US Government Debt Different - Finance Department - University of ...

Jim Millsteinfundamental disagreements over the appropriate level of expendituresin social security, health care, and defense—by far the largestcontributors to Federal spending. Second, US policymakers sharethe same fear as their European peers: tightening too fast, too quicklywould likely send the economy into another recession. Each side ofthe political aisle highlights that risk in defending its refusal to cutspending, on the one side, and in refusing to raise taxes, on the other.As a result, we are left with a budgetary stalemate and seemingly noalternative but to sell assets to bring our debt levels down to sustainablelevels in the medium term.161Brief History of Sovereign Asset SalesSovereigns have long relied on asset sales to raise revenue and adjustfiscal balances, and more recently to promote economic efficiency,competition, and the development of their capital markets.Land sales are the most dramatic examples. In the 12th century,King Richard I sold real property throughout England to finance hisCrusade, famously stating: “I would sell London, if I could find apurchaser.” In the 19th century, Napoleon sold the Louisiana Territoryto pay off debts incurred to fund his military campaigns, whileRussia sold the Alaska Territory to avoid spending money to have todefend it against the British.Mineral rights, including oil and gas rights, have become increasinglyvaluable over the past century and an alternative to outright landsales. For example, Colombia has granted foreign corporations oilexploration and production rights on over 90 million acres of land,as well as mining rights on another 12 million acres and farmingrights on other land. That represents mineral and agricultural rightson 40 percent of the country’s land. In order to fuel its economicgrowth and satisfy its growing demand for industrial inputs, Chinahas provided cheap funding to its nascent private sector and to itsstate-owned enterprises to obtain significant mineral rights in Africa,Latin America, Southeast Asia, Iran, and Russia.