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Old 04-21-2013, 01:53 PM
Honesty Honesty is offline
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Why doesn't the U.S government open a business?

You're a government whose current debt obligations is 100% of your GDP. Although you own vast resources and have a sprawling population of 320 million, 40 - 50% of your yearly income comes in the form of tax receipts from the population. The political winds have made it impossible to increase taxes, therefore spending is cut, which means the economy slows, less taxes are collected, and a death spiral of debt and poverty continues in perpetuity; indeed, it has been clear since 1981 that your population abhor taxation are willing to increase the deficit in favor of tax cuts. You also know that the last time a sitting President and Congress voted to raise taxes to tackle the deficit, they were booted out of office.

Now, back to you. You're glorious. You have your own army, your own science and space programs, and even your own corp of engineers that can build you things. Not only that, but you have federal lands with vast reservoirs of untapped oil and natural gas as well as mines filled with precious metals and minerals. Powered by a central bank that can provide liquidity to your endeavors.


Open a Oil Company: If Exxon-Mobil pulled in $40 billion in one year, a government-owned oil company could likely pull in twice that amount or, likewise, pass that savings on to the customer in the form of cheaper gas.


Open a Pharmaceutical Company: There's a $10 billion dollar market in the United States. Using your scientists, you can develop drugs and acquire patents that'd be transferred to the federal government. Patents for discoveries will ensure a steady flow of royalties that can be used to reduce debt or, likewise, be used to reduce the cost to the taxpayer in the form of cheaper medications.


Open a Bank: Banking sector contributes about 10% to GDP, which, if my math is correct, would be $1.5 trillion. Let's say a U.S bank could 6% of that, which would be $90 billion. The U.S Bank could lend to customers, offer loans, engage in high frequency trading, commodities, etc etc.

All said and done, that would be $140 billion or $1.4 trillion in revenue over ten years. This could be used to cover the anticipated $4 trillion in deficit reduction advocated by Simpson-Bowles Commission.
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Old 04-21-2013, 02:20 PM
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They did.
The Postal Service was a success, until Congress took bribes "campaign contributions" from Fed Ex & UPS to kill it.
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Old 04-21-2013, 02:22 PM
Martin Hyde Martin Hyde is offline
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There are some government owned corporations, Amtrak and USPS are examples.

The UK tried to run a lot of sectors of the economy at one point and it was generally viewed as a failure by everyone except for some uneducated Northern English.
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Old 04-21-2013, 02:22 PM
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It's called socialism.
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Old 04-21-2013, 02:35 PM
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The firm majority of business sectors would bring in more money from taxes or use fees on private businesses than profits from government companies. Part of it is the flexibility of capitalism in and of itself, but a much bigger part of this inefficiency from a market standpoint is political meddling, and the related public pressure to provide cheap or free services to those whoever the particular lobbier thinks deserves is.

So there may be reasons for a government to run a business, but taking in more in profits than in taxes is usually not one of them.

That said, there are certainly sectors where government involvement would make the sectors more efficient from a consumption of labor standpoint, for instance health care. There are a lot of people whose entire jobs are to deny services to patients or to argue for said coverage, and the need for these would be greatly reduced in a goverment health care system. It's just that political pressure and the reality of having to treat everyone would mean that it wouldn't turn out to be a greatly profitable system. The benefit would be that there would be a lot more health care going on to the people who need it most, using fewer manpower resources that could then be used in other sectors of the economy.
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Old 04-21-2013, 02:49 PM
PatriotGrrrl PatriotGrrrl is offline
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Some states do this, in the form of state liquor stores. The ones here in NH are successful, making $140 million profit last year (that may not seem like much, but NH is a small state). This is one of the reasons NH doesn't need a personal income tax, or sales tax (except on certain items).
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Old 04-21-2013, 03:06 PM
Ravenman Ravenman is online now
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There was a proposal to have a government run health insurance company. Actually called the "public option," the mere mention of those words caused most people to freak the fuck out.
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Old 04-21-2013, 03:11 PM
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Why bother starting a business, you're the GOVERNMENT, for cripes sakes, just confiscate one that's already all set up and chugging along. And once you find that the nifty business you took over can't compete with you running it, you can, because you're the GOVERNMENT, declare a monopoly. Or, being the GOVERNMENT, you just make some laws that force your competitors to be as inefficient as you are.

Easy.

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Old 04-21-2013, 03:15 PM
Shmendrik Shmendrik is offline
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There was a proposal to have a government run health insurance company. Actually called the "public option," the mere mention of those words caused most people to freak the fuck out.
I thought the whole appeal of government run health insurance is that no one needs to make a profit, unlike private insurance companies.
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Old 04-21-2013, 03:39 PM
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There's also Federal Prison Industries, aka UNICOR. By federal law, any products FPI manufactures can only be sold to the government, but their services can be sold to anyone. They have call centers, data entry, etc.

Selling licenses for activities on public lands is a business -- like the right to harvest timber or minerals.

