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Scott Goldsmith


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© Chris Arend Photography

How many economists can talk about working with former headhunters in the hot, steamy jungles of Borneo, even learning a few lessons from them? One can—Scott Goldsmith.

“After I got my BA in 1967, I wasn’t sure about what I wanted to do. I planned to go to graduate school, but not immediately. I was left with two choices: go to Vietnam or join the Peace Corps.”

His choice got him a two-year assignment as a Peace Corps volunteer in Sarawak, Malaysia, in northwest Borneo. Goldsmith’s job was to persuade people in rural areas to adopt modern public health practices—vaccinations, toilets, and water systems.

The work also took him upriver into areas where tribes of former headhunters lived, and sometimes he met with them “in traditional longhouses where old, dust-covered heads hung from the rafters.”

The two years in Borneo were not a big success. Peace Corps volunteers received little local support and, Goldsmith says, he probably got more out of the experience than the locals.

It was difficult to persuade people to accept changes such as bathing in fixed places rather than rivers and using latrines rather than the jungle, Goldsmith says. But he learned from that experience.

“Sometimes it is best to let people do what they have been doing even if it may seem primitive to us. But they are not dumb. They taught me to look at both sides of an issue and to not entirely dismiss an opposing point of view,” he says.

After two years in Borneo, Goldsmith spent another travelling the “hippie trail” across southern Asia. After returning to the United States he started studies for a PhD in economics at the University of Wisconsin-Madison, not far from Chicago, his hometown.

 

40 Years in Alaska

Goldsmith, sixty-nine, has lived in Alaska for much of his life—forty years—but grew up in Chicago in a family that valued education. Both parents were graduates of Northwestern University. His older brother attended Princeton, and Goldsmith followed him. His brother chose religious studies, but Goldsmith picked economics. His reason: “It offered a logical way to think about how the world worked. I wanted to understand that and then help others understand it too,” he says.

Making people understand Alaska’s important fiscal issues has been Goldsmith’s goal since he arrived in 1975, the year he finished his PhD. When he began his job search one possibility was at the University of Alaska Anchorage’s Institute of Economic and Social Research (ISER), he says. An offer came from George Rogers of ISER who met Goldsmith at an economics conference in San Francisco.

Goldsmith was married by then and the idea of moving to Alaska intrigued him. But it was his wife Yvonne who really wanted to come. “Her mother worked for Pan Am, which entitled the family to discounted travel. When Yvonne was in her teens she went on a round-the-world trip with her family. They got bumped for twenty-four hours in Fairbanks, but that stay left an impression on Yvonne. She thought it was better than New York City, where she lived, and was excited about moving to Anchorage.”

He accepted the job and they moved to Anchorage, where their two daughters were born. They meant to stay for only a few years but the outdoor opportunities, the diversity of people, and the challenges kept them here, Goldsmith says.

Over the years Goldsmith built his reputation as the state’s leading economic and fiscal policy analyst. In addition to his ISER work on fiscal analysis, energy economics, and regional economics, he also taught classes. He started as an assistant professor and then became full professor. From 2001 to 2005 he served as ISER’s director.

The university recognized his achievements and bestowed several honors on Goldsmith, including the Chancellor’s Award for Outstanding Service in 1999 and the Edith Bullock Award for Excellence in 2006. He became professor emeritus when he retired in 2012, although not fully.

 

Scott Goldsmith has educated Alaskans on financial realities through the years.

© Chris Arend Photography

 

Financial Reality

Through the years, Goldsmith became adept at educating Alaskans on financial realities. “Scott has been our educator, our mentor, our tutor for years. He is the state’s eminent educator on fiscal issues,” says Larry Persily, former deputy commissioner of revenue.

When Goldsmith arrived in 1975, the trans-Alaska oil pipeline was two years away from taking North Slope oil to market, and ISER was at the forefront of the debate on how the state would deal with its finite oil wealth. “People were discussing ways to deal with both the oil from Prudhoe Bay and the revenues they felt were not sustainable,” Goldsmith says.

