Today is the day the United States government will officially exceed its statutory debt cap, set at $14.3 trillion. The President and some of his allies in Congress, loath to address their spending addiction, claim this amounts to a “default” and threatens the fiscal credibility of the United States. In reality, the unsustainable growth in spending over the past few years is what undermines the country’s economic posterity.
Federal government revenues currently total ten times more than what is necessary to pay debt obligations. Below are seven actions the Obama administration could take instead of raising the debt limit:
- Swap out debt. Currently, the government sits on massive investments in various funds, and can exchange liabilities from debt that counts against the limit to debt that doesn’t. All told, federal funds in various accounts, coupled with federal financing gimmicks, amount to almost a trillion in assets and borrowing flexibility.
- Get out of the bailout business. Simply by selling the remainder of its General Motors shares, the government could net $18 billion in savings. The government should also demand GM pay back the $30 billion in outstanding assistance from TARP.
- Redeem TARP assets in full. As of last fall, the government is owed $179.2 billion in outstanding TARP loans plus $142.5 billion in equity investments that could be liquidated.
- Lease government lands for energy production. The federal government currently owns over 85 million acres of untapped oil and gas reserves. Immediate income from auctioning federally-owned leases could total $61 billion.
- Sell public lands. The federal government currently owns over 650 million acres of land – almost 30 percent of all land in the United States. Based on land values estimated on past exchanges, selling federal lands (exempting National Parks) could be worth as much as $230 billion. This doesn’t include the over $25 billion spent on maintenance or $347 million spent on acquisition annually.
- Reform federal property management. The federal government is estimated to hold 900,000 buildings and structures. GAO has warned that real property owned by the government is consistently underutilized or abused, including the government’s maintenance of its real property as a part of its High-Risk Series since 2003. Selling nonperforming real estate assets and reforming federal real estate management would save at least $4 billion.
- End the spending spree. If spending continues on its current trajectory, debt is expected to consume the entire economy in the next two decades. Congress must use the debt limit debate to refocus on the government’s overspending problem, and make meaningful institutional reforms to establish fiscal restraint in federal budgeting. These reforms should look at constitutional spending limits, reforming budget rules and federal bookkeeping and statutory spending caps.