Similarly, NASA licenses technologies for consumer product use through the technology transfer program.
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Old 04-21-2013, 04:37 PM
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Private businesses don't want the competition. They support political lobbies that keep the government out of their business.
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Old 04-21-2013, 04:40 PM
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I think the OP doesn't entirely understand the difference between revenues and profits.
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Old 04-21-2013, 05:22 PM
Honesty Honesty is offline
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Originally Posted by Duckster View Post
It's called socialism.

I don't understand. I'm not advocating abolishing private enterprise, I'm merely suggesting that government be able to compete for a share profits.

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Originally Posted by Alessan View Post
I think the OP doesn't entirely understand the difference between revenues and profits.
If I was wrong, kindly point to where the value was incorrect rather than making some vague statement to the contrary. My point Alessan, is this: the U.S government main source (40-50%) of revenue is from U.S tax receipts. This invisible line connecting tax revenues and employment, means that a recession or an anomaly in the job market can leave the government with declining tax receipts.

IMO, this over reliance on tax revenues coupled with lack of political will to raise taxes, means that the U.S should exploit other ways to raise revenue without raising taxes. In fact, I would suspect, that if the profits of government-owned business may grow large enough to address the deficit in a way that allows cut individual tax rates.

It seems like a win-win. The government gets a crack at business and making money and an opportunity to reduce tax rates for all.

- Honesty

Last edited by Honesty; 04-21-2013 at 05:25 PM.
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Old 04-21-2013, 05:27 PM
Honesty Honesty is offline
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Originally Posted by Bosda Di'Chi of Tricor View Post
They did.
The Postal Service was a success, until Congress took bribes "campaign contributions" from Fed Ex & UPS to kill it.
Wait, what? Explain.
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Old 04-21-2013, 05:30 PM
Martin Hyde Martin Hyde is offline
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Wait, what? Explain.
I don't know about the bribe stuff but generally most people agree the recent requirement that USPS prefund their retiree benefits from current revenues has created a massive shortfall for the USPS that no private company would be running into. Additionally, the USPS needs a lot of structural reform in addition to getting rid of the silly prefunding requirement in order to operate more effectively.

Many of these structural reforms, like closing down relatively unused post offices, canceling Saturday delivery and etc can and are blocked by Congress leaving the USPS virtually no way to avoid running deep in the red at present.

I would guess the assertion is this state of affairs was brought about in part by political influence from FedEx and UPS since USPS is still the largest parcel and mail mover in the country and the worse off they are the better its private competitors are.
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Old 04-21-2013, 05:40 PM
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I don't know about the bribe stuff but generally most people agree the recent requirement that USPS prefund their retiree benefits from current revenues has created a massive shortfall for the USPS that no private company would be running into. Additionally, the USPS needs a lot of structural reform in addition to getting rid of the silly prefunding requirement in order to operate more effectively.

Many of these structural reforms, like closing down relatively unused post offices, canceling Saturday delivery and etc can and are blocked by Congress leaving the USPS virtually no way to avoid running deep in the red at present.

I would guess the assertion is this state of affairs was brought about in part by political influence from FedEx and UPS since USPS is still the largest parcel and mail mover in the country and the worse off they are the better its private competitors are.
It would seem easy to fix: relax the requirement for prefund retiree benefits to cover the shortfall. Do you know what Congress they did this in? I've never ever heard of this.

Last edited by Honesty; 04-21-2013 at 05:40 PM.
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Old 04-21-2013, 05:40 PM
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I don't know about the bribe stuff but generally most people agree the recent requirement that USPS prefund their retiree benefits from current revenues has created a massive shortfall for the USPS that no private company would be running into.
And then after Congress passed a law requiring the Postal Service to accumulate this huge amount of money for future expenses, Congress turned around and essentially said, "You know as long as you've got this big pile of money that you're not using sitting around, we're going to borrow it."
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Old 04-21-2013, 05:43 PM
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Do you know what Congress they did this in? I've never ever heard of this.
It was the Postal Accountability and Enhancement Act (H.R. 6407) which was enacted in 2006.
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Old 04-21-2013, 06:01 PM
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If I was wrong, kindly point to where the value was incorrect rather than making some vague statement to the contrary. My point Alessan, is this: the U.S government main source (40-50%) of revenue is from U.S tax receipts. This invisible line connecting tax revenues and employment, means that a recession or an anomaly in the job market can leave the government with declining tax receipts.

IMO, this over reliance on tax revenues coupled with lack of political will to raise taxes, means that the U.S should exploit other ways to raise revenue without raising taxes. In fact, I would suspect, that if the profits of government-owned business may grow large enough to address the deficit in a way that allows cut individual tax rates.

It seems like a win-win. The government gets a crack at business and making money and an opportunity to reduce tax rates for all.

- Honesty
And if the same recession hurts the government-owned business, who covers the loss? Now you have to raise taxes not just to cover government expenses, but also to keep massive government corporations afloat.

