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Taxed Enough Already?


ydoaPs

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Despite the USA's relatively low taxes, its citizens often complain about how high the taxes are.

 

While playing Fable 3, I got a half baked idea. What if we could put in place a program to eventually eliminate federal taxes altogether? In Fable, as King, I got rid of the taxes to up my morality status. To pay for the federal budget, I then went to work in a pie shop. What if the Federal government does the same? What if the government sets up low cost competitors and uses our free-market economy to fund its programs? A government-owned Walmart-esque chain could potentially bring in a lot of revenue. Such things could stimulate the economy by competition and job creation. After the infrastructure for government-owned competitors is in place, the tax rate could theoretically be lowered and even eventually removed.

 

A small scale real world example would be states with ABC laws governing the sale of hard alcohol. Virginia, for instance, requires that all liquor be be purchased from the state government or purchased/consumed at a bar/restaurant. This is not quite the same, however, since it is a monopoly rather than a competition.

 

Moving toward a more limited government could help things along in this plan. Several things could be done along these lines. Social Security could be faded out(and any similar benefits become a state issue should the people desire them) and the Thrift Savings Plan could be opened up to all citizens as a retirement option. Medicare/Medicaid could be faded out(and any similar benefits become a state issue should the people desire them) while a low cost federally-owned insurance coverage option would be put in place(and the healthcare bill removed). The bank reform could be repealed and a federally owned bank could be instated to help drive down interest rates through competition rather than reform.

 

 

Is this idea even feasible? If so, what kind of revenue are we talking about here?

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So the federal government would be funded like a corporation? And there would be no sales or income tax? (Just wondering if I'm understanding you correctly.)

 

One problem that leaps to mind is that it's pretty common for the government to pass laws and exempt itself from any applicability. Obviously it would not be able to do that without being accused of monopolistic practices. If they're going to compete with Wal-Mart, they have to follow the same regulations as Wal-Mart, or they won't be able to impose those regulations. That also puts a difficult burden on prosecutors and law enforcement to avoid the appearance of impropriety.

 

But assuming all of that is possible, I wonder if there might be conflicts over the nature of regulation. It may be that some regulation could not be logically applied to a "government store".

 

Also, what happens if Wal-Mart just plain *beats* the government store, and nobody wants to go there? Let's say revenue falls to the point where government actually goes out of business. You still have a border to defend, police to pay, contract laws to enforce (judges and clerks, buildings, etc), and of course an army has to defend the country.

 

I suppose you could stockpile a fund to pay for economic rough patches. Assuming you've met the test of regulation, you could resurrect Bill Clinton's most-idiotic-idea-in-the-history-of-the-state-of-the-union-address idea of investing in the stock market without the obvious pitfalls.

 

(That should get us started, anyway. I'll think about it some more.)

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Well, the funding has to come from somewhere. While it is true that they could make themselves a corporation that earns its own pay, so could anyone else -- and everyone else already has a head start in that. By being as a corporation but with a giant money sink that is funding a country, they would be at a disadvantage compared to other corporations that invest in themselves. I suppose it could be done like with the corporations earning money for their shareholders, but then our government has huge debts not a bunch of capital to invest.

 

And even worse, it is nearly unavoidable that the government is going to legislate itself some advantages. This would crush competition. Also note that even if it didn't eliminate competition, it wouldn't increase any efficiency -- they'd simply take the job someone else could be doing, spending the money someone else could be investing. In fact, I suppose we could consider that the government already does run a corporation, all of us, and we pay our shareholder the government a portion of our profits.

 

However, I think that it would certainly do something with our culture of spending, if they had to make that much effort to earn their money. Or, they could just keep spending it all and let it crash on the heads of whoever gets elected next.

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So the federal government would be funded like a corporation? And there would be no sales or income tax? (Just wondering if I'm understanding you correctly.)

Whether there would be no taxes or lowered taxes would really depend upon the revenue provided by the federally-owned competitors.

 

One problem that leaps to mind is that it's pretty common for the government to pass laws and exempt itself from any applicability. Obviously it would not be able to do that without being accused of monopolistic practices. If they're going to compete with Wal-Mart, they have to follow the same regulations as Wal-Mart, or they won't be able to impose those regulations.

Agreed. I thought that was implied, but it probably should have been spelled out.

