Defusing the U.S. Debt Time Bomb

Politicians in the U.S. capital have long avoided proposing solutions to America’s worsening fiscal crisis—a national debt that since 2007 has more than doubled to nearly $20 trillion. Although some policymakers are ignorant of the grave risks it poses, others fear that initiating an honest discussion would cost them reelection.

Fortunately, the solution to our debt problem may be easier than most people realize—and it need not rely on politically unpopular tax hikes and deep spending cuts. (This isn’t at all to say that major spending and tax reductions should not also be pursued.)

We believe the most promising approach to paying down the national debt involves raising revenue by selling federally owned assets, including buildings, land, infrastructure, and mineral deposits.

The U.S. government’s holdings are enormous. The Federal Real Property Profile Open Data Set (FY2015) reported 769,000 federal buildings and other structures plus 49 million acres of federal land (excluding real property related to national security). However, it left out the most valuable asset class of all—energy deposits on or under federal property. This includes vast reserves of technically recoverable oil (1,194 billion barrels), natural gas (2,150 trillion cubic feet), and coal (7.4 billion tons).

If federal energy reserves fetched even one-third of these commodities’ current market prices, the U.S. Treasury would bring in $23.3 trillion—more than our $20 trillion national debt. No other category of real property comes close to helping the feds raise the revenue necessary to pay off the debt.

Of course, any revenue estimate from asset sales is fraught with uncertainty. Prices, costs, technology, consumer demand, and discount rates are subject to change. Moreover, a large and rapid sell-off would lower asset values. Still, regardless of the price the marketplace would ultimately clear and set for access (or exploration) rights to energy deposits, this strategy has superior potential for defusing the debt crisis.

Is it a politically viable strategy? We believe history offers grounds for optimism.

In 1987, President Reagan signed legislation that gave homeless- assistance organizations first dibs on purchasing excess federal properties. Nearly thirty years later, such groups supported the Federal Asset Sale and TransferAct,whichenhancedtheiraccesstoacquisitions.Thatbill,which President Obama signed in December 2016, is expected to raise at least $8 billion—exclusively for debt reduction—through the sale of unneeded, underutilized surplus federal buildings and associated real estate.

The lesson is clear: Creative legislation can incentivize political coalitions to support federal asset liquidation. Properly structured, such legislation can serve the interests of many, without harming the interests of any.

Endangered Species Act: The folly of this well-meaning law is well known. (“Shoot, shovel, and shut up,” anyone?) Instead of the current ap- proach, the EPA could set up programs designed to align the incentives of landowners with the well-be- ing of endangered species. The agency could, for example, set up a stewardship incentives program that rewards property owners with tax credits for habitat maintenance or improvements.

Clean Air Act: Although one provision of this law requires the EPA to monitor the impact of air-quality regulations on employment, the agency neglects the cumulative impact across the broader economy. Yonk would require the regulators to publish thorough assessments of the social and economic dimensions of their actions as well as the environmental impacts.

Energy Policy Act: Few programs are more wasteful than taxpayer subsidies for technologies that cannot pass the market test. One example of such waste that Yonk would eliminate is the Renewable Fuel Standard, which requires ethanol to be mixed with domestic fuels. It’s a subsidy for a few large agricultural and ethanol-refining corporations, but the environmental benefit is so small that even the coalition that first advocated for it has dried up.

“There is much more to be done, but these five changes would be excellent starting points,” Dr. Yonk writes. “Reformers who keep [a few key] prin- ciples in mind can help ensure that environmental policy will be made more pragmatic, effective, and intellectually honest.”

See Five Ways Trump Can Improve Environmen- tal Policy, by Ryan M. Yonk, at www.independent. org/publications/executive_summaries/

We believe the right kind of asset-liquidation proposals could gain broad support. All that awaits is for members of the public to get the discussion going. Policymakers who seize the opportunity will be rewarded, and any explosion of the national-debt time bomb could be avoided.