That's the difference between revenues and profits. It's not enough for a company to have massive revenues - it needs to have revenues massive enough to cover its expenses and have something left as profit. An the bigger the business, the bigger its expenses.
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Old 04-21-2013, 06:01 PM
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Unless you're from the southeastern U.S. you've probably never even heard of the Tennessee Valley Authority, a truly massive government corporation designed during the Depression to modernize the most pitiful, desperate, poverty-stricken region of the country.

And ever since the government proved it could be done, private industry has been after them to break up the TVA, sell its pieces and end this "socialism."
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Old 04-21-2013, 06:15 PM
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From your link:

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TVA was envisioned not only as a provider, but also as a regional economic development agency that would use federal experts and electricity to rapidly modernize the region's economy and society.
Nothing there about turning a profit for Uncle Sam.

The TVA and similar projects are grand and noble enterprises, designed to benefit the people and the country as a whole. They also are not what the OP is talking about.
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Old 04-21-2013, 06:32 PM
Little Nemo Little Nemo is offline
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I think the OP doesn't entirely understand the difference between revenues and profits.
A good point. Let's say the government set up an oil company like Exxon. Exxon is one of the most profitable corporations in the world. But its annual profits are in the neighbourhood of forty billion dollars. That would provide less than one percent of the annual revenue of the United States government.

Last edited by Little Nemo; 04-21-2013 at 06:33 PM.
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Old 04-21-2013, 06:41 PM
Kimmy_Gibbler Kimmy_Gibbler is offline
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Unless you're from the southeastern U.S. you've probably never even heard of the Tennessee Valley Authority, a truly massive government corporation designed during the Depression to modernize the most pitiful, desperate, poverty-stricken region of the country.

And ever since the government proved it could be done, private industry has been after them to break up the TVA, sell its pieces and end this "socialism."
I don't know why you put socialism in tone-quotes. Nationalization of key industries is a canonical socialistic platform plank. Do you think socialism is some sort of urban myth? Because it really does exist, and there's no reason to beat around the bush in calling it what it is.
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Old 04-21-2013, 07:13 PM
Ludovic Ludovic is online now
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I don't know why you put socialism in tone-quotes. Nationalization of key industries is a canonical socialistic platform plank. Do you think socialism is some sort of urban myth? Because it really does exist, and there's no reason to beat around the bush in calling it what it is.
Because that's what people are literally calling it, it's fair to use quotes, even if it is actually true. It is a shame that the word is not very useful any more because it would be great to use it in cases like this, but 95% of the time the users of the word mean to blur the line between socialistic aspects of America, European Socialism, and Communism.
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Old 04-21-2013, 08:08 PM
Honesty Honesty is offline
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I don't know why you put socialism in tone-quotes. Nationalization of key industries is a canonical socialistic platform plank. Do you think socialism is some sort of urban myth? Because it really does exist, and there's no reason to beat around the bush in calling it what it is.
I'd like to repeat: I'm not referring to socialism - state socialism - or otherwise. I am specifically referring to the federal government being able to compete in the free market.

It's not clear to me how the opposition thinks the debts should be paid. For example, if the bulk of the income is from federal income taxes and taxes cannot be raised due to political constraints, what do you guys suggest as a counterproposal to this problem? It seems to me that one can circumvent the problem of taxation altogether by focusing on making profits on the free markets. Indeed, Republicans have talked about the free market being the engine of prosperity - surely, it could also bring prosperity to the United States.

- Honesty
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Old 04-21-2013, 08:15 PM
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A good point. Let's say the government set up an oil company like Exxon. Exxon is one of the most profitable corporations in the world. But its annual profits are in the neighbourhood of forty billion dollars. That would provide less than one percent of the annual revenue of the United States government.
I'm not talking about just about an oil company in isolation but a proliferation of government owned businesses in the financial sector, oil and gas, and mining and precious metals. $40 billion in a year is nothing to sneeze especially over the course of a decade and that dough could be used to plug all sorts of financial holes. Together, these industries should easily be able to pull in over $100 billion a year or $1 trillion over one decade. It also beats raising taxes which, for some reason, is not politically actionable.

- Honesty
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Old 04-21-2013, 08:28 PM
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A company that syphoned off all it's profit (which is what you are proposing) wouldn't survive. Profits are needed to re-invest in new technologies to keep the business competitive. Very few companies, other than Apple, just sit on capital without re-investing it.

The best you could hope for is that the company paid the equivalent of dividends to the government. And, as already mentioned, what about the bad years?
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Old 04-21-2013, 09:00 PM
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Also due to its very nature government can squeeze out its competition in ways private companies can't. Once you lose competition you lose market pressure towards efficiency. Add to that political meddling and soon entire sectors of the economy are running at a loss. Economic sectors that can't be allowed to fail with no one else left in the market.
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Old 04-21-2013, 09:01 PM
Kimmy_Gibbler Kimmy_Gibbler is offline
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I'd like to repeat: I'm not referring to socialism - state socialism - or otherwise. I am specifically referring to the federal government being able to compete in the free market.