 

But assuming all of that is possible, I wonder if there might be conflicts over the nature of regulation. It may be that some regulation could not be logically applied to a "government store".

 

Also, what happens if Wal-Mart just plain *beats* the government store, and nobody wants to go there? Let's say revenue falls to the point where government actually goes out of business.
That's where the competition comes into play. It's not like I'm suggesting we remove all taxes and then have the government open up a convenience store. Once we get a feel for how the store would do, THEN the tax change would be configured.

 

Also, the federally-owned stores would be for running the nation(with, as i pointed out before, a more limited and therefore less expensive) government that combined with the fact that a Walmart-esque chain wouldn't be the only government competition in play might mean the prices could be lower before the competition even begins to take effect.

 

You still have a border to defend

Again, I said it would use a limited government. That means that border patrol would be a state issue until any challenge of the constitutionality of the law, such as racial issues, reach the supreme court.

 

police to pay

State/local issue.

 

course an army has to defend the country.
My version of a limited government includes the part of the government that is the military. Think withdrawal plans for all offensive troops not on assignment from the UN. Think the US actually pretending it's in the UN. Think lowered recruiting quotas.

 

Also, financial responsibility in the DOD would be nice. You know, justifying expenditures.

 

It's crazy how a limited government lowers the budget.

 

So the federal government would be funded like a corporation? And there would be no sales or income tax? (Just wondering if I'm understanding you correctly.)

Whether there would be no taxes or lowered taxes would really depend upon the revenue provided by the federally-owned competitors.

 

One problem that leaps to mind is that it's pretty common for the government to pass laws and exempt itself from any applicability. Obviously it would not be able to do that without being accused of monopolistic practices. If they're going to compete with Wal-Mart, they have to follow the same regulations as Wal-Mart, or they won't be able to impose those regulations.

Agreed. I thought that was implied, but it probably should have been spelled out.

 

But assuming all of that is possible, I wonder if there might be conflicts over the nature of regulation. It may be that some regulation could not be logically applied to a "government store".

 

Also, what happens if Wal-Mart just plain *beats* the government store, and nobody wants to go there? Let's say revenue falls to the point where government actually goes out of business.
That's where the competition comes into play. It's not like I'm suggesting we remove all taxes and then have the government open up a convenience store. Once we get a feel for how the store would do, THEN the tax change would be configured.

 

Also, the federally-owned stores would be for running the nation(with, as i pointed out before, a more limited and therefore less expensive) government that combined with the fact that a Walmart-esque chain wouldn't be the only government competition in play might mean the prices could be lower before the competition even begins to take effect.

 

You still have a border to defend

Again, I said it would use a limited government. That means that border patrol would be a state issue until any challenge of the constitutionality of the law, such as racial issues, reach the supreme court.

 

police to pay

State/local issue.

 

course an army has to defend the country.
My version of a limited government includes the part of the government that is the military. Think withdrawal plans for all offensive troops not on assignment from the UN. Think the US actually pretending it's in the UN. Think lowered recruiting quotas.

 

Also, financial responsibility in the DOD would be nice. You know, justifying expenditures.

 

It's crazy how a limited government lowers the budget. It might be obvious by now, that I'm talking about an actual limited government vice the imaginary one the TEA partiers want. Mine includes things like gay marriage, abortion, and the legal status of marijuana being state issues.

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The very short answer (IMHO) is: Since even a public firm directly competes for dollars with private firms, by taking those dollars out of the private system it amounts to a very unevenly distributed tax. If it was a natural gas company, at worst it would hurt competition, and at best mean that Florida pays nothing and the coldest nastiest states pay for everything. No matter how it's done, it's ultimately an adhoc and uneven tax collection mechanism.

 

 

Another problem is that markets change over time, and it's natural for all the players to play the "adapt or die" game, and those that happen to do so slowly end up out of business. The process tends to start with a young company ready to take advantage of new markets, continue to innovate, then eventually loose their market share while desperately lobbying the government to protect their business model. I forget which group, but one is lobbying right now to force all cell phone manufacturers to include a radio in their devices by law. This is purported to be a safety feature, but it is the same organization that represents music labels and they have special royalty arrangements that apparently vary based on access to radio - so they stand to make money whether cell phone users ever tune into a radio station simply by the option being there. (I'm sorry I haven't looked it up, it's really late and I need to sleep shortly)

 

These psychological shifts are almost impossible to see when you are "inside the bubble" and people who amassed amazing fortunes by applying ingenious insight to new tends become almost idiotic when viewed by those outside the bubble. If the government was to have to go inside that bubble, it would not only lead to huge conflict of interest with lobbyists but is a huge threat to objectivity.

