The Public Policy

A Federal Black Friday

Raising taxes is not the only way big government could raise revenue.

By 11.30.11

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Black Friday this year was a roaring success. I have heard it said that it is called Black Friday not because it inspires black tempers among shoppers, but because it's the day on which businesses get out of the red and into the black. The federal government, of course, is deeply in the red. It could get, if not into the black, closer to it with a few well-placed sales of its own.

We have just been through an effort to reduce the deficit, of course. The obstructionist left-liberals on the late and unlamented Supercommittee were simply short on imagination. They appear to believe that the only way to raise revenue is to raise taxes. This is akin to a company in financial trouble saying that the only way to increase accounts receivable is to increase product sales. There are other things you can do. For instance, when Ford found itself short on cash during the crisis that hit the American auto industry, it sold off a prized asset, the Volvo brand, for $1.8 billion. This was a huge loss -- Ford paid $6.5 billion for Volvo in 1999 -- but it was a necessary way to raise needed revenue.

Congress has many similar options for raising revenue. The United States is sitting on a large hoard of assets. For instance, the federal government owns almost 30 percent of the land in the United States, most of which is controlled by the four federal land agencies and the Department of Defense. Many of these lands and other federal properties have high commercial potential. Selling some federal lands and buildings will put money in the federal treasury, put unproductive assets to use, and increase local property tax revenue as well as corporate and personal income taxes.

The Feds can also speed up the permitting process for new energy and extractive operations on federal lands. Congress can play its part by expediting the determination of companies' compliance with the exhaustive environmental assessment requirements of laws like the National Environmental Policy Act (giving a short but appropriate window for challenge, of course). Pipeline projects, mines, and even solar power plants could start operating much more quickly on federal lands in this way, bringing in substantial non-tax federal revenue streams.

A speed-up in permitting is long overdue. For example, the Environmental Protection Agency's (EPA) own Inspector General (IG) has just released a report that says the agency has been dragging its feet over the permitting of surface mines in the Appalachians. Almost half of the 185 permit applications reviewed by the IG took an average of 731 days to approve. The EPA says it should take just 144 days. That means that many projects endured almost two whole years of delay -- two years during which those project could have been providing jobs, resources, and federal tax revenue, but couldn't because of EPA ineptitude or possibly even intransigence.

The federal government holds many other valuable assets. Amtrak, for instance, is a continually loss-making service that would bring in cash if privatized. Not only are the track, trains, and stations worth something in themselves, but the opportunity to turn a money pit into a generator of tax revenue is one that many governments around the world have taken. Similarly, privatization of a host of government agencies would bring in revenue both immediately from the sale and into the future through taxation.

In many cases, agencies can be asked to cover their own costs by charging user fees. An example would be the U.S. Forest Service, which should charge users fair market value for recreation and other uses of the lands it manages. These fees would almost certainly recoup the service's $5 billion operating budget.

Not all such assets are tangible. The federal government controls access to the electromagnetic spectrum used for telecommunications. Auctions of spectrum have raised $60 billion in revenues to date. Estimates suggest a further $16 billion could be raised from future auctions.

When Margaret Thatcher embarked on her privatization program in the UK, she was criticized for "selling off the family silver." Yet by doing so she made the British family much more prosperous. From being the "sick man of Europe," when much of its economy was state-owned, Britain became one of the most competitive economies in the world over the next decade following the privatizations. America faces a similar opportunity. All that's needed is the political will.

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About the Author

Iain Murray is Vice-President for Strategy at the Competitive Enterprise Institute.