Asset Sales:

 

Elsewhere, I have proposed a comprehensive economic agenda encompassing: tax and regulatory reform that revitalizes our economy: welfare reform that covers the basic needs of those unable to provide for themselves while providing an escape from the poverty trap: true education reform that builds the capacity of all of our citizens for thriving in an ever-changing world; spending cuts that slash waste and trim programs that cannot stand on their merits; and a balanced-budget amendment that results in the federal government living within its means and stops pushing off to future generations the cost of our extravagant spending.

 

Here, I am proposing sales of various federal assets to not only help bridge the gap as we transition from the steady diet of budget deficits to budget balance but also to place assets in the hands of those who can manage them best. Asset sales will also hold down the amount of federal debt.  Under my comprehensive plan for tax reform and spending cuts, deficits will disappear.  However, it will take several years before we reach a balanced budget and can lock budget balance in with my balanced budget amendment.  In the meantime, the most prudent way to cover the transitory shortfalls will to rely in part on asset sales.  The federal government has massive amounts of assets, including land and mineral rights, which do not serve the interests of taxpayers.  They have continued to be held by the federal government because very few have seriously questioned whether these assets serve a useful public purpose.

 

As a general matter, I do not believe that turning to sales of assets should be an excuse to be profligate spenders or to avoid reining in spending when it exceeds the government’s income—tax revenues.  This has not worked for us as individuals nor has it worked for nations that have been on similar spending sprees— living beyond their means without regard to the painful consequences for generations down the road.  However, I do believe that there are certain circumstances in which large-scale asset sales can serve the American public well and hold down the level of public debt.  In particular, I see asset sales to be appropriate for use in bridging our path to a balanced budget, and also to pay down our bloated federal debt.

 

In this context, our choice is whether to continue to expand our national debt—pushing further beyond $19 trillion—or to rely on selective asset sales as a bridge.  In principle, we need to be asking ourselves what kind of return do we as taxpayers receive on the various assets that we own at the national level and how does this compare with the alternative, the cost of issuing more federal debt?  Moreover, we need to ask whether the resources that we sell might be better managed if they are in other hands.  Indeed, privatization will complement my tax and deregulation plans in breathing new life into our economy.  Further, we can eliminate the substantial budgetary cost of managing these resources, which is high even though these assets are generally managed poorly. 

 

Experience in the many other countries where privatization has proceeded much further than in the United States indicates clearly that privatization improves the performance of the assets involved.  Before proceeding farther, I need to state clearly that I am not proposing the sale of land that is required by our military or of our cherished national parks.

 

With this in mind, I am proposing that we bridge the path to a balanced budget and begin the process by selling assets that represent low-hanging fruit, described below.  Beyond these, I will direct the various federal departments and agencies to compile a thorough and up-to-date inventory of all federal assets.  The entire inventory will be subject to cost-benefit scrutiny by professional outside analysts, with an eye to selling assets that cannot meet this test. 

 

Basically, a consensus has emerged from various studies that have been conducted by outside organizations suggesting that among the first to be sold should be: 

 

Federal lands and mineral rights.  The federal government owns roughly 640 million acres of land, more than one-fourth of all land in the United States, and has title to millions of subsurface acres that have bounteous natural resources (notably oil, natural gas, and coal).  Sales of just a small fraction of these land and mineral rights will easily raise $500 billion.   

 

Gold. The federal government owns about 9,000 tons of gold.  At today’s prices, this would fetch more than $200 billion.

 

Federal enterprises. The federal government owns a number of enterprises that should be sold for cash, which would also improve the service that they provide to the public.  Included here are: the TVA and the five power marketing administrations, the Postal Service, air traffic control, dams, various labs and research centers, Amtrak and rail infrastructure, NASA launch facilities, and the Corporation for Public Broadcasting.  Sale of these enterprises would bring in at least $80 billion.

 

Federal buildings. The federal government owns roughly 300,000 buildings, many vacant or greatly underutilized.  Selling those that cannot pass quick muster could yield another $50 billion.

 

Loans. The federal government holds over $1 trillion various consumer, mortgage, and other loans and is an ineffective manager of these assets.  A good portion of these could be sold readily.