It's not clear to me how the opposition thinks the debts should be paid. For example, if the bulk of the income is from federal income taxes and taxes cannot be raised due to political constraints, what do you guys suggest as a counterproposal to this problem? It seems to me that one can circumvent the problem of taxation altogether by focusing on making profits on the free markets. Indeed, Republicans have talked about the free market being the engine of prosperity - surely, it could also bring prosperity to the United States.

- Honesty
Obviously just saying "Well, it's socialistic" doesn't answer the question. It just puts a tag on the proposal. My point was to express wonderment that people were objecting to calling state socialism what it is.

At a high-level, there are three points to consider further:

First, as already noted, there is the enterprise risk. What if Federal Oil or Federal Meds doesn't do so well (a fate which indeed befalls some businesses)? Then one is stuck with a failing business.

Second, there are some agency problems. Suppose it doesn't do well. Who decides if one keeps it propped up? And what if the people who want it propped up (voters generally) are not the one who will be asked to pay to do so (taxpayers, a not wholly overlapping class).

Or even, what if it does do well? Your proposal was to pass along those savings to consumers ("pass that savings on to the customer in the form of cheaper gas"). Well, why not pass those savings on to taxpayers in the form of lower tax rates? As noted, however, the set of taxpayers is smaller than the set of voters (and in a progressive system, the set of high-taxpayers even smaller still). So, we can probably expect these government corporations generally to expropriate assets from a small group of people in order to fund discounts on things like cheap gas (which is not really any kind of fundamental right).

Even if the expropriation factor doesn't give you any quibbles, there is the fact that this agency mismatch will produce externalities that will distort economic efficiency. Because savings (paid for by electoral minorities) are being passed on to others who don't bear the costs of their actions, those others are likely to overconsume rather than have these resources put to their best economic use (i.e., market discipline will be absent). Artificially cheaper gas, artificially cheaper meds, artificially lower borrower interest rates and higher saver interest rates will distort best consumption and investment decisions.
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Old 04-21-2013, 09:29 PM
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A company that syphoned off all it's profit (which is what you are proposing) wouldn't survive. Profits are needed to re-invest in new technologies to keep the business competitive. Very few companies, other than Apple, just sit on capital without re-investing it.

The best you could hope for is that the company paid the equivalent of dividends to the government. And, as already mentioned, what about the bad years?
Yeah, but a company owned by the government could essentially treat taxes as profit. Apple, for example, paid $6 billion in corporate taxes in 2012. That money is essentially profit for a government owned company. The government would likely book even more given that they wouldn't spend money trying to avoid said taxes.

That said, I think people are greatly over-thinking and sensationalizing this. First, plenty of non-socialist governments basically have government owned businesses. One prime example being sovereign wealth funds, which have existed for a long time. The states of Texas and Alaska have them. Modern SWFs in countries like Norway, Hong Kong, Russia, China, and Australia often invest their money in markets just as banks and other funds do, so they are often in direct competition with banks and investors. CIC, one of China's SWFs, owns part of the Blackstone Group and Morgan Stanley. Most of the countries with funds still have functional banking sectors.

Second, the government already (basically) owns many businesses. Not only things like the USPS, but also things like FDIC, CPB, and the CCC. If the question is more about why the government doesn't own corporations that sell consumer products, it likely because it's often inherently unfair to run a business backed by the bottomless pockets of the US government and/or the ability to write your own rules via government legislation.
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Old 04-21-2013, 10:27 PM
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It's not clear to me how the opposition thinks the debts should be paid. For example, if the bulk of the income is from federal income taxes and taxes cannot be raised due to political constraints, what do you guys suggest as a counterproposal to this problem? It seems to me that one can circumvent the problem of taxation altogether by focusing on making profits on the free markets. Indeed, Republicans have talked about the free market being the engine of prosperity - surely, it could also bring prosperity to the United States.
I say the solution is to shoot Grover Norquist. Or at least to never vote for anyone he endorsed. Conservatives need to stop believing in the magic pixie dust of tax cuts. If you're going to spend a lot of money - and conservatives do - you have to earn it first. And for the government, earning money is collecting taxes. Cry all you want about reality but that's the way every government in history has worked. No government has ever been self-financing.

The government going into business wouldn't change that. I'm not saying it would hurt. I'm not one of the true believers who thinks any government program is doomed to fail. The government could start private businesses and run them successfully. But the majority of government revenue would still have to come from taxes because the profits from those businesses would never come close to being enough.
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Old 04-21-2013, 10:32 PM
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Old 04-21-2013, 10:36 PM
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The lottery is just a gambling operation. Which is partly why it is illegal to gamble in any other non-revenue enhancing way. Things like that create a lot of resentment, it is very easy for the government to abuse their powers to create crony capitalism.
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Old 04-21-2013, 11:18 PM
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I think the OP doesn't entirely understand the difference between revenues and profits.
I don't think the OP understands the fundamental difference between a business and the government.

