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> While technically true, this is misleading. The numbers are still the same whether or not the government runs the bank. The private bank would lose 1 cent, as

by fiter 9y ago

> While technically true, this is misleading. The numbers are still the same whether or not the government runs the bank. The private bank would lose 1 cent, as you mentioned, but no matter what the government is still getting the $2 in taxable revenue resulting in 20 cents to the government at the 10% rate. This doesn't seem misleading at all: in your scenario, the private bank would not lend so the government would not be able to collect tax revenue. > I don't know about you, but I would never, ever count on the government running anything more efficiently than the private sector. This is a bad idea. Why? What is the inherent quality of the government run enterprise compared to the privately run enterprise that makes the former less efficient?

dimaggiosghost 9y ago
Skin in the game seems to be a large factor. Government workers tend towards better job security (less of a stick) and don't tend to get bonuses (smaller carrot) than private sector. This is of course by design, since favoritism is generally acceptable in a private organization but (the perception of it) poison to govt roles.
turc1656 9y ago
"Why? What is the inherent quality of the government run enterprise compared to the privately run enterprise that makes the former less efficient? " Because there is far less motivation to be efficient and well-run. The government can, for the most part, determine its revenue by the tax rate. How efficient would a private sector company be if they could mandate how much money was going to be guaranteed to them from their customers as a matter of law? Also, when government agencies that are supposed to be self-sufficient lose money, they just get subsidized instead of shut down. Take a look at the USPS for a perfect example. It loses billions of dollars every year, and has for quite some time. No private sector company would survive that when it goes on for as long as it has with the USPS.
- csdreamer7 9y ago
  USPS has several laws affecting it's profitability due to battles in Congress that simply a small government would not have (or be able to sustain). One is being required to over pay it's pensions to shore up the deficit other federal agencies have not made to the federal pension. Another is a requirement to serve mail all 5 working business days regardless of how rural a location it is. USPS actually delivers foreign letters, that can contain small items below cost, as do all nations mail systems due to international treaty. Congress has also has placed limits on how much USPS can raise the cost of a stamp. And then there is the USPS union battles. There are plenty of small government agencies that run very well simply because private enterprise has been uninterested or incompetent. Chattanooga TN's utility provider can match Google Fiber on $70 gigabit internet.
  - turc1656 9y ago
    I realize you didn't intend this, but as I read what you wrote I can't help but take it as supporting my claim. What you said about the USPS is a perfect example of why the government frequently does a terrible job running operations like this. None of that (except the union battles) would exist if it weren't for government nonsense. I would be curious to see the details on Chattanooga's ability to provide those lines for comparable cost. My guess is that they get tax breaks that Google doesn't and/or don't have to pay for something else that Google has to - i.e. the land to run the lines. I would be utterly shocked if they didn't have some advantage that existed purely as a result of them being a government agency and were able to compete with Google. Because if they have any advantage, it's not really a fair competition.
    - csdreamer7 9y ago
