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View Full Version : Govt. run as a business (Derail from Santorum thread)


raburrell
02-08-2012, 06:58 PM
Here's the thing. Roomney wants to run the government like a business.
The idea that government can and should be run like a business is seriously flawed, IMO. There are elements of management strategy, efficiency, etc, which can be applied, but the purpose of a government and the purpose of a corporation couldn't possibly be more different.

While I understand that many conservatives would disagree, the ideal purpose of a government is to protect the many from the few and the few from the many. (source of said quote is eluding me. And if it happens to be Lenin or Stalin, it will be par for the course with how my day is going lol). Anyhow, a business's purpose is to make money for its shareholders. I see very little in common there.

Teinz
02-08-2012, 07:57 PM
Um, the Republicans, as currently constituted, are not conservatives. I have not viewed them as such since Newt was Speaker. They're revolutionaries. Their goal is to destroy the United States and replace it with something where they'll be in power forever.


Quite a dark perspective on the GOP. You describe them as being the Norsefire Party and the US are just a "Three Waters" and a "St. Mary's" away from them taking over. Although I'm sometimes tempted to believe the same, I don't think it does them justice.

Besides, do you think Democrats can't be equally powerhungry themselves?

The idea that government can and should be run like a business is seriously flawed, IMO.

I agree. Government is about people, not profit.

Also there's lots of myths around, saying businesses are better equipped for performing certain tasks than government is. Sometimes they aren't.

j. Adams
02-08-2012, 07:59 PM
The idea that government can and should be run like a business is seriously flawed, IMO. There are elements of management strategy, efficiency, etc, which can be applied, but the purpose of a government and the purpose of a corporation couldn't possibly be more different.

While I understand that many conservatives would disagree, the ideal purpose of a government is to protect the many from the few and the few from the many. (source of said quote is eluding me. And if it happens to be Lenin or Stalin, it will be par for the course with how my day is going lol). Anyhow, a business's purpose is to make money for its shareholders. I see very little in common there.

The difference is that a government run "business" is not in it to make a profit(I have no idea why people don't understand this), but rather, its main purpose is to maximize its expenditures as they relate to the money it is given every year. in other words, their aim is to use every penny that they are given for their budget.

raburrell
02-08-2012, 08:06 PM
What I fail to see is why anyone would believe Romney's vaunted business experience would help him do any of that.

If you read my comment, I said there are useful elements in terms of efficiency, etc, but setting business strategy for a corporation (especially one like Bane) and setting policy for a nation are entirely different animals.

eta: Not to mention that by his own admission, the guy has been 'unemployed' since his rather unpopular stint as governor here. Five years of sitting on his butt having someone else manage his assets prepares him for running the country how?

Xelebes
02-08-2012, 08:48 PM
The difference is that a government run "business" is not in it to make a profit(I have no idea why people don't understand this), but rather, its main purpose is to maximize its expenditures as they relate to the money it is given every year. in other words, their aim is to use every penny that they are given for their budget.

Furthermore, the primary concern of government is conserving the assets of the nation (people and land). This is in opposition to what a business is about, to serve people and not just those in the nation.

Chrissy
02-08-2012, 09:42 PM
The difference is that a government run "business" is not in it to make a profit(I have no idea why people don't understand this), but rather, its main purpose is to maximize its expenditures as they relate to the money it is given every year. in other words, their aim is to use every penny that they are given for their budget.

I wish the federal government had this problem. And I don't think anyone "doesn't understand" that the government isn't "in it to make a profit."

When I say "run it like a business," I'm not referring to a greedy, money-hoarding, every-man-for-himself, rape-the-land mentality. The fact is that the government should aim for profit -- except that the profit would be used for additional programs that benefit the country. Like a non-profit business, it's still a business.


Furthermore, the primary concern of government is conserving the assets of the nation (people and land). This is in opposition to what a business is about, to serve people and not just those in the nation.

Interesting assessment. It's sounds like you're saying that a typical business is not interested in asset management, or in the conservation of its assets. That would be (and is, where it exists) really stupid business. Intelligently-operated businesses ARE like this--they care about their employees and they cultivate their land/assets/etc and this is because of the profit motive. For the production of future income. They put money back into the company with long-term goals to continue to be in existence and to be profitable. I'm not talking about irresponsible businesses or businesses who run their people and their assets into the ground. That kind of management eventually will fail. Which kind of circles back to my point, that the only reason the federal government hasn't failed is because for years, they've been dipping into funds that should be off limits and borrowing money. Basically, raping the social security system and becoming indebted to other countries.

The fact is that there is so much fiscal waste, and no one seems to be truly motivated to keep expeditures equal to income, let alone reduce the national deficit. Not since I was wee child and Reagan was in office.

I do accounting and taxes for profit and non-profit businesses. A common goal of both of these businesses is to operate within their means and to continue to exist. This is much stronger motivation where there is no temporary "out" in the form of loans, or even, I daresay, in increasing the taxpayers' burden.

Romantic Heretic
02-08-2012, 09:43 PM
If you read my comment, I said there are useful elements in terms of efficiency, etc, but setting business strategy for a corporation (especially one like Bane) and setting policy for a nation are entirely different animals.

One of the main problems with our idea of 'efficiency' is that we conflate it also to mean 'effective' and 'good.'

As the problems with health care in the States demonstrated the insurance companies were very efficient at making money but not very effective at delivering health care.

As far as efficiency being good goes, at the risk of Godwinning this thread, the Holocaust was very efficient.

raburrell
02-08-2012, 09:55 PM
When I say "run it like a business," I'm not referring to a greedy, money-hoarding, every-man-for-himself, rape-the-land mentality. The fact is that the government should aim for profit -- except that the profit would be used for additional programs that benefit the country. Like a non-profit business, it's still a business.

Make a profit on what? Sorry, I don't get this.
And while donning (ahem) my austrian-proof underwear, there's nothing wrong with governments operating at a deficit when economic conditions dictate. (It's when they do it all the time that it becomes a problem).

Chrissy
02-08-2012, 10:01 PM
Make a profit on what? Sorry, I don't get this.


Definition of profit: excess of revenue over expenses. That is all. No mystery. And obviously, no shareholders. :)

raburrell
02-08-2012, 10:02 PM
Okay. Although I was asking more for clarification on what they were making a profit from and on than the definition of profit. But I still stand by the other half. Nothing wrong with the same government occasionally running a deficit.

Chrissy
02-08-2012, 10:06 PM
One of the main problems with our idea of 'efficiency' is that we conflate it also to mean 'effective' and 'good.'

As the problems with health care in the States demonstrated the insurance companies were very efficient at making money but not very effective at delivering health care.

As far as efficiency being good goes, at the risk of Godwinning this thread, the Holocaust was very efficient.

I agree with your sentiment. Conversely, I'll say that "profit motive" does not equal "evil motive."

IMO, your point brings up a rather separate discussion of integrity (delivering what you promise to deliver). But since we all know that politicians are exempt from such matters, why go there? ;)

Chrissy
02-08-2012, 10:12 PM
Okay. Although I was asking more for clarification on what they were making a profit from and on than the definition of profit. But I still stand by the other half. Nothing wrong with the same government occasionally running a deficit.

Yes, I also agree that occasionally isn't necessarily a bad thing, in an emergency situation. I dunno though, 15 trillion, with no end in sight? And we bailed out WHO?

Anyway. 'Nuff from me. I've got a tiny little business to run. Cheers! :)

Xelebes
02-08-2012, 10:34 PM
The purpose of business is to serve assets (wares, inventory) to customers. Businesses have capital, just like governments, but that's not how they ensure they survive. If a business has too much capital assets to serve its wares and inventories, it is not going to end up well because the expenses are going to be too much. The government does not have that problem - capital assets belong to the government any which way unless it decides to sell them off.

j. Adams
02-08-2012, 11:11 PM
Definition of profit: excess of revenue over expenses. That is all. No mystery. And obviously, no shareholders. :)

It seems to me like you've never actually worked for a government organization, because if you had, you would be laughing at your own commentary.

Government run monopolies don't work that way. If they are given a budget consistent of X dollars, and for some reason they make a profit of Y dollars on that budget, the next year they will receive a budget of X-Y dollars from the government. That's one of the main reasons why a government run monopoly seeks to maximize expenditures and not profits. i.e. They just don't want to get less money the next year.

Having said that, state sponsored social programs, while they may never be "fixed" to run with perfect efficiency, maybe they simply don't need to. Maybe they just need to continue running at a level that serves the community in a way that makes most people feel like they are getting a fair return for their tax dollar, with an eye towards always improving the system.

If a "businessman" gets a hold of these programs, he will run it in a way that does not serve the community, but rather the almighty bottom line, and that can have negative social consequences. i.e. Public Finance is not the same as Corporate Finance.

Chrissy
02-08-2012, 11:44 PM
It seems to me like you've never actually worked for a government organization, because if you had, you would be laughing at your own commentary.

Not sure why the GAAP definition of profit is funny. But of course, you're entitled to laugh. :)

Government run monopolies don't work that way. If they are given a budget consistent of X dollars, and for some reason they make a profit of Y dollars on that budget, the next year they will receive a budget of X-Y dollars from the government. That's one of the main reasons why a government run monopoly seeks to maximize expenditures and not profits. i.e. They just don't want to get less money the next year.

You have just made my point. (Now I'm supressing laughter ;)) That is one of the most ridiculous, waste-inducing justifications for spending money that I have ever heard of. We need to change this. I.E., run it like a business. So you don't lose your funding just because you didn't spend it by the end of the fiscal year.

Having said that, state sponsored social programs, while they may never be "fixed" to run with perfect efficiency, maybe they simply don't need to. Maybe they just need to continue running at a level that serves the community in a way that makes most people feel like they are getting a fair return for their tax dollar, with an eye towards always improving the system.

To me, this is a contradiction, and sounds suspiciously like the typical government attitude. "Aw shucks, it's not that bad." And what is this nebulous incentive for improvement? Government is typically thirty years behind non-government businesses when it comes to innovation and technology.

If a "businessman" gets a hold of these programs, he will run it in a way that does not serve the community, but rather the almighty bottom line, and that can have negative social consequences. i.e. Public Finance is not the same as Corporate Finance.

I completely disagree. This theory assumes certain prejudices about "businessmen" (to use your quotes) -- it seems you feel they are not capable of helping anyone but themselves. Simply not true. It's not an either/or situation.

MattW
02-08-2012, 11:50 PM
I
If a "businessman" gets a hold of these programs, he will run it in a way that does not serve the community, but rather the almighty bottom line, and that can have negative social consequences. i.e. Public Finance is not the same as Corporate Finance.This assumes that the person with business experience is entirely ignorant of the objective of government, and malevolent to boot.

Businesses exist to serve customers with goods or services. If a business does not satisfy customers in a cost effective way, their either lose the customer or close up shop. Government isn't too much different - they provide services to the people.

I'm not saying that government is 100% broken, or that businesses are 100% efficient. But why can't some measure of efficiency, cost accountability, streamlining, and customer service become part of how government operates?

One example: How many agencies at the local, state and federal level do the exact same thing? How much money goes into ensuring they are coordinated? How many missteps or levels of approval are there to accomplish anything? That goes for everything from law enforcement to agriculture to education to tax collection.

And sometimes (most times if you only read the P&CE) government oversteps, or doesn't go far enough to protect the rights, safety, property, or lives of citizens. It's not enough that they try to provide a service - if they are designed to do it, they should do it near flawlessly.

I'd like government to look more like a benevolent corporation where the people come first, than whatever it is today...

j. Adams
02-08-2012, 11:52 PM
Not sure why the GAAP definition of profit is funny. But of course, you're entitled to laugh. :)



You have just made my point. (Now I'm supressing laughter ;)) That is one of the most ridiculous, waste-inducing justifications for spending money that I have ever heard of. We need to change this. I.E., run it like a business. So you don't lose your funding just because you didn't spend it by the end of the fiscal year.



To me, this is a contradiction, and sounds suspiciously like the typical government attitude. "Aw shucks, it's not that bad." And what is this nebulous incentive for improvement? Government is typically thirty years behind non-government businesses when it comes to innovation and technology.



I completely disagree. This theory assumes certain prejudices about "businessmen" (to use your quotes) -- it seems you feel they are not capable of helping anyone but themselves. Simply not true. It's not an either/or situation.

Yes, I suppose all the people that specialize in Public Finance that have been doing this for decades have it completely wrong.

Do you realize how absurd you sound right now?

You're trying to equate a corporate business to a government run monopoly, and that's where you
fall flat on your face. It's not the same thing. In fact,
its not even close.

The purpose of social programs is to benefit the community as a whole, not just the bottom line. You seem to think that running these programs with the mind of making a profit will make things WAY better. I find that laughable tbh. The reality of the Economics in question is completely against you.

See, when you run a business for profit and (say healthcare), and you have a patient that is costing
you a lot of money, you would probably let him go, in order to improve efficiency. Conversely, in a government run healthcare institution (Medicare and Medicaid), it would be irrelevant how much money that person was eating up, as you would help them regardless no matter what the cost was.

That's the difference that you don't seem to want to understand.

j. Adams
02-08-2012, 11:56 PM
This assumes that the person with business experience is entirely ignorant of the objective of government, and malevolent to boot.

Businesses exist to serve customers with goods or services. If a business does not satisfy customers in a cost effective way, their either lose the customer or close up shop. Government isn't too much different - they provide services to the people.

I'm not saying that government is 100% broken, or that businesses are 100% efficient. But why can't some measure of efficiency, cost accountability, streamlining, and customer service become part of how government operates?

One example: How many agencies at the local, state and federal level do the exact same thing? How much money goes into ensuring they are coordinated? How many missteps or levels of approval are there to accomplish anything? That goes for everything from law enforcement to agriculture to education to tax collection.

And sometimes (most times if you only read the P&CE) government oversteps, or doesn't go far enough to protect the rights, safety, property, or lives of citizens. It's not enough that they try to provide a service - if they are designed to do it, they should do it near flawlessly.

I'd like government to look more like a benevolent corporation where the people come first, than whatever it is today...

They already do all that. The problem here is that the nation is getting older, and as such the costs for Medicaid, and Medicare are ballooning. That isn't the fault of the government, that is just the reality we face today.

And like I told Chrissy, a business can turn a customer away, the government however can't. It's reason for existing is to serve the needs of its populace. The business' reason for existing is to maximize its profits in order to ensure a good return for its shareholders.
Those are almost diametrically opposed POV's.

Also, as I stated before, Romney is a corporate finance guy. He has no inkling how to run public institutions that operate at a federal level.

Chrissy
02-09-2012, 12:23 AM
Yes, I suppose all the people that specialize in Public Finance that have been doing this for decades have it completely wrong.

Yes, that is exactly what I am saying. The government sector has a "specialized" view of fiscal responsibility that is wasteful, and therefore, IMO, detrimental to the taxpayers that it serves.

Do you realize how absurd you sound right now?

You're trying to equate a corporate business to a government run monopoly, and that's where you
fall flat on your face. It's not the same thing. In fact,
its not even close.

Interesting word choices. We can be respectful, can't we? I enjoy the dialogue, and I know you can make your points without the dramatic extras.

To answer the above, I agree that it's not the same thing. I'm saying it should be. Just using your own definition of the federal government as a monopoly: Monopolies aren't even legal in most cases. Why? Because there's an inherent belief that monopolies are too powerful and lead to abuse of that power.


The purpose of social programs is to benefit the community as a whole, not just the bottom line. You seem to think that running these programs with the mind of making a profit will make things WAY better. I find that laughable tbh. The reality of the Economics in question is completely against you.

I've already responded to the social benefit versus bottom line concept. You've exaggerated my position as far as "profit" is concerned. In a previous post, I mentioned that non-profits run their businesses in the same way that profit businesses do. Income in, expenses out. The End.

I'd really like you to expand on the bolded statement. You're not providing any basis for it.

See, when you run a business for profit and (say healthcare), and you have a patient that is costing
you a lot of money, you would probably let him go, in order to improve efficiency. Conversely, in a government run healthcare institution (Medicare and Medicaid), it would be irrelevant how much money that person was eating up, as you would help them regardless no matter what the cost was.

That's the difference that you don't seem to want to understand.


And again, you're exaggerating. My point was not that we should look at people's needs like a cost/benefit analysis. Maybe that's what you think I'm suggesting--that any program that isn't somehow "profitable" should be shut down? Never said anything of the sort. There is obviously benefit in helping people. This is why nonprofits spend money, while all the while they still have to be accountable for their expenditures and they don't have a bottomless well of foreign credit, nor are they allowed to shift funds earmarked for other programs to do social experiments that may or may not (and usually don't) work in practice.

What you don't seem to understand at all is how much money is being wasted due to the giant, bureaucratic slug that the federal government has become.

Williebee
02-09-2012, 12:34 AM
MOD Note:

I'm thinking we can have this discussion without the personal digs.