Plus most of his math doesn't make much sense to me.
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Old 04-22-2013, 02:01 AM
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Yeah, but a company owned by the government could essentially treat taxes as profit. Apple, for example, paid $6 billion in corporate taxes in 2012. That money is essentially profit for a government owned company. The government would likely book even more given that they wouldn't spend money trying to avoid said taxes.

That said, I think people are greatly over-thinking and sensationalizing this. First, plenty of non-socialist governments basically have government owned businesses. One prime example being sovereign wealth funds, which have existed for a long time. The states of Texas and Alaska have them. Modern SWFs in countries like Norway, Hong Kong, Russia, China, and Australia often invest their money in markets just as banks and other funds do, so they are often in direct competition with banks and investors. CIC, one of China's SWFs, owns part of the Blackstone Group and Morgan Stanley. Most of the countries with funds still have functional banking sectors.

Second, the government already (basically) owns many businesses. Not only things like the USPS, but also things like FDIC, CPB, and the CCC. If the question is more about why the government doesn't own corporations that sell consumer products, it likely because it's often inherently unfair to run a business backed by the bottomless pockets of the US government and/or the ability to write your own rules via government legislation.
Don't forget that most businesses fail, and leave the investors holding the bag. Not to mention that Congresscritters are going to lobby to get the pork funneled into their district, whether or not it makes good business sense. We already see this with so many federal programs.

So, yeah, they could treat taxes as profit, but they also have treat losses as outlays. Governments do well running "businesses" that are monopolies. If the US nationalized all the oil wells, they could probably make a tidy sum. But it's unclear that we would be making sound business decisions rather than expedient political ones.
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Old 04-22-2013, 02:36 AM
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There are some government owned corporations, Amtrak and USPS are examples.

The UK tried to run a lot of sectors of the economy at one point and it was generally viewed as a failure by everyone except for some uneducated Northern English.
I thought several railroads had stakes in Amtrak.

There are several corporations where the US government owns a big chunk of it but there are other stockholders too:

Ally Bank
General Motors (the Canadian government also has a share)
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Old 04-22-2013, 06:51 AM
Martin Hyde Martin Hyde is offline
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I thought several railroads had stakes in Amtrak.

There are several corporations where the US government owns a big chunk of it but there are other stockholders too:

Ally Bank
General Motors (the Canadian government also has a share)
Amtrak, when formed, received railroad stock from some 20 railroads that were still operating passenger lines at that time. Basically those operations were imminently going to go away because they were no longer profitable. In exchange, these companies received some Amtrak common stock.

But with railroad consolidation, and the fact Amtrak has never been operationally profitable, I don't actually know if very many of those railroads that received Amtrak common stock still exist and I believe most of them have sold back any ownership in Amtrak that they once held.

Amtrak's majority owner is definitely the government though, the government appoints all of its officer and conducts oversight on its operation.
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Old 04-22-2013, 07:08 AM
Martin Hyde Martin Hyde is offline
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Originally Posted by brickbacon View Post
Yeah, but a company owned by the government could essentially treat taxes as profit. Apple, for example, paid $6 billion in corporate taxes in 2012. That money is essentially profit for a government owned company. The government would likely book even more given that they wouldn't spend money trying to avoid said taxes.

That said, I think people are greatly over-thinking and sensationalizing this. First, plenty of non-socialist governments basically have government owned businesses. One prime example being sovereign wealth funds, which have existed for a long time. The states of Texas and Alaska have them. Modern SWFs in countries like Norway, Hong Kong, Russia, China, and Australia often invest their money in markets just as banks and other funds do, so they are often in direct competition with banks and investors. CIC, one of China's SWFs, owns part of the Blackstone Group and Morgan Stanley. Most of the countries with funds still have functional banking sectors.

Second, the government already (basically) owns many businesses. Not only things like the USPS, but also things like FDIC, CPB, and the CCC. If the question is more about why the government doesn't own corporations that sell consumer products, it likely because it's often inherently unfair to run a business backed by the bottomless pockets of the US government and/or the ability to write your own rules via government legislation.
A corporation is just an organizational form, there is nothing spectacular about governments owning one. Like has been said, we have several that the U.S. government owns.

Based on Federal law we have two types of government enterprises: Government Sponsored Enterprises, and Government Chartered and Owned Enterprises. The distinction isn't always as clear as it should be, but a GSE is technically owned by private shareholders who can receive profits from the enterprise, but is sponsored by the Federal government. Typically the government holds "warrants" that entitle them to take an ownership stake in GSEs, usually a substantial percentage.

The Federally Chartered and Owned Corporations include:

Commodity Credit Corporation, Corporation for National and Community Service, Corporation for Public Broadcasting, Export-Import Bank of the United States, FAMC, Farm Credit Banks, FCIC, FDIC, FFB, FHLB, Federal Prison Industries, Gallaudet University, GNMA, St. Lawrence Seaway Development Corporation, Tennessee Valley Authority.

Now, some of these are operated with the expectation they will never generate a profit. Some of them are operated with the expectation they will generate a profit and be self-sufficient of any external government funding.

