State of Dependence
Ted Stevens's Alaska problem—and ours.
By Charles Homans
etchikan, the fifth largest city in Alaska, is situated on a narrow strip of land, eight miles long and seven blocks wide, wedged between the waters of the Tongass Narrows and the hilly, forested interior of Revillagigedo Island. The town of 8,000 people grew up as a small port on Alaska's Inside Passage, and getting to it by means other than water has always been difficult. Forty years ago, when Ketchikan hosted a thriving timber industry, the only way to reach the place by air was to fly first to Annette Island, twelve miles to the southeast, where you strapped yourself into a thirty-eight-foot amphibious aircraft called the Grumman Goose, a cartoonishly bulbous dual-propeller plane with a boatlike hulled fuselage hanging below a forty-nine-foot wingspan. The Goose's landing gear was raised and lowered with a hand crank, and in bad weather, occupying one of the plane's seven seats was like riding inside a yo-yo. But the craft could land at sea and taxi up to the docks that line the Ketchikan waterfront, and, at the time, the town had few other options.
Things hadn't gotten any easier by the 1970s, when the Alaska Department of Transportation decided to provide Ketchikan with an airport. Searching for a feasible spot on which to build, planners eventually settled on an island called Gravina, just on the other side of the Tongass Narrows. Getting to Gravina would require a boat ride, but state officials indicated that a bridge span would one day link city to airport. In the meantime, ferries would shuttle passengers and freight the half mile from Gravina Island to the Ketchikan waterfront.
As tourism began to pick up in Alaska, Ketchikan became the state's southernmost port of call for cruise ships, and by 2004 the ferry service between Ketchikan and Gravina was carrying more than 300,000 passengers a year. Ketchikan was also gaining inhabitants, and, since the town was hemmed in by water on one side and unforgiving topography and federally managed forests on the other, developers were eyeing the flat land on Gravina Island as the most promising place to build. Without a bridge to Ketchikan, however, no one was likely to move there. With all this in mind, the Department of Transportation finally took up the bridge project in earnest, and the local government put its seal of approval on a plan that would cost roughly $250 million.
Then things took a quintessentially Alaskan turn. The DOT picked a more expensive alternative design, increasing the price tag of the project to more than $300 million. And Washington got involved. In August 2005, at the apex of the earmarking bonanza of the 109th Congress, Senator Ted Stevens, then chairman of the Senate Committee on Commerce, Science and Transportation, and Representative Don Young, then chairman of the House Transportation Committee, steered $229 million in federal money toward the Ketchikan bridge project. When Hurricane Katrina prompted Republican Senate colleague Tom Coburn of Oklahoma to suggest diverting the bridge money toward rebuilding efforts in the Gulf, Stevens threw a tantrum, accusing Coburn of attacking Alaska's sovereignty and vowing that he would "be taken out of here on a stretcher" before allowing the funds to be redirected. (Alaska got its money, and the stretcher remained unused.) Thus was born the Bridge to Nowhere.
It wasn't that Ketchikan didn't deserve any federal money to build the bridge. In order to grow and accommodate its development, the town needed more land, and Washington has been funding large infrastructure projects around the country for decades. Still, even by the standards of federal earmarks, the Gravina project was unique in the enormity of the subsidy per capita, which was more than $17,000 per Ketchikan Gateway Borough resident. (By way of comparison, Boston's Big Dig project, which has become synonymous with pork-barrel politics and overspending, is estimated to have cost less than a fifth of this per Greater Boston resident.)
Two years on, the Bridge to Nowhere has gone from the drawing board to the dustbin—in September, the project was scrapped on the orders of Sarah Palin, Alaska's new governor. But it has lived on as a political symbol. In the Republican rout of 2006, it was an oft-invoked icon of government spending run amok.
To reduce the Bridge to Nowhere to a punch line, however, is to miss an important point. Life on the Last Frontier is complicated and expensive, and you pay for it. More precisely, we all pay for it, with about $8 billion a year in federal expenditures. Much of this subsidization is legitimate: the State of Alaska is only forty-eight years old, making it comparatively young, and it needs a boost in order to catch up to the rest of the country in development and infrastructure. But such legitimate demands become a pretext for federal handouts that are out of all proportion to any actual need.
