Category — Strategic Petroleum Reserve
As the battle rages over the federal debt ceiling, more pundits and even some politicians are taking a serious look at a solution that any private organization would have considered from the beginning: selling off assets to satisfy creditors.
Contrary to the doomsday rhetoric of Treasury Secretary Geithner, it is simply not true that the Congress needs to raise the federal debt ceiling, lest Uncle Sam default on existing obligations. On the contrary, large (but feasible) spending cuts, coupled with aggressive privatization of federal assets, would balance the books. There is no need to raise taxes or the debt ceiling.
The bonus to privatization is also market entrepreneurship in place of bureaucratic management. So the asset transfer would be good for both taxpayers and the private sector writ large.
I’ll outline the numbers, then focus on the possible objection to privatizing the Strategic Petroleum Reserve, a topic that should be of the most interest to readers of Master Resource.
The Scope of the Problem
When analysts ran the numbers about a month ago, the federal government was projected to spend about $750 billion more in the remainder of Fiscal Year 2011 (which ends on September 30) than it would collect in revenues. Therefore, in order to avoid raising the debt ceiling without defaulting on interest payments on existing debt, the feds would need to cut spending and/or increase revenues by that amount, just over the next four months.
In a political culture where agreements shaving a few hundred million dollars are touted as radical measures, the prospect of slashing $750 billion seems inconceivable. Indeed, this is why Brad DeLong and other leftist commentators think it is obvious that the “adult” thing to do is raise the debt ceiling already, since they can see no other alternative. [Read more →]
June 2, 2011 10 Comments