Tuesday, August 16, 2011

A Modest Proposal to Reduce the Debt

In the early days of the United States, the states sold their land and used the revenues from land sales to pay their debts. The problem that the United States government faces now is not that it owes money, but that it owes too much money. If half the debt were to be paid off, then the government would be solbent enough to restore full faith in our credit. I suggest that the federal government follow the precedent of the individual states in selling off property. I suggest we sell off something worth seven billion dollars.

I suggest we sell Texas!

Recall, the United States bought the Louisiana Territory, Florida, Alaska and made the Gadsden Purchase from other nations. It bought the New Mexico Territory from the Republic of Texas. In each case, the purchase included sovereignty over the land and the people of the purchased area. So lets sell a big state. The Civil War demonstrated that states, including Texas which tried, did not have the right to secede from the Union. However, since the Constitution has been demonstrated to allow the United States to buy territory we may assume that the sale of territory would also be constitutional.

Texas has a total area of 171 million acres. So how much could we get for it?

Remember the story of the Texas plutocrats meeting in an exclusive club in downtown Dallas. They start to compare their land holdings. The first says he has a ranch of 100,000 acres. The second scoffs, allows how his is not as big as the King Ranch, but is about 200,000 acres; that is a real ranch. The third huy says he has barely 500 acres. Smiling, the owner of the fifth of a million acre ranch asks what the little piece of land was called. The answer was "downtown Dallas".

The point of the story is that while a lot of Texas land is not worth very much per acre, some of it would be quite expensive to purchase. So lets put the value at $7 trillion!

If we think of another precedent, the British Empire acquired India by the Government of India Act of 1858, before which India was ruled by the East India Company. Lets reverse the process and privatize Texas. The United States could simply form the "Texas Corporation" with a large number of shares, value those shares at seven trillion dollars, and trade them at face values to the holders of half the federal debt. The company would hold sovereignty over the land and people of Texas.

There continues to be a secession movement in Texas, and indeed there was a secession rally there earlier this year. Since so many people in Texas want to secede, they should not object if we sell the state. A lot  of Texans might also be pleased by turning the state into a corporation. Another advantage is that Texans would loudly argue that Texas was worth more than $7 trillion, and that turning over the state to our debtors was not a default on our sovereign debt.

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