Simply put, Alaska has made a habit of transferring its operating costs to the federal government. The state pulls out nearly two times as much money as it pitches in to the Treasury, a drain that looks especially bad in light of the state's fiscal reality. Today, Alaska enjoys a healthy budget surplus, and it sits on a Permanent Fund of more than $39 billion. It also refuses to levy sales or income taxes on its citizens. In a state that fails to pull its weight, the Bridge to Nowhere is just an especially weighty example.
This is often presumed to be the legacy of Ted Stevens, a lawmaker so eminent in his home state that he is known there simply as Uncle Ted. The senator is a legend of the Last Frontier, a reliable provider whose constituents regard him, in the words of veteran Alaskan journalist Michael Carey, as "something of a frontier fertility god—worshipped, propitiated, feared."
In Washington, journalists label Stevens with a less flattering nickname: the King of Pork. In recent months, Stevens has garnered media attention for even less desirable reasons: he is currently entangled (though yet to be charged) in a federal corruption investigation that has snared three lawmakers and lobbyists (with more indictments pending) back in Alaska on charges of conspiracy and bribery. But Stevens is better known for what he has done legally, parceling out federal dollars for projects like the Bridge to Nowhere. During one year at the peak of his powers as the head appropriator in the Senate, Stevens pulled in $705 million for Alaska in earmarks alone—more than what any other state received, on a per capita basis. And that figure is dwarfed by the support structure that Stevens has helped engineer—a Byzantine network of subsidies, loopholes, and Alaska-specific federal programs—that has funneled billions of dollars more in Alaska's direction.
Reform-minded citizens could be excused for hoping that the eventual departure of the eighty-three-year-old Stevens, whenever it happens, and the political shake-ups in his home state will put an end to the excess. But it's not so much that Alaska's problem is Ted Stevens as that Ted Stevens's problem is Alaska. If Stevens is guilty of anything, it is of being unusually good at meeting the outsize demands that his outsize state places on the shoulders of anyone representing it in Washington.
For decades, Stevens has been directing financial aid to Alaska in the hopes of laying the groundwork for the independence and economic self-sustenance that he and other advocates of Alaskan statehood, half a century ago, declared to be within Alaska's reach. But the more Stevens has provided, the more dependent Alaska has grown. The reasons for this lie as much in Juneau as in Washington, and the eventual retirement or indictment of Stevens is unlikely to do much to alleviate Alaska's massive drain on the federal Treasury, a sum that constitutes a third of the state's economy. Stevens certainly perpetuated and expanded America's biggest welfare state. But he didn't create the problem, and getting rid of him won't undo it.
hen did Alaska become the American taxpayer's burden? The short answer is that it always was. In 1912, the Washington Post declared Alaska to be "more dependent on Congress than any other part of the United States outside of the District of Columbia." University of Alaska historian Terrence Cole has estimated that with the exception of two decades in the nineteenth century (when the Treasury spent little in the territory and reaped considerable revenues off the fur seal harvest in the Pribilof Islands) and a few years in the late 1970s and early '80s (when high oil prices exploded Alaska's state coffers), Alaska has always cost the federal government money. By the most recent figures available, the United States spends $1.87 on Alaska for every dollar it collects in Alaskan taxes.
From the earliest years of the territory, getting anything done properly in Alaska has been difficult. When a publisher's assistant named Ivan Petroff was asked to conduct the first-ever U.S. Census of Alaska's population in 1880, he found the task of traveling to the far reaches of a territory one-fifth the size of the continental United States and fraught with mountain ranges, volcanic islands, and frozen tundra to be too overwhelming. Instead, he stayed home and made up the numbers, possibly underestimating the non-Native population by a factor of two.
More than a century later, Alaska is no less enormous and only somewhat less daunting. Much of it remains inaccessible by road, and all of it is miles from anything else. What limited economic activity can take place there is for the most part too capital intensive for all but the largest companies, and any work they do in Alaska is only of the sort that can't be moved elsewhere: oil drilling, mining, fishing, or logging. "Alaska is a long-term, massive operation, conditioned by its inaccessibility, and its ferocious terrain," a British journalist visiting the territory in 1958 wrote. "It is proper meat for the great corporations with capital the size of national debts and machines and helicopters and dedicated graduates from mining schools."