 

Putting these together, we can count on asset sales to raise at least $1 trillion to bridge the gap to a balanced budget, enabling us to avoid piling on more debt while putting these assets in hands that can put them to better use.  Once we subject all other assets to careful cost-benefit analysis, there will be many more to be sold—enabling us to pay down federal debt dollar for dollar.

 

Beyond asset sales, my administration will be looking for new and creative ways for financing of physical infrastructure.  Modern technology has opened up new doors for better ensuring that those who benefit the most from infrastructure projects are the ones who pay the most.  For example, electronic monitoring equipment can be used to identify those who travel over a bridge and can charge them for usage.  In this way, those who are not users would not be forced to contribute to the costs of infrastructure enjoyed by others.  This will also relieve pressure on government budgets, while providing new incentives for maintaining and improving infrastructure.

 

A reasonable question arises about whether we can expect to get fair value for the sales of the federal assets that I am proposing? It is necessary that we develop an efficient, transparent mechanism for ensuring that the American people get the best price for each asset that is sold and there is plenty of transparency and accountability for all those involved.  Some assets are highly “liquid” such as gold, others less liquid and more prone to bureaucratic delays before sale such as federal lands.  With modern portfolio arrangements, we can insure that “fire sales” and low sale values are eliminated on specific assets, as well avoiding any “cash- flow” gaps that may arise with potential long delays with more problematic and illiquid asset sales.

 

As a starting point, I intend to set up a system modeled after the Resolution Trust Corporation (RTC) that was used more than a quarter of a century ago to dispose of failed savings and loans and their assets.  The RTC relied on both the public and private sectors to dispose of a substantial volume of assets of all sorts—such as mortgages, commercial properties, and golf courses—in only a few years.  The RTC generated widespread buyer interest and relied on open-outcry auctions, sealed bids, and securitizations for selling assets.  And it was subject to stringent reporting and auditing standards.  This episode demonstrated that modern financing tools, along with well-designed transparency and accountability, can be very effective in selling off assets owned by the federal government.

Asset Sales:

Bridging the Gap

 

Elsewhere, I have proposed a comprehensive economic agenda encompassing: tax and regulatory reform that revitalizes our economy: welfare reform that covers the basic needs of those unable to provide for themselves while providing an escape from the poverty trap: true education reform that builds the capacity of all of our citizens for thriving in an ever-changing world; spending cuts that slash waste and trim programs that cannot stand on their merits; and a balanced-budget amendment that results in the federal government living within its means and stops pushing off to future generations the cost of our extravagant spending.

 

Here, I am proposing sales of various federal assets to not only help bridge the gap as we transition from the steady diet of budget deficits to budget balance but also to place assets in the hands of those who can manage them best. Asset sales will also hold down the amount of federal debt.  Under my comprehensive plan for tax reform and spending cuts, deficits will disappear.  However, it will take several years before we reach a balanced budget and can lock budget balance in with my balanced budget amendment.  In the meantime, the most prudent way to cover the transitory shortfalls will to rely in part on asset sales.  The federal government has massive amounts of assets, including land and mineral rights, which do not serve the interests of taxpayers.  They have continued to be held by the federal government because very few have seriously questioned whether these assets serve a useful public purpose.

 

As a general matter, I do not believe that turning to sales of assets should be an excuse to be profligate spenders or to avoid reining in spending when it exceeds the government’s income—tax revenues.  This has not worked for us as individuals nor has it worked for nations that have been on similar spending sprees— living beyond their means without regard to the painful consequences for generations down the road.  However, I do believe that there are certain circumstances in which large-scale asset sales can serve the American public well and hold down the level of public debt.  In particular, I see asset sales to be appropriate for use in bridging our path to a balanced budget, and also to pay down our bloated federal debt.

 

In this context, our choice is whether to continue to expand our national debt—pushing further beyond $19 trillion—or to rely on selective asset sales as a bridge.  In principle, we need to be asking ourselves what kind of return do we as taxpayers receive on the various assets that we own at the national level and how does this compare with the alternative, the cost of issuing more federal debt?  Moreover, we need to ask whether the resources that we sell might be better managed if they are in other hands.  Indeed, privatization will complement my tax and deregulation plans in breathing new life into our economy.  Further, we can eliminate the substantial budgetary cost of managing these resources, which is high even though these assets are generally managed poorly. 

