From your link:
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.
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 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.
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
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
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?
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.
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.
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.
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.
nm
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.
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.
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.
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.
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:
- The service provided by the entity is seen as a necessary service to the public.
- The private market is unable to adequately fulfill the need for this service.
- The entity will operate more effectively as a quasi-independent entity as opposed to an agency of the government.
- The entity has some potential to be financially self-sufficient through revenue generation.
- 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.
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.
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.