That Alaska became a state in spite of these obvious economic impediments is a testament to the spirit of the era in which it happened. Statehood was a grand experiment, organized around the thesis that if the territory were given a modern government, a modern economy and society would develop accordingly. "Like the tail fin and the Hula hoop, the State of Alaska is an artifact from the Eisenhower era, a profession of optimism in a world of limitless possibilities," Terrence Cole writes. Statehood was also viewed by its advocates as a moral imperative. "It was this feeling that there's more to this than whether we can afford it," says Vic Fischer, one of four surviving coauthors of Alaska's 1956 constitution. "We want to have control of our resources. We want to be able to vote."
At the time, Alaska was flush with the most massive infusion of federal cash in the history of the territory: the post–World War II boom in defense spending, which constituted the near entirety of the state's economy in the '50s and transformed Anchorage and Fairbanks into modern cities. The era was also one of unprecedented political responsibility in the state. In 1949, the territorial legislature had finally passed an income tax, and by the early '50s it had balanced its budget. This was taken as proof that Alaska was capable of both governing and financing its own affairs, and Congress was beginning to entertain the idea of statehood.
In its first decade, Alaska's nonfederal economy resembled a giant craps game, and there was no guarantee the state would come out ahead. The military money was about the only thing keeping the state in the black—Alaska's prewar economy, built tenuously on salmon canning and mining, had all but disappeared. "Today Alaska could be described with almost equal accuracy as one of the most excitingly promising and one of the most hopelessly declining economic areas under the American flag," Alaska Division of Planning consultant George Rogers concluded in his 1962 analysis, The Future of Alaska. "The characterization will depend on your point of view and the length of your look into the future." The state was saved from insolvency by an enormous lucky break: in 1968, the largest oil reserves in the United States were discovered on Alaska's North Slope at Prudhoe Bay, land that belonged to the state and not the federal government. Later that year, a new senator named Ted Stevens would arrive in Washington to help the state make the most of its sudden fortune.
heodore Fulton Stevens was born in Indianapolis, Indiana, in 1923, but he didn't stay there long. Divorce and the Great Depression dissolved his family when he was six, and Stevens spent his childhood bouncing between family members in Chicago, Indianapolis, and, eventually, Manhattan Beach, California. During World War II, he flew cargo planes over the Himalayas, earning the Distinguished Flying Cross. After the war, Stevens attended UCLA and Harvard Law School, where he developed an expertise in maritime law. In the early '50s, Stevens's ambitions centered on Washington, but when a job in the Eisenhower administration failed to materialize, Stevens accepted an offer from a law firm in Fairbanks and a $600 loan to help him and his wife, Ann, get there. In the winter of 1953, the Stevenses pulled into Fairbanks in a 1947 Buick.
Ted Stevens quickly came to love the territory. Before long, he had become an ardent advocate for statehood. When he finally landed a job in Eisenhower's Interior Department and returned to Washington in 1956, it was as an insurgent. Even as he was working as legislative counsel at Interior, he was lobbying in Congress for Alaskan statehood. (Years later, Stevens would admit in an interview that this was illegal.) Two years after Stevens arrived back in Washington, on July 7, 1958, Eisenhower signed the Alaska Statehood Act into law.
In 1961, Stevens returned to Alaska, serving in the Alaska House of Representatives and mounting two failed U.S. Senate bids. (Any clairvoyant with a sense of irony would have been amused to hear Stevens attack the incumbent senator, Ernest Gruening, for being a "cantankerous old man.") In 1968, he made it to Washington anyway, when Senator Bob Bartlett suffered a fatal heart attack and, at the urging of President-elect Nixon, Alaska Governor Wally Hickel tapped Stevens to fill his seat.