Let's proceed with a bit more forethought, thanks.

j. Adams
02-09-2012, 12:37 AM
In private business, there is this thing that's called COMPETITION When there are lots of companies vying for your dollar, they compete against each other, and the end result is usually a lower price for you, as well as a more efficiently run industry. The companies that can't adapt and change either go bankrupt or leave. If a company is inefficient and is running at a cost higher than the others in the industry, they will eventually go bankrupt. So either they adapt or they leave.

Government run monopolies (i.e. social programs) have no competition. There are no competitors to drive these programs to become more efficient, or more importantly to help drive down costs.

That's the name of the game here. Competition.

If you think that Romney is going to magically clean up the government and make it run more efficiently, then IMHO you're off to LA La Land. It will never happen. You can't just magically make a business run more efficiently if you don't actually have competition. It just doesn't work that way.

j. Adams
02-09-2012, 12:38 AM
MOD Note:

I'm thinking we can have this discussion without the personal digs.

Let's proceed with a bit more forethought, thanks.

Oops, I didn't see this post. My bad. I'll edit my last one

j. Adams
02-09-2012, 12:40 AM
Yes, that is exactly what I am saying. The government sector has a "specialized" view of fiscal responsibility that is wasteful, and therefore, IMO, detrimental to the taxpayers that it serves.



Interesting word choices. We can be respectful, can't we? I enjoy the dialogue, and I know you can make your points without the dramatic extras.

To answer the above, I agree that it's not the same thing. I'm saying it should be. Just using your own definition of the federal government as a monopoly: Monopolies aren't even legal in most cases. Why? Because there's an inherent belief that monopolies are too powerful and lead to abuse of that power.




I've already responded to the social benefit versus bottom line concept. You've exaggerated my position as far as "profit" is concerned. In a previous post, I mentioned that non-profits run their businesses in the same way that profit businesses do. Income in, expenses out. The End.

I'd really like you to expand on the bolded statement. You're not providing any basis for it.




And again, you're exaggerating. My point was not that we should look at people's needs like a cost/benefit analysis. Maybe that's what you think I'm suggesting--that any program that isn't somehow "profitable" should be shut down? Never said anything of the sort. There is obviously benefit in helping people. This is why nonprofits spend money, while all the while they still have to be accountable for their expenditures and they don't have a bottomless well of foreign credit, nor are they allowed to shift funds earmarked for other programs to do social experiments that may or may not (and usually don't) work in practice.

What you don't seem to understand at all is how much money is being wasted due to the giant, bureaucratic slug that the federal government has become.

Feel free to point your finger at an actual part of the Govt. Too often I see people saying what you stated and not having a clue as to where the "waste" is.

thebloodfiend
02-09-2012, 12:40 AM
j. adams, you're being really rude.

j. Adams
02-09-2012, 12:43 AM
j. adams, you're being really rude.

*shrug* It happens when people say things that are utterly wrong.

thebloodfiend
02-09-2012, 12:45 AM
*shrug* It happens when people say things that are utterly wrong.

And there's also a thing called tact. I vehemently disagree with Chrissy about a number of things, but I respect her enough to not insinuate that she's stupid.

j. Adams
02-09-2012, 12:49 AM
And there's also a thing called tact. I vehemently disagree with Chrissy about a number of things, but I respect her enough to not insinuate that she's stupid.

This isn't a subjective question where the personal opinion one has actually carries some relevance. This is something that has a right answer and has been known for eons. If you've ever studied business, finance, or Econ, the answer to this question is very easy. But as usual, she's being stubborn and trying to hold on to her POV even though its dead wrong. After a while of that...you tend to lose patience.

In as far as tact is concerned, on the internet I prefer a big ol' Club to get my point across :)

Williebee
02-09-2012, 12:54 AM
In as far as tact is concerned, on the internet I prefer a big ol' Club to get my point across

MOD Note:
Leave your club in the closet. It impresses no one, and it's hurting the points you are trying to make.

j. Adams
02-09-2012, 12:55 AM
Yes, that is exactly what I am saying. The government sector has a "specialized" view of fiscal responsibility that is wasteful, and therefore, IMO, detrimental to the taxpayers that it serves.



Interesting word choices. We can be respectful, can't we? I enjoy the dialogue, and I know you can make your points without the dramatic extras.

To answer the above, I agree that it's not the same thing. I'm saying it should be. Just using your own definition of the federal government as a monopoly: Monopolies aren't even legal in most cases. Why? Because there's an inherent belief that monopolies are too powerful and lead to abuse of that power.




I've already responded to the social benefit versus bottom line concept. You've exaggerated my position as far as "profit" is concerned. In a previous post, I mentioned that non-profits run their businesses in the same way that profit businesses do. Income in, expenses out. The End.

I'd really like you to expand on the bolded statement. You're not providing any basis for it.




And again, you're exaggerating. My point was not that we should look at people's needs like a cost/benefit analysis. Maybe that's what you think I'm suggesting--that any program that isn't somehow "profitable" should be shut down? Never said anything of the sort. There is obviously benefit in helping people. This is why nonprofits spend money, while all the while they still have to be accountable for their expenditures and they don't have a bottomless well of foreign credit, nor are they allowed to shift funds earmarked for other programs to do social experiments that may or may not (and usually don't) work in practice.

What you don't seem to understand at all is how much money is being wasted due to the giant, bureaucratic slug that the federal government has become.

Regarding the bolded statement:

A government run business (Which is a monopoly) will never be as efficient as a private run business due to the lack of competition.

There's no "if" there. It will never happen.

j. Adams
02-09-2012, 12:59 AM
MOD Note:
Leave your club in the closet. It impresses no one, and it's hurting the points you are trying to make.

From her prior posts I've read on this site, its pretty clear that she will never change her POV in regards to what she thinks is right.

I could try to explain it further, but if she doesn't have a background in Econ/Finance/Business, its doubtful that she will ever understand it. The main problem here is that she is making conclusions based on incomplete information.

She has this bizarre idea that a private business is the same as a government run business. At this point, I don't know what else to say other than...well, you're wrong. (As I explained)

j. Adams
02-09-2012, 01:05 AM
I wish the federal government had this problem. And I don't think anyone "doesn't understand" that the government isn't "in it to make a profit."

When I say "run it like a business," I'm not referring to a greedy, money-hoarding, every-man-for-himself, rape-the-land mentality. The fact is that the government should aim for profit -- except that the profit would be used for additional programs that benefit the country. Like a non-profit business, it's still a business.




Interesting assessment. It's sounds like you're saying that a typical business is not interested in asset management, or in the conservation of its assets. That would be (and is, where it exists) really stupid business. Intelligently-operated businesses ARE like this--they care about their employees and they cultivate their land/assets/etc and this is because of the profit motive. For the production of future income. They put money back into the company with long-term goals to continue to be in existence and to be profitable. I'm not talking about irresponsible businesses or businesses who run their people and their assets into the ground. That kind of management eventually will fail. Which kind of circles back to my point, that the only reason the federal government hasn't failed is because for years, they've been dipping into funds that should be off limits and borrowing money. Basically, raping the social security system and becoming indebted to other countries.

The fact is that there is so much fiscal waste, and no one seems to be truly motivated to keep expeditures equal to income, let alone reduce the national deficit. Not since I was wee child and Reagan was in office.

I do accounting and taxes for profit and non-profit businesses. A common goal of both of these businesses is to operate within their means and to continue to exist. This is much stronger motivation where there is no temporary "out" in the form of loans, or even, I daresay, in increasing the taxpayers' burden.

The problem here is not expenditures (as you seem to think). It's the large reduction in tax revenues that is the problem. If you really are an accountant, then I'm honestly appalled as to how you could possibly be getting this so wrong.

Slashing expenditures so that they match current revenues will only accomplish one thing: A massive reduction in aggregate demand that would trigger another Great Depression.

You see in 1929, the Geniuses of that time thought that slashing expenditures would also get them out of their current mess. In the end, it blew up in their face. Austerity measures have been proven time and time again to not work.

What you need is an increase in tax revenues with a small reduction in expenditures.

Chrissy
02-09-2012, 01:08 AM
In private business, there is this thing that's called COMPETITION When there are lots of companies vying for your dollar, they compete against each other, and the end result is usually a lower price for you, as well as a more efficiently run industry. The companies that can't adapt and change either go bankrupt or leave. If a company is inefficient and is running at a cost higher than the others in the industry, they will eventually go bankrupt. So either they adapt or they leave.

Government run monopolies (i.e. social programs) have no competition. There are no competitors to drive these programs to become more efficient, or more importantly to help drive down costs.

That's the name of the game here. Competition.

If you think that Romney is going to magically clean up the government and make it run more efficiently, then IMHO you're off to LA La Land. It will never happen. You can't just magically make a business run more efficiently if you don't actually have competition. It just doesn't work that way.

So you're saying that if there is no competition, there cannot be more efficiency. I disagree. It's called accountability and responsiblity to the taxpayers who provide your revenue (and vote for you).

Regarding bold: Never did I say this about Romney. Just have to make that point, because I would never vote for him. Among other things, he spends too much time on hair and makeup. I distrust his motives.

But that's outside the scope of our debate, and I still hold forth that a government enterprise, without any competition, is capable of becoming streamlined and maximizing the benefit of the taxpayers' dollars. Many state and local governments are much closer to this and make these priorities.

Williebee
02-09-2012, 01:08 AM
Looked at from the outside? You two are both a little bit wrong, and a lot right. And yeah, that's an opinion, just like yours. As near as I can tell, the disagreement may well arise because you aren't clear on what each other is saying. (I could be wrong... It happens.)

For example:

She has this bizarre idea that a private business is the same as a government run business.

Looking past the rudeness, Chrissy, is this actually what you said? If so, is it exactly what you meant to say?

Don
02-09-2012, 01:15 AM
You have just made my point. (Now I'm supressing laughter ;)) That is one of the most ridiculous, waste-inducing justifications for spending money that I have ever heard of. We need to change this. I.E., run it like a business. So you don't lose your funding just because you didn't spend it by the end of the fiscal year.

Chrissy, I agree with you 100%. Unfortunately, it's not that simple. Really. Ludwig von Mises explained it thoroughly in 1944 with the seminal work Bureaucracy, wherein he explains that government-run entities with no profit motive and a budget based on the political process are designed from the ground up with incentives for every employee that work diametrically to those incentives required to run an organization as a profit-making (or non-profit, donation-funded) organization.

In public administration there is no market price for achievements. This makes it indispensable to operate public offices according to principles entirely different from those applied under the profit motive....

A bureau is not a profit-seeking enterprise; it cannot make use of any economic calculation; it has to solve problems which are unknown to business management. It is out of the question to improve its management by reshaping it according to the pattern of private business. It is a mistake to judge the efficiency of a government department by comparing it with the working of an enterprise subject to the interplay of market factors.

And thus, from the summary listed below:
The greatest entrepreneur, if appointed head of a government department, could not be expected to duplicate his success in his new position. He would lack the compass that was readily available in his former situation: market prices, the tool of economic calculation by which he could guide his efforts to earn profits. In his government department, he would essentially be like any other bureaucrat, and his success in the marketplace would count for little. True, his department might have to buy supplies in the market, and as a former businessman, he might strive for the best deals. But that would not constitute placing his department on a businesslike basis, for its “output” would never be offered for sale on the market and thus would command no price. So economic calculation would be impossible.

Mises also rejects the notion that the “tools of scientific management,” such as time and motion studies, are relevant to bureaucracies. He writes, “Like any kind of engineering, management engineering too is conditioned by the availability of a method of calculation,” profit and loss, which is missing in bureaucratic management.

This (http://www.fff.org/freedom/fd0501b.asp) is a decent brief summary, although I recommend reading it in its entirety. It's only 120 pages.

The book is available as a free PDF from this link (http://mises.org/Books/bureaucracy.pdf).

And it's also available for online reading or browsing at http://mises.org/etexts/mises/bureaucracy.asp

j. Adams
02-09-2012, 01:15 AM
So you're saying that if there is no competition, there cannot be more efficiency. I disagree. It's called accountability and responsiblity to the taxpayers who provide your revenue (and vote for you).

Regarding bold: Never did I say this about Romney. Just have to make that point, because I would never vote for him. Among other things, he spends too much time on hair and makeup. I distrust his motives.

But that's outside the scope of our debate, and I still hold forth that a government enterprise, without any competition, is capable of becoming streamlined and maximizing the benefit of the taxpayers' dollars. Many state and local governments are much closer to this and make these priorities.

The marketplace does not operate on the principles of human benevolence. I think you're dreaming if you honestly think that people will do the right thing when it comes to money and being efficient, when there is no push to actually become more efficient.

That's the primary reason why a government run business operates on the principle of maximizing expenditures. Since there is no competition, profit
does not matter, and the only aim is to use up its budget
in a way that makes the tax payer feel like he gets a good return on his tax dollars.

Conversely, a private business has to compete with other business's. Because of this competition there will be a never ending war to become more efficient when it comes to costs in order to drive down long run average costs, ultimately, in order to maximize profits. Here profits always matter as the business has to answer to the shareholders or the owner. With no profits, the business does not stay in business for long.

j. Adams
02-09-2012, 01:17 AM
Don, are you a fan of the Austrian School of Economics?

Chrissy
02-09-2012, 01:18 AM
The problem here is not expenditures (as you seem to think). It's the large reduction in tax revenues that is the problem. If you really are an accountant, then I'm honestly appalled as to how you could possibly be getting this so wrong.

Slashing expenditures so that they match current revenues will only accomplish one thing: A massive reduction in aggregate demand that would trigger another Great Depression.

You see in 1929, the Geniuses of that time thought that slashing expenditures would also get them out of their current mess. In the end, it blew up in their face. Austerity measures have been proven time and time again to not work.

What you need is an increase in tax revenues with a small reduction in expenditures.

I read through all of the posts, and I am really amazed that you think that your opinion is so obvious and mine is so wrong. I'm not some lone crusader in my views regarding government spending.

Yes, I am a CPA, I have Masters in Taxation and took an awful lot of economics and finance classes. There is plenty of room for debate on the subject, and I don't believe there is some "magic cure" in increasing taxes to compensate for wasteful spending.

And since you really feel that you're just humoring me and getting angry at my inability to see the light, then there isn't much to be said, is there? That's too bad.

No hard feelings on my end. :)

Don
02-09-2012, 01:19 AM
Don, are you a fan of the Austrian School of Economics?
No, I just quote Mises to piss off the Keynesians. :D

...and since you're relatively new here, I'll throw in this sign. :sarcasm

ETA: Read my signature. There are a few things there that might give you some indication of my position as well. ;)

j. Adams
02-09-2012, 01:24 AM
I read through all of the posts, and I am really amazed that you think that your opinion is so obvious and mine is so wrong. I'm not some lone crusader in my views regarding government spending.

Yes, I am a CPA, I have Masters in Taxation and took an awful lot of economics and finance classes. There is plenty of room for debate on the subject, and I don't believe there is some "magic cure" in increasing taxes to compensate for wasteful spending.

And since you really feel that you're just humoring me and getting angry at my inability to see the light, then there isn't much to be said, is there? That's too bad.

No hard feelings on my end. :)

An "educated" opinion is worthless unless you can actually back it up.

Feel free to look at the question from a historical perspective (I have). That's if you're honest about
your ability to actually want to learn something.

What I'm seeing here is a lot of meandering and deflecting. You have yet to answer a question thoroughly.

Chrissy
02-09-2012, 01:26 AM
She has this bizarre idea that a private business is the same as a government run business.
Looking past the rudeness, Chrissy, is this actually what you said? If so, is it exactly what you meant to say?

If I take the sentence literally, then no, I didn't say they ARE THE SAME. But from a financial point of view, I think they should be more the same. As I understand it, right now, any given government program will spend money because they HAVE the money and if they don't spend it, it could be taken away. To me, this is motivation to throw money at anything, rather than get a budget reduction next year. Money equals hurry-up-and-spend-it? Completely different from a non-government entity's point of view. What I'm saying is that the government should have the same motivation to not waste money or overspend that a profit organization does (or even an nonprofit, as are some of my clients).

Chrissy
02-09-2012, 01:28 AM
An "educated" opinion is worthless unless you can actually back it up.

Feel free to look at the question from a historical perspective (I have). That's if you're honest about
your ability to actually want to learn something.

What I'm seeing here is a lot of meandering and deflecting. You have yet to answer a question thoroughly.

I feel exactly the same way about all of your posts.

Don
02-09-2012, 01:29 AM
If I take the sentence literally, then no, I didn't say they ARE THE SAME. But from a financial point of view, I think they should be more the same. As I understand it, right now, any given government program will spend money because they HAVE the money and if they don't spend it, it could be taken away. To me, this is motivation to throw money at anything, rather than get a budget reduction next year. Money equals hurry-up-and-spend-it? Completely different from a non-government entity's point of view. What I'm saying is that the government should have the same motivation to not waste money or overspend that a profit organization does (or even an nonprofit, as are some of my clients).
But it doesn't. There is no data available for economic calculation in a taxpayer-funded bureaucracy. It's not there to be used.

j. Adams
02-09-2012, 01:32 AM
I feel exactly the same way about all of your posts.

Sorry, but no. If anything, I have explained why in great detail.

You're just "hoping" that a government run business should be operated the same way as a privately run business.