However generally speaking the Government picks this form of organization when at least a few of these possible criteria are met:

1. The service provided by the entity is seen as a necessary service to the public.
2. The private market is unable to adequately fulfill the need for this service.
3. The entity will operate more effectively as a quasi-independent entity as opposed to an agency of the government.
4. The entity has some potential to be financially self-sufficient through revenue generation.
5. The business involved is a natural monopoly.

If you look basically all government owned corporations meet at least a few of those criteria, some might even meet all of them.

Generally speaking we don't run any corporations because "the money we make from them could help alleviate the need for taxes." Some of the government corporations do make money, but mostly we use that money to fill various funds and trusts related to the business these corporations operate in.

The OP is talking about operating businesses in sectors that already have robust private market competition for the purposes of generating profits for the government. That is an unwise proposition, because government enterprises often either cannot compete with private competitors because of poor management (since top positions are inevitably political appointees), because of politicians lobbying for it to do various things real businesses wouldn't do, or alternatively the government enterprise unfairly competes with private enterprise and drives private competitors out of business with its "blank check" funding power. Either one of those things is not really good, because if a government enterprise drives competitive businesses out of the market then we've taken something with a healthy group of competitors and made it a government monopoly. Then if the government does a bad job managing that business that whole sector is now poorly managed.

This is exactly what happened in the United Kingdom. Some of the government enterprises in certain industries were unsustainable in the UK simply because those industries were no longer sustainable in Britain, they could not effectively compete in the real world with lower cost labor pools overseas. But some of the manufacturing businesses that the UK government took over could have been productive private enterprises but were mismanaged by middle class government appointees without any real government experience who were appointed to their position because they had gone to the most exclusive schools and had friends in government.

Read about the UK's experience basically owning auto companies, mining companies, textile mills, etc and what you ultimately find is a bunch of companies that either were never going to be profitable and thus had to be subsidized by taxpayers or a bunch of companies that were marginally profitable and ultimately undermined the long term health of that entire sector of the British economy.

The government industries in the UK absolutely were not a big revenue boon.
  #39  
Old 04-22-2013, 07:46 AM
brickbacon brickbacon is offline
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Quote:
Originally Posted by Martin Hyde View Post
A corporation is just an organizational form, there is nothing spectacular about governments owning one. Like has been said, we have several that the U.S. government owns.

Based on Federal law we have two types of government enterprises: Government Sponsored Enterprises, and Government Chartered and Owned Enterprises. The distinction isn't always as clear as it should be, but a GSE is technically owned by private shareholders who can receive profits from the enterprise, but is sponsored by the Federal government. Typically the government holds "warrants" that entitle them to take an ownership stake in GSEs, usually a substantial percentage.

The Federally Chartered and Owned Corporations include:

Commodity Credit Corporation, Corporation for National and Community Service, Corporation for Public Broadcasting, Export-Import Bank of the United States, FAMC, Farm Credit Banks, FCIC, FDIC, FFB, FHLB, Federal Prison Industries, Gallaudet University, GNMA, St. Lawrence Seaway Development Corporation, Tennessee Valley Authority.

Now, some of these are operated with the expectation they will never generate a profit. Some of them are operated with the expectation they will generate a profit and be self-sufficient of any external government funding.

However generally speaking the Government picks this form of organization when at least a few of these possible criteria are met:

1. The service provided by the entity is seen as a necessary service to the public.
2. The private market is unable to adequately fulfill the need for this service.
3. The entity will operate more effectively as a quasi-independent entity as opposed to an agency of the government.
4. The entity has some potential to be financially self-sufficient through revenue generation.
5. The business involved is a natural monopoly.

If you look basically all government owned corporations meet at least a few of those criteria, some might even meet all of them.

Generally speaking we don't run any corporations because "the money we make from them could help alleviate the need for taxes." Some of the government corporations do make money, but mostly we use that money to fill various funds and trusts related to the business these corporations operate in.

The OP is talking about operating businesses in sectors that already have robust private market competition for the purposes of generating profits for the government. That is an unwise proposition, because government enterprises often either cannot compete with private competitors because of poor management (since top positions are inevitably political appointees), because of politicians lobbying for it to do various things real businesses wouldn't do, or alternatively the government enterprise unfairly competes with private enterprise and drives private competitors out of business with its "blank check" funding power. Either one of those things is not really good, because if a government enterprise drives competitive businesses out of the market then we've taken something with a healthy group of competitors and made it a government monopoly. Then if the government does a bad job managing that business that whole sector is now poorly managed.

This is exactly what happened in the United Kingdom. Some of the government enterprises in certain industries were unsustainable in the UK simply because those industries were no longer sustainable in Britain, they could not effectively compete in the real world with lower cost labor pools overseas. But some of the manufacturing businesses that the UK government took over could have been productive private enterprises but were mismanaged by middle class government appointees without any real government experience who were appointed to their position because they had gone to the most exclusive schools and had friends in government.

