Murphy to U.S. Government: Sell Assets

I think it is fascinating to hear people discuss the debt ceiling. Many of them keep on saying that we cannot reduce our deficit by spending cuts alone and that we must also raise more revenue. Yet, I have not heard once why that is the case. The deficit is really a simple problem. There are two numbers: revenue, spending. If spending is higher than revenue, we have a deficit and must borrow. Why is it impossible to make the spending number so much smaller that it will be lower than the revenue number? I cannot find any reason why that is the case.

Of course its not impossible to eliminate the deficit with purely spending cuts. Its just probably impossible along the lines of what passes for "spending cuts" in the current discourse (which generally means "cutting funding for liberal policy priorities")

Why won't the democrats propose ending some wars as a way to reduce the deficit? Wouldn't this please their base? I don't understand the politics in play here.

I am always frustrated that both the Democrats and Republicans say some things I like during campaigns, but they only seem to get around to implementing those portions of their platform I didn't like.

I fully expect this will be the case with Republican spending cuts. I expect to see massive projected future cuts (that future politicians can't be held to) with very little in the way of immediate or even near term cuts.

As for selling things, this seems like a good idea to me regardless of whether the government is having money problems or not just to get those things into productive hands. The only thing I wouldn't sell is the gold, but that's just because I hope for a gold backed currency someday. That's probably a vain hope anyway.

Broadly I don't have a problem with the sentiment of Murphy's article. That being said, there is a concern with the particular quote you selected from the article ... would selling off gold and non-US currencies make the United States more vulnerable to a currency attack? Similarly, does being the reserve currency make us more vulnerable to such an attack? What if other nations holding US currency want to exchange their dollars / dollar denominated assets for something else, what do we pay them with ... hard assets, other US dollar denominated debt? I suppose the treasury could purchase foreign currency from US banks and use those purchases to satisfy their need for foreign currency reserves, but the banks could experience similar problems depending on their balance sheets. (Previous currency crises are studied in depth in "This Time is Different" by Rogoff and Reinhart.)

According to global finance magazine, US dollars are 2/3 of the worldwide reserves that are held in dollars (link below).

http://www.gfmag.com/tools/global-database/economic-data/10212-international-reserves-by-country-2010-ranking.html#axzz1RBbaMvOE

Particularly given our open capital markets, we need to keep in mind how much reserve currency we should keep on hand to be able to defend US currency against an attack.

It is possible that the "other financial assets" listed in Murphy's article could be sold off, and used to pay down debt. However, if we had to sell them off quickly, they may sell for significantly less than the value listed. This point is noted by Murphy later in his article. (I don't know how FED values the assets to begin with).

I also don't know how much is needed by August, or subsequent debt limit timelines. That weighs significantly in the discussion.

A problem with, say, selling offshore oil rights that Mr Murphy did not mention is the enormous risk of the government changing the rules to make it uneconomic after the fact.

@John:

Aren't medicare and social security liberal spending priorities?

Ok. So Murphy says that we have $1.6 trillion in liquid assets. Fine. Doesn't that only solve the budget problem for one year? Then what?