Your POV has been debunked thoroughly. Several times in fact.

Chrissy
02-09-2012, 01:37 AM
But it doesn't. There is no data available for economic calculation in a taxpayer-funded bureaucracy. It's not there to be used.

Well I understand it's not inherently there. That's what I think the problem is, or one of them. I will read your link Don, and maybe it will help me learn some lingo, including how to express my points from a more non-capitalism-oriented construct. :)

ColoradoGuy
02-09-2012, 01:39 AM
. . . I have Masters in Taxation . . .

That's a pretty ominous-sounding degree.

j. Adams
02-09-2012, 01:40 AM
Regarding how much money government run programs get:

What the Government does is take the expenditures from the last year, then they factor in economic realities, ultimately, in order to come upon a fiscal projection regarding how much money that program will need for the upcoming year. And they then put that into the national budget and then run it through both houses.

If that program uses up less money, they will in all probability get less money the coming fiscal year. That's why they operate on the principle of maximizing expenditures.

That's Economic reality.

Maxinquaye
02-09-2012, 01:41 AM
I don't really understand why there should be no competition in government services. For instance, here in Sweden we have a voucher-based public education system. That has lead to the creation of many, many schools over the last few decades: private, co-ops, and public.

The state funds the education, and there is no discrimination against any type of school. All have to follow the national curriculum, and all have to be operated by educators. But to the state it is irrelevant whether the school is private, cooperative or public. They all get the same moneys per student.

That has meant there is competition for students, among the schools, and what they compete in is education quality. If parents feel that in a particular school, their kid gets a good education, they send the child to that school. If a school has problems, violence, disturbance - then the parent pulls the child from that school and sends him or her elsewhere.

This has had a dramatic effect on schools in for instance minority areas that used to be hell-holes. Some of the best schools in the country is now in deprived areas, and well-to-do parents put their children in queue to go there.

Chrissy
02-09-2012, 01:44 AM
That's a pretty ominous-sounding degree.

It's hideous. I'd rather be writing. :)

j. Adams
02-09-2012, 01:45 AM
Well, now you're entering the realm of privatization, which can be a minefield.

I don't disagree with you on primary/secondary education. Education in the US is a MESS. Privatizing it could in fact make it more competitive. which could help it in the LR. The problem here is that of relative size. What can work for Sweden might not necessarily work for the US due to the population differential.

MattW
02-09-2012, 01:46 AM
I don't really understand why there should be no competition in government services. For instance, here in Sweden we have a voucher-based public education system. That has lead to the creation of many, many schools over the last few decades: private, co-ops, and public. Vouchers are a great example of competitive forces in public service. Unfortunately, they are so rare in the US, and fought so vehemently by teachers unions that the value has been little realized.

Don
02-09-2012, 01:47 AM
Well I understand it's not inherently there. That's what I think the problem is, or one of them. I will read your link Don, and maybe it will help me learn some lingo, including how to express my points from a more non-capitalism-oriented construct. :)
It's a tough difference to wrap your head around, certainly.

Here's one example that comes to mind. No Child Left Behind was intended to bring standards-based education reform to bureaucratically-based public education, yet it has failed miserably. OTOH, Sylvan Learning Centers and other organizations have been relatively successful with what are essentially standards-based for-profit education. The difference is inherent to the two types of systems.

ETA: And I see while I was writing this that several others brought up for-profit education and vouchers.

Maxinquaye
02-09-2012, 01:49 AM
I don't know. Geographically, Sweden is bigger than Californa. Populationwise, we're at a tenth of the population. There are geographical challenges, not to mention climate challenges. But there's no need for privatisation. Just introduce vouchers, and open up for co-op or private schools. Don't discriminate between schools.

If public (or private or co-op) schools can't deliver what they're supposed to deliver, they'll be punished economically. Their funding is going to be dependent on what students they can keep. And that's going to be dependent on what the school can deliver.

It will sort itself out over time.

Don
02-09-2012, 01:55 AM
I don't know. Geographically, Sweden is bigger than Californa. Populationwise, we're at a tenth of the population. There are geographical challenges, not to mention climate challenges. But there's no need for privatisation. Just introduce vouchers, and open up for co-op or private schools. Don't discriminate between schools.

If public (or private or co-op) schools can't deliver what they're supposed to deliver, they'll be punished economically. Their funding is going to be dependent on what students they can keep. And that's going to be dependent on what the school can deliver.

It will sort itself out over time.
Which explains exactly why the National Education Association spent almost $6 million (http://www.opensecrets.org/orgs/summary.php?id=D000000064) on lobbying efforts in 2011.

Chrissy
02-09-2012, 02:00 AM
It's a tough difference to wrap your head around, certainly.

Here's one example that comes to mind. No Child Left Behind was intended to bring standards-based education reform to bureaucratically-based public education, yet it has failed miserably. OTOH, Sylvan Learning Centers and other organizations have been relatively successful with what are essentially standards-based for-profit education. The difference is inherent to the two types of systems.

ETA: And I see while I was writing this that several others brought up for-profit education and vouchers.

I'm definitely on board for private-owned options. In case that wasn't obvious. ;)

Maxinquaye
02-09-2012, 02:02 AM
Another example here is our "socialised medicine" system. In fact, it works pretty much like the educational system. If you have a doctor's license, you can open a primary care centre, or practice. As long as you can show that you have a doctor's license, you're free to do so.

You get money per patient that walks in through the door and says 'I like you, you'll be my doctor'. If people don't like the doctor, they'll go elsewhere. In an obscenely healthy population like here, you won't have much more than accidents, acute diseases and campaigns against the sniffles - unless you go into the more deprived areas where you can test your knowledge against more complex things like PTSD and war-wounds among the immigrant population, and thus get more moneys. Or you can specialise, and work at a hospital, of course.

Xelebes
02-09-2012, 02:36 AM
Another example here is our "socialised medicine" system. In fact, it works pretty much like the educational system. If you have a doctor's license, you can open a primary care centre, or practice. As long as you can show that you have a doctor's license, you're free to do so.

You get money per patient that walks in through the door and says 'I like you, you'll be my doctor'. If people don't like the doctor, they'll go elsewhere. In an obscenely healthy population like here, you won't have much more than accidents, acute diseases and campaigns against the sniffles - unless you go into the more deprived areas where you can test your knowledge against more complex things like PTSD and war-wounds among the immigrant population, and thus get more moneys. Or you can specialise, and work at a hospital, of course.

That is how Canadian Health Care works too.

Romantic Heretic
02-09-2012, 04:14 AM
In private business, there is this thing that's called COMPETITION

COMPETITION An activity in which there are more losers than winners. Otherwise it's not a competition. A society based on competition is therefore a society that consists mostly of losers. - John Ralston Saul

Competition has its place if there are clear cut rules about how to play the game and there are methods for individuals to keep from suffering too much for being on a losing team along with the ability to get back in the game.

Otherwise society will be like the NFL, where only a few people work and most are relegated to the stands, watching. A privilege they have to pay for.

Romantic Heretic
02-09-2012, 04:20 AM
I'm definitely on board for private-owned options. In case that wasn't obvious. ;)

Such as law enforcement, justice or defence? Introducing the profit motive for these means that society has accepted that it can't stop corruption and that services go only to those who afford them.

Plus a private armed forces will find it profitable to start wars, and may decide that they're better qualified to run things since they have weapons and everybody else does not.

All these things have been tried before. There's a good reason we stopped doing them.

Chrissy
02-09-2012, 04:42 AM
Such as law enforcement, justice or defence? Introducing the profit motive for these means that society has accepted that it can't stop corruption and that services go only to those who afford them.

Plus a private armed forces will find it profitable to start wars, and may decide that they're better qualified to run things since they have weapons and everybody else does not.

All these things have been tried before. There's a good reason we stopped doing them.

I've never heard of these things being privatized before. I completely agree with you. There is a legitimate need for government, and I have no issue with their authority in matters of law enforcement, justice, and defense. Keeping in mind that many of these matters are relegated to the states. But still. The Appellate and Supreme Courts and the Armed Forces have a very valid and much appreciated existence.

benbradley
02-09-2012, 05:04 AM
I've never heard of these things being privatized before.
Welcome to P&CE, where I've seen the "all conservatives are anarchists" over-the-top argument several times before.

j. Adams
02-09-2012, 05:10 AM
Competition has its place if there are clear cut rules about how to play the game and there are methods for individuals to keep from suffering too much for being on a losing team along with the ability to get back in the game.

Otherwise society will be like the NFL, where only a few people work and most are relegated to the stands, watching. A privilege they have to pay for.

That is not a good comparison. Competition spurs innovation, which in turn increases the productivity of that industry, which in turn benefits society. The US grows every year mainly through technological change.

The end winner in a competitive industry is the consumer. i.e. YOU The "losers" as you call them are the companies that couldn't adapt to competition.

muravyets
02-09-2012, 05:10 AM
I've never heard of these things being privatized before. I completely agree with you. There is a legitimate need for government, and I have no issue with their authority in matters of law enforcement, justice, and defense. Keeping in mind that many of these matters are relegated to the states. But still. The Appellate and Supreme Courts and the Armed Forces have a very valid and much appreciated existence.
The US prison system is largely privatized now, and it costs us more and more every year, and rehabilitates fewer and fewer convicts (repeat customers = more profit, after all). The prison system is part of the justice system.

One of my biggest issues with the point of view you are representing here (not your pov exclusively, I know; it is widely held) is that there's so much it hasn't heard of but is pretty sure wouldn't be a problem. In addition, there is so much it hopes will be the case, so much it thinks should be the case, and so much it is sure would be the case, if all the circumstances could ever be made just right. It has little to offer in the way of reality, i.e. any historical or current instances of any of its principles actually working as promised. That lack of substantial grounding makes me extremely suspicious that it's basically a bunch of daydreaming, and I don't want that sort of pie-in-the-sky whatiffery affecting real policies that will impact my real life.

Sorry, but that's the way I feel about it. So when someone espouses these ideas but cannot point to a single example of the concepts in application, I lose interest. Also when someone talks about wanting to change government to act more like business, and to replace government with privatized services, but then cannot point to any specific areas of government they want to see changed, and in fact praises some of the biggest and most controlling (properly, imo) areas of government, I again lose interest in their argument. I start to wonder if they've actually ever thought this stuff through beyond taking up a catalogue of talking points they like the sound of.

Privatization has been tried and has yielded results that can be measured. Some are good results, some are bad results. There is enough data for anyone to educate themselves to judge what aspects of our lives can be safely privatized and what should be kept strictly public. Personally, I don't think there is any excuse for vague suppositions on this sort of thing.

However, all that said, I don't see what any of this talk of business models and privatization has to do with Rick Santorum.

Williebee
02-09-2012, 05:20 AM
However, all that said, I don't see what any of this talk of business models and privatization has to do with Rick Santorum.

I thought we were taking competitive bids on who got to pummel him like a duck?

Chrissy
02-09-2012, 05:31 AM
Don,

Okay, I read your link (Mises). Thank you, it was very enjoyable. Basically, I walked away with a strong sense of: the less government the better, because bureaucracy is incapable of efficiency. Am I right? I'm in total agreement with the less government theory. :D

I can see why the idea of running the government like a business has been rubbing AW economists the wrong way. What I've been doing is asking that the government be more efficient, without any measure of what efficiency is, or how results/output are measured. Compounded by the fact that government output is not strictly monetary, nor is it put in the pockets of investors. The point is well taken.

One thing that stood out to me in Part 1 (a seemingly basic explanation of the free market) is: the example of the "product for sale" had an elastic demand. Consumers had a choice of purchasing it or of using their money for other purchases. This isn't a perfect representation of the free market because you have to consider the market for inelastic demand, where the consumer’s choices are much more restricted. But still, ultimately inapplicable to a monolopy government.

Referring to my previous comparison of a non-profit business to a government entity: I think this is much closer to the idea I’m trying to convey. Nonprofits have “output” that is similar to the output of government social programs, and this output can be measured, albeit in a non-monetary way. It’s measured in social benefits. Nonprofit spends X dollars, and Y results are seen. The contributors are looking for a certain result, and if they get it, they are likely to contribute again.

Why doesn’t the government feel compelled to conduct themselves in the same way? Well, I guess, because tax dollars are guaranteed. Taxes are “by force.” The only factor that remains for a politician is whether he/she will be voted into office, or back into office.

But this is unacceptable to me. Is this the only true motivation for a government-run enterprise? To get voted in? God forbid a president is in his second term. What's the point of doing anything, since it's not for personal gain? I understand that the same standards of the free market can't be applied to the government due to the lack of market indicators.

But I still say that the output versus input is measurable and should be accounted for. The way I measure it is the way I will vote. I want to see results. And I don't think I'm alone. People aren't throwing up their hands and saying, "Well, that's government, you can't expect anything better, they have no competition." We still expect wisdom and intelligent decisions and legitimate results. Compare the government to nonprofits, compare them to other countries, compare them to something. Don't let them get away with anything because there is no perfect comparison.

muravyets
02-09-2012, 05:31 AM
Another example here is our "socialised medicine" system. In fact, it works pretty much like the educational system. If you have a doctor's license, you can open a primary care centre, or practice. As long as you can show that you have a doctor's license, you're free to do so.

You get money per patient that walks in through the door and says 'I like you, you'll be my doctor'. If people don't like the doctor, they'll go elsewhere. In an obscenely healthy population like here, you won't have much more than accidents, acute diseases and campaigns against the sniffles - unless you go into the more deprived areas where you can test your knowledge against more complex things like PTSD and war-wounds among the immigrant population, and thus get more moneys. Or you can specialise, and work at a hospital, of course.
While I would very much like to see a system in the US that combines socialized programs with privatized usages in ways that approximate what some European nations have, I think I should caution you not to underestimate the differences between Sweden and the US. It's not just a matter of population and geography, though those do make a difference. There's also a matter of culture and politics.

I think it might be hard for people outside of the US to see just now heterogenous this country is. We are one nation, but we are not A people. The cultural and social divisions between the regions of this country can be stark, even shocking. Throughout our history and to this day, those divisions drive deeply negative feelings among many people -- suspicion, hostility, even outright hatred in some cases. Northeast, South, West, Midwest, they seem like different countries, they can be so tribalistic at times.

Americans pull together when we are forced by circumstance to deal with each other -- like in the military or in response to disaster. But as can be seen every day in current politics, nothing is easier than to set us at each other's throats. It is a difficult job to get Americans truly to think in terms of nation. Even when many of us think on the national level, we end up really just thinking of making the whole nation be just like our own little corner of it, where "our people" live.

Tribalism, ideology, radicalism of various kinds, run deep in the US, and does the cult of romanticized individualism. In such a culture, if you introduce a national voucher system for schools, or any public service, you will see that service splinter and become completely dysfunctional in a short while.

Why? Because, unlike Sweden, from the sound of it, there is no national acceptance of a curriculum or standard of education among Americans. There is no agreed upon standard of health care for everyone. And so forth. Everyone knows what they want for themselves. On that, there is little disagreement. But when it comes to what others should have -- whether those others are minorities, immigrants, gay, female, Muslim, atheist, etc, etc, etc -- oh, yeah, everyone's got their own idea about that.

I mean, we are talking about a country in which the crisis of agreement has gotten so bad that we actually have people arguing over what a fact is, and whether evolution is just a theory and creationism is equal to or better than it. What do you think would be the end result, in terms of the number of Americans getting any education at all, if all parents got to choose to send their kids to the school they liked best, rather than being provided with a properly funded public school fulfilling a national curriculum, as was the case when I was a kid?

From what I read of your comments, Sweden has a national standard of education and the voucher system allows parents to choose which school within that standardized system they will use.

But in the US, there is no agreement on a national standard. So right there, the Swedish voucher idea doesn't fit us.

We have the same lack of agreement on health care, and increasingly on public safety, food safety, and civil rights, too.

Xelebes
02-09-2012, 06:14 AM
Canada does not maintain a national curriculum, but there are some stipulations over language. However, there are expectations by the universities to remain competitive and so a general consensus is achieved by that demand. Alberta, and I think Ontario too, maintain two public systems: Public and Catholic. This would apparently be impossible by the US Constitution, I would presume.

j. Adams
02-09-2012, 06:19 AM
Canada does not maintain a national curriculum, but there are some stipulations over language. However, there are expectations by the universities to remain competitive and so a general consensus is achieved by that demand. Alberta, and I think Ontario too, maintain two public systems: Public and Catholic. This would apparently be impossible by the US Constitution, I would presume.

The worst thing Ontario ever did was get rid of their OAC's in favour of a system that topped out in Grade 12. I did the OAC's back in 1996 and they were very useful (I went to HS in Ottawa). They prepared you extremely well for University.

Xelebes
02-09-2012, 06:23 AM
The worst thing Ontario ever did was get rid of their OAC's in favour of a system that topped out in Grade 12. I did the OAC's back in 1996 and they were very useful (I went to HS in Ottawa). They prepared you extremely well for University.

Ontario Academic Challenge? Or is that Grade 13 you are refering to?

j. Adams
02-09-2012, 06:25 AM
Ontario Academic Challenge? Or is that Grade 13 you are refering to?