 

Secondarily, Walmart makes buying decisions that make and break thousands of jobs all the time. What politician can tell their constituents that "most of you will be fired soon" whether they are federal cashiers or just private product manufacturers?

 

Another interesting thing - Alaska has no sales tax and no income tax, and funds state expenditures through petroleum revenues, and instead Alaskan citizens get payments each year from the Alaska Permanent Fund Corporation. I believe this is all generated by tax revenue on oil production levied against private oil companies, but it is not an income tax or sales tax. It's an interesting piece of irony, considering Palin's views and that it is probably the largest wealth redistribution framework of any of these United States.

 

 

In the long run though, it's all just smoke and mirrors because the burdens have to be carried and the bills have to be paid, letting the invisible hand assign the tax bracket system only makes this harder to see and harder to manage, but it still weighs out the same in the end.

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Creating many state owned companies, creating money which can be used to run the state???

Having the same state create the rules - undoubtedly also to maximize its own efficiency???

 

I thought that we just defeated communism 20 years ago?

 

And tell me, if one of your state-companies is running at a loss. What would be the state's interest to fire these people (just so that they will instantly enter the welfare program, and still cost a lot of money)?

 

 

It's funny that you mention games. In games, there is often a plan based economy, with you as the despotic ruler. In a plan based economy, the whole country is viewed as resources, labour force (or production capacity), and a list of desired products or services. Such a system is often considered communist... the market instead will regulate itself.

 

Now, you seem to suggest a more plan-based economy as a solution to tax deficits.

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Assuming you've met the test of regulation, you could resurrect Bill Clinton's most-idiotic-idea-in-the-history-of-the-state-of-the-union-address idea of investing in the stock market without the obvious pitfalls.

 

 

Why is investing in the stock market an idiotic idea? This is what the aforementioned Thrift Saving Plan is, at least in part.

 

A small scale real world example would be states with ABC laws governing the sale of hard alcohol. Virginia, for instance, requires that all liquor be be purchased from the state government or purchased/consumed at a bar/restaurant. This is not quite the same, however, since it is a monopoly rather than a competition.

 

Which the governor wants to sell off, but that's another discussion. Anyway, governments doing business usually do so to control things, as in liquor, or it's because it's a service which is not economical to be provided by a private company (or, possibly, private industry could not be trusted to do it, because of conflict of interest, like inspections. Cheap ones are probably bad ones).

 

The government has monopolies already that it could leverage, but then, that's going to look just like taxes. You could charge for GPS. Which is what the Europeans are trying to do with Galileo, only to find out that private companies didn't want to ante up and buy the service (partly, I presume, because GPS is free). NIST charges for calibration services, among other things. Where I work we actually charge other government agencies for some things, but can't charge the general public. I suspect people will have a hard time with a hybrid system of paying taxes and also for services, since they'll think they are already paying for it (and government officials do a bad job of convincing us otherwise)

 

The problems with direct competition vs taxation includes this: taxation will always be a cheaper way of funding a service, because you get to charge people who don't use the service. If you have kids, you don't pay the real cost of their schooling, because I don't have kids and still pay into the system. We tax people who don't drive very much, which help pay for roads that are used by others. But if this were done as a business, as competition, it would cost the users more. We have a prime example in Virginia — the Dulles Greenway, connecting the airport region with Leesburg. It's 14 miles long and costs $4.45 for a single trip over the entire length (more for trucks and during rush hour). $44.50 a week for commuters. Contrast that with the entire federal highway system, for which the median taxpayer pays $64 a year. Why does it work? One: we're undertaxed and the system is underfunded and will eventually crumble. Two: those who don't use the highways much will, on average, "overuse" some other service. Three: the government isn't trying to turn a profit to keep shareholders happy, so there's no conflict over minimizing outlays by skimping on services in order to maximize profits (think "insurance industry dropping your policy when you get sick, or denying treatment").