Once in Washington, Stevens distinguished himself with a sense of pragmatism and an eye for the long game. One of his most lasting accomplishments came in his first elected term in the Senate, when he brokered a solution to a crucial problem that threatened to complicate Alaska's newfound oil windfall. Oil companies wanted to build a pipeline to bring North Slope crude to market, but they were wary of a Damocles' sword hanging over the project: Alaskan Natives had ancestral lands that lay along the pipeline route, and this created the potential for costly land claims lawsuits. Stevens, who had worked with the oil companies and (pro bono) with Native groups as a lawyer in Anchorage in the '60s, found a way to bridge the parties. The result was the 1971 Alaska Native Claims Settlement Act, a paradigm-shifting piece of legislation that ceded land and cash to newly created Native-owned corporations in exchange for their go-ahead on the pipeline.
The law made the large-scale development of the North Slope possible—Congress passed a pipeline act two years later—and created a class of wealthy and politically powerful Native leaders who remain some of Stevens's most dedicated allies. (Stevens subsequently tinkered with the law, loosening the requirements that the corporations' subsidiaries be Native managed, and entitling them to get lucrative no-bid contracts with the federal government. [See Ben Wallace-Wells, "Polar Fleeced," July/August 2005, Washington Monthly.] The result has been a boom in federally funded contracting jobs for white Alaskans in Anchorage.)
Awash in oil money, Alaska's state leaders spent freely in the '70s and early '80s. Rural Alaska, in which conditions were dubbed "Stone Age" by one Native leader, found itself catapulted into the late twentieth century. Villages finally began to acquire basic amenities like water and sewer systems, and even communities of only a few thousand people had multimillion-dollar schools lavished upon them.
In the midst of this fiscal euphoria, Juneau managed to make one very good decision. Determined not to perpetuate its habit of squandering the annual oil windfalls, the state legislature used a portion of the North Slope revenues to create an investment fund whose principal was untouchable. To this day, the Permanent Fund, as it is known, continues to grow, and is currently worth more than $39 billion.
But as the oil boom rolled on, acts of prudence became the exception rather than the rule. In 1980, the state began paying out annual dividends from the Permanent Fund to every man, woman, and child in Alaska (typically in the neighborhood of $1,000), siphoning off hundreds of millions of dollars from the state's coffers each year. That same year, the legislature made things worse by abolishing the state's income tax, making Alaska the only state in the union with taxes on neither income nor sales. It was a bad idea. Without knowing it, Alaska had laid the groundwork for a new kind of federal dependency, one that would paradoxically arise from the state's newfound fortune.
Alaska's bill soon came due, when OPEC relaxed the restraints on its production and oil prices descended from the heights they had reached in the Jimmy Carter years. By 1986, the state's government, which now relied almost entirely on oil money, faced a unique dilemma. On paper, Alaska was rich: the Permanent Fund account had passed the $5 billion mark two years earlier. But that money remained untouchable as the Prudhoe Bay revenues plummeted, and the state became effectively broke. Alaska's budget shrank by nearly half, unemployment rose to 11 percent, and a state that in 1975 had attracted 30,000 new residents was now hemorrhaging 15,000 of them a year. The 2,200-person community of Barrow, which depended on local government for 95 percent of its employment, racked up a $1.3 billion deficit. Faced with fiscal crisis, the state turned to Uncle Ted.
At the time, Stevens was not in much better shape than his state. His marriage to Ann, known as one of the happiest in the Senate, was cut short in 1978, when she died in a plane crash. In December of 1980 Stevens had remarried, but his personal finances were soon battered by bad investments in cattle ranching and crab fishing, and he was forced to sell his house in Maryland.
Politically, however, Stevens was well positioned to help out his constituents. In the '80s he won notoriety for his use of his seat on the Appropriations Committee, tacking inventive earmarks and other forms of spending for Alaska on to bills moving through the Senate. When the U.S. Army formed a new division to combat extremists in the developing world, for instance, Stevens contrived to have it stationed in Anchorage. Thanks to Stevens, the division's mission was transformed from low-intensity overseas operations into defense of the forty-ninth state.