The solution Alaskans arrived at was the creation of the Permanent Fund in 1976 and, later, the dividend in 1980. Lee Huskey, UAA professor emeritus of economics and Goldsmith’s colleague at ISER, worked with him “on one of the first studies in 1977 that looked at the Permanent Fund and growth of the Alaska economy and how to deal with the oil wealth.” A lot of money was at stake, and people realized that the tendency would be to spend it unless it was locked up and very hard to get, Huskey says.

That study started Goldsmith’s long involvement with the Permanent Fund and fiscal policy. One important question needing resolution in those early years was the management of the Permanent Fund.

“ISER was part of the debate about managing the Fund portfolio: Should it be an economic development bank investing in Alaska’s projects or an account that invests in assets outside of Alaska? ISER came down on the second alternative,” Goldsmith says.

He is glad for that choice: “If we had set up an investment fund, we could have opened up the Fund to raids by people thinking of all kinds of projects, and we would have lost a lot of money,” he says.

Setting up a dividend program was a good decision too, Goldsmith says, and it serves a good purpose. “The residents like their dividends and they keep the politicians from taking out money from the Fund because people don’t want the dividend to be reduced.”

But he regrets the elimination of the state income tax in 1980, the same year the dividend program was started. “That was a big mistake. It took away fiscal discipline. If Alaska had an income tax, people would pay more attention to how the Legislature is spending their money,” Goldsmith says.

Ever since, he has reminded people of the consequences of the state’s dependence on oil. But Goldsmith is more than just a messenger with a consistent message.

“I would put Scott on the list of Alaskans who make a difference,” Huskey says. “The great thing about Scott is that he provides analytical support for what he says. Some people can be consistent by just saying the same thing over and over again, but Scott updates the message to fit the circumstances of a particular time.”

 

Constant Need to Educate

Goldsmith realized the need to educate people, not just perform analysis, soon after starting at ISER. “Most of our population comes from someplace else and a lot of people move in and out of the state. There is a constant need to educate people, both old-timers and newcomers, about the heavy dependence of the state’s economy and the state fiscal structure on petroleum.”

“That dependence on one resource made our state economy much like that of an island,” Goldsmith says. He uses the Pacific island nation of Nauru as an example. Comparing Alaska’s economy to that of an island is entirely appropriate, says Persily. “Scott talks about Nauru because of its experiences with the overharvesting of guano, its only resource. It didn’t have a sustainable fiscal plan and went broke,” Persily says.

Goldsmith and ISER staff also write reports and do economic analyses for the Legislature, agencies, and non-government entities, including Associated General Contractors of Alaska and banks such as Northrim and First National Bank of Alaska.

For the past twelve years, Goldsmith has worked with the Associated General Contractors of Alaska on its annual construction spending forecast. John MacKinnon, the association’s executive director, praises Goldsmith’s ability to back up his projections with analysis. “Scott is able to see the numbers and comes up with a rational explanation.”

It’s not easy for most academics to make complex information understandable to people, according to Pamela Cravez, a friend and a colleague of Goldsmith’s. “He has the facility to make really complex economic issues easily understandable, and that is the mark of a brilliant person.”

MacKinnon echoes Cravez when he talks about the association’s 2014 construction forecast. Goldsmith had estimated a sharp increase in construction partially due to the Legislature’s change of the state oil tax law in 2013 through Senate Bill 21. At the time there was a voter initiative pending to repeal the tax change in the 2014 elections, which failed.

“I knew that some of my member companies were holding back [because of the uncertainty], but I had noticed the change [in construction spending] and Scott’s research validated my thinking. Scott showed how the change in the law had worked and he made a connection between the 18 percent increase in construction spending and the passage of [Senate Bill] 21.”

 

Transparent Work

His work for banks and other private entities might raise eyebrows, but Goldsmith says there is transparency in what he does. Such work is essential because ISER is partially funded through contractual work. Northrim Bank, for example, supported the research used in a 2008 paper in which Goldsmith highlighted the three parts, or legs, of the state’s economy, the legs being petroleum, the federal government, and everything else.

