Thinking of how governments fund all they do, we usually think of taxes.
But there is much more.
Desperate for cash, in 2010, Arizona’s governor sold the state capitol. The deal included the House and Senate, the State Fair Grounds, the state Library and Archives, the state Supreme Court, and some other facilities. The governor even sold his own office. Nine years later, they happily announced that they were buying it all back,
Meanwhile, New Hampshire unsuccessfully tried to sell an historic bridge. A dollar price tag made it seem cheap but there was a catch. The state’s Department of Transportation said that the bridge not only had to be relocated but then people had to use it.
The European Union
Three EU nations–Cyprus, Malta, and Bulgaria–had Citizenship by Investment (CBI) programs. Also called Golden Passports, these programs generated revenue by exchanging citizenship for investments. Depending on the country, the investments could range from buying a house to bringing your wealth with you. More recently, while Cyprus and Bulgaria eliminated the programs and Malta won’t offer them to Russians or Belarussians, some EU nations still have Residency by Investment (RBI). Also generating revenue, RBI programs require investments for residency rights. Statista tells us that from 2011 to 2019, 130,000 people helped countries raise an estimated €21.4 billion through their CBI and RBI programs.
Our Bottom Line: U.S. Debt
However, as we know, borrowing (by selling securities) is the most typical way that governments get the extra revenue they need. Through 5 facts, Pew Research had the perfect summary of the U.S. national debt.
They started by telling us that the federal debt was $31.38 trillion on February 10. Next though, we need to know how to judge its size. One way is to compare it to the GDP. Just like we decide if a mortgage is affordable by looking at a household’s income, we can compare debt to GDP.
Some worry about a debt to GDP ratio that exceeds 100 percent:
Then, we should know who owns the debt:
Taking us from fiscal policy (spending, taxing, and borrowing by the President and the Congress), we move to monetary policy and the Federal Reserve as a massive holder of the federal debt. During Covid especially (and the Great Recession), the Federal Reserve siphoned money into the economy by buying gargantuan quantities of government bonds. But, it all returns us to fiscal policy because whenever the government borrows, it has to service the debt with interest payments. And that interest adds to the deficit and the need to borrow.
My sources and more: Thanks to my Statista email for inspiring today’s post and then this euronews article for the details. From there, Pew told more about states selling assets while AZ Central looked at Arizona. Then finally, returning again to Pew, we had the perfect debt fact summary.