# Why doesn't the U.S government open a business? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [April 21, 2013, 5:53pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322 "2013-04-21T17:53:13Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![brickbacon](https://avatars.discourse-cdn.com/v4/letter/b/898d66/32.png) [@brickbacon](https://boards.straightdope.com/u/brickbacon)\ **Post date:** [April 22, 2013, 6:58pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/41 "2013-04-22T18:58:46Z")
> [@Martin\_Hyde](#): > > 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. > [@Martin\_Hyde](#): > > 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. > [@Martin\_Hyde](#): > > 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. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [April 22, 2013, 10:57pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/42 "2013-04-22T22:57:55Z")
> [@Honesty](#): > > **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. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [April 22, 2013, 11:03pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/43 "2013-04-22T23:03:21Z")
> [@Honesty](#): > > **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. ---
**Author:** ![ratatoskK](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ratatoskk/32/2987_2.png) [@ratatoskK](https://boards.straightdope.com/u/ratatoskK)\ **Post date:** [April 22, 2013, 11:11pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/44 "2013-04-22T23:11:37Z")
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. ---
**Author:** ![Dereknocue67](https://avatars.discourse-cdn.com/v4/letter/d/6de8d8/32.png) [@Dereknocue67](https://boards.straightdope.com/u/Dereknocue67)\ **Post date:** [April 23, 2013, 9:10am UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/45 "2013-04-23T09:10:27Z")
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. ---
**Author:** ![Ken001](https://avatars.discourse-cdn.com/v4/letter/k/43a26b/32.png) [@Ken001](https://boards.straightdope.com/u/Ken001)\ **Post date:** [April 23, 2013, 9:49am UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/46 "2013-04-23T09:49:14Z")
> [@Martin\_Hyde](#): > > 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. > [@Honesty](#): > > 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… :smack: ---
**Author:** ![Diceman](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Diceman](https://boards.straightdope.com/u/Diceman)\ **Post date:** [April 23, 2013, 1:21pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/47 "2013-04-23T13:21:55Z")
> [@robert\_columbia](#): > > 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. ---
**Author:** ![Diceman](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Diceman](https://boards.straightdope.com/u/Diceman)\ **Post date:** [April 23, 2013, 1:50pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/48 "2013-04-23T13:50:11Z")
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. ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [April 24, 2013, 12:34am UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/49 "2013-04-24T00:34:30Z")
> [@LonghornDave](#): > > 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. > [@Ken001](#): > > 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. > [@Ken001](#): > > 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. > [@Ken001](#): > > 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 ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [April 24, 2013, 12:37am UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/50 "2013-04-24T00:37:15Z")
> [@LonghornDave](#): > > 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 ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [April 24, 2013, 12:43am UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/51 "2013-04-24T00:43:56Z")
> [@Martin\_Hyde](#): > > 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. For your UK example, I’m not referring to simply taking up a cherished company or product and nationalizing it. That’s stupid. I’m referring to building a new business for the sole purpose of generating profit from the free market. One example would be to open a bank. Banks play on the stock market and engage in high frequency trading in order to generate risk-free money (e.g. risk-free in that you don’t have to work for it). The U.S government could likely do this and do this better than private industry given their resources. As for competition, I see no reason to believe that private industry cannot compete with the government. Also, if you would, could you explain how you’d fix the debt? What importance do you find in fixing the government income with employment? It’s completely unnecessary and does nothing but decrease tax receipts and increase the deficit. - Honesty ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [April 24, 2013, 1:11am UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/52 "2013-04-24T01:11:57Z")
> [@Honesty](#): > > 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. This post made me burst out laughing. You think owning a business is a stable, steady way of making money? ---
**Author:** ![Tom48](https://avatars.discourse-cdn.com/v4/letter/t/dc4da7/32.png) [@Tom48](https://boards.straightdope.com/u/Tom48)\ **Post date:** [April 24, 2013, 1:29am UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/53 "2013-04-24T01:29:08Z")
The U.S. Government took over a Whore House for back(no pun intended) Taxes years ago. The Whore House went Bankrupt. Now I don’t understand how anyone could lose money running the business that is the oldest profession around. But the U.S. Government did. Those bozos in D.C. can’t do anything right. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [April 24, 2013, 6:45am UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/54 "2013-04-24T06:45:26Z")
