Selling it during a budget crunch would seem a sure bet to incite derision. The satirical newspaper The Onion recently ran a story in which President Obama vowed to balance the budget through spending cuts, tax increases and a daring midnight heist of Fort Knox. (“I’ve got the blueprints and I think I found a way out through a drainage pipe.”)
A sudden gold sale would also postpone only briefly — two or three months, perhaps — the deadline for raising the debt limit.
“It’s merely a procrastination technique. It would throw markets into turmoil, and you’d have to accept fire-sale prices,” said the senior administration official.
But some economists want to liberate the bullion.
“Why not?” asks Chris Edwards, director of tax policy studies at the libertarian Cato Institute. “I think it shows that the government is getting serious about reforming itself.”
The debt limit, or debt ceiling, is set by Congress as the maximum debt the federal government can carry. Congress last raised the limit in February 2010, to just under $14.3 trillion (which includes money the Treasury owes to government trust funds, such as Social Security). The Treasury Department projects that the limit will be reached Monday, but that “extraordinary measures” that involve the shifting of money among different accounts can keep the government flush until Aug. 2.
The Obama administration has said that it needs to borrow an average of $125 billion a month to keep paying its bills and meeting its obligations under current law. Although the raising of the debt limit has historically been viewed as a noxious necessity — to fail to do so would raise the specter of the government defaulting — Republicans in Congress have insisted that any increase this time be tied to long-term spending cuts.
But even approaching the debt-limit deadline can spook investors, Treasury officials say, and if investors become worried about the U.S. ability to pay off its debts, they’ll demand higher interest rates before buying Treasury notes.
Fraser of Heritage fired back: “What’s going to spook the markets is not doing anything about the budget trajectory we’re on.”
The Obama administration is not opposed, in principle, to asset sales. The Treasury department is steadily unloading the mortage-backed securities it acquired in the 2008 economic meltdown. The administration also has a program known as the Civilian Property Realignment Act that would sell some assets. But these asset sales aren’t connected to the debt-limit debate, and aren’t framed as a way of significant source of revenue for easing budget deficits.
One prominent economist, the Urban Institute’s Eugene Steuerle, said that selling assets doesn’t really help the government’s balance sheet in a strict sense.
“In a normal accounting system, if you sell an asset, it doesn’t add to your income,” Steuerle said.
The ultimate government asset is the ability to tax a large, wealthy population. Households and non-profit institutions in the U.S. collectively were worth about $57 trillion at the end of 2010, according to Steuerle. And that doesn’t count the intangible assets — education, the rule of law, an entrepreneurial culture.
“The biggest asset we have by far is our human capital – our abilities,” Steuerle said.