What If the United States DID Sell Alaska?

The Senate impeachment proceedings have raised this question: What might happen to life insurers’ U.S. bond holdings if President Donald Trump really gave or sold Alaska to Russia?

(Related: Medicare Posts $1.6 Billion Loss)

The question has surfaced because Alan Dershowitz, a member of the president’s legal team, raised it in 2018, in “The Case Against Impeaching Trump,” a book about the laws, rules and traditions that govern impeachment proceedings.

The United States bought Alaska from Russia for $7.2 million in 1867.

If the president decided to let Russian President Vladimir Putin take Alaska back, because he thought that made sense, “that would be terrible, but would it be impeachable?” Dershowitz asks. “Not under the text of the Constitution.”

A president could be impeached for letting Putin take Alaska only if he did that because he was paid to do so, or extorted into doing so, Dershowitz writes.

Dershowitz used the idea of giving Alaska to Putin as a hypothetical example. The Trump administration does not seem to have put Alaska in play.

But Rep. Adam Schiff, D-Mass., brought the idea back into public consciousness Jan. 19, when he mentioned the Alaska give-away example on ABC News’ “This Week” show.

Resources

A link to the purchase page for the Dershowitz book.
A link to the transcript for the ABC News’ Schiff interview.
A link to Nathan N.J. Grant’s article about corporate bonds and spin-offs.

Life insurers ended 2018 with about $422 billion in notes, bonds and other securities issued by the federal government, according to the American Council of Life Insurers.

Alaska accounts for about 17% of the United States’ 3.9 million-square-mile area.

If the owner of a six-bedroom house had a big mortgage and gave one-sixth of the house away to a neighbor, a mortgage lender might have some concerns about that.

What should life insurers about the idea of the United States divesting itself of Alaska?

1. The United States does appear to have the right to sell Alaska or give it away without talking to its debt holders.

If the United States gave Alaska away or sold it, or spun it off to form a separate country, that might be similar, in some ways, to the spin-off transaction some big insurers have used to spin off major units in recent years.

2. Calculating the possible impact of an Alaska giveaway, sale or spin-off on the market value of the United States is hard.

The Federal Reserve Board says the United States ended 2019 with about $100 trillion in net wealth.

If Alaska accounts for about 17% of the total U.S. area, maybe it accounts for about $17 trillion in net wealth.

Given that the number of parties with the ability to pay $17 trillion for Alaska is small, the state’s market value might be less than that.

The state’s role in helping the United States to make debt payments is not all that clear.

3. An Alaska sale might leave the United States with a lot of debt.

If the United States sold Alaska for a good price, rather than giving it away, the deal might not do enough to improve U.S. finances by eliminating the national debt.

The country now has $23 trillion in debt, according to the Concord Coalition.

If the United States raised $17 trillion in cash by selling Alaska, it would still have $6 trillion in debt, or about as much debt as it had in 2002.