NationStates Jolt Archive

Something's been bothering me.

Like most people, I hate taxes, or, more specifically, I consider them a necessary evil that I only hate when I actually have to pay them. Until recently, it seemed to me that taxes were the only way the government could obtain the funds necessary to run its programs.

But then I hit upon an idea. Perhaps others have thought of this first; if so, please kindly point me in the direction of their threads.

The idea is fairly simple: individuals and corporations invest in stocks, bonds, etc., etc. in the expectation of making money. So why couldn't the government do that? Instead of taxing people, why couldn't the government buy and sell property and investments, the profits on which would be the government's operating capital?

I know, it's a bit of a pipe dream, and clearly the government would have to stash some money away in a "rainy day" fund for those inevitable periods of market tanking. But this seems like a better idea than taxes to me; instead of hurting the economy by taxing it, the government could push it along by investing in it.

And here's a follow-up question: if this type of government fundraising could work, why don't any countries use it?

In posting this thread, I expect that there is a reason that this wouldn't work, and that I'm just not good enough at economics to recognize it. So, if someone would enlighten me, it would be much appreciated.

Probably because it wouldn't generate enough revenue.

Isn't that really similar to state capitalism? That hasn't turned out too well in the past.

I see a lot of potential for abuse and corruption and giving big business unprecedented control over the government. After all, the government would be controlled by whomever they own stock in or whomever they buy property from. The government and the market would be totally unified, creating a very dangerous synthesis between the two that would probably end up screwing over everyone but the superrich.

The idea is fairly simple: individuals and corporations invest in stocks, bonds, etc., etc. in the expectation of making money. So why couldn't the government do that? Instead of taxing people, why couldn't the government buy and sell property and investments, the profits on which would be the government's operating capital?
The problem with this is that we're talking about funding the administration of one of the largest and most complex bureaucracy on Earth. Investing is fine for funding Fortune 500s and nest eggs, but this is the United States government we're talking about.

I know, it's a bit of a pipe dream, and clearly the government would have to stash some money away in a "rainy day" fund for those inevitable periods of market tanking. But this seems like a better idea than taxes to me; instead of hurting the economy by taxing it, the government could push it along by investing in it.
The question is: do you really want the US government tied to the health of its economy? I wouldn't want it to be crippled when the next recession or depression comes around. Quite the opposite, in fact -- the government should be strong and self-sufficient in order to help bail out failing businesses, pay out welfare, and hire the unemployed.

And here's a follow-up question: if this type of government fundraising could work, why don't any countries use it?
Because it couldn't work.

Because it couldn't work.

Well, the USSR kind of did, but they took it a step farther by controlling the entire process. And, of course, they ended up disintegrating because the strength of their government and the health of their economy were irrevocably linked.

The reason most governments aren't profitable is because people feel that a government's main job should be stealing from people and using the money to buy $25,000 toilet seats.

I think there are a few governments that actually do turn a profit, but they are still a government and not a corporation. Really, both 'corporation' and 'government' are simply titles for collections of people in an institution, the major difference is in goals.


The question is: do you really want the US government tied to the health of its economy?

Isn't it already? The economy goes into the toilet, they're not gonna get very much from income OR sales taxes. Or any of the other thousands of taxes they like to levy.

Isn't this called 'Jennifer Government'?


Or rather, the govt that the character works for..

Isn't it already? The economy goes into the toilet, they're not gonna get very much from income OR sales taxes. Or any of the other thousands of taxes they like to levy.

Not really; even the worst recessions only cause a drop of between 1 and 2% of GDP and a few percentage points of employment. The 2001 recession, for example, saw GDP contract by barely half a percent and a drop of 2 or 3% in payrolls. Also, since the government can run deficits tax revenue doesn't really matter; in fact, deficit spending is a way of reviving the economy by inflating the money supply.

Overall, it would take a Depression-scale economic collapse to seriously affect tax revenue.

Isn't it already? The economy goes into the toilet, they're not gonna get very much from income OR sales taxes. Or any of the other thousands of taxes they like to levy.
Not really. Tax revenue may vary with the health of the economy, but it's not nearly as volatile as the stock market or land investment.

Imagine: with state capitalism, the Great Depression would have obliterated the government, making any sort of government-funded recovery impossible. Very bad idea, that.

So what happens if the government makes a terrible investment and bankrupts your nation? Then you're fucked, aren't you.

Well, if you did that, you'd have to cut the things the government does by quite a bit.

And you'd also be removing the special status of government somewhat. You'd end up with an investment bank that also happens to have the right to point a gun at you to make you do stuff.