As Stevens became more adept at tapping federal revenues, however, Alaska seemed to become more helpless. In the first years of the state's fiscal crisis, cooler heads had suggested that the income tax be reintroduced. But the legislature flinched, and when the Gulf War brought a brief lift in oil prices, the idea was swept off the table. When budgetary shortfalls continued into the '90s, the state overspent its revenues by as much as a billion dollars a year while balancing its budget out of various other savings accounts. Instead of looking for ways to boost state revenues, however, Juneau kept waiting for help to come from Washington.
And, often thanks to Stevens, help kept coming. In 1997, Stevens assumed the chairmanship of the Appropriations Committee, and Alaska enjoyed its most bountiful run of federal funding yet. From 1983 to 1996, Alaskans had received $1,000 more in federal grants per capita than the average American; from 1996 to 2002, they received $3,000 more. Overall, in that two-decade span surveyed by the University of Alaska's Institute of Social and Economic Research (ISER) in 2003, federal spending in Alaska increased at three times the rate it did in the nation as a whole.
n the late 1990s, people began to refer to a problem called the "Alaska Disconnect": the high expectations Alaskans continued to have of government even as they failed to pay in properly. This fiscal dissonance was abetted by Stevens's largesse, but ultimately it wasn't his fault. The problem had been triggered the moment Alaska struck it rich with oil. Psychologically, it had been cemented with the fateful 1980 decision to abolish the income tax.
Through its continued aversion to basic taxation, Alaska had also created a warped anti-incentive for economic growth. In most states, job creation leads to more incomes and purchases. This has the effect of increasing tax revenue to the state treasury. In other words, improvements in public services and infrastructure help to promote economic growth, and vice versa. But in Alaska this wasn't the case after 1980. Ted Stevens could bring millions of dollars in infrastructure and services to his home state, but insofar as they attracted new residents or kept current ones the boons tended only to increase the fiscal troubles of Alaska's government. The new jobs and new people created an increased demand for public services, but, without proper taxes, the new jobs and new people didn't create new revenue streams. ISER has calculated that every job created in Anchorage thanks to economic development projects winds up imposing a net annual burden of $1,100 on the public purse each year. The more Washington helped to develop Alaska's economy, the more Alaska's economy required Washington to help.
All of this had the effect of corroding the idealism of the statehood movement. The dream that Ted Stevens and other founding Alaskans had harbored had been one of genuine self-determination, however fragile. Today, what has replaced it is a libertarian fantasy that political scientist Thomas Morehouse has dubbed "dependent individualism." This is largely the result of a still-pervasive Alaskan view that casts the state and its residents as aggrieved victims of the whims of the federal government, in spite of the fact that they benefit more from it financially than anyone else in the country.
This attitude—a steroidal version of the historical antifederalism of the American West—is an echo of Alaska's late territorial era, when the state really was a functional colony of the United States. It has calcified, however, into a reflexive argument for a kind of perpetual reparations to the state, reparations that have become irrationally huge.
Consider King Cove, a village of 800 people on the remote Alaska Peninsula. In 1998, the town decided it wanted a road built to Cold Bay, a nearby community of fewer than a hundred people with an airport that made access to medical facilities possible. Since the road would have had to pass through the federally protected Izembek Wildlife Refuge, though, Congress wouldn't permit it to be built. In recompense, it granted King Cove $37.5 million for local clinic upgrades and a state-of-the-art hovercraft that could be used to transit the wildlife refuge without the benefit of a road. Nine years later, King Cove has the hovercraft but complains that it doesn't have the money to operate it for more than a few years. As if the multimillion-dollar handout had never happened, the village renewed its request for a road last summer. It is a very Alaskan story: the need is genuine, but the remedy is excessive (the $37.5 million subsidy from Congress amounted to almost $50,000 per inhabitant). And the local government, conditioned by easy access to the federal Treasury, responds with more demands.
Along the way, Alaska's pattern of federal reliance has long since stopped being a matter of necessity and simply become habit. The state has continued to behave as if it were on the brink of economic failure even after 2002, when high oil prices once again balanced the state's books and then some (the state's budget surplus will probably top $100 million for the current fiscal year). In 1998, Stevens had created a joint state-federal entity called the Denali Commission, which was intended to provide a wide array of support for infrastructure and services in Alaska. But the federal money—sometimes as much as $150 million a year—that Congress pumped into the commission went unmatched by the state even after it had bounced back from the fiscal crisis. Alaska now feels it is simply entitled to such support.