 

As far as the pie shop concept, I think it's actual socialism, as opposed to the phantom socialism people have been screaming about recently, and would take a serious change in mindset for the government to compete. These days we're so worried that someone will misspend a dime that we waste a lot of money on controls for spending (for small amounts, while millions go missing over in Iraq) because its bad press when you find out someone was able to buy a stereo with their government credit card. Spending more on fraud waste and abuse (FWA) prevention, in terms of actual outlays and lost productivity, than is lost in actual FWA is paradoxically not considered waste, partly because nobody really keeps track of it. I don't think the government could run a for-profit business with the look-over-my-shoulder attitude it has.

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Why is investing in the stock market an idiotic idea? This is what the aforementioned Thrift Saving Plan is, at least in part.

 

For one thing, you'd better make sure that the revenue from the stock market investment are larger than the interest you have to pay to do that investment in the first place. Governments have almost always a debt, not a surplus of money so they need to borrow money for every additional investment.

If investing in the stock market was guaranteed to give a profit on the long term, then almost everybody would be borrowing money to invest in the stock market.

 

Secondly, if you wish to do this, it seems more straightforward to give the shares of the stock market directly to the people? Then they have to pay less tax (since you don't need to buy shares, or pay interest and repay a debt) and the government still gets the profit, through taxation. Then the population becomes the shareholder of all the stock market, and Carl Marx will be happy.

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For one thing, you'd better make sure that the revenue from the stock market investment are larger than the interest you have to pay to do that investment in the first place. Governments have almost always a debt, not a surplus of money so they need to borrow money for every additional investment.

If investing in the stock market was guaranteed to give a profit on the long term, then almost everybody would be borrowing money to invest in the stock market.

 

Secondly, if you wish to do this, it seems more straightforward to give the shares of the stock market directly to the people? Then they have to pay less tax (since you don't need to buy shares, or pay interest and repay a debt) and the government still gets the profit, through taxation. Then the population becomes the shareholder of all the stock market, and Carl Marx will be happy.

 

You aren't investing with debt. Social security currently generates a surplus, which the government then borrows at very low interest. Instead of that, you would be investing elsewhere. Higher risk, since the government is considered to be essentially zero-risk, but with a higher return potential.

 

Wouldn't that only be the case if it were the only pie shop in town?

 

Fair enough. Since we have a wide spectrum of definitions of socialism, how about I rephrase it as it's closer to actual socialism than what people are complaining (or not*) about today.

 

 

 

*i.e. it won't be called socialism if the right does it.

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The problems with direct competition vs taxation includes this: taxation will always be a cheaper way of funding a service, because you get to charge people who don't use the service. If you have kids, you don't pay the real cost of their schooling, because I don't have kids and still pay into the system. We tax people who don't drive very much, which help pay for roads that are used by others. But if this were done as a business, as competition, it would cost the users more. We have a prime example in Virginia — the Dulles Greenway, connecting the airport region with Leesburg. It's 14 miles long and costs $4.45 for a single trip over the entire length (more for trucks and during rush hour). $44.50 a week for commuters. Contrast that with the entire federal highway system, for which the median taxpayer pays $64 a year. Why does it work? One: we're undertaxed and the system is underfunded and will eventually crumble. Two: those who don't use the highways much will, on average, "overuse" some other service. Three: the government isn't trying to turn a profit to keep shareholders happy, so there's no conflict over minimizing outlays by skimping on services in order to maximize profits (think "insurance industry dropping your policy when you get sick, or denying treatment").

While that is certainly true, there are also benefits for making interstates into toll roads. By only taxing those who actually use the interstates, one could argue that it is more fair than being taxed for a service that one does not use. The increased cost of interstate travel would provide incentive for people to live closer to work reducing their carbon footprint and the fuel demand which could lead to fuel price rises happening more slowly. And the toll road idea could make it so the program is not underfunded.

 

As with most decisions, there's pros and cons; I guess it's down to whether the pros outweigh the cons.

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While that is certainly true, there are also benefits for making interstates into toll roads. By only taxing those who actually use the interstates, one could argue that it is more fair than being taxed for a service that one does not use. The increased cost of interstate travel would provide incentive for people to live closer to work reducing their carbon footprint and the fuel demand which could lead to fuel price rises happening more slowly. And the toll road idea could make it so the program is not underfunded.

 

As with most decisions, there's pros and cons; I guess it's down to whether the pros outweigh the cons.

