending as well to achieve that. And that's sort of a variation on the argument that everybody needs to have skin in the game. Skin in the game does cause you to push back in a way that you haven't before. But here's where I get off track with Bettisworth. I mean, he talks about the permanent fund dividend and essentially says that cuts in the permanent fund dividend don't count the skin of the game, um, and and so that's not generating the type of of of activity, that's not generating the type of of involvement, uh, that he envisions we should be doing, uh, uh, in order to, in order to help, uh, help, guide government, guide government.
Speaker 1:If you're, if you're in the top 20%, which Bettisworth is, that's your perspective. Pfds don't mean much to me. Cutting them doesn't affect me much, um, and so they shouldn't really count as skin in the game. I need something more real, uh, to get me involved, to make me involved in government. I need something more tangible. I need more of my income at risk, uh, by what's going on in government to make me. To make me involved in government. I need something more tangible. I need more of my income at risk by what's going on in government to make me get involved. Pfds, cutting PFDs don't really count. Well, that's the top 20% perspective, non-resident industry perspective, oil company perspective. But when you get to middle and lower income Alaska families, cutting PFDs takes a significant material share of their income and does count as skin in the game. They are pushing back All these people we hear about, oh you got to cut government spending.
Speaker 1:They're seeing it. Middle and lower income Alaska families are seeing it, seeing the impact of not controlling government spending by the dollars not reaching their pocket as a result of PFDs being diverted to pay for government. The ultimate concern I have is this Once we sort of use up the PFD and government consumes all of it, if we get to that point, then we're going to be facing taxes and the concern I have is that government will say well, pfd cuts didn't count for anything, so you need to pay taxes. Middle and lower income Alaska families need to pay taxes on top of that because you haven't had any skin in the game so far. You really haven't had any involvement or any impact out of government spending, so we need to charge you taxes on top of eliminating your PFD. You're deeply cutting your PFD to get you involved. That's not right. Pfd cuts need to count, should count as skin in the game by middle and lower income Alaska families. They are taking, they are diverting enough of the income of middle and lower income Alaska families to make them involved.
Speaker 1:If you talk to middle and lower income Alaska families, as I do a lot, they talk about the fact that PFD cuts have hurt them and they talk about you know where's that money going.
Speaker 1:Is it going to the oil companies? Is it going to you know, all these government programs that have gotten set up? Is it going to you know all of the construction contracts that have been? What is it in the Alaska Airlines Center, at UAA? I mean, they talk about the skin in the game that they've given up and where it's translated into government. So I'm going to say, charles, that when lower income families do have skin in the game, they have been talking about these issues. You in the top 20 percent haven't, because it hasn't affected you. And yes, I agree that if we need more revenues, that it should come out of your hide. It should come out of your hide, it should come out of the oil company, it should come out of the non-residents, as opposed to continuing to take more out of middle and lower income Alaska families, because they've already given a significant share Right.
Speaker 2:They've already given enough blood. You guys have all the blood that's left at this point as a percentage of your income, because you've run that chart. I mean the percentage of income that the PFD takings have been in the lower, you know, 40% of income earners is anywhere from you know, 11 to 25% right of their full and total income. It's a huge number compared to 1% or less in the upper 5% or 10%. I mean it's a huge difference.
Speaker 1:It's 0.2% in the top 1% income bracket. The impact of PFD cuts? It's not noticeable. It's like a variation in the stock market didn't go up quite as high today as we anticipated that it would. But you're right, it is material over 10% when you get to the middle and lower income bracket. So it is.
Speaker 1:I guess another way to say it is middle and lower income Alaska families are motivated. They're ready. It's the top 20%. They're ready to get government under control. It's the top 20%, the donor class and the oil companies and the non-resident industries who are paying either a negligible amount in the case of the top 20%, or none in terms of increased cost to government in the case of the oil companies and the non-resident industries. They're the ones who are just sort of looking the other way while government continues to grow and spending continues to increase. They need to be motivated. I agree with that. But middle and lower income Alaska families, they're already motivated and to discount PFD cuts as a motivation, to discount that as skin in the game, I think does a tremendous disservice to what's going on with the middle and lower income Alaska families in that segment of the Alaska economy.
Speaker 2:It's frustrating to watch because we've been beating the same drum for so long on this, and it's just frustrating to watch. And the governor has not been much of a help, Although I don't know if you've watched the last couple, the last week or so, the governor's put out now a second, like so, two strongly worded letters where he takes people to task. If we'd had a strong governor this whole time, maybe we could have helped steer the ship in a little bit of a different direction. Right, it's like all of a sudden he's found his anger switch and he can say things that he wasn't saying before. I don't know what's going on, but give us we're down to 90 seconds here. Give us your final thoughts on this.
Speaker 1:Everything that Dunleavy does is geared toward his race two years from now against Lisa. I mean, it has nothing to do with being a strong governor. He's gone into campaign mode for his Senate run against Lisa. So I really I mean, yeah, mike, nice thanks, but it's not effective and it's not moving the legislature in the right direction. It's just positioning himself to claim to be something he's not, which is a fiscal conservative. It's positioning himself to have these claims when he runs against Lisa.
Speaker 2:Well, that's sad. Thank you for giving me that piece of yeah, I mean, it's the truth, but it is sad to see You're right. I mean I spent all this time yesterday and I really didn't even get to that point. But I mean, here's the governor, you know, railing against all these things that are going on and I'm like, where has this guy been for the last four years? Right, I mean, where's this guy been? That's had, it's, it's full of fire and brimstone. Uh, you know, he took the teachers, uh organizations, on in this latest letter that just came out, uh, uh, yesterday. Uh, you know, where was this guy over the last four years? Uh, you know, know, taking his stand and being strong and everything else. And you're right, it's sad. This is all you know. I didn't look at it through the lens of this is posturing for the next big race. I just thought, okay, maybe he just finally found, you know, some oomph or something. It's kind of crazy.
