The current set-up of having other people run businesses and then taking a share of whatever profits they make seems pretty stable. The government avoids the expenses and risks of running businesses but gets a piece of the rewards. Seems like the best of both worlds for the government.
You have a very odd definition for risk free money. Risk free usually means that you do not risk equity. It has nothing to do with not having to work for it. If I do consulting work for someone and get paid a fee for that, it would generally be seen as risk free. Obviously I am working for it. Conversely, if I lend some money to someone, then I haven’t done a tremendous amount of work (not zero, but potentially far less) to get the interest income however, I am clearly taking a risk.
It’s not the best of both worlds, Little Nemo. The vast majority of money that the government takes in comes from taxes. Since 1981, the U.S has cut taxes over and over again, making the prospect of running a prosperous country hinged on dwindling revenues and a population with little appetite for taxes. There are countries like Mexico, Australia, and even New Zealand that sidestep this problem entirely by supplementing GDP with profits from government-owned enterprises. What I’m proposing is that government act more like a business and take proactive steps to reduce the debt.
Consider this, as well, Little Nemo: People can make money by starting businesses, cities can make money starting a business, and States can make money starting a business. For example, Pennsylvania generatednearly a half-billion dollars in profiton revenue exceeding $2 billion. Why, oh, why would the federal government be exempt from this trend? What’s good for the goose, ought to be good for the gander.
[QUOTE=Longhorn Dave;]
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.
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Whatever, man. PEMEX, Meridian Energy, PetroChina, Sinopec, Medibank Private, Mercury Energy, CODELCO, and I can go on and on. There are many successful, profitable government owned enterprises. For example, PEMEX generated nearly a half-billion dollars for the Mexican Government in 2012. In this paper, the author writes, “As much as 30-40 per cent of government revenues in Mexico stem from oil taxes, mainly in terms of royalty payments from the state-owned oil company PEMEX”. What’s more, Longhorn Dave, is that because government spending in Mexico is “flat” (See Figure 14), the PEMEX contributing “4-5 per cent of GDP” (See Figure 5 & Box on Page 9). Now, if Mexico, isn’t good enough for you. We can also do this with CODELCO, New Zealand, or the Pennsylvania Liquor Control Board just say the word.
Here’s my question to you: Why should the government be dependent on tax revenues when, in it’s current form, those revenues are dwindling?
According to Wikipedia:
Yes, I’m sure you can make tons when you kick everyone else out and run a monopoly, but I thought you didn’t want socialism?
Honesty, we’ve explained this to you several times so apparently it’s just something you don’t want to know.
You’re continuing to ignore the scale involved. Can a country make some money running a business? Sure. But the United States will never be able to make enough money just by running businesses.
Furthermore, you can’t prove that the government will make more money running businesses than it loses running businesses.
Woopty fucking doo. You’re telling me that the state owned oil monopoly of a country with 2/3rds the oil reserves as the U.S. generated less than 1/20th of just the royalty revenue of the U.S. Why exactly should we be excited about this? Pemex is an embarrassment. I could blindly pick anyone at random from Nowheresville, TX and they would out perform the management team of Pemex.
You want me to read a fifteen year old paper using data from two decades ago to support your thesis that a corrupt deadbeat company in a third world collapsing country is outperforming the envy of the world in the U.S. oil and gas industry? You are off the reservation.
Yes, by all means explain to me how the Pennsylvania Liquor Control Board is outperforming the U.S. oil and gas industry. Jesus Christ, is this a joke?
Because your basic premise is incorrect? Tax revenues are not dwindling. Is that the right answer?
And even if you accept that as a premise the money isn’t enough. In terms of profits, Exxon is the biggest company in history. And you’d need over a hundred Exxons to finance the national budget.
So to eliminate taxation, the government would have to run a hundred businesses - each of which would have to be more profitable than any company has ever been in history.
This is a pretty simple one to answer. Okay, the government’s going to start a business. They’ve got the startup cash, no problem.
