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Don’t Tax You, Don’t Tax Me, Sell the Gold Behind the Tree?

May 16th, 2011 . by economistmom

fort-knox-behind-trees

I thought Sunday’s front page story by Lori Montgomery in the Washington Post–on the idea of reducing federal government retirement benefits–was just the latest (depressing) installment of politicians avoiding broad-based, fundamental reforms that are needed to get projected budget deficits down to economically-sustainable levels.  Government workers are to the conservatives what really rich people and evil corporations (be they oil and gas ones or financial/insurance ones) are to liberals:  not a middle-class, Main-Street, majority of voters, and hence a group those policymakers are willing to say ought to pay for deficit reduction.

But today’s (Monday’s) front page story highlights an idea that goes way beyond the “tax the guy behind the tree” attitude.  As Joel Achenbach explains:

With the United States poised to slam into its debt limit Monday, conservative economists are eyeballing all that gold in Fort Knox. There’s about 147 million ounces of gold parked in the legendary vault. Gold is selling at nearly $1,500 an ounce. That’s many billions of dollars in bullion.

“It’s just sort of sitting there,” said Ron Utt, a senior fellow at the Heritage Foundation. “Given the high price it is now, and the tremendous debt problem we now have, by all means, sell at the peak.”

Good idea?  Well, Treasury and other Administration officials don’t seem to think so (emphasis added):

[T]hat’s cockamamie, declares the Obama administration. Mary J. Miller, Treasury’s assistant secretary for financial markets, said the U.S. should sell assets in an orderly, “well-telegraphed” manner, not in a “fire sale” atmosphere with a debt limit deadline accelerating the process.

“It would be bad for the taxpayers. It would be bad for the markets,” Miller said.

Another senior administration official, not authorized to speak for attribution, described the situation more bluntly: “Selling off the gold is just one level of crazy away from selling Mount Rushmore.”

And this qualifies as an example of how real life is often stranger than fiction, when, as Achenbach points out, the Onion knew about this “use the gold” policy solution before the Post did:

Although the country does not use the gold for anything, Treasury officials believe that selling it could create the impression of desperation, and thereby rattle the markets. Inert though it may be, the mountain of hidden gold may serve an indefinable psychological function.

Selling it during a budget crunch would seem a sure bet to incite derision. The satirical newspaper The Onion recently ran a story in which President Obama vowed to balance the budget through spending cuts, tax increases and a daring midnight heist of Fort Knox. (“I’ve got the blueprints and I think I found a way out through a drainage pipe.”)

A sudden gold sale would also postpone only briefly — two or three months, perhaps — the deadline for raising the debt limit.

Ah, so much drama (and comedy) for so little help with our real debt problem.

8 Responses to “Don’t Tax You, Don’t Tax Me, Sell the Gold Behind the Tree?”

  1. comment number 1 by: Bob

    It’s amazing the ideas that people will come up with to distract from real problems, isn’t it?

  2. comment number 2 by: Gipper

    Selling gold doesn’t solve the entire problem, but no one has explained what good that gold inventory is doing at Ft. Knox and elsewhere.

    Economistmom? Do you have an answer to that question? Why do we have all that gold just sitting there?

    It’s entirely sensible to sell off some of it. Doesn’t make the US look any more desperate than we already do when we’re selling Treasuries to the bond markets. At $1,500/oz., it’s stupid not to sell some of it.

    I bet if the proceeds from the gold sales went to NPR and Planned Parenthood, we’d be hearing a different tune from the Administration. But paying down the debt? Meh….

  3. comment number 3 by: Jason Seligman

    Mary J. Miller is correct — especially given the challenge to the Euro, and the possibility of disruptions in the business in many global financial institutions. A return to the gold standard would be crazy, of course, but Gold is a historically important global commodity, and therefore one of strategic import. Selling it off is not prudent in much the same way that selling of the Strategic Petroleum Reserve (which also “just sits there” most of the time) would not be prudent.

  4. comment number 4 by: AMTbuff

    Why don’t we just balance the budget by selling all our children into indentured servitude? Oh, wait… I guess we already did that.

  5. comment number 5 by: Jim Glass

    The always sane and sensible Tyler Cowen has a few worthwhilethoughts on the debt ceiling.

    Elsewhere he suggests the gold should have been sold off long ago. And I suggest that if it should be sold off, now is a good time to do it — when its real price is at a 26-year high.

    Buy low, sell high! Why shouldn’t the govt manage its investments as investments?

  6. comment number 6 by: Mark Herpel

    With every other Central Bank in the world buying gold, selling gold is a terrible idea. Even Mexico just bought 100 tonnes, but the point of your article is clear. Washington will talk about anything except how to fix things. Obama fiddles while Rome burns.

  7. comment number 7 by: TD Merritt Sr

    That’s right, continue to sell our children’s and their children’s children’s future. Or just make the hard decisions that need to be made and work this things out with a touch of dignity.

  8. comment number 8 by: Stevo

    He’s (Ron Paul) telling the government to sell it.. because he knows like everyone else does… its no longer there!

    He also knows the Osama Bin Laden… was killed a long time ago… that too is rubbish that he was killed few weeks ago.

    Its been sold a long time ago.