Read about the UK's experience basically owning auto companies, mining companies, textile mills, etc and what you ultimately find is a bunch of companies that either were never going to be profitable and thus had to be subsidized by taxpayers or a bunch of companies that were marginally profitable and ultimately undermined the long term health of that entire sector of the British economy.

The government industries in the UK absolutely were not a big revenue boon.
I'm not sure why you quoted me given you have not contradicted or clarified anything I have said.
  #40  
Old 04-22-2013, 07:59 AM
Martin Hyde Martin Hyde is offline
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I was building upon this statement:

Quote:
Second, the government already (basically) owns many businesses. Not only things like the USPS, but also things like FDIC, CPB, and the CCC. If the question is more about why the government doesn't own corporations that sell consumer products, it likely because it's often inherently unfair to run a business backed by the bottomless pockets of the US government and/or the ability to write your own rules via government legislation.
I hope that's not innately offensive to you. I think in addition to "contradicting and clarifying" one can also respond to a post simply to respond, or to add something to the post in question.

Also for the specific example of Sovereign Wealth Funds those are almost universally when government has a revenue stream from something where it also has a responsibility to turn that stream back toward taxpayers or employees in the future. For example in most State governments, they actually get some % of employee gross pay as payroll deductions into the pension system. Sitting on this huge horde of cash which can be over $100bn for the largest states necessitates properly investing it because at some point it will have to be paid back out in the form of pension benefits. The alternative would have been just spending the pension revenues and then paying the benefits from taxes, which would mean the potential for very bad shortfalls down the road.

Last edited by Martin Hyde; 04-22-2013 at 08:00 AM.
  #41  
Old 04-22-2013, 02:58 PM
brickbacon brickbacon is offline
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Quote:
Originally Posted by Martin Hyde View Post
I was building upon this statement:

I hope that's not innately offensive to you. I think in addition to "contradicting and clarifying" one can also respond to a post simply to respond, or to add something to the post in question.
Not at all. My apologies for misunderstanding.

Quote:
Originally Posted by Martin Hyde View Post
Also for the specific example of Sovereign Wealth Funds those are almost universally when government has a revenue stream from something where it also has a responsibility to turn that stream back toward taxpayers or employees in the future.
Well, those things or back to the government's general revenue or reinvest it.

Quote:
Originally Posted by Martin Hyde View Post
For example in most State governments, they actually get some % of employee gross pay as payroll deductions into the pension system. Sitting on this huge horde of cash which can be over $100bn for the largest states necessitates properly investing it because at some point it will have to be paid back out in the form of pension benefits. The alternative would have been just spending the pension revenues and then paying the benefits from taxes, which would mean the potential for very bad shortfalls down the road.
True, but a distinction should be made between SWFs, regular "funds", or trusts that essentially invest money set aside for future outlays so it is not allowed it to sit idle (eg, the Texas fund, or the SS trust fund) and those that basically speculate in private companies and foreign markets (eg. China Investment Corp, Singapore's GIC). The latter types are certainly closer to a business than a the former, and would contradict some of those implying that such businesses would either squeeze out private competition, or would only be found in socialist countries.
  #42  
Old 04-22-2013, 06:57 PM
LonghornDave LonghornDave is offline
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Quote:
Originally Posted by Honesty View Post
Open a Oil Company: If Exxon-Mobil pulled in $40 billion in one year, a government-owned oil company could likely pull in twice that amount or, likewise, pass that savings on to the customer in the form of cheaper gas.
You do realize that the U.S. already brings in billions of dollars a year in oil and gas revenues from their federal lands from royalty payments, right? When the federal government leases its land to private companies, not only do they receive a lease bonus (payment just for the lease), but they also retain a royalty interest, which varies but is typically in the 12.5% to 16.67% range. Therefore, they get paid a percentage of the gross revenues without taking any risk or being responsible for any of the capital or operating costs. It doesn't get much better than that.
  #43  
Old 04-22-2013, 07:03 PM
LonghornDave LonghornDave is offline
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Quote:
Originally Posted by Honesty View Post
Open a Bank: Banking sector contributes about 10% to GDP, which, if my math is correct, would be $1.5 trillion. Let's say a U.S bank could 6% of that, which would be $90 billion. The U.S Bank could lend to customers, offer loans, engage in high frequency trading, commodities, etc etc.
Your numbers here are comically close to accurate. Comical because they've already done this. The bank they opened is the Federal Reserve. The Federal Reserve generates something like $80 billion a year in profit right now. It then turns over the profit to the U.S. Treasury.

Last edited by LonghornDave; 04-22-2013 at 07:03 PM.
  #44  
Old 04-22-2013, 07:11 PM
ratatoskK ratatoskK is offline
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It already is a business, but it's not for the benefit of the people. It's for the benefit of the corporations and they people they pay off.
  #45  
Old 04-23-2013, 05:10 AM
Dereknocue67 Dereknocue67 is offline
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Why doesn't the U.S government open a business?

It has.