So who runs it? A crony of the administration, of course, chosen for loyalty, not competence. How is it staffed? Through a complicated system that involves picking people for diversity reasons rather than talent. How are employees rewarded? They aren’t. They get paid based on scales whether they do a good job or not. How are employees punished for doing a poor job? They aren’t. Is the business conducted in a way as to maximize profits, or to fulfill various political missions the administration and members of Congress give it? Silly, why do you even ask?
Then you get what is known in modern times as epic fail.
But that’s not even the end of the story. NOw you have a business that’s providing jobs. So does the company’s failure result in it getting put out of business? HA!!! Now it gets subsidies.
Exactly this. Great response.
Exactly. It’s like that time the Japanese bombed Pearl Harbor and the first thing Roosevelt did was appoint his brother-in-law to be in charge of the war.
The reality is there’s plenty of competent people working for the government and plenty of incompetent people working in private businesses (in some cases running them).
This is true. And my scenario is not going to happen at every step. But it only takes one of those things being true to make the business uncompetitive. So maybe the President does appoint someone competent to run the business. It’s still likely to be subject to political direction. Look at state pension funds. Their purpose is to make money for pensioneers, but politics keeps on causing them to drop certain investments and make certain investments, thus reducing performance. And any government sponsored enterprise is also likely to inherit government job protections. It will also be implicitly backed by a promise to bail it out should it fail, which will reduce incentive to actually succeed. Workers will treat it as a government job and act accordingly.
But more likely than not, the President would appoint a political crony. That’s how most of the Cabinet is staffed. But since this business venture would be a new thing, we’ll be generous and assume the President would have a major incentive to see it succeed. Future Presidents, unfortunately, would not be all that invested in its success, not having created it.
The military is a different case. It doesn’t have to be. If we ran the civilian side the way we did the military it would probably work better. But we don’t. And there’s a reason for that. Wars are important. If the US had lost the war, FDR would have been disgraced, if not executed, either by a conqueror(unlikely) or a revolutionary government(more likely). Politicians are good at self-preservation. A business by contrast, or any other government program, if it fails or is inefficient, it doesn’t really affect the politicians any.
I had considered similar ideas in the past, particularly state-owned industries to supply the government with key resources such as paper, fuel, etc. It seems very inefficient to lease oil rights to companies and then purchase the fuel from those companies. Why not cut out the middle man and refine our own oil? Several posts have given good reasons why that would not work, at least at the national level. Mainly Congress has shown that they are the worst board of directors ever. (And most presidents have not been the best C.E.O.s either.)
There are many municipal-owned enterprises from utilities to parking garages to arenas. The key is determining the right size to enable efficiency and accountability. And they still have major problems with keeping enterprises from being over-politicized to serve whatever interests - from major donors to major unions. (Civil service is great for agencies focused on service. Not so great for enterprises focused on generating revenue and profit.)
Yet I would not consider a state-owned enterprise socialism per se. If they nationalized the entire sector and forbid any competitors, yeah, that is old school state socialism. (And I won’t argue that certain municipal utilities don’t meet that definition, though no one is forced to live in those cities that I am aware of.) But having them compete in the open market? It is still a capitalist enterprise, just with a different class of shareholders.
If government needs to increase tax revenue without raising tax rates, then the best method I think is increasing the size of the revenue pool to be taxed - i.e. enable more businesses to generate more taxable profits. In other words, old fashioned economic and business development. (Not the same as allowing businesses to become ‘too big to fail’ and then require government bailouts.)
I think the federal government does a decent job with the Small Business Administration and several other Commerce dept programs. Economic development is a mixed bag around the country and could use more focused leadership at the national and state levels, but most state economies are growing. I think there is room for more municipal or state (i.e. local) owned enterprises. But not at the federal level. Not with our government.
The jury is still out on China and the Arab sovereign wealth funds. It may work with their cultures. I do not see it working within ours.
Keep in mind the military is not some rare exception to a supposed general incompetence in the government. The military, which you feel is well run, is the largest part of the government by far. The “typical” government employee is an enlisted man in the Army.
