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Unprecedebted Sellout?

Monday December 31st, 2012   •   Posted by K. Lloyd Billingsley at 7:30am PST   •  

On December 26, one day after Christmas, Treasury Secretary Timothy Geithner broke a blockbuster story. On New Year’s Eve, December 31, 2012, the United States will reach its $16.4 trillion borrowing limit and will have to undertake “extraordinary measures” to avoid default. The debt ceiling had been troubling Steven Mufson of the Washington Post and prompted him to propose “a simple, elegant option that involves no tax increases, no spending cuts and just a bit of imagination. Sell Alaska. That’s right. Put the entire state — from Juneau to Deadhorse, from the Bering Strait to the Beaufort Sea — on the auction block.” The idea, he said, is “no more absurd than the spectacle taking place right now as we skid closer to the ‘fiscal cliff.’”

Alaska could fetch at least $2.5 trillion, Mufson argues, because it has 3.7 billion barrels of proven oil reserves and unexplored areas could render as many as 20 billion barrels. Further, new fracturing techniques could yield yet more supplies from the large shale areas. The state also boasts more than $300 billion worth of copper, gold and molybdenum at the proposed Pebble mine in southwestern Alaska, and the state’s forests hold other riches. Russia, which sold Alaska to the United States, might be first in line to buy it back. China also might make good use of it, and so might one of the OPEC countries.

A move such as selling Alaska, Mufson contends, is not unusual in other parts of the world. “When governments spend beyond their means,” he wrote, the International Monetary Fund offers aid on the condition that the government sell “state-owned assets” like airlines or phone companies. He notes that after the fall of Communism, Eastern European countries sold off state-owned enterprises. And history provides other examples. In 1803, after his setback in Haiti, Napoleon decided to sell the Louisiana Territory to the United States, rather than deal with the problems of a far-flung empire.

The parallels are a stretch but Mufson nails the cause of massive debt – governments spending beyond their means. That’s why the United States has a debt ceiling of $16.4 trillion and must take extraordinary measures or default. Munson, ironically, made a strong case for developing Alaska’s vast oil and mineral resources. The proceeds would boost the economy and help the nation pay down the debt.

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December 2012