Vanderbilt Law Review

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Each year, the government sells and leases public assets worth billions of dollars. FCC auctions to allocate rights to electromagnetic spectrum generated over twenty billion dollars within a three-year period, and proceeds from mineral leases, timber sales, and disposition of real estate from defaulting thrifts have surpassed several billion dollars annually.

From the taxpayer's perspective, however, government sales and leases have been deplorable. The government has donated valuable resources to preferred claimants, allocated scarce broadcast and oil rights resources by lottery, and sold both public land and mineral rights to private parties at a fraction of the market price. Although the government in disposing assets may have legitimate programmatic, distributional, and social preservationist objectives unrelated to any financial maximization goal, our analysis of three particular disposition schemes-mining claims, grazing fees, and allocation of the electromagnetic spectrum-suggests that those aims too often have masked inefficiency or graft.

Existing oversight of agency disposition programs is woefully deficient, and we trace the historical, conceptual, and political roots of the regulatory failure. For a mixture of reasons, Congress exempted asset dispositions from the APA's rulemaking provisions; judicially imposed justiciability requirements have limited participation in adjudications affecting governmental disposition programs; and agencies themselves have declined to permit third parties to question the propriety of various asset dispositions. The inadequate monitoring exacerbates the absence of any market-type discipline as in the private sector.

Accordingly, we argue that Congress and agencies should adopt, where possible, schemes to maximize return on assets sold or leased, minimizing the need for external monitoring. Given that the government will still pursue non-financial objectives, we propose that the APA rulemaking exemption for asset disposition be rescinded. We also suggest that courts and agencies permit greater participation in adjudications over transfer of public assets. In light of the shortcomings of judicial review as a monitoring mechanism, however, we recommend amending Executive Order 12,866 to include government disposition of assets within the scope of agency action subject to cost-benefit analysis. The change would help ensure both that agencies justify their departure from financial maximization principles and that they use the most cost-effective means of structuring divestiture programs. Similarly, Congress should amend the Small Business Regulatory Enforcement Fairness Act to permit Congress time to study all major agency disposition initiatives-as with other significant agency rules-before they go into effect. Finally, we also suggest revising the pay-as-you go or PAYGO budget mechanism to include below-market asset sales and leases within the direct spending that must be matched by additional revenue measures. These measures would help promote greater accountability in the disposition of government assets, ultimately resulting in greater return to the Treasury and more effective pursuit of non- monetary goals.

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