Speaker 1:You may remember, after the last election, when Governor, when Dunleavy got reelected you and I had a conversation about Dunleavy is going to come to a decision point. Is he going to want to cement his legacy as governor and do some hard things to get the state back on the right direction, or is he going to start looking at his next race and posturing himself for the next race and not really being governor but sort of positioning himself in what he says and what he does for the next race, which was which elected, to start positioning himself to go Hollywood in a way, to go to deep, to go DC, if you will, and start spending a lot of time out of state? You know talking about things that that would get him national recognition and get a national fundraising, and not spending time in the state. And not spending time. Try to govern, try to govern the state.
Speaker 1:So everything you're seeing now in these last two years is all about positioning himself to get to further run against Lisa. It's not. He's not trying to govern. I mean, if he was trying to govern, if he was trying to establish a legacy, he would have. He would have handled things a lot differently these last two years. He's just trying to position himself to run against Lisa.
Speaker 2:That's damn it. I mean, it just is. So it's just, it's. It's so tough. I mean he there was such a golden opportunity here and, and, and I think he could have. In my opinion, he could have done both. He could have been a strong governor and come away with a legacy and still had strong support going into a race against lisa, but he chose instead to kind of pander and play this quiet game in this middle ground, maybe in the hopes of picking up some of the more moderate votes against lisa or whatever. But I don't know. It's just, it's so frustrating to watch.
Speaker 1:I think I think, looking back, the recall scarred him.
Speaker 1:The recall that he had after the, the 2019 budget proposal, uh, I think the recall scarred him in a way that he, looking back, he never really wanted to govern Alaska from that point forward because governing it was too tough and he got too much pushback and he got too many, he got too much negative response.
Speaker 1:So I think I think at that point he gave up governing, he ran for reelection because you know he could run for reelection and he said some things during that reelection campaign that said, well, maybe, maybe he's going to want to establish legacy, maybe he'll come back in and actually actually govern. Turns out, not Turns out. It was all positioning to go Hollywood, to get to DC, to position himself for national fundraising, and that's the way he's governed ever since the recall. He's not going to take positions that get him involved in another recall, another pushback for the recall, because that's too scarring on his on his future aspirations. He wants to sound tough, he wants to write letters that look tough, but he doesn't want to do the things that are necessary to get the state's fiscal situation under control, its fiscal situation under control.
Speaker 2:Damn it, brad. I'm just. You know I'm so hopeful and then you know, but it's the truth and that's the worst part. Go ahead, I'm sorry.
Speaker 1:Well, if you can convince him that actually being tough improves his odds against Lisa, that might work. But it's all built around that calculus, and that calculus isn't being made by Alaskans, it isn't being made by anybody in the governor's office Right. It's being made by the advisors that he's bringing on to run the Senate race Right Against Lisa. So it's not, and they don't know much about Alaska. So it's like you know, mike, sound tough, sound like a fiscal conservative, but don't do anything. That gets the pushback like a recall again, yeah, again.
Speaker 2:Yeah, we see what's happening at the national level. We just spent a whole segment talking about. You know the kind of the madness that's happening there. We see what's going on at the state level. One point, I mean you kind of said, well, if the permanent fund goes, I mean if we have a billion dollar deficit, brad, there is no permanent fund. Right, I mean that's a big chunk of that billion dollars is what's left of the permanent fund? This is what we're facing in the near future. We're facing, basically, financial catastrophe for both. We got about a minute here a minute and a half.
Speaker 1:Well, you're talking about the permanent fund dividend. There won't be a permanent fund dividend. There'll still be a permanent fund, unless Devin and his crowd managed to run it into the ground, but there won't be a permanent fund dividend. And so the legislature has figured out the legislature, who also doesn't want to make hard choices the legislature's figured out that they won't get pushback from the top 20%. They won't get pushback from their donor class.
Speaker 1:Zach Fields is a perfect example of this. They won't get pushback as long as they take all the money from the permanent fund dividend, as long as they take it from middle and lower income Alaska families, because those are people who don't have voices, they don't have money to give to a campaign, so they'll continue taking it from them as opposed to taking it from the donor class. And so, yeah, that'll, that'll be, that'll be what goes Um, and we'll see what happens beyond that. Uh, uh. But Bettisworth has already tried to set up the argument that, oh, permanent fund dividend cuts don't count. So we can have, you know, a very regressive sales tax, for example, to raise revenue that continues to shove the burden off on middle and lower income Alaska families. That's one of the next fights.
Speaker 2:This is what you and I have been worrying about for so long is that if we don't talk about the type of taxation, they're going to force it down our throat and say now it's time for you to pay your fair share. We know the PFD is gone, but that doesn't count right.
Speaker 1:That's what's happening, that's right.
Speaker 2:Brad Keithley, Alaskans for Sustainable Budgets. My friend, I wish you a very happy week of music and fun. Enjoy yourself, okay.
Speaker 1:You deserve it. Thank you, michael, I appreciate it. I'll see you next week.
Speaker 2:All right, thanks so much.
Speaker 1:Well, that's a wrap for another week's edition of the Weekly Top Three from Alaskans for Sustainable Budgets. Thank you again for joining us. Remember that you can find past episodes on our YouTube, SoundCloud, Spotify and Substack pages, and keep track of us during the week on Facebook and Twitter. This has been Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week on the Weekly Top Three. Thank you.