Estonia has a flat tax regime, which is currently being reduced by 1% every year until it's 20% in 2009. Sounds like a plan to me.

Well, the government is already controlled by big businesses anyway. But such form could be much more cost-efficient.

If I was in charge of one, I would start by replacing social welfare with warranted job (in military), privatizing roads, but replacing toll by yearly subscription... oh, wait, it means taxes!

A structure which controls such a large part of country's infrastructure will collect taxes one way or another. Well, that another way is not calling them taxes, but charging for use of government's property, which is hard not to use.
This idea would require major reduction of the government's size and responsibilities first.

ignoring the constitutional problems that would arise based on

a) nowhere in the constitution does it suggest that the government has the power to invest

and

b) if the government would buy stock in a company it would effectly partially own that company, and what happens when the government owns part of private companies, are those companies bound by constitutional and federal limitations on government employment?

The big problem is...where exactly do you suggest that the government invest that kind of money? If we recognize that even a 10% return annually in investment is highly optimistic, you would have to invest 10 times the annual budget to get returns that would keep the government running.

Do you have any IDEA what that kind of havoc on the economy that amount of money would do? Last years budget was in the order of 2.4 TRILLION dollars. Like I said, most people would say a 10% return annually is fairly optimistic in investment, so to keep that budget, the government would need to invest about 24 TRILLION dollars, and keep that level of investment.

24 trillion dollars, even ignoring how in hell we'd GET that much money together to invest, if injected in the stock market would cause massive economic turmoil and rampant inflation. Corporations wouldn't even be able to afford the dividends on that level of investment, and selling off that stock (to get the money back) would massivly devalue the stock, bankrupt companies....it'd be absolute chaos.

That amount of money is just waaaay too much to invest in private investment without causing some serious economic issues.

But this seems like a better idea than taxes to me; instead of hurting the economy by taxing it, the government could push it along by investing in it.
.
Taxes do not hurt the economy, in fact sensable progressive tax rates help the economy by stopping money from concentrating at the top and keep it circulating in the middle.

Something's been bothering me.

Like most people, I hate taxes, or, more specifically, I consider them a necessary evil that I only hate when I actually have to pay them. Until recently, it seemed to me that taxes were the only way the government could obtain the funds necessary to run its programs.

But then I hit upon an idea. Perhaps others have thought of this first; if so, please kindly point me in the direction of their threads.

The idea is fairly simple: individuals and corporations invest in stocks, bonds, etc., etc. in the expectation of making money. So why couldn't the government do that? Instead of taxing people, why couldn't the government buy and sell property and investments, the profits on which would be the government's operating capital?

I know, it's a bit of a pipe dream, and clearly the government would have to stash some money away in a "rainy day" fund for those inevitable periods of market tanking. But this seems like a better idea than taxes to me; instead of hurting the economy by taxing it, the government could push it along by investing in it.

And here's a follow-up question: if this type of government fundraising could work, why don't any countries use it?

In posting this thread, I expect that there is a reason that this wouldn't work, and that I'm just not good enough at economics to recognize it. So, if someone would enlighten me, it would be much appreciated.

Well, the government DOES invest in securities (China has bought up a lot of US debt). So this actually does happen. But the problem is that the government is going to need start-up capital to invest. It can do this by A). Taxing, or B). Inflating the money supply. Since this scheme is meant to eliminate taxes, I will not focus on this- instead, I will focus on the effects of inflation. What would essentially happen is that the government central bank would buy up securities from the market through inflating the money supply (the Fed doesn't have to pay out of their own pockets to get securities- they just have to type in a few numbers, make a few changes in the books, and they now own the security with money made out of thin air.) But inflation is a form of taxation as well, since it reduces the purchasing power of each privately held dollar and transfers it to the government (This is because it reduces money's scarcity and gives more money to the government.) It effectively transfers wealth from the wealth-producers to the government.

But it does not get any better from here. Not only does it weaken the value of the currency and effectively act as a hidden tax, this power of being able to whip up money on the spot will be very tempting for the government to support special interests (the Fed has performed many a bailout via inflation.) So not only does the government tend not to be profitable with this power, but rather it secretly taxes the people, weakens the currency, and transfers to the non-wealth producers at the expense of the wealth producers. It is probably worse than taxation, because at least taxation is visible and does not hurt the value of the currency, whereas this is a silent predator which damages the value of currency while effectively acting as a tax and spend measure.

I would think this notion is a little fundamentally anti-capitalist.

