President Donald Trump’s One Big Beautiful Bill Act that passed in July will likely have sprawling impacts to Alaska, from oil and gas production to a tax cut for whaling captains. But because of the way the nearly one thousand page bill was written, it’s hard to make specific predictions.
Some elements, like changes to Medicaid, don’t take effect until 2027.
Alaska Public Media’s Ava White spoke with Kevin Berry, a professor and chair of the economics department at the University of Alaska Anchorage. He says those dates may be far out, but that doesn’t necessarily minimize the impacts.
This interview has been lightly edited for clarity and length.
Kevin Berry: To the extent that the current law stays current law and doesn't change, it just delays the impact for these things. In some cases, though, it gives the state a chance to prepare or remove some of those impacts.
So for instance, when we talk about the impacts to SNAP – from the requirement for states to basically pay a penalty for payment mistakes, the delay in the implementation of that gives the state the opportunity to reduce those error rates, and if we show a good faith effort, avoid some of those impacts.
Now the state has a high error rate for SNAP payments, and it depends on whether or not we can actually do those things over time. To the extent that we can't, we're just delaying the impacts.
I think that one open question is that a lot of the provisions in the bill that kick in later can potentially change over time. To the extent that that law stays the way that it is right now, we can make projections of what the bill looks like, but some of these things that, you know, are going to come into effect in the next couple of years may change in response. There could be political will to change impacts to different programs or different rules or dates that things kick in. And so it makes it really hard, I think, to forecast exactly what this is going to look like in 10 years.
We can really only look at a lot of these baselines as what's under current law, but we've seen very recently that current law can change dramatically, very quickly. So I think it's worth keeping in mind that there's room to sort of discover and discuss and advocate around impacts from the bill that are really important.
Ava White: Many economists in the state talk about how Alaska's economy, it sits on a three legged stool. One is gas and petroleum, one's other industries, and one is the federal government. What does our stool look like now, and will it continue to – I don't know if teeter is the right word, but shift?
KB: The three legged stool analogy comes from my now retired colleague, Scott Goldsmith at ISER. And I'll say first, there's a pretty regular conversation amongst the economists in the Department of Economics and the Institute of Social and Economic Research about updating that report and making sure that we still have exactly a three legged stool. None of us expect that it's changed dramatically, though.
These new developments potentially mean the oil sector is stronger into the future, and to the extent that that economic activity filters through the rest of the economy, our other sectors may perform better too.
To the extent that the federal government is 1/3 of our economy, I think that there's questions about the increase in the budget deficit, and whether or not that's filled with spending cuts or tax increases in the future, or more borrowing as well, and it's unclear what the strategy will be to deal with the deficit in the long run.
AW: How do you think the impacts of the Big Beautiful Bill are changing the way people think about their own money and how they spend it? Or will it change?
KB: When I think about what's possibly going to happen, I most often think about what happened when we initially passed these tax cuts in 2017. We've got a few years of data afterwards that should be able to give us an idea of the impact of the bill.
But unfortunately, it's really hard to do that, because yes, the aggregate demand effects should have kicked in in the first two years, so between 2017 and 2019 we should see an effect – those seem like they're modest in the economic literature, that there's not huge impacts necessarily to aggregate demand. But the other big, key part of the bill is how it more generously treats investment by businesses.
Investment is when firms buy things like plants and equipment and basically the capacity to make more stuff in the future. Now, those effects are obviously not going to all happen in the first year, and so the more generous expensing provisions are supposed to kick in over a decade or even longer.
Unfortunately, we don't have any good data to tell what happened with the tax cuts and job acts the last time around, because covid happened and the economy got really, really weird. And so all those effects are kind of mixed in with, you know, shutdowns and end dates and impacts from the disease on human behavior and everything else that happened 2020 on. And so we don't really know what those provisions are going to do over time.
AW: What are some of the impacts that we can expect to see right away, or that maybe we are already seeing?
KB: On the natural resource side, we're already seeing lease sales being prepared, and so we'll get an idea of the amount of interest there is to develop those leases. And that process, of course, it starts immediately, but it takes a long time. Which is why, if you're looking at the bill and you wonder, ‘why do the royalties change in 2034?’ Well, new developments are going to take a while anyway. So that's less of a thing to worry about.
I could see potentially some of those indirect impacts from work requirements on Medicaid working through the system and potentially impacting Alaska. And this is all, of course, secondary to the tax cuts, which we'll see immediately. So for instance, a lot of medical providers don't operate in just one state, and a lot of insurance companies don't operate and want just one state. So to the extent that other people lose Medicare medical coverage in the lower 48 that may lead to the amount of uncompensated care, and then that can indirectly get placed in the rates that are charged to consumers in Alaska to make up for the cost of care in the lower 48 that's no longer being compensated. It's hard to tell how quickly healthcare companies would be pricing those into their prices they charge Alaskans, but that could begin earlier.
I think the biggest impact is going to be the impact on aggregate demand. We need to remember, this is a big tax cut. The intention is, on some level, to stimulate the economy. The effects from that stimulus are supposed to show up in the first year. So the 1% increased economic growth from higher aggregate demand happens basically in the first year, and then sort of peters out over time as people adjust to lower tax rates. So that effect we would expect to see early on, and that would, of course, shrink over time.
