By FRITZ PETTYJOHN
Forty years ago, Alaska was riding high. Oil was gushing through the pipeline, and the state had so much revenue the legislature couldn’t spend it all. I was in the House Minority at the time, and watched the legislature spend billions with wild abandon. Every legislator in the Majority was allotted tens of millions of dollars to spend on capital projects; no questions asked. We had so much money we wound up making special deposits to the Permanent Fund, beyond that required by the Constitution.
Then the price of oil cratered, getting down to $10 a barrel. Gov. Bill Sheffield was forced to make cuts to the operating budget, which cost him politically. The Alaska economy went into a mini-recession.
The problem was the Saudis. They were deliberately overwhelming the market, driving the price down. Ostensibly, they were disciplining members of OPEC who exceeded their assigned production quotas. It didn’t make a lot of sense, but that was their story.
Not coincidentally, the Soviet Union was brought to its knees. 90% of the hard currency it needed to play the superpower game was from the sale of its oil. Soviet production costs now exceeded revenue from sales. They were going broke, fast. At the same time, President Reagan was engaged in a massive increase in military expenditures, which the newly poor Soviets couldn’t come close to matching. Gorbachev was forced to sue for peace. The Cold War was over. We won; they lost, just as Reagan had foreseen. What the hell happened?
Upon taking office in 1981 Reagan’s first foreign policy initiative was to sell AWACS planes to Saudi Arabia. With these planes the Saudis had the capability of defending themselves from the Israeli air force. Israel was aghast, and the American Jewish community was appalled. Congress went along, but it was a struggle. The sale barely passed the Senate 53-47.
Though it has never been publicly acknowledged, it was all a quid pro quo. The quid was the AWACS planes. The quo was driving down the price of oil and bankrupting the Soviet Union.
That’s how Reagan won the Cold War.
Russia today is as dependent on oil revenue as the Soviet Union was. Drive down the price of oil, and you bring Russia to its senses.
It seems to me we’re seeing Trump make the same deal Reagan did. Instead of AWACS planes, were selling the Saudis F-35’s. They are responding by driving down the price of oil. At some point Putin is going to be forced to settle the Ukraine war. He’s going to run out of money.
In the meantime, Alaska suffers, just as it did 40 years ago. But this is temporary. Before we do anything foolish, like raising taxes, we should realize better days are ahead. With Trump as President, we’re going to develop our resources, and prosperity will return.
Keep the faith.
In 1979 the Reagan for President Committee appointed Fritz Pettyjohn as its Alaska Chairman..
2 thoughts on “Fritz Pettyjohn: Reagan and Trump – then and now”
Good reminder that history truly does repeat itself.
While lower oil prices might not be good for the bottom line of the State of Alaska revenues in the short term, if we allow oil producers to produce oil and up the throughput on the pipeline revenues to state coffers will rise. Gas prices at the pump will go down, diesel prices will drop, the savings to Alaskans will go up and we will have more of our own money to spend and contribute to our economy. If only we had elected representatives who understood this basic concept.