 

I think there's a fair amount of empirical data that shows that toll plazas slow traffic down, and then you have to employ people to collect tolls. So I think the total cost is lower, and efficiency higher, for a freeway. (In the example I gave, the win for the user, making it cost-effective, is a drop in time spent on the road, since the alternatives are much slower.) But if the government were to start abandoning the taxation model and went with privatized roads here and there, I suspect the average taxpayer would scream bloody murder about the increased cost. (This, of course, would be the same average taxpayer that was complaining about socialism. Be careful what you ask for.) I imagine this is true elsewhere, for other services. Privatization is not a panacea, and if that's so, some level of socialism can't be inherently bad.

 

——

 

Going back to the original concept: corporations have net incomes of, at best, a few tens of billions of dollars a year. If you combine Exxon, Apple computer and General Electric, you get perhaps $100 billion net profit a year (maybe more because they pay tax and a government corporation wouldn't have to). So I think the idea fails because of the sheer magnitude of the problem. Places that make this sort of thing work (in a way) sell raw materials or place a surcharge/tax on them (e.g. Venezuelan/middle eastern oil for foreign examples; Alaska, to a lesser extent, for a domestic one) but have relatively small populations.

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Why is investing in the stock market an idiotic idea?

 

I don't want to distract from ydoaPs's interesting thread, but in a nutshell it ignored the fact that stocks represent shares of actual ownership of a company, producing a conflict of interest. President Obama recognized this conflict when we took over General Motors by presenting what we might call an exit strategy (with surprising accuracy, as it turns out).

 

 

As far as the pie shop concept, I think it's actual socialism, as opposed to the phantom socialism people have been screaming about recently, and would take a serious change in mindset for the government to compete.

 

Even with competition? I got the socialism angle when I read it, but it seems like competition eliminates that argument. But maybe I misread something.

 

 

I don't think the government could run a for-profit business with the look-over-my-shoulder attitude it has.

 

I agree.

 

Going back to the original concept: corporations have net incomes of, at best, a few tens of billions of dollars a year. If you combine Exxon, Apple computer and General Electric, you get perhaps $100 billion net profit a year (maybe more because they pay tax and a government corporation wouldn't have to). So I think the idea fails because of the sheer magnitude of the problem. Places that make this sort of thing work (in a way) sell raw materials or place a surcharge/tax on them (e.g. Venezuelan/middle eastern oil for foreign examples; Alaska, to a lesser extent, for a domestic one) but have relatively small populations.

 

That does sound like another pitfall. And if the "privatized" government were to attack that problem by passing regulation against large conglomerates, would that be because it benefits the consumer or because it benefits the government's bottom line? It could be BOTH, but it would still be a conflict of interest.

 

 

I think there's a fair amount of empirical data that shows that toll plazas slow traffic down, and then you have to employ people to collect tolls.

 

I'm not sure I followed this back-and-forth, but I wanted to point out that they're ripping out toll booths left and right in South Florida as I speak, replacing them with a high-tech cashless system that works regardless of speed. (Not sure if that adds to the discussion or not.)

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When people complain about Walmart, I argue that it's the closest thing in capitalism to a communist economy. In communism, people are supposed to produce as much as possible and basically give it away to whoever needs it. The closest you can get to that in capitalism is to lower prices as close to costs as possible, while producing things as efficiently as possible. Obviously if Walmart gave away goods for less than they cost, it would go out of business. So it has to work within a capitalist market economy where inputs and labor require price-negotiations, but it basically tries to supply all possible needs for the lowest possible price in the most efficient way. This post is not an advertising promotion for Walmart, btw.

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I don't want to distract from ydoaPs's interesting thread, but in a nutshell it ignored the fact that stocks represent shares of actual ownership of a company, producing a conflict of interest. President Obama recognized this conflict when we took over General Motors by presenting what we might call an exit strategy (with surprising accuracy, as it turns out).

 

 

But the system already exists for some of us. Where is the conflict of interest in the Thrift Savings Program?

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State/local issue.

 

Hmmm, the conservative in me loves this.

 

My version of a limited government includes the part of the government that is the military. Think withdrawal plans for all offensive troops not on assignment from the UN. Think the US actually pretending it's in the UN. Think lowered recruiting quotas.