There are about 4,049,000 people who work for the United States government. The largest group are the 1,430,000 active-duty members of the armed forces. The second largest group are the 779,000 civilian employees who work in the military. The third largest group are the 517,000 people who work for the postal service. No other group is larger than 200,000.
So if you feel the military is well run, you’re basically saying the government is mostly doing a good job.
The military is well-run as far as employee performance. It’s actually as crappy as any other government agency when it comes to handling money. Maybe worse.
But the military’s role is not financial. Their job is to blow things up and they do that real well.
The only part of the government that I can think of offhand that’s supposed to produce income is the IRS. And say what you will about them, they get the job done. Every year they produce billions of dollars in income.
They blow things up well because they have discipline. If they couldn’t be demoted or fired or reassigned for poor performance, they’d get well, poor performance.
Show me a company in Texas that’s doing better than Pemex.
<shrug> It was the cite I could find on Google. If you have a cite that you’d like to bring forth, then by all means, please do so. It’s real easy to criticize but a cursory search on this thread shows me that you haven’t provided a link or a hyperlink, so you know, at least I’m trying, unlike you who is preening about your in-the-mirror expertise without putting anything on the table.
I must be living in a bubble. This entire thread hasn’t just been about the oil and gas industry, it has been about government-owned enterprises which could, in theory, include a copper company or a chain of liquor stores . I am not saying that the PLCB generates more than the U.S oil and gas industry, that’s your strawman which you’ve heroically slayed with your scythe of vengeance +1. The strawman collapsed to the ground, shuddering and moaning until it ceased all movement. Congratulations. What I am saying is that the PLCB can generate a stream of revenue for a State (in this case, Pennsylvania) to supplement revenue from tax receipts.
Listen, LonghornDave, I don’t know whether you’re being dense or you’re playing some artful game of semantics. But according to this chart, revenue (% of GDP) has decreased since the 2000 and hasn’t recovered. The point, LonghornDave, is that there isn’t enough revenue to cover the current 100% GDP-Debt ratio. As I’ve stated in my thesis, the American taxpayer has voted to cut federal taxes over and over again since 1981, which should suggest to you (and everyone here) that the revenue problem will continue to persist.
The IRS does a horrible job. The IRS charges less interest than the private sector as well as capping the amount of interest charged. The IRS budget has remained essentially flat (See Page 3) with sequential budget reductions in FY11 and FY12. If the IRS can collect over 2 trillion in revenue on 11 billion dollar budget, imagine how much they could collect with a 20 or 30 billion dollar budget.
While I emphatically disagree with this statement based on the success of GSE’s in other countries, it’s my belief, after considering this thread, that my idea may not work, but it’s not because government is so inefficient that it’ll mired in own clumsiness, it’s because Congress is no longer a steward of the people’s business. The tale of the Post Office which was described upthread is a deafening example.
Why are you acting as if private industry doesn’t do this every single day. My god. I have had a job where the owner of the company has her kid working as a “quality insurance” whom, by the way, got paid more than all of us to watch Netflix movies in her office. If you think nepotism is somehow government job specific, let be the first one to assure you that’s not true. The rest of your response doesn’t deserve a counterpoint as it’s just a veiled attack on diversity and affirmative action programs, which clearly you feel have no benefit.
I concur with this.
- Honesty
The IRS does a horrible job. The IRS charges less interest than the private sector as well as capping the amount of interest charged. The IRS budget has remained essentially flat (See Page 3) with sequential budget reductions in FY11 and FY12. If the IRS can collect over 2 trillion in revenue on 11 billion dollar budget, imagine how much they could collect with a 20 or 30 billion dollar budget.
Of course it happens in the private sector. and if it causes the company to fail, the problem is solved. A government enterprise wouldn’t be allowed to fail, thus the moral hazard.
as for diversity programs, I feel they do have a benefit. The way it’s supposed to work is that you recruit and develop promising minority candidates. But you don’t show a preference for minority candidates. that’s discrimination.