Proposal to sell Florida.
A Modest Proposal
April 15, 2009 · 84 Comments
A Modest Proposal: For Reducing the Indebtedness of the United States, and For Making the Burdens of the Unites States Beneficial to the World:
The United States’ debt is around $315 trillion and counting (including derivatives), which is about 6 times GDP of the entire world in a good year. This includes bailouts, national debt, corporate debt, household debt, mortgage debt, and Social Security and Medicare obligations. It’s hard to understand it because we’re more accustomed to seeing numbers like that in the world of astrophysics or in Doctor Seuss. The global current account deficit of the United States is now larger than it has ever been, and to finance both the current account deficit and its own sizable foreign investments, the U.S. must import trillions and trillions of dollars in foreign capital every year—that’s billions every working day. Worse yet, budget deficit projections run at staggeringly high levels for as far as the eye can see—payouts for these programs will significantly exceed tax revenues over the next 100 years. Also consider the $1.2 quadrillion (with a Q!) in listed and OTC derivatives (which is a ridiculous number that might as well be infinity), and which implies that all market participants want to do is speculate rather than invest. The situation is wildly unsustainable in both international financial and domestic political terms. We will be lucky to make it 10 years without a systemic economic collapse.
My point: the U.S. is broke–not just broke, we’re probably more broke than any institution in the history of money. Its really impossible to overstate the scope of this problem. There is no way we can continue to fund our obligations. Our economy is extremely over-leveraged and over-extended. We need to re-evaluate out entire balance sheet and make some tough decisions.
The obvious solution to this problem, and the prescription that the IMF would issue for any other banana republic, is to raise revenue and taxes, cut spending, and take firm steps to reduce corruption. Alas, the American political process over the last 25 years has shown us that the American people have no tolerance for reducing the level of government spending on social entitlement programs: Medicare, social security, and the rest are sacrosanct and untouchable by congress. Further, the electorate can’t bear the thought of a drastic reduction in military spending either—after all, one must consider one’s national pride. Also, time has proven that any attempt to raise taxes on ordinary working Americans to cover the budget deficits created by so much spending is likewise unacceptable.
This is directly related to the fact that the majority of our citizens have no real understanding of deficits, debt, or money. We lost our way somewhere around 1968, I think. In any event, the solution thus far has been to keep borrowing and printing money to cover our asses. This applies to the private sector, too. For example, when the President or anyone in our country says we need to get the credit market working again, that is newspeak for “we need you to be in more debt.” Eventually all this debt and borrowing will sink the entire currency and the entire country with it, unless a political revolution or world conflict grabs hold first. Dire stuff, so what’s a country to do?
Well, one way to address this systemic imbalance would be to deleverage. U.S. policy makers should honestly consider selling some assets that would be very attractive to buyers flush with cash like the Emirates and East Asian export economies–assets which would also represent serious liabilities for the U.S. if we continue to service them. Unloading these “toxic assets” would be a win-win.
The prevailing attitude in America seems to be that policy makers should do whatever is necessary to maintain the standard of living. Given the financial realities detailed above, and given that lowering standard of living is politically unacceptable, the prospect of political contraction should seem perfectly reasonable. We can not afford to keep living standard up in the 50 states. But what about 49 states? Our Modest Proposal, dear reader: sell the State of Florida to the highest bidder, preferably China. 50 States are simply no longer sustainable. But think of the bids that Florida would bring in! With a GDP of over $700 billion, we could easily get $50 trillion for it if you factor in all the capital in the state—at reduced, fire sale prices, of course. And the Chinese love Mickey. This is the only way to continue to fund our standard of living without going further and further down into the gyre of debt.
I can hear the objections already: “why sweet, precious, Florida, isn’t there anything else?” No, I’ve considered it—I’m afraid only Florida will do. After all, we’re going to have to bring in a lot of cash on this sale to justify selling an entire state. Worse-off states like Michigan wouldn’t win the high bids like sunny Florida would. The Chinese need their money and, by God, we’re good for our debts. Selling other, beautiful possessions like the Virgin Islands or Hawaii would surely bring in high bids, but they wouldn’t give us the other side of the equation that off-loading Florida would: off setting the trillions of dollars in Medicare and Social Security obligations and private health-care debt that would surely be incurred as we care for Florida’s mostly octogenarian population.
Sunshine State Paradise! Highly motivated seller!
Another important consideration in putting Florida on the auction-block: 360,000 and counting vacant houses, i.e. future skateparks. Think of all of the bad debts that could be taken care of if every delinquent mortgages and vacant house in Florida were no longer a drag on the U.S. economy. The Sunshine State has the highest mortgage delinquency rate and the highest credit card delinquency rate in the country. The offsets resulting from unloading these liabilities would be tremendous. Indeed, the true value possible from a Florida Sale would be enough to make the U.S. a creditor nation once again.
We don’t really need Florida, do we? Sure, it’s been nice while it lasted, with all the land booms and Ponzi schemes, but we’d be fine without it. We’ve purchased land on this continent from other countries during times of their economic distress, now its our turn to be the seller—except, hopefully this time, we will get more value per acre than the sellers received in the Louisiana Purchase, Seward’s Folly, or the Gadsden Purchase. This has got to be an attractive option for the world’s wealthy countries looking to make a move and take advantage of low asset prices. Florida, we love you, it’s been great, but we have to let you go. Downsizing hurts, but in times like this you have to get lean to survive.
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