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There's a lot of talk about how the Federal Gov't isn't like a household or business. It is different, but not to extent that people who preach that like to pre

There's a lot of talk about how the Federal Gov't isn't like a household or business. It is different, but not to extent that people who preach that like to pretend. That aside, I wonder what opportunities and paradigm shifts we are missing out on by being ok with all this debt, good or not. The American gov't is so far in the hole that it doesn't have ANY wealth! What if we built up a Sovereign Wealth Fund such that we could completely eliminate taxes and fund all government activities from the interest? What would that world look like?

UncleMeat 8y ago
Funding the government on interest is going to require more than 100T in capital.
- arcbyte 8y ago
  US GDP is 18T, which means we only need 5 years worth of GDP. If we saved/invested a surplus each year equal to the amount we reduced the public debt under Clinton in the year 2000 - $230 billion and assumed the 4% annualized returns - the same rate you're requiring for your 100T figure - for 75 years, we'd have 100T.
zzzzzzzza 8y ago
sovereign wealth funds underperform the market. They are the best solution out of a field of very bad solutions for what to do when your country has been struck by the resource curse. If you were an individual it would be like winning the lottery (lots of people's lives go totally down the shitter after winning the lottery). Setting a goal for your government of setting up a sovereign welath fund would be kind of like the average individual who hasn't won the lottery making a goal of setting up a trust fund, and getting the money to do so by working at mcdonalds instead of going to college (or some other more valuable alternative). The significant difference between this individual example and the government is the government is a worse decision maker than the individual since it can only make decisions by committee (or in a dictatorship by one uninformed individual who can't possibly be aware of everything going on in his/her country). Therefore the government should stick to the happy path (taking on college debt or equivalently funding basic social services/national defense/regulatory oversight through debt instruments).
damptowel 8y ago
The government should just run deficits for financing projects and use tax for redistribution and inflation control, like it does today. The issue today is excessive private sector money creation and lack of federal deficits to offset the debt overhang created by private finance.

UncleMeat 8y ago

Funding the government on interest is going to require more than 100T in capital.

arcbyte 8y ago
US GDP is 18T, which means we only need 5 years worth of GDP. If we saved/invested a surplus each year equal to the amount we reduced the public debt under Clinton in the year 2000 - $230 billion and assumed the 4% annualized returns - the same rate you're requiring for your 100T figure - for 75 years, we'd have 100T.

zzzzzzzza 8y ago

sovereign wealth funds underperform the market. They are the best solution out of a field of very bad solutions for what to do when your country has been struck by the resource curse. If you were an individual it would be like winning the lottery (lots of people's lives go totally down the shitter after winning the lottery). Setting a goal for your government of setting up a sovereign welath fund would be kind of like the average individual who hasn't won the lottery making a goal of setting up a trust fund, and getting the money to do so by working at mcdonalds instead of going to college (or some other more valuable alternative). The significant difference between this individual example and the government is the government is a worse decision maker than the individual since it can only make decisions by committee (or in a dictatorship by one uninformed individual who can't possibly be aware of everything going on in his/her country). Therefore the government should stick to the happy path (taking on college debt or equivalently funding basic social services/national defense/regulatory oversight through debt instruments).

damptowel 8y ago

The government should just run deficits for financing projects and use tax for redistribution and inflation control, like it does today. The issue today is excessive private sector money creation and lack of federal deficits to offset the debt overhang created by private finance.