      I don't think you see my point. There is a reason why I wrote "due to battles in Congress that simply a small government would not have (or be able to sustain)." Mandates, turf battles, happen in large corporations as well as government. Chiefdoms, out of touch executives, in large corporations are as common as partisan battles in Congress. Small governments, like small businesses can operate with a certain quickness and laser focus that larger organizations do not operate under. Which was a point of the article, large banks were ignoring small business lending in these small towns. > I would be utterly shocked if they didn't have some advantage that existed purely as a result of them being a government agency I believe you shall be shocked. The state of Tennessee actually barred them from extending service to other towns because Comcast lobbied/bribed the state. The reason they put in fiber is because the locally owned power municipality needed the fiber to monitor for down lines. The municipality claimed the cost savings for having employees drive around every time the power was cut paid for itself in a few years. The fiber broadband itself is a profit center.
- crdoconnor 9y ago
  >Because there is far less motivation to be efficient and well-run. A) There is plenty of motivation to be efficient and well run - electoral incentives, career incentives, etc. B) In an oligopolistic market (which banking DEFINITELY qualifies as) there is less motivation to be well run in the private sector. C) Competition works just the same way if it's coming from the public sector or the private sector. Competition from the public sector is a good way of disciplining the public sector and incentivizing it to be better run. >Also, when government agencies that are supposed to be self-sufficient lose money, they just get subsidized instead of shut down. Perfectly acceptable if they're serving a public purpose. Do you propose that the military start making a profit? That might be hard.
  - turc1656 9y ago
    No, I don't expect the military to turn a profit because the military is not an entity that is expected to be self-sufficient. I included that wording specifically because it is key for the agency/entity being examined. I don't expect the schools, military, police, fire, etc. to be profitable. As for the subsidies, I do not find it "perfectly acceptable" at all. That just means the cost is spread to non-users and society as a whole pays more for the service than we would otherwise. Take public transportation. The services near me are cheaper than the private companies because they are subsidized by the government so they can charge less. All this means is that people who drive their own vehicles and don't use public transportation end up paying for their non-use of the public transportation system. Also, the employees of the public transportation system have wages, benefits, and retirement packages that are far superior to the private sector ones. Guess who pays for all that? They are getting special treatment far above what the free market allows. The electoral incentives are not to be well run - they are to employ as many people as possible in that government agency and look good. It is usually to their benefit to overstaff than be lean and efficient. How good does it look when they are letting people go? The CFO of my previous company got let go during a merger we went through. He went to work for a government agency and he told me that he quite literally does the work of 5 people because he's used to having a full plate and can do what they consider a full day's work at that agency in about 2 hours.
    - 9y ago
- fiter 9y ago
  > Because there is far less motivation to be efficient and well-run. On its face, this seems like a simple problem to solve. In practice, I can see how it would tend towards inefficiency with the tax system you've proposed. Other posters have tackled the question of monopoly/duopoly/oligopoly. In practice, I can see how markets tend towards oligopoly. It would be nice if we had systems that would tend towards high levels of the kind of efficiency that we want, but I think we should actively manage all of our systems for optimal results. This would mean keeping government organizations accountable for costs versus benefits as well as keeping markets competitive. If the USPS is losing money on every letter sent, maybe it could put itself out of business by encouraging alternatives to physically sending letters. This is a behavior that would not be encouraged by a private sector company.