OAC = Ontario Academic Credit.

They phased them out in order to cut education costs.

blacbird
02-09-2012, 07:16 AM
The purpose of business is to serve assets (wares, inventory) to customers.

At the major corporate level, the purpose of business is to return profits to shareholders. I worked for many years for two major international corporations (and I mean WAAAAAAAY major), and sat in employee audiences more than once where high-level managers lectured us in explicit, specific terms on this very issue. Returning profits to shareholders takes precedence over providing products/services to customers, every time. And there are times when it is perceived that not providing products/services to customers is very much in the interest of returning profits to shareholders.

Especially when doing so generates fat bonuses for upper-level management.

And this principle generates all manner of quiet collusion among big corporations whose management perceives that such cooperation would be more profitable that competition.

caw

Xelebes
02-09-2012, 07:32 AM
Yes, in Corporate Finance, they teach you the main purpose of an executive is to maximise shareholder wealth (in the US, they might use the term profit.) In turn, the Board of Directors are there to ensure the business is to serve the customers. Unfortunately, there are ways to subvert the original intent of the Board of Directors by stacking them with executives.

muravyets
02-09-2012, 08:50 AM
At the major corporate level, the purpose of business is to return profits to shareholders. I worked for many years for two major international corporations (and I mean WAAAAAAAY major), and sat in employee audiences more than once where high-level managers lectured us in explicit, specific terms on this very issue. Returning profits to shareholders takes precedence over providing products/services to customers, every time. And there are times when it is perceived that not providing products/services to customers is very much in the interest of returning profits to shareholders.

Especially when doing so generates fat bonuses for upper-level management.

And this principle generates all manner of quiet collusion among big corporations whose management perceives that such cooperation would be more profitable that competition.

caw
That's something about the government-as-business arguments that has always bothered me. In the corporate world profit is for keeps. You do as little as you can to get as much as you can, and you keep as much as you can of what you get.

If the government were to work on the modern corporate profit model, how would it be profitable and what would it do with its profits? Would it devote itself to making, acquiring, or collecting money? How? From whom? By what means? And then would it just keep the money? For what purpose? Who would get to pocket that money and transfer it to numbered overseas accounts? What would be the point of running a government as if it's a business?

There is no reason for government to exist at all except as a tool for spending public money. That's what it's all about. We kick in our tax dollars, and the government spends that money to operate and maintain the nation we live in. The budget that everyone complains about -- it's our operating budget. If we're not spending it, it means we're not doing stuff, often stuff we need to do, like fix crumbling bridges. Yes, we should regularly go over the system to eliminate waste and corruption. Of course, right? But that doesn't mean that government spending is bad. Government spending is what government is for.

The point of private enterprise is to accumulate money. The point of government is to spend money.

blacbird
02-09-2012, 08:57 AM
The budget that everyone complains about -- it's our operating budget. If we're not spending it, it means we're not doing stuff, often stuff we need to do, like fix crumbling bridges.

Let "the market" take care of it. Any number of big corporations are just slavering over the chance to go out and fix those crumbling bridges. Let people who use those bridges pay them to do so.

Oh . . . wait . . . taxes . . . nooooooooooo . . . those are baaaad.

Drive around the damn bridges.

caw

muravyets
02-09-2012, 09:09 AM
Let "the market" take care of it. Any number of big corporations are just slavering over the chance to go out and fix those crumbling bridges. Let people who use those bridges pay them to do so.

Oh . . . wait . . . taxes . . . nooooooooooo . . . those are baaaad.

Drive around the damn bridges.

caw
The hilarious part is that, with government contracts, the people who use the bridges are paying private enterprise to build/repair them. That is, when we can yank our heads out of our ideological asses long enough to approve a frikkin budget.

Chrissy
02-09-2012, 05:44 PM
The US prison system is largely privatized now, and it costs us more and more every year, and rehabilitates fewer and fewer convicts (repeat customers = more profit, after all). The prison system is part of the justice system.

Total number of prison inmates 2.3 million http://en.wikipedia.org/wiki/United_States_prison_population

Total number of inmates in privatized jails 99,000
http://en.wikipedia.org/wiki/Private_prison


I can't find any evidence that an inmate in a public jail receives more rehabiliatation than an inmate and a private jail. However, the assertion that rehabilitation won't be implemented by the private sector is easy to fix. Make rehabilitation programs a service requirement, and pay the private companies for this. The private companies who are shown to provide more rehabilitation (which can, over time, be measured) will be the most successful, because they will get repeat business from the government. This is the free market concept at work.

This all assumes that we really do want to rehabilitate prisoners and not just punish them.

Having said all of that, this isn't an area of privatization that I would go picketing over.

The reason I listed the justice system and the legal systems as areas I feel are best run by the government is because of the need for impartiality and the fiduciary aspects in matters of law. Obviously there are places where "efficiency" isn't in the best interests of the people.

One of my biggest issues with the point of view you are representing here (not your pov exclusively, I know; it is widely held) is that there's so much it hasn't heard of but is pretty sure wouldn't be a problem. In addition, there is so much it hopes will be the case, so much it thinks should be the case, and so much it is sure would be the case, if all the circumstances could ever be made just right. It has little to offer in the way of reality, i.e. any historical or current instances of any of its principles actually working as promised. That lack of substantial grounding makes me extremely suspicious that it's basically a bunch of daydreaming, and I don't want that sort of pie-in-the-sky whatiffery affecting real policies that will impact my real life.

I understand, and because of you (and others) I am realizing the need to back up my ideas, ones that come from life experience but have never been vocalized, let alone debated. You challenge me to think more analytically, to provide examples and to try to apply my theories in a real-life way. When I do this, it also helps me see your POV. So for all of it, thank you. If I didn't have a job I would do this all day. I really do want to be a critical thinker, but I also don't want to lose my ability to dream and to hope and to be dissatisfied with what people insist is "the only way."

Sorry, but that's the way I feel about it. So when someone espouses these ideas but cannot point to a single example of the concepts in application, I lose interest. Also when someone talks about wanting to change government to act more like business, and to replace government with privatized services, but then cannot point to any specific areas of government they want to see changed, and in fact praises some of the biggest and most controlling (properly, imo) areas of government, I again lose interest in their argument. I start to wonder if they've actually ever thought this stuff through beyond taking up a catalogue of talking points they like the sound of.

I'll add this: it's human nature, and no one is exempt, to hold to one's opinions until it is proven differently. What you say here is basically "You don't know what you're talking about, but I do." The end. That's not conducive to a meeting of the minds, but you're entitled to be annoyed with me.

Also, I haven't ever come into any argument saying: I AM RIGHT, YOU ARE WRONG. Just putting theories out there, but it seems to piss people off, and I can only assume it's because they believe THEY ARE RIGHT, and I AM WRONG. Again, not conducive.

Privatization has been tried and has yielded results that can be measured. Some are good results, some are bad results. There is enough data for anyone to educate themselves to judge what aspects of our lives can be safely privatized and what should be kept strictly public.

Maybe this is where we differ. Not trying to be cliche, but not so long ago, everyone thought they had enough information to know that the world was flat.

I have the perspective that we don't know everything there is to know. More knowledge, new ideas, innovative thinking can be discovered and implemented. Always. I don't think that ever stops. I don't discount what we already know. I just don't think we should limit ourselves either.

MattW
02-09-2012, 06:16 PM
Total number of prison inmates 2.3 million http://en.wikipedia.org/wiki/United_States_prison_population

Total number of inmates in privatized jails 99,000
http://en.wikipedia.org/wiki/Private_prison


I can't find any evidence that an inmate in a public jail receives more rehabiliatation than an inmate and a private jail. However, the assertion that rehabilitation won't be implemented by the private sector is easy to fix. Make rehabilitation programs a service requirement, and pay the private companies for this. The private companies who are shown to provide more rehabilitation (which can, over time, be measured) will be the most successful, because they will get repeat business from the government. This is the free market concept at work.

This all assumes that we really do want to rehabilitate prisoners and not just punish them.There's the crux of the matter. For profit jails will only do what they are told to do by the paymaster - if rehabilitation becomes a requirement, with measurable success or failure, then that is what will start to happen in prisons.

Most prisons are penalty boxes, with a revolving door for repeat offenders. The justice system is designed to catch, prosecute and jail criminals. It is not rehabilitation or crime prevention. And even government agencies get rewarded for maintaining the status quo - bonuses of seized property, federal grants for equipment, and elected office based on prosecution rates.

Chrissy
02-09-2012, 06:41 PM
How the government model has failed:

*drum roll*

Social Security.

Not saying anything new here, obviously.

But I wanted to give an example of how, in my opinion, the government mentality, in direct opposition to the free market mentality, can be highly detrimental.

In the late fifties, the government looked at the growing trust fund and they thought: WE CAN SPEND THIS. That's government mentality.

If social security had been placed in the hands of competitive investment companies, those investment companies look would look at that trust fund and say: WE CAN MAKE THIS BIGGER, and take our share, of course. That's free market mentality.

I know this is a complicated issue, but the fact remains: if you had put 15% of your gross income in the hands of the free market over the course of your life... You. Would. Be. Rich.

clintl
02-09-2012, 07:13 PM
Investment firms are the entities that caused the current global economic catastrophe. I'm more in favor of taxing the hell out of them until they've paid back what they cost us than in rewarding them with opportunities to get even richer.

AncientEagle
02-09-2012, 07:40 PM
Given that this thread has wandered through myriad subjects that don't seem directly related to Santorum, I claim a point of privilege to state, briefly, my personal thoughts on the sub-topic of whether government should be run like a business. Since it isn't a business, I think the suggestion that it should mirror one is at best misguided and at worst an unrealistic political enticement to voters.

I've tried to think how many of our more effective presidents were effective businessmen. (Not counting as business experience either farming, military service, or diddling interns—which could, of course, be considered monkey business [not you, Monkey, if you're reading this]). In my own list of pretty good leaders—Washington, Jefferson, Jackson, Lincoln, two Roosevelts, Eisenhower—not one.

Gregg
02-09-2012, 07:50 PM
Investment firms are the entities that caused the current global economic catastrophe. I'm more in favor of taxing the hell out of them until they've paid back what they cost us than in rewarding them with opportunities to get even richer.

The investment firms weren't alone. They had plenty of help.
The credit rating agencies failed to do their job when they failed to recognize the high risk of most of the mortgage backed bonds being sold.
And the credit bureaus messed up as well - example: allowing a gardener making $14000 a year to buy a $700,000 house with little or nothing down.
I'm reading a book titled The Big Short by Michael Lewis - it is an in-depth study of the sub-prime meltdown.

j. Adams
02-09-2012, 07:59 PM
Ontario Academic Challenge? Or is that Grade 13 you are refering to?

The worst thing Ontario ever did was get rid of their OAC's in favour of a system that topped out in Grade 12. I did the OAC's back in 1996 and they were very useful (I went to HS in Ottawa). They prepared you extremely well for University.

How the government model has failed:

*drum roll*

Social Security.

Not saying anything new here, obviously.

But I wanted to give an example of how, in my opinion, the government mentality, in direct opposition to the free market mentality, can be highly detrimental.

In the late fifties, the government looked at the growing trust fund and they thought: WE CAN SPEND THIS. That's government mentality.

If social security had been placed in the hands of competitive investment companies, those investment companies look would look at that trust fund and say: WE CAN MAKE THIS BIGGER, and take our share, of course. That's free market mentality.

I know this is a complicated issue, but the fact remains: if you had put 15% of your gross income in the hands of the free market over the course of your life... You. Would. Be. Rich.

At this point it has become perfectly clear that you're just ranting against the government, because you've come up with yet another pie in the sky scenario as a possible solution. Investment firms make mistakes. In fact, they make rather massive mistakes. They've already shown that they can't be trusted with the money people give them to invest when they lost trillions during the MBS and CDO fiasco. Those losses wiped out a lot of people, and if you had put your 15% with them as well, it would have wiped you out too.

You also seem to think that they will make a return on the money they are given. Well, newsflash, wishing will not make it so. Oh, and to recap this, lets go back to your assertion that you only need to target expenditures and not revenues.

http://cdn.theatlantic.com/static/mt/assets/jamesfallows/DeficitChart.png

http://cdn.theatlantic.com/static/mt/assets/jamesfallows/Budget2.jpg

That's why you need to increase taxes back up to Clinton era levels. The effective tax rate right now is unsustainable given the size of the government. The Bush tax cuts are by far the single biggest driver of the current deficit.

j. Adams
02-09-2012, 08:09 PM
The investment firms weren't alone. They had plenty of help.
The credit rating agencies failed to do their job when they failed to recognize the high risk of most of the mortgage backed bonds being sold.
And the credit bureaus messed up as well - example: allowing a gardener making $14000 a year to buy a $700,000 house with little or nothing down.
I'm reading a book titled The Big Short by Michael Lewis - it is an in-depth study of the sub-prime meltdown.

I wrote my senior undergrad thesis on the MBS/CDO fiasco and I too mostly blamed the Ratings agencies.
Having said that, the banks should have also checked the math. Instead of using a t-distribution to calculate the dependence structure (as it related to the probability of a mortgage defaulting within the block), they used a Gaussian copula approach that because of it non-heavy tailed structure cannot accurately predict a cluster of highly unlikely events such as multiple mortgages defaulting. (Keep in mind that in time of economic crisis, heavy-tailed events are more likely to occur)

So what ended up happening, is that the blocks were given a lower dependence rating (Smaller probability of one of the MBS defaulting), and so they were assigned higher ratings (BBB or higher or Investment grade), which caused them to be scooped up by pension funds and other large funds. Having said that, these funds should have done their own independent analysis of the blocks of MBS/CDO's in question. It's standard procedure
when it comes to proper risk assessment. They however did not do this and just accepted what the banks and rating agencies told them.

As an added bonus, those same blocks of CDO's/MBS's were insured against them losing their value with AIG. When people started to default on their mortgages, the blocks of CDO's and MBS's lost a portion of their value (The mortgages were backing the value of the CDO's and MBS's), and the funds took a massive hit (Trillions of dollars). They then turned to AIG to cover their losses, which subsequently bankrupted AIG.

Chrissy
02-09-2012, 08:33 PM
At this point it has become perfectly clear that you're just ranting against the government, because you've come up with yet another pie in the sky scenario as a possible solution. Investment firms make mistakes. In fact, they make rather massive mistakes. They've already shown that they can't be trusted with the money people give them to invest when they lost trillions during the MBS and CDO fiasco. Those losses wiped out a lot of people, and if you had put your 15% with them as well, it would have wiped you out too.

Gee, you're right. Let's just give our retirement money to government, since it's "possible" I couldn't have done any better.

The government didn't make a "mistake." They SPENT the MONEY that was in a TRUST for us. Not a rant, just a fact.

Don
02-09-2012, 08:35 PM
Gee, you're right. Let's just give our retirement money to government, since it's "possible" I couldn't have done any better.

The government didn't make a "mistake." They SPENT the MONEY that was in a TRUST for us. Not a rant, just a fact.
But the government can just print more money. Investment firms can't do that. :sarcasm

Maxinquaye
02-09-2012, 08:41 PM
But the government can just print more money. Investment firms can't do that. :sarcasm

It's not like the AAA rating was appropriate considering the exec's on Wall Street and the banks got their money back for the bad lending practices because much of the bad lending was due to government backing of the securities to start with. Of course. :sarcasm

Here is a non-partisan explanation of the crisis. (http://www.youtube.com/watch?v=_ZAlj2gu0eM)

In more detail, a multipart-series about how the crisis happened. (http://www.youtube.com/user/khanacademy#p/c/9ECA8AEB409B3E4F/12/8IR5LefXVPY)

Xelebes
02-09-2012, 08:59 PM
I'm going to point to a series of radio shows that aired on CBC Radio 1 about the Wall Street Protests and about the effects of income and other forms of inequality.

http://www.cbc.ca/ideas/episodes/2012/01/16/left-behind/

Let me state that I think from the perspective of the left, they are a bit dogmatic in thinking that tax rates are at fault, but it does detail some of the political changes that happened in the 70s in the Anglosphere. Namely, I think what happened was that we became a generation removed from the Great Depression and World War II and started to do the same mistakes of the years prior. Namely, we started free-bidding on executives instead of looking internally, leaving businesses with executives who were prone to lacking understanding of what the ground-worker was experiencing as well as not understanding the operations of the company. This back-fired on the corporate culture as executive power became all about profits (to extract bonuses) instead of wealth.

Edited to Add: The notion of free-bidding on executives also appears to be counter-intuitive as the lay-people see executives as leaders (or are leaders) and while people demand that their political leaders be from where they live, they are expected to have no qualms about executives bouncing around. Or maybe they do have a problem with that and do in fact see it as carpetbagging.

Lucas
02-09-2012, 09:04 PM
It's not like the AAA rating was appropriate considering the exec's on Wall Street and the banks got their money back for the bad lending practices because much of the bad lending was due to government backing of the securities to start with. Of course. :sarcasm

Here is a non-partisan explanation of the crisis. (http://www.youtube.com/watch?v=_ZAlj2gu0eM)

In more detail, a multipart-series about how the crisis happened. (http://www.youtube.com/user/khanacademy#p/c/9ECA8AEB409B3E4F/12/8IR5LefXVPY)

Actually, if the government hadn't paid them the AAA rating would probably have been lowered. The thing is that certain people stand above the moral hazard problem - bankers and large investors for example.

