Time to Privatize Federal Assets

July 11, 2011

Although the issue is seldom discussed, the federal government currently owns more than $1.6 trillion of liquid assets.  Free market economists have a general presumption that private owners, relying on the profit-and-loss test, allocate resources to their most valuable uses.  Especially given the current budget crisis, now is an excellent time to begin privatizing Uncle Sam's colossal holdings, says Robert P. Murphy, a senior fellow in business and economic studies at Pacific Research Institute, and an economist with the Institute for Energy Research.

The government is currently holding assets that clearly belong in the private sector, regardless of the fiscal situation.  For example:

  • As of June 3, 2011, the Treasury reported international reserve assets of $144.2 billion.
  • According to the Federal Reserve, as of the end of the first quarter in 2011, the federal government held $786 billion in credit-market instruments.
  • As of late November 2010, the strategic petroleum reserve held 726.5 million barrels of crude -- with the price of crude hovering around $95 per barrel, this reserve is worth about $69 billion.

An aggressive program to sell a large portion of these holdings over the next few years, coupled with equally aggressive spending cuts, would allow the government to honor its existing interest payments without raising taxes or going deeper into debt.  Even putting aside the current budget crisis, many economists would argue that the federal government really has no business owning hundreds of billions of dollars of corporate securities, crude oil and real estate, says Murphy.

Source: Robert P. Murphy, "Privatizing Federal Government Assets," Library of Economics and Liberty, July 4, 2011.

For text:

http://www.econlib.org/library/Columns/y2011/Murphyprivatization.html

 

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