Ultimately, the sense of entitlement even seems to have infected Stevens personally. Long known for being an impecunious senator in a club of millionaires, Stevens had never shown much interest in accumulating riches. Nevertheless, after acquiring the chairmanship of the Appropriations Committee, he became wealthy with an unseemly haste. Beneficiaries of Stevens's federal largesse had helped in a variety of ways. One, a real estate contractor, made Stevens a partner in real estate investments, turning $50,000 into more than $750,000 in six years. Another, an Alaska Native corporation, paid $6 million a year to lease an office building owned by Stevens and his partners. This year, newspapers reported that the FBI and a federal grand jury were investigating Stevens for remodeling performed on his home in Anchorage that was overseen by the VECO Corporation, a curious hybrid of an oil field service company and lobbying firm.
ed Stevens has been in national office for almost thirty-nine of Alaska's forty-eight years as a state, and for most of them discussion of what the state would look like without him has been taboo. This is not the case anymore. Stevens is not getting any younger, his powers in Washington have ebbed along with Republicans' dominance, and he is working with a federal investigation hanging over his head. Beyond all that, he is clearly aware that he is testing his fellow senators' limits. "As lawmakers in Congress weigh spending priorities and work to reduce our federal deficit, many take note of Alaska's annual budget surplus and the billions of dollars in our Permanent Fund," Stevens told the state legislature in his annual address in March. "To them, the question seems simple: If Alaskans are unwilling to invest in a project, why should the federal government?" Local lawmakers in rural Alaska, returning from their periodic lobbying pilgrimages to Washington this fall, say that they too are increasingly being urged by the delegation to look once again to the state, not the feds, for the money that has flowed freely from the Treasury in the past two decades.
While the end of the Stevens era will undoubtedly trim some of the fat off Alaska's pork, however, it will barely scratch the surface of a federal Alaska budget that is simply too deeply entrenched, too widely spread among federal agencies, to be significantly reduced by a single election. The comically extravagant spending examples that journalists and taxpayer watchdog groups love to trot out—$100 million for researching the energy-generating possibilities of the northern lights, $500,000 to paint a salmon on the side of an airplane—may pass into history with Uncle Ted. But even at their peak, those giveaways added up to only a tenth of the Treasury's annual Alaska bill.
All of this is not to say that Alaska doesn't deserve an above-average level of federal subsidies. The problem is that Alaska's dealings with Washington have become dishonest. Alaska has come a long way from its days as a noble, if highly improbable, political experiment—the state has $39 billion in the bank, and a reliable budget surplus. Every September, the governor of Alaska announces the dollar value of the Permanent Fund check that every Alaskan will receive, in an envelope-opening ceremony reminiscent of the Academy Awards. This year, the check totaled $1,654, an amount—if airlines' and car dealerships' annual dividend-pegged sales are any indication—that will be spent on vacations and new Fords. These images are so jarringly inconsistent with the scenes of neglect routinely conjured by the state's delegation on Capitol Hill that last year then Governor Frank Murkow-ski earnestly suggested Alaska hire a PR firm to clean up the image it had acquired as a freeloaders' paradise.
When Alaska's founders drafted the state's constitution, they did so in the hope that Alaskans would take responsibility for their own destiny. Instead, an oil boom led Alaska down a different road, one that Ted Stevens consistently found federal money to help pave. The state's future, and the future of its relationship with the federal government, depends on Alaskans recapturing the political maturity they once demonstrated. "I think that the income tax would be a progressive measure for Alaska, but beyond that it would make [Alaskans] better citizens," Vic Fischer says. Repealing it "has really been at the expense of civic responsibility." Propositions like this will, of course, remain politically poisonous until—and perhaps after—a crash in oil prices causes the state's fortunes to fall once again. But if the dreams of genuine independence are to have any hope of being realized, Alaska must begin to start paying for itself. That means Alaskans must want to be participants in, rather than wards of, their government—and that attitude may be the one thing Uncle Ted can't buy for them.