A few years later, “First National Bank [of Alaska] came up with the ‘three-legged stool’ idea and ran the campaign to publicize it,” Goldsmith says. The bank wanted to educate Alaskans about how their economy worked and to show what Alaska’s economy was like before the petroleum industry—one of the three legs—became a major force.

Alaska has changed since he arrived, Goldsmith says. ISER was once the only game on economic research in town, but today other firms also doing research and issuing forecasts. “The work for Northrim or FNBA is transparent. They are in Alaska for the long haul. We are all interested in maintaining the health of the Alaska economy for the future. There is a commonality of interest.”

People might think that Goldsmith spends most of his time crunching numbers. He does, after all, radiate gravitas, with his frequent presence in the media or at conferences.

But there is another side. “Scott is not opposed to having fun,” says Huskey. “He does have this whole outside life, including going on long bike trips with his wife. And he once played second baseman on the UAA economics co-ed softball team called, appropriately, ‘The Invisible Hand.’”

The staid economist also confesses to a weakness for Marvel comics. He amassed a vintage collection of Spider-Man, Avengers, Fantastic Four, Incredible Hulk, and Silver Surfer. “They kept me sane at Princeton,” he says. His favorite, Silver Surfer, features a character who surfed between planets. It is one of the few that is not a movie yet, and Goldsmith looks forward to seeing it on the big screen.

Mary Killorin, who worked with Goldsmith as a research associate at ISER for many years, described him as a “self-effacing, compassionate guy with a terrific sense of humor who is always fun.”

ISER staff parties provided several occasions for levity, Killorin says. One party saw a performance by the “Beach Guys” with “songs by Scott and vocals by three other ISER staff—Lee Gorsuch, Lee Huskey, and Matt Berman. They sang original songs, including ‘Kalifornsky Girls’ and ‘Surveys USA,’” she says

 

Scott Goldsmith is an avid bicyclist.

© Chris Arend Photography

 

Sustainable Choices

Questions about Alaska’s long-term fiscal sustainability are being raised again. But Goldsmith is confident that Alaskans will make the right choices. The population is less transient than in the mid-1970s or the 1980s, and people of his generation are apt to stay around because “our kids are more likely to now come back to live in Alaska after school,” he says, speaking from experience. His daughters, Anmei and Anli, attended school in the Lower 48, but both are now working in Anchorage.

His confidence rests on the achievements of the last four decades. “We have the dividend and a lot of physical infrastructure. Institutions such as the Native nonprofits and Native for-profit corporations, AIDEA [Alaska Industrial Development and Export Authority], AHFC [Alaska Housing Finance Corporation], are all helping to build the state, and we have other Alaskan-minded private corporations that are not from Outside.”

Even the current low price of oil gives Goldsmith little cause for concern. “I think that the petroleum industry, which is the real driving industry in the economy, will continue to be strong unless we really do something to screw it up. We have lots of petroleum resources and the oil industry will continue to be interested. The industry has figured out ways to cut costs and to make use of new technologies to get more oil and gas out of the ground.”

The state’s fiscal crisis, while a concern, can be handled, Goldsmith says. It is time to consider “using the Permanent Fund. We have $50 billion in this fund and it was created for times like what we are now facing.” That should be the first step in closing the gap. Any taxes—sales, income, or both—should come after that, he says.

In his latest paper for ISER, released in April, Goldsmith argued for just that approach. He advocated for using a portion of the fund earnings to reduce the deficit next year by $2.2 billion and also keeping a full dividend for eligible Alaskans.

Even in semi-retirement, Goldsmith continues to work at ISER, but he has more time for other pursuits. Both he and Yvonne are now serious bikers. Their bike trips take months and cover thousands of miles. Last year’s trip was a three-month, four-thousand-mile trip from Kashgar to Istanbul. Next year it will be St. Petersburg to Lisbon.

In addition to his continued work at ISER, Goldsmith also serves periodically at Bean’s Café, where he has worked for five years. “It was a way to give back to the community and to connect with part of the community to get a sense of their lives,” he says.

There is no thought of leaving Alaska. “Yvonne is retired and I am semi-retired and our kids are here. We are going to stay here. We love Alaska.

This article first appeared in the August 2015 print edition of Alaska Business Monthly.

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