Trump’s Debt Idea

Selling Fed AssetsThe 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?

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  • PT

    Believe it or not: I like the idea. But as with all schemes involving the Swamp, the devil is in the details. As long as ALL of the money went to paying down the national debt, I am for it. There is not a democrat or lobbyist (other than the oil and gas) that will go along with it. And even if they did, just like the democrats robbed the social security fund back in the “old days”, they will steal this money to give to illegals and other vote buying groups.

  • LM

    Then….the system has to collapse eventually, the debts are not paid (or paid in worthless paper scrip, such as Venezuelan pesos today) and a new money and a new order is invented (or faked)/ No guarantee that the new order will be better than the old over the long haul. The reason is because the species is inherently and deeply flawed. The U.S. Constitution, and the concepts of liberty and the ideals of the Enlightenment, are too good and the species remains too flawed for the ideals to succeed for long…… even the limited-government republic’s founders, when in power, will become crooked, lying thieving degenerates.

  • PT

    Selling Federal Assets to pay off the National Debt: a shell game?

  • LM

    You’re right, a shell game. They won’t do it and the Democrats would demagogue it to death.

    The managing financial report would be a cash flow statement. Cash inflow goes to extinguish existing debt……we want to see total debt decreasing in line with the cash inflow from selling the assets. That will never happen because they will add new debt from ongoing yearly deficits.

    Here’s an even greater shell game for the debt. Place a value on all the government’s land and in-ground natural resources that can be exploited. Put that value on the Federal balance sheet and voila’, the debt is cancelled out and the new assets. The government is no longer running $20 trillion in national debt. Shell game. Bernie Madoff would be proud.