They could basically do whatever they please, and if any country even with-takes sensible regulation against them they will punish that country - either by moving to other less regulated economies, or by working to overthrow the government of said country (in 1934, a group of American companies approached an American officer with an offer to lead a military coup against Roosevelt for example).

ColoradoGuy
02-09-2012, 09:58 PM
How the government model has failed:

*drum roll*

Social Security.

Which has been an enormous success and changed lives for the better. Before it, the majority of the elderly were poor, even destitute. Now, they're not.

I know this is a complicated issue, but the fact remains: if you had put 15% of your gross income in the hands of the free market over the course of your life... You. Would. Be. Rich.

Well, that depends. On average, over the century, the stock market has been a good investment. But that isn't what Social Security needs to offer; it needs to provide reliable income for retired people, many of whom can't afford to wait out a decade-long downturn in the markets.

All this genuflecting to the Free Market God makes me ill. An unfettered free market is good for some things, not for others. Conversely, hurling insults at the Government Satan also is ahistorical and wrong. Government often has been, and still remains, a force for social good, benefiting our citizenry.

Gregg
02-09-2012, 11:13 PM
But Social Security and Medicare are in trouble. Some changes have to be made.

Here's the conclusion (summary) of the Social Security and Medicare Board of Directors 2011 report:

"Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative corrections if disruptive consequences for beneficiaries and taxpayers are to be avoided."

http://www.ssa.gov/oact/TRSUM/index.html

RichardGarfinkle
02-09-2012, 11:37 PM
But Social Security and Medicare are in trouble. Some changes have to be made.

Here's the conclusion (summary) of the Social Security and Medicare Board of Directors 2011 report:

"Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative corrections if disruptive consequences for beneficiaries and taxpayers are to be avoided."

http://www.ssa.gov/oact/TRSUM/index.html

That's a bit of a straw man. Social Security and Medicare are encountering a blip caused by a bulge in the aging population (the Baby Boom) so that there will be a stretch of time where more goes out than comes in. That's not a major problem if one accepts that fluctuations like that happen and sometimes programs have more outlay than income and vice-versa.

Common sense budgeting requires an awareness of fat years and lean years. But modern business thinking does not allow for such long term views. It's precisely, the business model of looking at this year's bottom line rather than the long term health of an economy that makes this perfectly predictable and handleable event a crisis.

Gregg
02-10-2012, 12:04 AM
It may be more than a "blip".
In 2010 there were 2.9 workers per beneficiary; this number gradually drops to 2.1 workers in 2035 and drops below 2.0 in the 2070's.

The report also states:
"The open group unfunded obligation for OASDI over the 75-year period is $6.5 trillion in present value and is $1.1 trillion more than the measured level of a year ago."

http://www.ssa.gov/oact/tr/2011/tr2011.pdf

The Board includes several members of the President's Cabinet.

Lucas
02-10-2012, 12:09 AM
It may be more than a "blip".
In 2010 there were 2.9 workers per beneficiary; this number gradually drops to 2.1 workers in 2035 and drops below 2.0 in the 2070's.

The report also states:
"The open group unfunded obligation for OASDI over the 75-year period is $6.5 trillion in present value and is $1.1 trillion more than the measured level of a year ago."

http://www.ssa.gov/oact/tr/2011/tr2011.pdf

The Board includes several members of the President's Cabinet.

The world will certainly have a global ecological collapse around 2070. Then Social Security would be the least of the concerns.

benbradley
02-10-2012, 12:10 AM
I'm hoping those 2.x workers are VERY productive.

Lucas
02-10-2012, 12:21 AM
I'm hoping those 2.x workers are VERY productive.

That's the thing.

Right now, our glorious leader Reinfeldt in Sweden wants to increase the retirement age to 75 years. While 23% of the Swedish youth are unemployed. Productivity has sky-rocketed too.

All that is moot however since our entire growth-based system is an absurd unsustainable global pyramid scheme which soon will begin to crash when the Earth cannot replenish its bio-diversity.

Gregg
02-10-2012, 12:24 AM
The world will certainly have a global ecological collapse around 2070. Then Social Security would be the least of the concerns.

What's the basis for your prediction of a collapse in 2070?

MarkEsq
02-10-2012, 01:11 AM
What's the basis for your prediction of a collapse in 2070?


... and it better be good, I just wrote it in my calendar.

Williebee
02-10-2012, 01:40 AM
MOD Note:

Before this thread derails again, I figured I'd get the existing derail out on its own.

Apologies for any spillage, lost keys or knocked over charts.

Lucas
02-10-2012, 02:04 AM
What's the basis for your prediction of a collapse in 2070?

The reassessment report on Club of Rome's Limits of growth (1970, 1999).

Humanity as a whole is using 133% of Earth's renewal capacity every year. If we continue like that, the ecosystems will have collapsed by 2070 and the prosperity of humanity will be reduced quite much, meaning poverty for the vast majority of the world's population.

Unless we find some way to balance it out so we are utilising the resources within the renewal capacity of the planet. You don't need to be Einstein to understand that relationship.

vsrenard
02-10-2012, 02:14 AM
How the government model has failed:

*drum roll*

Social Security.

<snip>

I know this is a complicated issue, but the fact remains: if you had put 15% of your gross income in the hands of the free market over the course of your life... You. Would. Be. Rich.

Unless of course, your retirement happened to coincide with the recession/depression/misfortune of individuals to the benefit of Big Business. Then You. Would. Be. Destitute.

The free market is not a solution to everything. Not by a long shot.

Chrissy
02-10-2012, 03:07 AM
Which has been an enormous success and changed lives for the better. Before it, the majority of the elderly were poor, even destitute. Now, they're not.

Current poverty level standard: $10,000 - $13,000 http://aspe.hhs.gov/poverty/11poverty.shtml

Current average social security payout: $14,000 http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/13/~/average-monthly-social-security-benefit-for-a-retired-worker

So yes, after contributing 15% of your gross income over 30 or 40 years, you can probably eat and live in a shack.


Well, that depends. On average, over the century, the stock market has been a good investment. But that isn't what Social Security needs to offer; it needs to provide reliable income for retired people, many of whom can't afford to wait out a decade-long downturn in the markets.

I don’t understand why you think they’d have to wait for a decade? They’ve been accumulating over their entire working lives. And you don’t cash out all at once. You take what you need from month to month.

All this genuflecting to the Free Market God makes me ill. An unfettered free market is good for some things, not for others. Conversely, hurling insults at the Government Satan also is ahistorical and wrong. Government often has been, and still remains, a force for social good, benefiting our citizenry.
Not hurling insults at all. I apologize if I've been harsh. I'm using facts. If the facts are insulting, well... maybe they should be.


I don’t think the Free Market is God, nor do I think the Government is Satan. I absolutely agree that the government is necessary. Although… a force for good? Not sure about that either. (Sounds like a Deity attribute.) I think it's a force for Order.

The government is made up of people, just like the free market. There is no God in either one. There’s just human nature. I’m sure lots of people in government have good intentions, but it's the way these good intentions work or don't work within the scope of the way the government operates that is at issue.

Unless of course, your retirement happened to coincide with the recession/depression/misfortune of individuals to the benefit of Big Business. Then You. Would. Be. Destitute.
The free market is not a solution to everything. Not by a long shot.

Neither is government takeover the solution to everything. I'm not trying to speak in absolutes here. And as far as the market crash, yes, you'd have significant losses, but no, you would not be desititute. And the stock market is not your only option for investment, provided you have options. Which. You. Don't. With. Social. Security. (okay I'll stop now.)

ColoradoGuy
02-10-2012, 03:39 AM
If social security had been placed in the hands of competitive investment companies, those investment companies look would look at that trust fund and say: WE CAN MAKE THIS BIGGER, and take our share, of course. That's free market mentality.

I find your faith in Wall Street touching. If history is any guide, they'd look at the trust fund and ask: "How can we steal this and get away with it?" (aka, "taking our fair share," in your formulation)

Chrissy
02-10-2012, 03:53 AM
I find your faith in Wall Street touching. If history is any guide, they'd look at the trust fund and ask: "How can we steal this and get away with it?" (aka, "taking our fair share," in your formulation)

Nope, I'm not buying it. There are plenty of legitimate investment companies. Yes, corruption exists. But that, as I see it, is where government restores order and penalizes wrongdoers.

And yes, I do have faith that intelligent businesses see the profit in a continuing stream of income that results from good service.

You seem to have faith in nothing... except perhaps a government that takes charge, because we as individuals are incapable?

rugcat
02-10-2012, 04:36 AM
Here's an interesting fact. Fact, not opinion based on idelogical beliefs.

The before-and-after Social Security picture is dramatic. Before Social Security, almost half of elderly Americans had income below the poverty line, reports the Center on Budget and Policy Priorities. Roughly 12 percent of elderly citizens are considered poor today. The program lifted more than 11 million out of poverty — more than 60 percent of those were women.

http://blogs.reuters.com/reuters-money/2011/09/16/perrys-monstrous-lies-about-social-security/

I know this is a complicated issue, but the fact remains: if you had put 15% of your gross income in the hands of the free market over the course of your life... You. Would. Be. Rich. Since you posses a "masters in taxation" I'm sure you're aware that worker contribute 4.2% into social security, not 15%

And saving 15% of income is not a possibility for those living paycheck to paycheck.

If you payed into ss and also invested the remaining 10.8%, you'd probably be doing quite well for yourself, in any case..

But bottom line is this. SS works. It's provided a safety net and saved millions of people from economic devastation. But there are some, perhaps even ourself, who are responsible enough, and make enough money, so that you could indeed do better for yourself without having to contribute to the the SS system.

And that's what seems to be important. Individual responsibility -- those who have foresight will prosper; those who don't will die in poverty and degradation.

We nothing to society as a whole. Government is there to provide citizens with the opportunity to prosper, not to rescue the unfortunate.

Those who didn't plan ahead? It's their fault. They made the bad choices. So screw 'em.

Paul
02-10-2012, 04:42 AM
Here's an interesting fact. Fact, not opinion based on idelogical beliefs.



http://blogs.reuters.com/reuters-money/2011/09/16/perrys-monstrous-lies-about-social-security/

Since you posses a "masters in taxation" I'm sure you're aware that worker contribute 4.2% into social security, not 15%

And saving 15% of income is not a possibility for those living paycheck to paycheck.

If you payed into ss and also invested the remaining 10.8%, you'd probably be doing quite well for yourself, in any case..

But bottom line is this. SS works. It's provided a safety net and saved millions of people from economic devastation. But there are some, perhaps even ourself, who are responsible enough, and make enough money, so that you could indeed do better for yourself without having to contribute to the the SS system.

And that's what seems to be important. Individual responsibility -- those who have foresight will prosper; those who don't will die in poverty and degradation.

We nothing to society as a whole. Government is there to provide citizens with the opportunity to prosper, not to rescue the unfortunate.

Those who didn't plan ahead? It's their fault. They made the bad choices. So screw 'em.
:)

the whole Randism nonsense gives me the chills.

but besides helping the lazy and dumb, ss improves the welfare of an country's economy.

even the dumb gotta eat (consume).

j. Adams
02-10-2012, 04:50 AM
Doesn't SS have a matching contribution from employers?
(i.e. If the employee pays 4.2%, then the employer also pays 4.2% into the fund)

Having said that, SS is run by a whole bunch of financial experts (One of those experts being investment actuaries that measure investment risk, which is what I do), and I fail to see how transferring the SS fund to private business would ameliorate the handling of the fund. SS is basically just a monthly endowment assurance, with a stream of guaranteed payments until death. In fact the closest thing to an SS type fund in private industry is probably a Pension fund. And pretty much all of those funds took a massive hit during the recession. Under your tutelage, the people that received their SS payments from the fund would have been completely wiped out and would have been destitute.

The thing about having SS managed by the government is if the fund lost a lot of value due to some investment issue, the Government could make up the difference by injecting money into the fund. A privately run fund would never do that. Ever. You, the investor would be left holding the bag.

Paul
02-10-2012, 04:53 AM
I wrote my senior undergrad thesis on the MBS/CDO fiasco and I too mostly blamed the Ratings agencies.
Having said that, the banks should have also checked the math. Instead of using a t-distribution to calculate the dependence structure (as it related to the probability of a mortgage defaulting within the block), they used a Gaussian copula approach that because of it non-heavy tailed structure cannot accurately predict a cluster of highly unlikely events such as multiple mortgages defaulting. (Keep in mind that in time of economic crisis, heavy-tailed events are more likely to occur)

So what ended up happening, is that the blocks were given a lower dependence rating (Smaller probability of one of the MBS defaulting), and so they were assigned higher ratings (BBB or higher or Investment grade), which caused them to be scooped up by pension funds and other large funds. Having said that, these funds should have done their own independent analysis of the blocks of MBS/CDO's in question. It's standard procedure
when it comes to proper risk assessment. They however did not do this and just accepted what the banks and rating agencies told them.

As an added bonus, those same blocks of CDO's/MBS's were insured against them losing their value with AIG. When people started to default on their mortgages, the blocks of CDO's and MBS's lost a portion of their value (The mortgages were backing the value of the CDO's and MBS's), and the funds took a massive hit (Trillions of dollars). They then turned to AIG to cover their losses, which subsequently bankrupted AIG.
Experienced traders knew the math wasn't delivering after a few years, but they kept the train fuelled nonetheless.

the tranching of different investment packages, (high risk mixed with low risk) was not accidental, or simply to level out the risk, it was intentional fraud.


math is our friend, but not our Daddy.

(in short the human element was the biggest element in the mess)

:D

Paul
02-10-2012, 05:01 AM
Doesn't SS have a matching contribution from employers?
(i.e. If the employee pays 4.2%, then the employer also pays 4.2% into the fund)

Having said that, SS is run by a whole bunch of financial experts (One of those experts being investment actuaries that measure investment risk, which is what I do), and I fail to see how transferring the SS fund to private business would ameliorate the handling of the fund. SS is basically just a monthly endowment assurance, with a stream of guaranteed payments until death. In fact the closest thing to an SS type fund in private industry is probably a Pension fund. And pretty much all of those funds took a massive hit during the recession. Under your tutelage, the people that received their SS payments from the fund would have been completely wiped out and would have been destitute.

The thing about having SS managed by the government is if the fund lost a lot of value due to some investment issue, the Government could make up the difference by injecting money into the fund. A privately run fund would never do that. Ever. You, the investor would be left holding the bag.
+1

Don
02-10-2012, 05:09 AM
The thing about having SS managed by the government is if the fund lost a lot of value due to some investment issue, the Government could make up the difference by injecting money into the fund. A privately run fund would never do that. Ever. You, the investor would be left holding the bag.
The government has to get that money from somewhere.

So the loss is shifted from the "investors" to the taxpayers, if the money needed is collected right away, or the government can just print it up, diluting the value of all the citizen's dollars, or shift the debt to the future where our kids can pay for it, plus interest, by borrowing it from China.

"From each according to his ability, to each according to his need" isn't just a clever slogan anymore.

Paul
02-10-2012, 05:11 AM
The government has to get that money from somewhere.

So the loss is shifted from the "investors" to the taxpayers, if the money needed is collected right away, or the government can just print it up, diluting the value of all the citizen's dollars, or shifted to the future where our kids can pay for it, plus interest, by borrowing it from China.

"From each according to his ability, to each according to his need" isn't just a clever slogan anymore.
meh.

I mean, what is money?

ye know?

Don
02-10-2012, 05:13 AM
meh.

I mean, what is money?

ye know?
Money is not wealth. It's not goods and services that can be consumed. It is, however, a representation of wealth.

Money has three purposes; a medium of exchange, a method of account, and a store of value. Inflation wrecks the third purpose.

j. Adams
02-10-2012, 05:14 AM
But Social Security and Medicare are in trouble. Some changes have to be made.

Here's the conclusion (summary) of the Social Security and Medicare Board of Directors 2011 report:

"Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative corrections if disruptive consequences for beneficiaries and taxpayers are to be avoided."

http://www.ssa.gov/oact/TRSUM/index.html

As has been explained, its because of the aging population that SS and Medicare are in trouble.

Having said that, the other factor driving up Medicare costs is the cost of healthcare in the US. It has been spiralling out of control. The new HC law targets this phenomenon and when it comes on-line in 2014 it will help drive down HC costs. THat will help ameliorate the situation as it pertains to the cost of Medicare.

In as far as SS is concerned, the only real solution is to increase the contributions as the baby boom generation starts to get SS.. I know this might not seem "fair" to some people as it will mean that this current generation will be paying more than the generation that is actually using up SS, but that's how a country works. You're paying into SS so that your elders don't end up in poverty. And as has been shown historically, it works.

j. Adams
02-10-2012, 05:16 AM
The government has to get that money from somewhere.