It would seem more efficient to take a little bit of money from a whole lot of independent companies that compete among each other in a free market.

Oh, that would work well.
"We just invested millions in Walmart! Quick, change the laws so they can make a better profit!"
This would give the government a rather obvious conflict of interest.

Oh, that would work well.
"We just invested millions in Walmart! Quick, change the laws so they can make a better profit!"
This would give the government a rather obvious conflict of interest.

Mercantilism, anyone?

When it comes time to sell the stock, the market is gonna tank.

Isn't that really similar to state capitalism? That hasn't turned out too well in the past.

I see a lot of potential for abuse and corruption and giving big business unprecedented control over the government. After all, the government would be controlled by whomever they own stock in or whomever they buy property from. The government and the market would be totally unified, creating a very dangerous synthesis between the two that would probably end up screwing over everyone but the superrich.

When Ve-freakin-TALIA tells you some kind of economic system won't work, it just plain won't work, guarenteed.

Something's been bothering me.

Like most people, I hate taxes, or, more specifically, I consider them a necessary evil that I only hate when I actually have to pay them. Until recently, it seemed to me that taxes were the only way the government could obtain the funds necessary to run its programs.

But then I hit upon an idea. Perhaps others have thought of this first; if so, please kindly point me in the direction of their threads.

The idea is fairly simple: individuals and corporations invest in stocks, bonds, etc., etc. in the expectation of making money. So why couldn't the government do that? Instead of taxing people, why couldn't the government buy and sell property and investments, the profits on which would be the government's operating capital?

I know, it's a bit of a pipe dream, and clearly the government would have to stash some money away in a "rainy day" fund for those inevitable periods of market tanking. But this seems like a better idea than taxes to me; instead of hurting the economy by taxing it, the government could push it along by investing in it.

And here's a follow-up question: if this type of government fundraising could work, why don't any countries use it?

In posting this thread, I expect that there is a reason that this wouldn't work, and that I'm just not good enough at economics to recognize it. So, if someone would enlighten me, it would be much appreciated.
What you are talking about is nationalising most (if not all) of industry. That is not capitalism, and it doesn't work. Besides, if you are talking about investing in, rather than just forcibly taking over, the firms that would fund the traditional government stuff, then this would mean increased not decreased taxes for the rest of your lifetime.

Such government actually could work. But in a world full of international corporations, which are no smaller than the government.

It would need, effectively, city-states structure. For modern world, make the United States 50 fully independent, divide other large countries into provinces or whatever. And abolish migration laws.
This way the governments would be not excessively big players, and could operate on the markets. When a company to invest is outside the country, and not inside, the government can work with it. Of course, effectively, they would become not as much masters over people as just companies running the infrastructure and owned collectively by the citizens.

http://www.cafrman.com/


Has anyone seen this site?

Something's been bothering me.

The idea is fairly simple: individuals and corporations invest in stocks, bonds, etc., etc. in the expectation of making money. So why couldn't the government do that? Instead of taxing people, why couldn't the government buy and sell property and investments, the profits on which would be the government's operating capital?

And here's a follow-up question: if this type of government fundraising could work, why don't any countries use it?


This is state capitalism. It has been used in various countries, in different ages, to degrees ranging from very mild social-democracy (a la Keynes: F.D.Roosevelt's New Deal) to complete state-run economies (Stalin's CCCP).
Somewhere in the middle was Italy's IRI (Istituto per la Ricostruzione Industriale, Insitute for Industry Reconstruction). It was a state-owned corporation whose aim was to re-industrialise Italy after WW2: it took over industries who were about to go bankrupt, and, using state funds, tried to rebuild them and get them back to positive. The problem is, that a lot of capitalists and enterpreneurs began to rely even more heavily on state funds - going to fraud bankrupt, having the state fix the whole thing, and they buying the industries back from IRI for bargain prices - and, that way, the private italian industries lost any need to re-investing their profits into the tech innovation and basic research. The effect is that the state lost a lot of money - look at Italy's public debt - and that the italian industrial sector lost competitivity.

Moreover, the main problem with the state being an actor on the capitalist scene, is that, because of the huge quantities of goods and resources a state is able to own and manage, state monopolies are created quite easily, and monopolies, be they private or public, tend to choke a capitalist market - this is why the US has (or at least used to have, see the issue about Rockefeller's Standard Oil in the '70s iirc) very stron anti-monopoly laws.

Oh, that would work well.
"We just invested millions in Walmart! Quick, change the laws so they can make a better profit!"
This would give the government a rather obvious conflict of interest.

If you just replace Walmart with Halliburton...