4 ms·

by definition that liability is someone else's asset. it may even be yours: many pension funds seek uber-stable paper among other things to diversify risk.

paulddraper 7y ago
It is someone else's asset. That doesn't change the parent's point about the U.S. government not having money for such a fund. (Nor, do I think should it have such a fund. If the government were to have extra money -- and it doesn't -- the government should lower its taxes.)
- pedrocr 7y ago
  > Nor, do I think should it have such a fund. If the government were to have extra money -- and it doesn't -- the government should lower its taxes. In the case of Norway's sovereign fund (the biggest I think) there's a very good reason for it to exist. The fund inflows are the result of extracting oil from the ground so from the accounting point of view those are not revenues. They're movements in the balance sheet, converting one asset (oil) into another asset (cash). So they then put that in a fund and spend the returns, funding expenses with actual revenues. If they were to spend the capital they would be funding current expenses from assets. The equivalent in the US would be to every year sell a part of the national parks and use that money for tax breaks.
  - paulddraper 7y ago
    Norway is indeed a semi-socialist country financed by state-owned oil. Regardless of whether you think that's a good or bad thing, it's certainly very far from the U.S. situation. > those are not revenues. They're movements in the balance sheet, converting one asset (oil) into another asset (cash)' Though it doesn't invalidate your point, I do not think it means what you think it means. Revenue: The income generated from sale of goods or services, or any other use of capital or assets
    - pedrocr 7y ago
      I'm not saying it's a good or bad thing. I'm just explaining why they've setup a sovereign fund and why reducing taxes instead doesn't always make sense. And the point is that Norway is not funded by the oil directly, they're funded by the investment returns of the oil. They don't touch the principal. I agree the situation is very different from the US. I was just pointing out the parallel wasn't the US starting to raise taxes to setup a fund, the parallel would be selling some other asset the US government already does own. In usual accounting terms revenue has clear rules. If you sell long-term assets for the same value you had on your balance sheet already you record nothing in your income statement. You only record a gain or loss if the sale value is different from the book value, and even that goes straight to the bottom line and is not top-line revenue. Norway's oil is a long-term asset so converting it to cash is not revenue in the normal accounting sense.
      - paulddraper 7y ago
        > I was just pointing out the parallel wasn't the US starting to raise taxes to setup a fund, the parallel would be selling some other asset the US government already does own. Yes that is the closest parallel. Though in the long-term it's all relative; funding is funding. The U.S. could sell its national assets to lower tax burden. Norway could sell its national assets to lower tax burden. Or, instead of lowering the amount taxed, they could use those assets to fund a sovereign wealth fund for government benefits.
        pedrocr 7y ago
        >Or, instead of lowering the amount taxed, they could use those assets to fund a sovereign wealth fund for government benefits. Both options are equally easy for the state to do, of course. The point is there's a sound argument for doing the fund when you have such a large asset that's otherwise useless to you, instead of returning the money as lower taxes. If you do the fund you're setting up your economy to be able to depend on the revenues from the fund forever as you are not depleting the capital. If you lower taxes you get an economy using asset sales to fund current expenses. Once those assets run out you get to deal with that somehow to go back to a balanced budget. Since most states tax incomes much more than wealth doing that would basically mean the current generation living large and passing on the problem to their children to solve. Which is effectively what is happening in a lot of the oil rich countries.
- pmorais 7y ago
  The US government DOES have such a fund though. It’s called DARPA/ONR/whatever other military research wing. They all invest heavily in startups.
  - paulddraper 7y ago
    DARPA invests in startups for military technologies. VCs invest in startups for commercial viability.

paulddraper 7y ago

It is someone else's asset. That doesn't change the parent's point about the U.S. government not having money for such a fund. (Nor, do I think should it have such a fund. If the government were to have extra money -- and it doesn't -- the government should lower its taxes.)

pedrocr 7y ago
> Nor, do I think should it have such a fund. If the government were to have extra money -- and it doesn't -- the government should lower its taxes. In the case of Norway's sovereign fund (the biggest I think) there's a very good reason for it to exist. The fund inflows are the result of extracting oil from the ground so from the accounting point of view those are not revenues. They're movements in the balance sheet, converting one asset (oil) into another asset (cash). So they then put that in a fund and spend the returns, funding expenses with actual revenues. If they were to spend the capital they would be funding current expenses from assets. The equivalent in the US would be to every year sell a part of the national parks and use that money for tax breaks.
- paulddraper 7y ago
  Norway is indeed a semi-socialist country financed by state-owned oil. Regardless of whether you think that's a good or bad thing, it's certainly very far from the U.S. situation. > those are not revenues. They're movements in the balance sheet, converting one asset (oil) into another asset (cash)' Though it doesn't invalidate your point, I do not think it means what you think it means. Revenue: The income generated from sale of goods or services, or any other use of capital or assets
  - pedrocr 7y ago
    I'm not saying it's a good or bad thing. I'm just explaining why they've setup a sovereign fund and why reducing taxes instead doesn't always make sense. And the point is that Norway is not funded by the oil directly, they're funded by the investment returns of the oil. They don't touch the principal. I agree the situation is very different from the US. I was just pointing out the parallel wasn't the US starting to raise taxes to setup a fund, the parallel would be selling some other asset the US government already does own. In usual accounting terms revenue has clear rules. If you sell long-term assets for the same value you had on your balance sheet already you record nothing in your income statement. You only record a gain or loss if the sale value is different from the book value, and even that goes straight to the bottom line and is not top-line revenue. Norway's oil is a long-term asset so converting it to cash is not revenue in the normal accounting sense.
    - paulddraper 7y ago
      > I was just pointing out the parallel wasn't the US starting to raise taxes to setup a fund, the parallel would be selling some other asset the US government already does own. Yes that is the closest parallel. Though in the long-term it's all relative; funding is funding. The U.S. could sell its national assets to lower tax burden. Norway could sell its national assets to lower tax burden. Or, instead of lowering the amount taxed, they could use those assets to fund a sovereign wealth fund for government benefits.
      - pedrocr 7y ago
        >Or, instead of lowering the amount taxed, they could use those assets to fund a sovereign wealth fund for government benefits. Both options are equally easy for the state to do, of course. The point is there's a sound argument for doing the fund when you have such a large asset that's otherwise useless to you, instead of returning the money as lower taxes. If you do the fund you're setting up your economy to be able to depend on the revenues from the fund forever as you are not depleting the capital. If you lower taxes you get an economy using asset sales to fund current expenses. Once those assets run out you get to deal with that somehow to go back to a balanced budget. Since most states tax incomes much more than wealth doing that would basically mean the current generation living large and passing on the problem to their children to solve. Which is effectively what is happening in a lot of the oil rich countries.
pmorais 7y ago
The US government DOES have such a fund though. It’s called DARPA/ONR/whatever other military research wing. They all invest heavily in startups.
- paulddraper 7y ago
  DARPA invests in startups for military technologies. VCs invest in startups for commercial viability.