So the loss is shifted from the "investors" to the taxpayers, if the money needed is collected right away, or the government can just print it up, diluting the value of all the citizen's dollars, or shift the debt to the future where our kids can pay for it, plus interest, by borrowing it from China.

"From each according to his ability, to each according to his need" isn't just a clever slogan anymore.

True, but on the other hand, you would have to deal
with your elders going into poverty. So to me, its mainly about choosing the lesser of two evils.

j. Adams
02-10-2012, 05:18 AM
Money is not wealth. It's not goods and services that can be consumed. It is, however, a representation of wealth.

Money has three purposes; a medium of exchange, a method of account, and a store of value. Inflation wrecks the third purpose.

Just get some gold :)

muravyets
02-10-2012, 05:18 AM
Total number of prison inmates 2.3 million http://en.wikipedia.org/wiki/United_States_prison_population

Total number of inmates in privatized jails 99,000
http://en.wikipedia.org/wiki/Private_prison


I can't find any evidence that an inmate in a public jail receives more rehabiliatation than an inmate and a private jail. However, the assertion that rehabilitation won't be implemented by the private sector is easy to fix. Make rehabilitation programs a service requirement, and pay the private companies for this. The private companies who are shown to provide more rehabilitation (which can, over time, be measured) will be the most successful, because they will get repeat business from the government. This is the free market concept at work.

This all assumes that we really do want to rehabilitate prisoners and not just punish them.

Having said all of that, this isn't an area of privatization that I would go picketing over.
I notice that you are again, above, proposing ideas you'd like to see in place, and not referencing programs that are in place. Is it because the systems that you imagine could make privatized prisons work well for society do not currently exist? If so, then on what basis should we believe that privatized prisons which exist right now are good for society? This is another example of imaginings being offered in place of facts, in other words, another example of why I have no interest in these free-market pipe dreams.

By the way, Wikipedia is convenient but more rigorous sources make the situation look less simple and small than you make out. You may want to stroll through this lengthy and relatively unbiased overview of the controversies and varying points of view on the matter before you draw conclusions: http://government.cce.cornell.edu/doc/html/prisonsprivatization.htm

The reason I listed the justice system and the legal systems as areas I feel are best run by the government is because of the need for impartiality and the fiduciary aspects in matters of law. Obviously there are places where "efficiency" isn't in the best interests of the people.But you didn't just say these areas are best kept public. I said that, and therefore, obviously, I would agree with you saying that. The statement of yours I was responding to was that you had not heard of privatization in areas such as the legal system. The existence of private prisons is just one example of such privatization. In order to make your argument about privatization work you're going to have to account for such programs and make a case for why those programs are bad for society and which other ones would be good for society. And then to bolster your argument that the government should be run more like a business, you're going to have to account for why some parts should be like a business while others should not, and give some idea of which parts.

I understand, and because of you (and others) I am realizing the need to back up my ideas, ones that come from life experience but have never been vocalized, let alone debated. You challenge me to think more analytically, to provide examples and to try to apply my theories in a real-life way. When I do this, it also helps me see your POV. So for all of it, thank you. If I didn't have a job I would do this all day. I really do want to be a critical thinker, but I also don't want to lose my ability to dream and to hope and to be dissatisfied with what people insist is "the only way."It's not an either/or proposition. If the more analytical thinkers here could not still dream and hope and be dissatisfied with the supposed "only way", we probably wouldn't be writers.


I'll add this: it's human nature, and no one is exempt, to hold to one's opinions until it is proven differently. What you say here is basically "You don't know what you're talking about, but I do." The end. That's not conducive to a meeting of the minds, but you're entitled to be annoyed with me.

Also, I haven't ever come into any argument saying: I AM RIGHT, YOU ARE WRONG. Just putting theories out there, but it seems to piss people off, and I can only assume it's because they believe THEY ARE RIGHT, and I AM WRONG. Again, not conducive.Actually, I think what gets on some people's nerves -- and what I know can get on my nerves after a while -- is what you alluded to earlier, the lack of basis or supporting evidence or logic presented with your ideas. As you say, we're all entitled to our opinions and beliefs. I'll go so far as to say we're all entitled to believe that we're right and everyone else is wrong, too. But if we're going to present that to others, we have to be able to present our arguments and defend our arguments in ways that are meaningful to others, not just to ourselves.

Insisting only on presenting opinion unsupported by any demonstrable connection to facts is also not conducive to a meeting of the minds, because there’s nothing to meet in it. Telling someone that their opinion unsupported by any demonstrable connection to facts is not persuasive because it lacks substance is not the same as shouting “I’m right, you’re wrong!”

Maybe this is where we differ. Not trying to be cliche, but not so long ago, everyone thought they had enough information to know that the world was flat.

I have the perspective that we don't know everything there is to know. More knowledge, new ideas, innovative thinking can be discovered and implemented. Always. I don't think that ever stops. I don't discount what we already know. I just don't think we should limit ourselves either.That might be one of the weakest defenses of arguing from a position of ignorance I’ve ever seen, but it might also be one of the most finessed “it could happen” arguments I’ve ever seen. Not gonna fly either way, though.

Paul
02-10-2012, 05:18 AM
Money is not wealth. It's not goods and services that can be consumed. It is, however, a representation of wealth.

Money has three purposes; a medium of exchange, a method of account, and a store of value and is made by wizards/ sorcerers. Inflation wrecks the third purpose.
fyp.

;)

Paul
02-10-2012, 05:20 AM
Total number of prison inmates 2.3 million http://en.wikipedia.org/wiki/United_States_prison_population

Total number of inmates in privatized jails 99,000
http://en.wikipedia.org/wiki/Private_prison


I can't find any evidence that an inmate in a public jail receives more rehabiliatation than an inmate and a private jail. However, the assertion that rehabilitation won't be implemented by the private sector is easy to fix. Make rehabilitation programs a service requirement, and pay the private companies for this. The private companies who are shown to provide more rehabilitation (which can, over time, be measured) will be the most successful, because they will get repeat business from the government. This is the free market concept at work.

This all assumes that we really do want to rehabilitate prisoners and not just punish them.

Having said all of that, this isn't an area of privatization that I would go picketing over.

The reason I listed the justice system and the legal systems as areas I feel are best run by the government is because of the need for impartiality and the fiduciary aspects in matters of law. Obviously there are places where "efficiency" isn't in the best interests of the people.



I understand, and because of you (and others) I am realizing the need to back up my ideas, ones that come from life experience but have never been vocalized, let alone debated. You challenge me to think more analytically, to provide examples and to try to apply my theories in a real-life way. When I do this, it also helps me see your POV. So for all of it, thank you. If I didn't have a job I would do this all day. I really do want to be a critical thinker, but I also don't want to lose my ability to dream and to hope and to be dissatisfied with what people insist is "the only way."



I'll add this: it's human nature, and no one is exempt, to hold to one's opinions until it is proven differently. What you say here is basically "You don't know what you're talking about, but I do." The end. That's not conducive to a meeting of the minds, but you're entitled to be annoyed with me.

Also, I haven't ever come into any argument saying: I AM RIGHT, YOU ARE WRONG. Just putting theories out there, but it seems to piss people off, and I can only assume it's because they believe THEY ARE RIGHT, and I AM WRONG. Again, not conducive.



Maybe this is where we differ. Not trying to be cliche, but not so long ago, everyone thought they had enough information to know that the world was flat.

I have the perspective that we don't know everything there is to know. More knowledge, new ideas, innovative thinking can be discovered and implemented. Always. I don't think that ever stops. I don't discount what we already know. I just don't think we should limit ourselves either.

3 words

Kids for Cash.


wiki it :)

muravyets
02-10-2012, 05:21 AM
How the government model has failed:

*drum roll*

Social Security.

Not saying anything new here, obviously.

But I wanted to give an example of how, in my opinion, the government mentality, in direct opposition to the free market mentality, can be highly detrimental.

In the late fifties, the government looked at the growing trust fund and they thought: WE CAN SPEND THIS. That's government mentality.

If social security had been placed in the hands of competitive investment companies, those investment companies look would look at that trust fund and say: WE CAN MAKE THIS BIGGER, and take our share, of course. That's free market mentality.

I know this is a complicated issue, but the fact remains: if you had put 15% of your gross income in the hands of the free market over the course of your life... You. Would. Be. Rich.
An example without any links to sources of fact, I see. You are within your rights to adopt that right-wing talking point if you want to, but if you are going to argue that Social Security is an existing failure of government, you're going to have to come up with proof that it is so, and make a stronger argument than the would/could/should of "You. Would. Be. Rich."

Yeah. And if wishes were ponies, beggars would ride.

muravyets
02-10-2012, 05:23 AM
Given that this thread has wandered through myriad subjects that don't seem directly related to Santorum, I claim a point of privilege to state, briefly, my personal thoughts on the sub-topic of whether government should be run like a business. Since it isn't a business, I think the suggestion that it should mirror one is at best misguided and at worst an unrealistic political enticement to voters.

I've tried to think how many of our more effective presidents were effective businessmen. (Not counting as business experience either farming, military service, or diddling interns—which could, of course, be considered monkey business [not you, Monkey, if you're reading this]). In my own list of pretty good leaders—Washington, Jefferson, Jackson, Lincoln, two Roosevelts, Eisenhower—not one.
Jefferson, arguably, pretty good president, worst possible example of a businessman.

Chrissy
02-10-2012, 05:26 AM
Since you posses a "masters in taxation" I'm sure you're aware that worker contribute 4.2% into social security, not 15%


As J. Adams mentioned, employers also contribute (and get a tax deduction for their share). The employer pays 6.2%, which is also what the employee was contributing before the 2% temporary decrease beginning in 2011, which is scheduled to expire February 28, 2012, unless an extension is enacted. (Watch your paycheck, you'll notice.) Ironically, Obama used this to assist the current workforce, even though it puts the social security fund into an even deeper deficit.

Plus there's the Medicare contribution, 1.45% each by employer and employee.

Total contribution of 12.4% SS and 2.9% Medicare, collectively known as FICA totalling 15.3%. Please forgive my rounding down.


And that's what seems to be important. Individual responsibility -- those who have foresight will prosper; those who don't will die in poverty and degradation.

We nothing to society as a whole. Government is there to provide citizens with the opportunity to prosper, not to rescue the unfortunate.

Those who didn't plan ahead? It's their fault. They made the bad choices. So screw 'em.

I detect a hint of sarcasm. But truthfully, if being personally responsible, financially diligent and prepared for the future was as highly valued as say, watching television, I think this could go a long way. However, I am totally for helping people who've made mistakes. And I'm even on board for a legitimate government-sponsored program to help people be responsible.

Here's the thing that no one seems to want to acknowledge: The government took the aforementioned funds and placed them in a trust to help the elderly and reduce/eliminate poverty. Sounds great. BUT THEN. THEY SPENT THE MONEY. Social security is a GREAT idea. It just didn't turn out that way.

Chrissy
02-10-2012, 05:29 AM
An example without any links to sources of fact, I see. You are within your rights to adopt that right-wing talking point if you want to, but if you are going to argue that Social Security is an existing failure of government, you're going to have to come up with proof that it is so, and make a stronger argument than the would/could/should of "You. Would. Be. Rich."

Yeah. And if wishes were ponies, beggars would ride.

Sorry muravyets, but I have been posting links, so why don't you post a link to a source of fact that disputes my claims.

I can't help but notice that you never ask for a link for a "left-wing" claim. Guess those unsupported claims fit right in with your paradigm, so they must be true.

Chrissy
02-10-2012, 05:34 AM
As has been explained, its because of the aging population that SS and Medicare are in trouble.

If the principal that was contributed by said larger aging population was STILL THERE, there would be no shortage.

Chrissy
02-10-2012, 06:02 AM
Non-Mod Note:

Chrissy is exhibiting snarkiness and has therefore been remanded to a extended commercial break.

benbradley
02-10-2012, 06:05 AM
...
Here's the thing that no one seems to want to acknowledge: The government took the aforementioned funds and placed them in a trust to help the elderly and reduce/eliminate poverty. Sounds great. BUT THEN. THEY SPENT THE MONEY. Social security is a GREAT idea. It just didn't turn out that way.
Don't ask where the money went. Good Statesmen have put it to Good Use, and the current Social Security obligations are being paid. Trust them. That's all you need to know.

:sarcasm

rugcat
02-10-2012, 06:16 AM
Plus there's the Medicare contribution, 1.45% each by employer and employee.

Total contribution of 12.4% SS and 2.9% Medicare, collectively known as FICA totalling 15.3%. Please forgive my rounding down. Except, medicare is not social security. It's a health insurance program. And the employers matching contribution is mandated by the system. It doesn't go to the employee.

So the money available to invest -- the extra money that would come to you if there was no mandated contribution is now 4.2% (previously 6.2%). This is not 15%, no matter how you spin it to make it look different than it actually is.

Don
02-10-2012, 06:18 AM
Just get some gold :)
That's not as outlandish an idea as people like to make believe.

I can buy two gallons of gas for the silver quarter that bought me a single gallon of gas in 1970. I can buy slightly more goods with an ounce of gold today (nominal value $1750) than I could in the 1920s, when it had a nominal value of $20.

What'll a pot-metal quarter or a 20-dollar bill buy you today?

That's what "store of value" means.

BunnyMaz
02-10-2012, 06:27 AM
That's not as outlandish an idea as people like to make believe.

I can buy two gallons of gas for the silver quarter that bought me a single gallon of gas in 1970. I can buy slightly more goods with an ounce of gold today (nominal value $1750) than I could in the 1920s, when it had a nominal value of $20.

What'll a pot-metal quarter or a 20-dollar bill buy you today?

That's what "store of value" means.

Yup! Not going to comment on the economics thing in detail because I really don't know enough to make better points than the ones already being made here, but a year ago I sold my one small piece of gold jewellery - a tiny, fine chain so slim it was barely visible when worn. I kept the pendant, which was the important part. I got £40 for that chain. Unsurprisingly, gold exchanges are popping up and thriving at the same time all the places actually selling new stuff. There's four on my high street.

muravyets
02-10-2012, 07:18 AM
Sorry muravyets, but I have been posting links, so why don't you post a link to a source of fact that disputes my claims.

I can't help but notice that you never ask for a link for a "left-wing" claim. Guess those unsupported claims fit right in with your paradigm, so they must be true.
I just reviewed the thread to make sure I hadn't missed anything. You have posted a total of 24 posts in this thread, by my count. Of that number 2 contain links. Post #74 links to Wikipedia articles about private prisons. I answered that post with a link to an explanatory overview of the issue from Cornell.edu that I believe illustrates the lack of foundation in the claims you sought to support with Wikipedia. Post #100 links to a reference about Social Security, but rugcat already posted another link debunking your argument on that. I saw no need for me to duplicate his work.

Among the rest of your posts, four (#'s 6, 77, 83, and 119) contain assertions of fact that have been challenged by various posters but are as yet unsupported. And three (#'s 37, 44, and 75) contain defenses of your arguments which actually kind of undermine your credibility, in my opinion.

As for "left-wing" claims, most of the ones I don't challenge and which contain assertions of fact, also come with links to supporting sources and/or examples, or else the author is ready to supply them upon request (and usually does before I get caught up with the thread). So I typically don't have to demand them.

Also, not all arguments contain assertions of fact. Many of your posts/points of argument were simply expressions of opinion and not assertions of fact. So not all arguments need supporting citations. For example, counter-arguments that attack the logic or credibility of an original argument don't need sources, because their evidence is the argument they are attacking.

It is when someone claims something is a fact and that claim is disputed that they need to pony up some citations. You have made claims that you should be aware are widely disputed (and not just here) -- claims such as Social Security is a failure. If you were caught by surprise at being asked to prove that claim, the fault is yours. That's like going to a swim meet with no swimsuit.

I'm sure it can get irritating to be always on the receiving end of demands to prove the claims on which you base your arguments. There's an easy way to put an end to that, of course -- pull some links to supporting facts while you write your posts. Then you'll only have to deal with debate about your interpretation of your chosen facts and the logic of your conclusions based on them. But the one thing you can't avoid is having to back your stuff up. If you claim (with drum roll, even) that Social Security is an example of a failed government program, you are going to be responsible for defending and even proving that claim. So far, you have not been able to.

ETA: By the way, I'm no stranger to being on the receiving end of demands for citations/evidence/sources/etc. The tag-line under my name is a humorous reference to that.

vsrenard
02-10-2012, 07:29 AM
Neither is government takeover the solution to everything. I'm not trying to speak in absolutes here. And as far as the market crash, yes, you'd have significant losses, but no, you would not be desititute. And the stock market is not your only option for investment, provided you have options. Which. You. Don't. With. Social. Security. (okay I'll stop now.)

Except that you are painting the free market "solution" to SS as a definitive success, without any proof. Clever punctuation might get you emphasis, but doesn't somehow confer success on an unproven idea.

BunnyMaz
02-10-2012, 08:40 AM
Except that you are painting the free market "solution" to SS as a definitive success, without any proof. Clever punctuation might get you emphasis, but doesn't somehow confer success on an unproven idea.

