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Economist Mom

Don't tax you, don't tax me, sell the gold behind the tree!

One proposal for deficit reduction goes far beyond the 'tax the guy behind the tree' attitude. Should the US sell off some of its gold to avoid taxing citizens more?

By Guest blogger / May 16, 2011

A tree stands in a field during a torrential rainstorm near the Birds Point levee Sunday, May 1, 2011, near Wilson City, Mo. There may not be a taxpayer hiding behind the proverbial tree, but there's a pile of gold. Should the US sell it?

Jeff Roberson / AP / File

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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.

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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.

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