> [@Tom48](#): > > The U.S. Government took over a Whore House for back(no pun intended) Taxes years ago. The Whore House went Bankrupt. Now I don’t understand how anyone could lose money running the business that is the oldest profession around. But the U.S. Government did. Those bozos in D.C. can’t do anything right. Let me guess. You heard that story somewhere. The Mustang Ranch in Nevada was seized for unpaid taxes in 1990. The government never attempted to operate the business. The property was sold at an auction. ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [April 24, 2013, 3:25pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/55 "2013-04-24T15:25:56Z")
> [@RickJay](#): > > This post made me burst out laughing. You think owning a business is a stable, steady way of making money? It’s more stable than the current set-up. ---
**Author:** ![Honesty](https://avatars.discourse-cdn.com/v4/letter/h/f04885/32.png) [@Honesty](https://boards.straightdope.com/u/Honesty)\ **Post date:** [April 24, 2013, 3:28pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/56 "2013-04-24T15:28:45Z")
I also think the IRS tax penalties are too soft and not in-line with the private sector, contributing to the deficit. Has there ever been any study that linked IRS funding to more tax receipts? I’m wondering whether greatly enhancing the IRS budget would proportionally increase the amount of taxes collected. It may be, on second thought, that the revenue is out there but the IRS is hamstrung in collecting it. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [April 24, 2013, 4:12pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/57 "2013-04-24T16:12:45Z")
> [@Honesty](#): > > 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. No offense, but has it occurred to you that you are completely clueless on this subject? The meager royalty payments are something like $10 billion per year. Exxon, who was your reference company before, made $3.9 billion in profit in 2012 in their domestic oil and gas business. This is prior to taking into account corporate expenses. This also excludes capital expenses which I will cover in a minute. The U.S. takes on very little risk, has very minimal overhead, no capital expenses, and essentially no expertise, and makes more than twice what Exxon makes already. Now, if you are proposing that the U.S. start up a global fully integrated company operating in multiple industries like Exxon, then good luck with that. Perhaps it might occur to you that some of the countries that Exxon does business in wouldn’t want to allow a U.S. state owned oil company to do business there. Perhaps it might occur to you to look at the utter lack of success that some of the resource rich state owned oil companies such as those in Argentina, Venezuela, and Mexico experience. Why is the U.S. experiencing increased production while our neighbor to the South, with similar geology, can’t replace reserves. Take a look at the Eagle Ford which spans South Texas and Mexico. Why have private companies in the U.S. generated $61 billion in economic activity in 2012 alone in Texas but Mexico won’t be able to drill as many wells in the next five years as are drilled every month on the U.S. side due to a lack of capital. Now back to that whole capital expense thing that Exxon spends to generate that $3.9 billion in profit. Their acquisition and exploration costs were $9.7 billion in 2012 on just U.S. oil and gas. Back in 2010 they spent $45 billion in acquiring XTO. Your problem is that you see $40 billion in profit for Exxon and just assume that they have $40 billion in cash flow rolling in that could go to the general fund if it was a state owned oil company. It isn’t anything like that. Only a small portion of that relates to U.S. oil and gas and since they are a real company and not a government, they actually spend money for investment purposes. In many cases, they have a net cash outflow due to their capex program. That’s the difference between Exxon and PDVSA. PDVSA uses the cash flow they generate to give handouts to the populace resulting in declining production; they mortgage the future. Exxon cares about growing a long-term company. Their time horizon is decades in many cases. ---
**Author:** ![LonghornDave](https://avatars.discourse-cdn.com/v4/letter/l/a87d85/32.png) [@LonghornDave](https://boards.straightdope.com/u/LonghornDave)\ **Post date:** [April 24, 2013, 4:21pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/58 "2013-04-24T16:21:08Z")
> [@Honesty](#): > > 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 And here I thought your point was to make money for the U.S. treasury, not service the public. What exactly is it that you are trying to accomplish again? ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [April 24, 2013, 5:00pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/59 "2013-04-24T17:00:41Z")
> [@Honesty](#): > > It’s more stable than the current set-up. What makes you think that? Most new businesses fail. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [April 24, 2013, 5:34pm UTC](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322/60 "2013-04-24T17:34:57Z")
Are the existing businesses going to continue to pay taxes that will be used to undercut their profit margins? Regards, Shodan [Previous page](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322.md?page=2) [Next page](https://boards.straightdope.com/t/why-doesnt-the-u-s-government-open-a-business/656322.md?page=4)