by fiter 9y ago

dimaggiosghost 9y ago

Skin in the game seems to be a large factor. Government workers tend towards better job security (less of a stick) and don't tend to get bonuses (smaller carrot) than private sector. This is of course by design, since favoritism is generally acceptable in a private organization but (the perception of it) poison to govt roles.

turc1656 9y ago

"Why? What is the inherent quality of the government run enterprise compared to the privately run enterprise that makes the former less efficient? " Because there is far less motivation to be efficient and well-run. The government can, for the most part, determine its revenue by the tax rate. How efficient would a private sector company be if they could mandate how much money was going to be guaranteed to them from their customers as a matter of law? Also, when government agencies that are supposed to be self-sufficient lose money, they just get subsidized instead of shut down. Take a look at the USPS for a perfect example. It loses billions of dollars every year, and has for quite some time. No private sector company would survive that when it goes on for as long as it has with the USPS.

csdreamer7 9y ago
USPS has several laws affecting it's profitability due to battles in Congress that simply a small government would not have (or be able to sustain). One is being required to over pay it's pensions to shore up the deficit other federal agencies have not made to the federal pension. Another is a requirement to serve mail all 5 working business days regardless of how rural a location it is. USPS actually delivers foreign letters, that can contain small items below cost, as do all nations mail systems due to international treaty. Congress has also has placed limits on how much USPS can raise the cost of a stamp. And then there is the USPS union battles. There are plenty of small government agencies that run very well simply because private enterprise has been uninterested or incompetent. Chattanooga TN's utility provider can match Google Fiber on $70 gigabit internet.
- turc1656 9y ago
  I realize you didn't intend this, but as I read what you wrote I can't help but take it as supporting my claim. What you said about the USPS is a perfect example of why the government frequently does a terrible job running operations like this. None of that (except the union battles) would exist if it weren't for government nonsense. I would be curious to see the details on Chattanooga's ability to provide those lines for comparable cost. My guess is that they get tax breaks that Google doesn't and/or don't have to pay for something else that Google has to - i.e. the land to run the lines. I would be utterly shocked if they didn't have some advantage that existed purely as a result of them being a government agency and were able to compete with Google. Because if they have any advantage, it's not really a fair competition.
  - csdreamer7 9y ago
    I don't think you see my point. There is a reason why I wrote "due to battles in Congress that simply a small government would not have (or be able to sustain)." Mandates, turf battles, happen in large corporations as well as government. Chiefdoms, out of touch executives, in large corporations are as common as partisan battles in Congress. Small governments, like small businesses can operate with a certain quickness and laser focus that larger organizations do not operate under. Which was a point of the article, large banks were ignoring small business lending in these small towns. > I would be utterly shocked if they didn't have some advantage that existed purely as a result of them being a government agency I believe you shall be shocked. The state of Tennessee actually barred them from extending service to other towns because Comcast lobbied/bribed the state. The reason they put in fiber is because the locally owned power municipality needed the fiber to monitor for down lines. The municipality claimed the cost savings for having employees drive around every time the power was cut paid for itself in a few years. The fiber broadband itself is a profit center.
crdoconnor 9y ago
>Because there is far less motivation to be efficient and well-run. A) There is plenty of motivation to be efficient and well run - electoral incentives, career incentives, etc. B) In an oligopolistic market (which banking DEFINITELY qualifies as) there is less motivation to be well run in the private sector. C) Competition works just the same way if it's coming from the public sector or the private sector. Competition from the public sector is a good way of disciplining the public sector and incentivizing it to be better run. >Also, when government agencies that are supposed to be self-sufficient lose money, they just get subsidized instead of shut down. Perfectly acceptable if they're serving a public purpose. Do you propose that the military start making a profit? That might be hard.
- turc1656 9y ago
  No, I don't expect the military to turn a profit because the military is not an entity that is expected to be self-sufficient. I included that wording specifically because it is key for the agency/entity being examined. I don't expect the schools, military, police, fire, etc. to be profitable. As for the subsidies, I do not find it "perfectly acceptable" at all. That just means the cost is spread to non-users and society as a whole pays more for the service than we would otherwise. Take public transportation. The services near me are cheaper than the private companies because they are subsidized by the government so they can charge less. All this means is that people who drive their own vehicles and don't use public transportation end up paying for their non-use of the public transportation system. Also, the employees of the public transportation system have wages, benefits, and retirement packages that are far superior to the private sector ones. Guess who pays for all that? They are getting special treatment far above what the free market allows. The electoral incentives are not to be well run - they are to employ as many people as possible in that government agency and look good. It is usually to their benefit to overstaff than be lean and efficient. How good does it look when they are letting people go? The CFO of my previous company got let go during a merger we went through. He went to work for a government agency and he told me that he quite literally does the work of 5 people because he's used to having a full plate and can do what they consider a full day's work at that agency in about 2 hours.
  - 9y ago
fiter 9y ago
> Because there is far less motivation to be efficient and well-run. On its face, this seems like a simple problem to solve. In practice, I can see how it would tend towards inefficiency with the tax system you've proposed. Other posters have tackled the question of monopoly/duopoly/oligopoly. In practice, I can see how markets tend towards oligopoly. It would be nice if we had systems that would tend towards high levels of the kind of efficiency that we want, but I think we should actively manage all of our systems for optimal results. This would mean keeping government organizations accountable for costs versus benefits as well as keeping markets competitive. If the USPS is losing money on every letter sent, maybe it could put itself out of business by encouraging alternatives to physically sending letters. This is a behavior that would not be encouraged by a private sector company.