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To solve our debt problems, let’s sell Alaska

By Steven Mufson,December 14, 2012

(Page 3 of 3)

The deaccessioning of Alaska would also slash the interest the government pays on the national debt. Under the budget plan Obama proposed in February, those interest payments would otherwise grow to more than $600 billion in 2017, and in 2018 they would become the third-biggest item in the federal budget, after defense and Social Security.

There would, of course, be objections. Some Alaskans might want to resettle in the Lower 48. Others might become squatters. Environmentalists would certainly squawk. Alaskan Inuits might not want to give up their special status, and certainly, neither the Russians nor the Chinese would want to create yet one more unhappy autonomous region.

And then there is the $16 trillion question: How much time could be bought by selling Alaska? How long would it take before the federal government would be groaning once again under an unsustainable debt?

According to Treasury, as of Nov. 30, there was $11.6 trillion of federal debt held by the public. That comes to about 75 percent of GDP — uncomfortably close to the 90 percent level that the respected Harvard economists Kenneth Rogoff and Carmen Reinhart say is an unmanageable albatross that damages growth and threatens national solvency.

Add in the $4.8 trillion that on paper is owed to, and not actually sitting in, the Social Security fund, and the national debt comes to $16.369 trillion, more than GDP and just $63 billion shy of the statutory limit. The Republicans are threatening not to budge on that limit.

Say we get a premium price of $4 trillion for Alaska. That would slash the debt held by the public to $7.6 trillion, about half of GDP.

But not for long. The Obama budget proposal forecast that the deficits from 2013 through 2017 would add back $3.44 trillion to the national debt. Over the next decade, deficits would total $6.7 trillion. We’d be bumping our heads against the ceiling again in six years — assuming, plausibly, that Democrats and Republicans can’t agree on a budget deal and fiscal deadlock continues.

And at that point, we wouldn’t have Alaska anymore.

The solution then would be, as Millstein suggested, to sell more assets. After all, that’s what happens in the private sector: Companies that run in the red are forced to restructure, trim unnecessary costs and focus on their core competencies.

With manifest destiny looking manifestly unaffordable, the federal government could auction off more territory. There’s plenty there. The government owns 40 percent or more of California, Nevada, Oregon, Idaho, Arizona, New Mexico and Wyoming. Then there are the oil-rich federal waters of the Outer Continental Shelf.

Millstein said he proposed a federal asset sell-off to embarrass “the current crowd” of lawmakers and administration budget-writers. He wanted to suggest that things are so bad, it could come to this.

“I think selling all this stuff would be criminal, but in the absence of compromise on spending and tax policies, it may be necessary, even if totally humiliating,” he said.

It all depends on the budget talks over the next two weeks and the tax reform efforts next year. Our fate — Alaska’s fate? — is in Washington’s hands.

Treadwell said, “Let me know when we can put together a bid.”

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