I also want to point out that 10-15% of your income is a bloody huge sum for most people to find spare. I never had that sort of money to put by when I was working full time, and I was in a fairly decent above-minimum-wage job.

Xelebes
02-10-2012, 09:27 AM
15% of one's income. The math:

You make $1 000 a month (12 000 a year.) You sock $150. You can buy a block of shares valued at $1.50 a share, once a month. You cannot buy a bond unless severely priced below face value.

You make $2 000 a month (24 000 a year.) You sock $300. 1 block of $3.00 shares a month. You cannot buy a bond a month unless severely priced below face value.

You make $4 000 a month (48 000 a year.) You sock $600. 1 block of $6.00 shares a month. You cannot buy a bond a month unless severely priced below face value.

You make $6 000 a month (72 000 a year.) You sock $1200. 1 block @ $12.00 shares per month. You can buy a bond a month at face value.

Lower priced shares are considered very risky. Overpriced shares are also risky. Blue chip shares are typically sold at 20 to 100 dollars a share. The options that remain are regular contributions to a mutual fund or to the bank account.

Chrissy
02-10-2012, 05:01 PM
Except, medicare is not social security. It's a health insurance program. And the employers matching contribution is mandated by the system. It doesn't go to the employee.

So the money available to invest -- the extra money that would come to you if there was no mandated contribution is now 4.2% (previously 6.2%). This is not 15%, no matter how you spin it to make it look different than it actually is.

I'm not really even sure what your argument is. Yes, the employer pays 1/2 of the 15%. But I'm trying to compare apples to apples. What we put in is the apple, and the variable is what we get of out it under the government versus the free market.

Under FICA, 15% of your gross income is calculated and put away. Better?

3.3% of that is medicare. (This is like paying health insurance premiums--except health care costs have become astronomical and that's a very different topic, IMO.) Bottom line is, the purpose of the whole 15% is to provide for a person at the end of his/her working life.

I agree with you that the employer's share is mandated by the system. I never argued that it shouldn't continue to be. I also previously posted that the employee's contributions could continue to be compulsory, for those people who don't have the discipline to do it voluntarily.

My whole argument has been about what happens to the money once it leaves the contributors. No one has responded to that, except to say, basically, that all investment companies are evil.

Chrissy
02-10-2012, 05:16 PM
15% of one's income. Over 40 years. You can put it in savings account for the first year if you like. Then you don't have to buy a half a share at a time. You can also put it in a money market account. You can keep in the savings account. You can stick under your mattress.

Here, using a 2% annual return (which is insanely conservative), is "The math":

You make $1 000 a month (12 000 a year.) You sock $150. You can buy a block of shares valued at $1.50 a share, once a month. You cannot buy a bond unless severely priced below face value.

At the end of 40 years at 2% you will have $106,491.04


You make $2 000 a month (24 000 a year.) You sock $300. 1 block of $3.00 shares a month. You cannot buy a bond a month unless severely priced below face value.

At the end of 40 years at 2% you will have $212,988.61

You make $4 000 a month (48 000 a year.) You sock $600. 1 block of $6.00 shares a month. You cannot buy a bond a month unless severely priced below face value.

At the end of 40 years at 2% you will have $425,971.60

You make $6 000 a month (72 000 a year.) You sock $1200. 1 block @ $12.00 shares per month. You can buy a bond a month at face value.

At the end of 40 years at 2% you will have $851,944.21



And after you retire, you only draw a certain amount out of that account each month, so the remaining balance continues to earn interest.

ETA: Forgot my LINK!!! Here it is: http://www.calculatorsoup.com/calculators/financial/future-value-investments.php

j. Adams
02-10-2012, 05:42 PM
Are you sure you're an accountant?

Because what you just posted completely ignores inflation. You're looking at money growth in nominal terms. Inflation is usually around 3% (on average) or so, so you would need at least a 3% return to actually break even in real terms. Good luck getting a savings/CD account that pays 3% interest.

If you're extremely lucky you will get a 7% average return (annually) in your investments (This is the historical return you get from equity stocks) if you go the stock market route. Factoring in inflation, you would have at most a 4% return in real terms. (This being the best case scenario)

Your "theory" is also predicated on the fact that you will always have a stable job, and that you will always be able to put the same % of your earnings into a savings/money market account. In actual terms, what you're proposing is a pretty rare phenomenon, as very few people are able to save money in that fashion.

It makes much more sense to put your money towards getting an annuity when you turn 65 (retirement), from where you will receive monthly payments until your death. In other words, you would pay an company X dollars every month, in order to receive those monthly payments until your death once you turn 65.

And guess what? That's exactly what SS is.

Chrissy
02-10-2012, 05:55 PM
3 words

Kids for Cash.


wiki it :)

This is an interesting argument against prison privatization, since THE JUDGES took the bribes. Aren't judges government employees?

And I'll say again (and this is for murvayets as well) I did not insist that prisons should be privatized. Here's what I said, after offering a solution the problem of "less rehabilitation in privatized prisons":



Having said all of that, this isn't an area of privatization that I would go picketing over.

The reason I listed the justice system and the legal systems as areas I feel are best run by the government is because of the need for impartiality and the fiduciary aspects in matters of law.

Don
02-10-2012, 06:00 PM
Are you sure you're an accountant?

Because what you just posted completely ignores inflation. You're looking at money growth in nominal terms. Inflation is usually around 3% (on average) or so, so you would need at least a 3% return to actually break even in real terms. Good luck getting a savings/CD account that pays 3% interest.

If you're extremely lucky you will get a 7% average return (annually) in your investments (This is the historical return you get from equity stocks) if you go the stock market route. Factoring in inflation, you would have at most a 4% return in real terms. (This being the best case scenario)

Your "theory" is also predicated on the fact that you will always have a stable job, and that you will always be able to put the same % of your earnings into a savings/money market account. In actual terms, what you're proposing is a pretty rare phenomenon, as very few people are able to save money in that fashion.

It makes much more sense to put your money towards getting an annuity when you turn 65 (retirement), from where you will receive monthly payments until your death. In other words, you would pay an company X dollars every month, in order to receive those monthly payments until your death once you turn 65.

And guess what? That's exactly what SS is.
I'm guessing Chrissy was thinking net inflation, since she used two percent for the growth rate.

And if you believe inflation's running three percent, let me introduce you to Shadowstats (http://www.shadowstats.com/alternate_data/inflation-charts).

Second chart down, on the right. See what amazing things you can do when you control the definition of "inflation" and can redefine it at will?

j. Adams
02-10-2012, 06:02 PM
I'm guessing Chrissy was thinking net inflation, since she used two percent for the growth rate.

And if you believe inflation's running three percent, let me introduce you to Shadowstats (http://www.shadowstats.com/alternate_data/inflation-charts).

Even if she factored in inflation, there is no way on earth that you will get a 2% real return from a savings or money market account with the small amount of money you will be investing.

It's yet another pie in the sky scenario.

j. Adams
02-10-2012, 06:08 PM
As an example:

http://www.money-rates.com/mmarket.htm

Money Market Accounts for $100,000+ US dollars (Jumbo) as well as savings accounts.

The highest is an IR of 2% and that is only valid for balances below $20,000. Factoring in inflation, that
gives you a negative real return.

For money market accounts with a balance > $100,000, the highest IR is only 1.15% So, like I said before, there is no account in existence that will give you an IR of 3% or more for balances in the $100,000 range.

Chrissy
02-10-2012, 06:11 PM
Even if she factored in inflation, there is no way on earth that you will get a 2% real return from a savings or money market account with the small amount of money you will be investing.

It's yet another pie in the sky scenario.


Just a suggestion: you could post your own link, calculate alternative figures and we could go from there.

ETA: great, I see you did. I'll check it out.

ETAA: wouldn't a time deposit be more accurate? Money markets and savings don't have withdrawal restrictions, where as social security does. http://www.money-rates.com/cdrates.htm

j. Adams
02-10-2012, 06:12 PM
Just a suggestion: you could post your own link, calculate alternative figures and we could go from there.

I just debunked your "calculations" by showing that there is no IR of 2% available in sums over $100,000.

And that's in nominal terms btw.

Chrissy
02-10-2012, 06:31 PM
I just debunked your "calculations" by showing that there is no IR of 2% available in sums over $100,000.

And that's in nominal terms btw.

And I just debunked your debunk.

ETA: I also think it's very interesting how you like to use "historical" data when it suits your purpose, but you argue now with a current snapshot rate of return.

j. Adams
02-10-2012, 06:33 PM
At the end of 40 years at 2% you will have $106,491.04
1.15% => 54.2679*1800 = $97,682.22
At the end of 40 years at 2% you will have $212,988.61
1.15% => 54.2679*3600 = $195,364.44
At the end of 40 years at 2% you will have $425,971.60
1.15% => 54.2679*7200 = $390,728.88
At the end of 40 years at 2% you will have $851,944.21
1.15% => 54.2679*14400 = $781,457.76

Calculation = X + X(1.1015) + X(1.015)^2.......+ X(1.015)^40) = X*(1 - 1.015^40)/(1- 1.015) = 54.2679X
(Just the standard sum of a series of n terms)

Now lets convert this to real terms:

Let V = inflation = (1/1.03)

$97,682.22*V^40 = $29,945.15
$195,364.44*V^40 = $59,890.31
$390,728.88*V^40 = $119,780.61
$781,457.76*V^40 = $239,561.22

Assuming you are retiring at 65, and since life expectancy for a female is about 78 years in the US, you would have about 13 years remaining in your life on average.

That will give you the following yearly payments on average. I'm not even going to bother discounting these for inflation.

1) $2303.47/year
2) $4606.95/year
3) $9213.89/year
4) $18,417.78/year

Only (4) would put you above the poverty line in real terms. Also, $18k a year is not even close to being a lot of money as you seem to imply.

j. Adams
02-10-2012, 06:34 PM
And I just debunked your debunk.

If you really want to go down this road with me the fine. As an Actuary I do this sort of thing for a living.

What you just don't seem to get is that when you discount your lump sums in order to get the actual sums in real terms, you actually lose a rather large chunk of your nest egg.

j. Adams
02-10-2012, 06:38 PM
Just a suggestion: you could post your own link, calculate alternative figures and we could go from there.

ETA: great, I see you did. I'll check it out.

ETAA: wouldn't a time deposit be more accurate? Money markets and savings don't have withdrawal restrictions, where as social security does. http://www.money-rates.com/cdrates.htm

They max out at 1.2%.

Chrissy
02-10-2012, 06:53 PM
They max out at 1.2%.



On your link -- what is the option paying 2.96% right below Ally Bank?

j. Adams
02-10-2012, 06:55 PM
On your link -- what is the option paying 2.96% right below Ally Bank?

Special Easy Start Certificate-$3,000 maximum balance-must have direct deposit of net pay-Navy FCU checking and monthly automatic deposit of at least $15-See site for membership eligibility details.

Chrissy
02-10-2012, 06:56 PM
If you really want to go down this road with me the fine. As an Actuary I do this sort of thing for a living.

Wow. My apologies. No wonder you're angry. ;)

What you just don't seem to get is that when you discount your lump sums in order to get the actual sums in real terms, you actually lose a rather large chunk of your nest egg.

When inflation occurs, prices go up, wages go up and interest goes up (though I imagine not as fast or in direct proportion) correct?

Can we (and when I say "we", I mean "you" :D) do a calculation that factors in these variables as well?

j. Adams
02-10-2012, 06:57 PM
10-year CD's:

Best is 2.45% for $100,000+

Chrissy
02-10-2012, 07:00 PM
Special Easy Start Certificate-$3,000 maximum balance-must have direct deposit of net pay-Navy FCU checking and monthly automatic deposit of at least $15-See site for membership eligibility details.

Well at least we're taking care of our troops.

I see what the problem was. 1.02% is on 1-year.

Here's the 10-Year CD rate: http://www.money-rates.com/cdrates.htm

DING DING DING We have a winner!!!

Chrissy
02-10-2012, 07:02 PM
10-year CD's:

Best is 2.45% for $100,000+

Well at least we got there. Now, about that inflation....

j. Adams
02-10-2012, 07:03 PM
Wow. My apologies. No wonder you're angry. ;)



When inflation occurs, prices go up, wages go up and interest goes up (though I imagine not as fast or in direct proportion) correct?

Can we (and when I say "we", I mean "you" :D) do a calculation that factors in these variables as well?

As long as your rate of money growth (Interest rate) < inflation rate (i.e. the real interest < 0%), you're going to lose your shirt as it pertains to the NPV of your lump sum.

j. Adams
02-10-2012, 07:04 PM
Well at least we got there. Now, about that inflation....

http://forecasts.org/inflation.htm

j. Adams
02-10-2012, 07:05 PM
So basically, any time the annualized inflation rate is > 2.45% you will lose money.

Chrissy
02-10-2012, 07:11 PM
As long as your rate of money growth (Interest rate) < inflation rate (i.e. the real interest < 0%), you're going to lose your shirt as it pertains to the NPV of your lump sum.

But if your wages are going up over the 40 year period, then your contribution increases, so using your actuarial example (which uses my example, which uses the same contribution over 40 years) isn't accurate either.

Romantic Heretic
02-10-2012, 07:15 PM
I've been of percolating thoughts about this thread. Forgive me if I don't go back and quote every post that contributed to these thoughts.

First on competition, and the claim it creates products. No, it doesn't. Imagination, intuition, expertise and hard work create products. Competition then decides whether these products, and the companies that create them, have an economic niche. A survivable economic niche. Many, probably most, do not survive.

That's fine. The question is what happens to the people involved. When their products and companies die, must they die as well? According to the major idea of competition these days the answer is "Yes." Winners rule and losers drool. Even those who support sustaining people through failure tend to be uncomfortable with it because of our conception of competition as a good thing.

However, over the last thirty years, since we began removing the rules governing competition, the wealth of the middle class has become rather stagnant (http://www.epi.org/page/-/img/020510-wages.jpg) and the number of people in poverty has been growing (http://money.cnn.com/2011/09/13/news/economy/poverty_rate_income/index.htm). I know a lot of people disagree with me but that is not a good thing.

Which brings me to my next point. People on this thread are arguing, as always, about the goodness of government and business. They are neither good nor evil. Both are ethically neutral. These things are tools and tools have no ethical qualities. They do only what the people who control them direct them to do. And like all tools there are things they are good at and things they are bad at. To say, "You can never use this tool," is to limit ourselves and commit ourselves to using tools not suited for the job.

Any way, it's a poor workman who blames his tools.

Finally I'll say that a common meme throughout political discussions here and elsewhere is starting to get my goat. That meme is, "all politicians are evil and incompetent." This is rank bigotry. We wouldn't say this about any other group of people so why politicians?

Done now. Off to check my webcomics.

j. Adams
02-10-2012, 07:15 PM
But if your wages are going up over the 40 year period, then your contribution increases, so using your actuarial example (which uses my example, which uses the same contribution over 40 years) isn't accurate either.

You're assuming a steady payment stream for 40 years. That is not realistic. Now, you're going for an increasing payment streaming which is even less realistic. Keep in mind that you're projecting this onto the entire population, and that the mean of that population will operate under your "theory". i.e. steady employment for 40 years + steady(or increasing payments) for 40 years.

Also, the CD is for $100,000. In order to get said CD you need to have a balance of $100,000. You will not get there for at least 7 years in the best case scenario.

BunnyMaz
02-10-2012, 07:16 PM
You're still forgetting the very simple fact I mentioned above that the people who have the greatest need to save - those on the lower incomes who are unlikely to have property assets at retirement - don't have 10% of their income spare for this.

At the highest wage I earned when working I had a little over 1000pound (sorry using the SILs mac can't figure out pound signs on this) per month. Take off monthly rent which was cheap at 450 a month, basic phone/web access at an average of 45 a month, electricity costing 60 a month, council tax of around 150 a month, basic income tax, groceries, water rates... I didn't even have a car to have insurance, MOT and fuel on, or a phone contract, and we struggled to find the money to cover our basic outgoings. We regularly spent a day without electricity a month. And I was on an above-min-wage job. These concepts are very nice, but most of us need the security of a government-funded, guaranteed retirement income.

Chrissy
02-10-2012, 07:16 PM
It makes much more sense to put your money towards getting an annuity when you turn 65 (retirement), from where you will receive monthly payments until your death. In other words, you would pay an company X dollars every month, in order to receive those monthly payments until your death once you turn 65.

And guess what? That's exactly what SS is.

Now, this is interesting. You've just told me that an annuity is my best option.

I suppose, the only question remaining is: will the company carrying my investment spend it all, and then ask me to pay more in so that they can give it back to me later?

Don
02-10-2012, 07:21 PM
Now, this is interesting. You've just told me that an annuity is my best option.

I suppose, the only question remaining is: will the company carrying my investment spend it all, and then ask me to pay more in so that they can give it back to me later?
If they do, you can sue them for misappropriation of funds and fraud, and maybe land some of them in jail.

Unless it's the same company that runs the justice system.

Chrissy
02-10-2012, 07:23 PM
You're still forgetting the very simple fact I mentioned above that the people who have the greatest need to save - those on the lower incomes who are unlikely to have property assets at retirement - don't have 10% of their income spare for this.