 

While obviously nit picking your idea, I can't help but suggest that this might have some interesting effects. The US has troops everywhere. There are huge contingents (like tens of thousands) in places like Korea, Germany, or Japan, and as many as ten thousand in places like Italy or Britain. I don't know know a lot of the effects of discontinuing these installments would be. I'd rather expect if the US cut back the UN would come forward. A lot of neo-con ideas can come out, but the seas and air are safer for trade because of a lot US military presents/actions. To what extent I'm not sure. But I'd expect something to fill the power vacuum, hopefully someone benevolent (more neo-con "benevolent imperialism" -- sry guys).

 

There's an interesting comparison to public schooling. As opposed to "phantom socialism" (mentioned by swansont), the government does have substantial control on at least a few sectors of industry. Just because these services have traditionally come from government sources doesn't mean that those same services could not come from private sources. Any time a government exerts any control by legislation or displacement of services it is socialism. I don't think that these are necessarily bad things, but there's no reason to forgo the socialism label, as it applies.

 

Anyways, I've thought that whole charter school controversy has been interesting. Public schools get so much money and they teach children, but charter schools that are privately operated are given the same amount of money and their children usually preform better. The interesting comparison is that private mangers in this case have out-preformed their public counterparts. They got more return for their money (usually). This is often the case for other services the government offers. The government often inefficiently offers services, which cost everyone more money (because the government is obviously is publicly funded). What's worked in this case is government money with a private extension to manage that money and offer services. Applying this to your idea the government could put money up for a business, let it be privately operated, and take a cut. But that almost resembles our current tax system more than your original idea.

 

I'm probably just rambling now, but I don't think the inefficiencies are inherent in government. I rather think it's a symptom of a cultural disinterest in education and activism in real politics -- as apposed to the more exciting and dumbed down version of politics (most people in the US actually think that this is politics) rhetoric and partisanship.

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But the system already exists for some of us. Where is the conflict of interest in the Thrift Savings Program?

 

Yes, but there's no conflict of interest in your owning part of a company, because you can't pass anti-competitive exemptions to taxation and regulation.

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Yes, but there's no conflict of interest in your owning part of a company, because you can't pass anti-competitive exemptions to taxation and regulation.

Yet again, I feel that limited federal government would solve this problem. Any commerce regulation would be state issue with the exception of interstate commerce.

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The last time you claimed conflict of interest you at least admitted it wasn't an absolute.

http://www.scienceforums.net/topic/13165-clintons-elder-statesman-role/

 

I'll just say this, so we don't have to go over the same ground: "There is a conflict of interest" is not the same as "there could be a conflict of interest," and it is also different than "there doesn't have to be a conflict of interest"

 

If you still insist that it's a conflict of interest, you should tell the Fed, because they do it, and unlike some other government defined-benefits programs, the Fed's did not suffer from underfunding issues. Employees don't even have to contribute out-of-pocket.

 

Currently, eight firms are retained to manage our $5.8 billion in pension assets (of which about two-thirds were invested in equities as of year end 1998)

(emphasis added)

http://www.federalreserve.gov/boarddocs/testimony/1999/19990225.htm

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Fair enough, "potential" conflict of interest. I suppose the actual conflict would only be if the government were to obtain majority shareholder status while playing a regulatory role that affected the company in question.

 

I guess it's a good thing we have quality, ethical people in charge who would never be tempted by inappropriate influences.

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Fair enough, "potential" conflict of interest. I suppose the actual conflict would only be if the government were to obtain majority shareholder status while playing a regulatory role that affected the company in question.

Good thing the idea being discussed has the federal government's only regulatory role in relation to commerce being interstate commerce. Other than that, all commerce would be state regulated. That's part of the whole limited government thing.

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Good thing the idea being discussed has the federal government's only regulatory role in relation to commerce being interstate commerce. Other than that, all commerce would be state regulated. That's part of the whole limited government thing.

 

So does the federal government have the power to limit out-sourcing and in-sourcing among states? Couldn't it stimulate the local economies and create jobs within states to limit what they can import? Could corporations be encouraged to support local suppliers by having uniform tariffs on interstate trade?

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  • 3 weeks later...

Hello, is it safe to wake this up? I'm interested [because I had a similar idea back in 2008...]

I'm not sure if people want to discuss this option to help chip away the deficit. All the issues raised thusfar I think can be solved by competition and a limited government.

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