New York and Britain both face huge fiscal imbalances, partly as a result of their reliance on the volatile financial sector for too much tax revenue. And both may come up with the same purported partial solution to the problem: sales of public assets — in Britain, their half of the Channel Tunnel, plus other stuff; here, maybe the thruway or the lottery — to raise easy cash.
What does the Financial Times have to say about Britain’s plan? It notes that “there are often good reasons to privatise assets,” including private-sector efficiencies.
But among those good reasons isn’t that the government doing the sale is desperate for money, and everyone knows it — as is the case on both sides of the pond. As the paper’s editorial continues:
[Asset sales] can do nothing to help cope with the UK’s fiscal problem. Indeed, in practice, these sales may even make the situation worse. Governments have time horizons that are longer than those of any private investors. … This permanence is one of the reasons why governments enjoy borrowing costs that are significantly lower …. The combination of an ultra-long time horizon and cheap borrowing means that most assets are worth more in real terms to governments than they are to private investors — especially when the private sector is suffering a credit freeze. … [S]tates should expect to be worse off following such disposals.
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