 

Experience in the many other countries where privatization has proceeded much further than in the United States indicates clearly that privatization improves the performance of the assets involved.  Before proceeding farther, I need to state clearly that I am not proposing the sale of land that is required by our military or of our cherished national parks.

 

With this in mind, I am proposing that we bridge the path to a balanced budget and begin the process by selling assets that represent low-hanging fruit, described below.  Beyond these, I will direct the various federal departments and agencies to compile a thorough and up-to-date inventory of all federal assets.  The entire inventory will be subject to cost-benefit scrutiny by professional outside analysts, with an eye to selling assets that cannot meet this test. 

 

Basically, a consensus has emerged from various studies that have been conducted by outside organizations suggesting that among the first to be sold should be: 

 

Federal lands and mineral rights.  The federal government owns roughly 640 million acres of land, more than one-fourth of all land in the United States, and has title to millions of subsurface acres that have bounteous natural resources (notably oil, natural gas, and coal).  Sales of just a small fraction of these land and mineral rights will easily raise $500 billion.   

 

Gold. The federal government owns about 9,000 tons of gold.  At today’s prices, this would fetch more than $200 billion.

 

Federal enterprises. The federal government owns a number of enterprises that should be sold for cash, which would also improve the service that they provide to the public.  Included here are: the TVA and the five power marketing administrations, the Postal Service, air traffic control, dams, various labs and research centers, Amtrak and rail infrastructure, NASA launch facilities, and the Corporation for Public Broadcasting.  Sale of these enterprises would bring in at least $80 billion.

 

Federal buildings. The federal government owns roughly 300,000 buildings, many vacant or greatly underutilized.  Selling those that cannot pass quick muster could yield another $50 billion.

 

Loans. The federal government holds over $1 trillion various consumer, mortgage, and other loans and is an ineffective manager of these assets.  A good portion of these could be sold readily.

 

Putting these together, we can count on asset sales to raise at least $1 trillion to bridge the gap to a balanced budget, enabling us to avoid piling on more debt while putting these assets in hands that can put them to better use.  Once we subject all other assets to careful cost-benefit analysis, there will be many more to be sold—enabling us to pay down federal debt dollar for dollar.

 

Beyond asset sales, my administration will be looking for new and creative ways for financing of physical infrastructure.  Modern technology has opened up new doors for better ensuring that those who benefit the most from infrastructure projects are the ones who pay the most.  For example, electronic monitoring equipment can be used to identify those who travel over a bridge and can charge them for usage.  In this way, those who are not users would not be forced to contribute to the costs of infrastructure enjoyed by others.  This will also relieve pressure on government budgets, while providing new incentives for maintaining and improving infrastructure.

 

A reasonable question arises about whether we can expect to get fair value for the sales of the federal assets that I am proposing? It is necessary that we develop an efficient, transparent mechanism for ensuring that the American people get the best price for each asset that is sold and there is plenty of transparency and accountability for all those involved.  Some assets are highly “liquid” such as gold, others less liquid and more prone to bureaucratic delays before sale such as federal lands.  With modern portfolio arrangements, we can insure that “fire sales” and low sale values are eliminated on specific assets, as well avoiding any “cash- flow” gaps that may arise with potential long delays with more problematic and illiquid asset sales.

 

As a starting point, I intend to set up a system modeled after the Resolution Trust Corporation (RTC) that was used more than a quarter of a century ago to dispose of failed savings and loans and their assets.  The RTC relied on both the public and private sectors to dispose of a substantial volume of assets of all sorts—such as mortgages, commercial properties, and golf courses—in only a few years.  The RTC generated widespread buyer interest and relied on open-outcry auctions, sealed bids, and securitizations for selling assets.  And it was subject to stringent reporting and auditing standards.  This episode demonstrated that modern financing tools, along with well-designed transparency and accountability, can be very effective in selling off assets owned by the federal government.

 

 

 

 

 

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