We call it Congress and they're all for sale but act now because only a few are still available.
  #46  
Old 04-23-2013, 05:49 AM
Ken001 Ken001 is offline
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Quote:
Originally Posted by Martin Hyde View Post
A corporation is just an organizational form, there is nothing spectacular about governments owning one.

Read about the UK's experience basically owning auto companies, mining companies, textile mills, etc and what you ultimately find is a bunch of companies that either were never going to be profitable and thus had to be subsidized by taxpayers or a bunch of companies that were marginally profitable and ultimately undermined the long term health of that entire sector of the British economy.
Agreed. However to be fair the British government owned those businesses either as a legacy (coal mining) or to save them from bankruptcy. Better to resurrect a business than have millions of people on the dole.

Still...its a difficult task. Most of these government rescues fail which means taxpayers lose.

Quote:
Originally Posted by Honesty View Post
You're a government whose current debt obligations is 100% of your GDP. Although you own vast resources and have a sprawling population of 320 million, 40 - 50% of your yearly income comes in the form of tax receipts from the population.


Open a Oil Company: If Exxon-Mobil pulled in $40 billion in one year....


Open a Pharmaceutical Company: There's a $10 billion dollar market in the United States...


Open a Bank: Banking sector contributes about 10% to GDP...

Oil - yes that is a no-brainer but the US government yields royalties anyway. The current system works.

Pharmaceuticals - you gotta be kidding. Big Pharama is a money hole, very high risk and not something even the private investor touches without knowing they can loose it all.

A Bank - well yes, that can work provided you have sufficient faith in the managers. But if they are backed up by federal funds why should they worry. A bit more here and a bit more there, hey - things will recover...

Last edited by Ken001; 04-23-2013 at 05:49 AM.
  #47  
Old 04-23-2013, 09:21 AM
Diceman Diceman is offline
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Quote:
Originally Posted by robert_columbia View Post
I thought several railroads had stakes in Amtrak.

There are several corporations where the US government owns a big chunk of it but there are other stockholders too:

Ally Bank
General Motors (the Canadian government also has a share)
The government is currently selling its stake in General Motors. It's selling its shares a little bit at a time, so as not to crash the price of GM's stock.

As for Ally, they're busily selling off oversees assets, non-core assets, and the sink in the ladies' restroom to pay off their government loans. I fully expect that when they've done so, they're going to announce that they've been bought up by some mega-bank.
  #48  
Old 04-23-2013, 09:50 AM
Diceman Diceman is offline
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Incidentally, Chrysler Financial (which also received bailout funds) ended up getting sold to Toronto Dominion bank. They do business in the US as TD Ameritrade.
  #49  
Old 04-23-2013, 08:34 PM
Honesty Honesty is offline
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Quote:
Originally Posted by LonghornDave View Post
You do realize that the U.S. already brings in billions of dollars a year in oil and gas revenues from their federal lands from royalty payments, right? When the federal government leases its land to private companies, not only do they receive a lease bonus (payment just for the lease), but they also retain a royalty interest, which varies but is typically in the 12.5% to 16.67% range. Therefore, they get paid a percentage of the gross revenues without taking any risk or being responsible for any of the capital or operating costs. It doesn't get much better than that.
It is clear that these billions of dollars are not enough to cover the bills of running the U.S government. I am referring to the U.S opening it's own oil company to generate it's own profits in addition to whatever meager royalty payments you've described here.

Quote:
Originally Posted by Ken001 View Post
Oil - yes that is a no-brainer but the US government yields royalties anyway. The current system works.
These royalties are insufficient in generating the income needed fund government.

Quote:
Originally Posted by Ken001 View Post
Pharmaceuticals - you gotta be kidding. Big Pharama is a money hole, very high risk and not something even the private investor touches without knowing they can loose it all.
"Big Pharma" piggybacks off NIH research, there's very few drugs you can point to were not researched first by public institutions first.

Quote:
Originally Posted by Ken001 View Post
A Bank - well yes, that can work provided you have sufficient faith in the managers. But if they are backed up by federal funds why should they worry. A bit more here and a bit more there, hey - things will recover...
How does this differ from the current setup?




All-in-all, I've yet to hear anyone enunciate how the debt problem should be tackled. Why should the U.S government main source of revenue be linked to employment? This means that if there an ripple in the job market, there will be waves felt by the Treasury. The government's source of income should be stable and steady and not hinged on factors outside its control.

- Honesty
  #50  
Old 04-23-2013, 08:37 PM
Honesty Honesty is offline
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Quote:
Originally Posted by LonghornDave View Post
Your numbers here are comically close to accurate. Comical because they've already done this. The bank they opened is the Federal Reserve. The Federal Reserve generates something like $80 billion a year in profit right now. It then turns over the profit to the U.S. Treasury.

I must be living in a bubble, sheesh. The Fed is the Bank's bank. Individuals are not able to take advantage of the 0.25% interest rate but Banks are. If you've found a loophole in which the Fed will service the PUBLIC and not corporations, let me know as I'll open an account post-haste.

- Honesty
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