Wednesday, February 23, 2011

Privatization 7: Debts -- Cut Borrowings

(Note: sources 3 graphs below are from the following: UK fiscal gap, from WSJ; European governments debts, from; US fiscal gap, from The Economist.)

Many, well majority, of governments around the world now are simply fiscally irresponsible. That is, they live beyond their means, they spend much larger than their revenues, year in and year out. And how do they fill in the annual gap between high spending and low revenues? Through borrowings, endless borrowings, so that their public debt keep rising and rising.

Take for instance, this annual gap between spending and revenues of the UK government starting in 2002. These are not absolute numbers but as percent of GDP. Nonetheless the gap is very clear. Such yearly gap would require yearly borrowing so that the cumulative debt should be rising every year.

Well, many European governments are notorious for accumulating huge public debt. See for instance the gross debt of six governments in that continent, in billion Euros. The trend is a shameless picture of ever-rising debt. So what sort of "fiscal discipline" that these governments can preach to other poorer countries through their foreign aid projects via the IMF, WB, UN, OECD and other agencies?

The US federal government is among the most notorious fiscally irresponsible ones around the world now. With budget deficit of about $1 trillion a year since last year or last 2 years, not much proof is needed.

Most governments would think of more taxes and regulatory fees to raise their revenues to retire some of the debt contracted by past administrations. They always think of how to pass the cost of wastes and inefficiencies (if not robberies) to the public, not to the government bureaucracies and politicians themselves.

One important measure that governments can do to significantly reduce their public debts and eradicate the need to raise more taxes and fees, is to privatize many of their assets and properties. Privatization, not more taxation, is a practical solution that many governments simply do not wish to consider.

One of my favorite free market think tanks around the world, the Americans for Tax Reforms, has produced a short and recent paper on how to reduce the US' public debt, Mr. President: Instead of Buying Time, Sell Government Assets & Rescind the "Stimulus" . Here they are:

Days gained on the federal debt: 12

Days gained on the federal debt: 15

Days gained on the federal debt: 57

Days gained on the federal debt: 1

5. Rescind spending programs that have been proven failures, such as the “stimulus” plan. The White House recently admitted that as much as $168 billion in funds remain unspent.
Days gained: 42

Total amount of government assets and rescinded spending: $536 billion
Total number of days gained before the debt limit must be raised: 127

Simply by selling the assets the government maintains, Congress could gain roughly four months and one week to debate comprehensive spending reform that would prevent lawmakers from fixating on the debt problem and refocus on the problem at hand: government overspending.
Amen to that!

See also:

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