Trump’s Debt Idea
The federal debt’s $20 trillion, and the fastest growing part of it — entitlements (which make up 60% of all federal spending) — are surging as baby boomers retire in droves. Interest on all this red ink is piling up and rising interest rates are only going to make things worse. So Uncle Sam’s broke, right? That’s the common view.
Not so fast. If you’re only looking at the liabilities side of a company’s balance sheet, you only get half the story. At the end of its last fiscal year, Apple AAPL, -0.19% had $75 billion in long-term debt. Think Apple’s broke? Of course not: the other side of its balance sheet shows that the company is sitting on tons of assets.
Yet this is how we evaluate the federal government. We look at its liabilities while ignoring its assets. Think the feds are broke? Not so fast, says a 2013 report from the Institute for Energy Research, which points out that the government owns “above ground” assets such as “buildings, lands, roads, railroad infrastructure, levees, dams, and hydroelectric generating facilities, to name just a few, many of which are underutilized,” and “below ground” assets such as “rights to mineral and energy leases, from which they receive royalties, rents, and bonus payments.”
Let’s focus on a giant part of this: Mineral rights for oil and gas reserves. The IER report said they’re worth $128 trillion. But that was January 2013. Even though oil prices CLK7, +0.99% have dropped 50% and gas prices NGK17, +0.03% have fallen some 15% since, that’s still, as Donald Trump might say, a yuge amount of money.
Which brings us to one of the president’s more intriguing ideas: why not sell off some of those rights and pay down part of the debt?
Candidate Trump sold this in his usual simplistic terms: I’m a real estate guy, I know how to make the deals. We pay down the debt while putting Americans back to work in the oil and gas industry. We become energy independent and screw the Middle East. What’s not to like?