Apparently they have 7.65% of their income to spare, because that's what the government takes out. But I do understand what you are saying. A lot of the things we used to take for granted, like owning your house by the time you stop working, are less and less likely.

These concepts are very nice, but most of us need the security of a government-funded, guaranteed retirement income.

Right. I understand. It's the guarantee (??) of something, and in today's economic climate, that is a relief. I do absolutely understand that.

Chrissy
02-10-2012, 07:26 PM
If they do, you can sue them for misappropriation of funds and fraud, and maybe land some of them in jail.

Unless it's the same company that runs the justice system.

And if it's the justice system, they throw you in jail if you don't "invest". :D Ah well.

j. Adams
02-10-2012, 07:33 PM
Now, this is interesting. You've just told me that an annuity is my best option.

I suppose, the only question remaining is: will the company carrying my investment spend it all, and then ask me to pay more in so that they can give it back to me later?

The way an annuity works is that the company in question calculates the present value of all the annual (or monthly) payments in the payment stream from 65 till death. What the person has to do is decide as to how much money he/she will need upon retirement. $50k/year until death? So, what we have is an income stream that has to be discounted in relation to the current age of the person in question. If the person happens to be 40, then:

50,000*v^25 (payment when he's 65) + 50,000*v^26 + ........ 50 000*V^n (Death)

Now, the discount factor(V) is normally the nominal interest rate. We have tables for this sort of thing, but in any event the NPV today of an income stream of $50k/year in 25 years, until death (assuming an interest rate of 4%) is approx. $190k in today's dollars.

From there you calculate the premiums necessary from now(40) till age 65 in order to accumulate a present value of $190k + whatever profit you require.

P * a(25) = $190,000

P = $190,000/ ((1 - v^25)/0.04) = $12,162.27/year

RichardGarfinkle
02-10-2012, 07:36 PM
I've been of percolating thoughts about this thread. Forgive me if I don't go back and quote every post that contributed to these thoughts.

First on competition, and the claim it creates products. No, it doesn't. Imagination, intuition, expertise and hard work create products. Competition then decides whether these products, and the companies that create them, have an economic niche. A survivable economic niche. Many, probably most, do not survive.

That's fine. The question is what happens to the people involved. When their products and companies die, must they die as well? According to the major idea of competition these days the answer is "Yes." Winners rule and losers drool. Even those who support sustaining people through failure tend to be uncomfortable with it because of our conception of competition as a good thing.


Well said.

As for innovation, many ideas fail to get off the ground, if we take the view that each person gets one idea to test and if they fail they die, we lose the primary advantage of being intelligent: learning from experience.

Disturbingly, one of the ideas of one of the founders of free-market economics (David Ricardo) was that the basic way to restore a living wage in a labor glut was to pay a below living wage and wait for the poor to die off in order to restore wages to living levels. I apologize for not having the reference for this on hand but here's the Wikipedia link: http://en.wikipedia.org/wiki/David_Ricardo

Don
02-10-2012, 07:55 PM
Well said.

As for innovation, many ideas fail to get off the ground, if we take the view that each person gets one idea to test and if they fail they die, we lose the primary advantage of being intelligent: learning from experience.

But if you study any review of successful entrepreneurs, you'll find that's simply not the case. Most entrepreneurs don't succeed with their first business. Many don't come out on top until their second or third.

RichardGarfinkle
02-10-2012, 08:10 PM
But if you study any review of successful entrepreneurs, you'll find that's simply not the case. Most entrepreneurs don't succeed with their first business. Many don't come out on top until their second or third.

Sorry. That's what I was trying to get at. I apologize if I didn't make it clear. My point was supposed to be that the idea of you get one shot was a very bad one and it's better to give people the opportunity to keep trying rather than condemn to death for a single error.

Xelebes
02-10-2012, 08:55 PM
And after you retire, you only draw a certain amount out of that account each month, so the remaining balance continues to earn interest.

ETA: Forgot my LINK!!! Here it is: http://www.calculatorsoup.com/calculators/financial/future-value-investments.php

Um no, what kind of interest is that? Nominal interest? Real interest? Net interest? I use stocks and bonds because they are easier to beat inflation. In reality, 106 000 in 40 years from now is not that much of an egg. Divide that by 10 years of post-retirement and you have 10 000 dollars a year or a shade above it. Also, buying stocks and bonds further establishes oneself in the middle class with non-depreciable assets. However, the lower prices of stocks makes the risk of bankruptcy much more of a problem. It's like buying low value land - you run the risk of it not being worth your investment with it disappearing into the swamp.

Furthermore, I find it amusing that someone with a masters in taxation is using buzz-internet tools to calculate future growth in annuities. You should know how to do it in Excel at the very least.

Chrissy
02-10-2012, 10:54 PM
Furthermore, I find it amusing that someone with a masters in taxation is using buzz-internet tools to calculate future growth in annuities. You should know how to do it in Excel at the very least.

I do have it in Excel. I was under the impression that you have to post from the internet.

Tax is my speciality. This subject we've been discussing isn't tax (let alone state tax, corporate tax, partnership tax, which comprises the majority of my work).

But I'm always willing to learn and listen, whereas your primary purpose here seems to be showing up and hurling insults. Not cool.

benbradley
02-10-2012, 11:49 PM
...
It makes much more sense to put your money towards getting an annuity when you turn 65 (retirement), from where you will receive monthly payments until your death. In other words, you would pay an company X dollars every month, in order to receive those monthly payments until your death once you turn 65.

And guess what? That's exactly what SS is.
So what's the return on investment for Social Security?

I get the feeling some will tell me that question is impertinent, and not the point.

j. Adams
02-11-2012, 12:19 AM
So what's the return on investment for Social Security?

I get the feeling some will tell me that question is impertinent, and not the point.

Are you talking about everybody put together or one single person?

j. Adams
02-11-2012, 12:21 AM
Now, this is interesting. You've just told me that an annuity is my best option.

I suppose, the only question remaining is: will the company carrying my investment spend it all, and then ask me to pay more in so that they can give it back to me later?

The company can lose all your money and you're not entitled to getting any of it back because its not FDIC insured.

With the government you have an ironclad guarantee that you will be getting money from 65 (or 62) till death.

Gregg
02-11-2012, 12:33 AM
So what's the return on investment for Social Security?

I get the feeling some will tell me that question is impertinent, and not the point.

Probably 0%.
Or less.
That's because, currently, Social Security tax revenues minus benefits is a negative number. But as recently as 2008 the number was positive.
But Social Security funds are not invested in the traditional sense - like an IRA or 401k. Current revenues are used to pay current benefits -
When there is a surplus, the funds become part of the US Treasury - co-mingled with other revenues. And spent on other government programs.

http://digital.library.unt.edu/ark:/67531/metacrs1920/m1/1/high_res_d/94-593epw_2001Aug28.pdf

http://articles.businessinsider.com/2011-09-01/politics/30127590_1_net-surplus-adjustment-benefits

benbradley
02-11-2012, 12:37 AM
Are you talking about everybody put together or one single person?
I was thinking of one single person, but since you ask, the overall picture would be interesting as well.
The company can lose all your money and you're not entitled to getting any of it back because its not FDIC insured.

With the government you have an ironclad guarantee that you will be getting money from 65 (or 62) till death.
:popcorn:

Don
02-11-2012, 01:38 AM
For those who want government to run more like a business, and quit spending money just because it was allocated, here you go (http://paul.senate.gov/?p=press_release&id=452), hot off the presses, just introduced today.

Sen. Rand Paul today introduced the Cost Savings Enhancement Act, a bill that encourages federal agencies to return unused funds to the taxpayer through bonus incentives.

"Under current law, agencies are required to spend all of the money they are allocated and have no incentive to identify areas in the budget where savings could be found. When this occurs, federal agencies with surplus funds must rush to spend the funds before the end of the fiscal year, often on unnecessary purchases," Sen. Paul said. "This bill would reverse the trend toward agency bloat-whereby agencies are appropriated more each year than the previous and grow beyond the size they were intended to be and more responsibly handle taxpayer dollars."

The Cost Savings Enhancement Act has been endorsed by good-government groups such as Citizens Against Government Waste and Americans for Prosperity.

In a letter from Americans for Prosperity dated Feb. 10, the group lauds Sen. Paul's bill: "Senator Paul's Cost Savings Enhancements Act would help control federal agencies' budgets by creating an employee suggestion program. If employees spot waste or come forward with an idea on how to spend taxpayer dollars more wisely, they will get to keep as much as $10,000 of the budgetary savings if their suggestions are adopted. The head of the federal agency would then be given authority to return the money to the Treasury for deficit reduction."

I know, I know, it's one of those danged Pauls, but you can't have everything.

Chrissy
02-11-2012, 01:58 AM
With the government you have an ironclad guarantee that you will be getting money from 65 (or 62) till death.

Wow. Ironclad. Where do I sign up? Oh wait, I already am signed up. :D

How is this ironcladness achieved? With no rate of return, nothing to offset inflation?

Don
02-11-2012, 02:00 AM
Wow. Ironclad. Where do I sign up? Oh wait, I already am signed up. :D

How is this ironcladness achieved? With no rate of return, nothing to offset inflation?
Two words.

Printing. Press.

benbradley
02-11-2012, 02:01 AM
Probably 0%.
Or less.
That's because, currently, Social Security tax revenues minus benefits is a negative number. But as recently as 2008 the number was positive.
But Social Security funds are not invested in the traditional sense - like an IRA or 401k. Current revenues are used to pay current benefits -
When there is a surplus, the funds become part of the US Treasury - co-mingled with other revenues. And spent on other government programs.

http://digital.library.unt.edu/ark:/67531/metacrs1920/m1/1/high_res_d/94-593epw_2001Aug28.pdf

http://articles.businessinsider.com/2011-09-01/politics/30127590_1_net-surplus-adjustment-benefits
That was pretty much what I was thinking. And to quote this again:
The company can lose all your money and you're not entitled to getting any of it back because its not FDIC insured.

With the government you have an ironclad guarantee that you will be getting money from 65 (or 62) till death.
I'm sure Greek citizens are reassured at this.

Don
02-11-2012, 02:02 AM
I'm sure Greek citizens are reassured at this.
:roll: :Trophy: :roll:

[/lock thread]

Chrissy
02-11-2012, 02:09 AM
Two words.

Printing. Press.

I thought you were going to say

Higher. Taxes.

Hey, whatever works.

Don
02-11-2012, 02:12 AM
I thought you were going to say

Higher. Taxes.

Hey, whatever works.
Nah. When you do the math, there aren't enough rich people, or even middle-income people, to pay the upcoming bills. Maybe if we unwound the Empire and went back to being a Republic, we just might be able to squeak by, but given the current outlook for the November election, I wouldn't count on that. I'm betting it's the printing press, and dog food for us old folks on fixed incomes. I'm buying stock in Alpo.

Chrissy
02-11-2012, 02:14 AM
For those who want government to run more like a business, and quit spending money just because it was allocated, here you go (http://paul.senate.gov/?p=press_release&id=452), hot off the presses, just introduced today.

Can I be a government employee now?

:hooray:

j. Adams
02-11-2012, 02:22 AM
That was pretty much what I was thinking. And to quote this again:

I'm sure Greek citizens are reassured at this.

Let me know when US debt is at 200+% of GDP, then we'll have this discussion.

Chrissy
02-11-2012, 02:26 AM
Nah. When you do the math, there aren't enough rich people, or even middle-income people, to pay the upcoming bills. Maybe if we unwound the Empire and went back to being a Republic, we just might be able to squeak by, but given the current outlook for the November election, I wouldn't count on that. I'm betting it's the printing press, and dog food for us old folks on fixed incomes. I'm buying stock in Alpo.

They still do that? I remember studying the ill-effects of printing money back in the nineties. These days, I thought the proposed solution was to get those revenues from whomever can afford to part with them. Key word being "afford."

(Here's where you're going to make it easy for me--since I suck at online searches--and post a link about U.S. currency. Thank you Don! :))

Don
02-11-2012, 02:34 AM
They still do that? I remember studying the ill-effects of printing money back in the nineties. These days, I thought the proposed solution was to get those revenues from whomever can afford to part with them. Key word being "afford."

(Here's where you're going to make it easy for me--since I suck at online searches--and post a link about U.S. currency. Thank you Don! :))
All this "Quantitative Easing (http://en.wikipedia.org/wiki/Quantitative_easing)" they've been doing? Just another name for cranking up the printing press. They do it with electrons these days. OTOH, I think we borrowed most of the bailout money from the Chinese, so we won't have to pay that back, our kids will. Aren't we lucky. :) Sucks to be them, though.

benbradley
02-11-2012, 04:06 AM
Let me know when US debt is at 200+% of GDP, then we'll have this discussion.
Now you're scaring me! I looked it up and it appears we're halfway there. Now you got me watching the clock (http://www.usdebtclock.org/).
All this "Quantitative Easing (http://en.wikipedia.org/wiki/Quantitative_easing)" they've been doing? Just another name for cranking up the printing press. They do it with electrons these days. OTOH, I think we borrowed most of the bailout money from the Chinese, so we won't have to pay that back, our kids will. Aren't we lucky. :) Sucks to be them, though.
So that's what those government economists do to earn their money, they they make up these fancy new names for things they shouldn't be doing. I would have called it Gutenberging the economy, but I suppose I'm "too honest" for that kind of work.

Don
02-11-2012, 04:24 AM
Now you're scaring me! I looked it up and it appears we're halfway there. Now you got me watching the clock (http://www.usdebtclock.org/).

Well, if you're only counting debt we already have on the books, we're half-way there. But look down there toward the bottom, where it says "Social Security Liability?" Notice it's another $16 trillion? Then there's $20 trillion labeled "Prescription Drug Liability?" (Thanks, GWB!) And that final one, that's a biggie too... $81 trillion unfunded Medicare Liability.

What's $143 trillion divided by $15 trillion, expressed as a percentage... 953%? Check my math.

200% = pocket change.

Boy, it's a good thing we've got Social Security and Medicare, or grandpa and granny might end up eating dog food, living in the street and facing death panels. :rolleyes:

Xelebes
02-11-2012, 05:02 AM
Now you're scaring me! I looked it up and it appears we're halfway there. Now you got me watching the clock (http://www.usdebtclock.org/).

So that's what those government economists do to earn their money, they they make up these fancy new names for things they shouldn't be doing. I would have called it Gutenberging the economy, but I suppose I'm "too honest" for that kind of work.

Sometimes Gutenberg needs to get a little busy if the notes that have been printed are burning up in private reserve clawbacks.

Xelebes
02-11-2012, 05:14 AM
I do have it in Excel. I was under the impression that you have to post from the internet.

Tax is my speciality. This subject we've been discussing isn't tax (let alone state tax, corporate tax, partnership tax, which comprises the majority of my work).

But I'm always willing to learn and listen, whereas your primary purpose here seems to be showing up and hurling insults. Not cool.

Well, I just found it odd. Just state the formula you are using. We can verify it ourselves.

I am versed in (Canadian) tax (federal, provincial, GST, HST.) Working on my accounting degree at a tech school, which I understand is different than going to a university to do it. More practical learning of accounting systems than the universities. (I still can't believe that the FASB allows LIFO, for example.)

Paul
02-11-2012, 05:26 AM
This is an interesting argument against prison privatization, since THE JUDGES took the bribes. Aren't judges government employees?



???

did them being govt employees stop the juvenile prison from being private???

anywaay, you mention you would not like to see privation of prisons, so we agree. i think .

clintl
02-11-2012, 06:02 AM
All this "Quantitative Easing (http://en.wikipedia.org/wiki/Quantitative_easing)" they've been doing? Just another name for cranking up the printing press. They do it with electrons these days. OTOH, I think we borrowed most of the bailout money from the Chinese, so we won't have to pay that back, our kids will. Aren't we lucky. :) Sucks to be them, though.

Because all-out depressions, like they used to have in the old days, are so much better.

ColoradoGuy
02-11-2012, 06:15 AM
You seem to have faith in nothing... except perhaps a government that takes charge, because we as individuals are incapable?

A truly bizarre assertion, one which could only come from a person who has not read my posts in this and other AW forums for the past 7 years.

muravyets
02-11-2012, 06:21 AM
That was pretty much what I was thinking. And to quote this again:

I'm sure Greek citizens are reassured at this.
Greek citizens don't collect US Social Security. Comparing apples and oranges is one thing. Comparing apples and ladders is another entirely.

Chrissy
02-11-2012, 04:25 PM
???

did them being govt employees stop the juvenile prison from being private???

anywaay, you mention you would not like to see privation of prisons, so we agree. i think .

Yes, we agree.

But using the Kids for Cash example: It was found that the owners of the private jails offered bribes to the judges to give harsher/longer/more sentences. (This is one of the primary arguments against the free-market: that the free market has no conscience, it will do whatever it deems necessary to make the almighty dollar.)

But the judge was not a free-marketer. He was a judge. He was paid by the government, voted by the people or appointed by another government official. And the judge took the money. They judge also put the almighty dollar first.

I think it's safe to say that whether we're talking about free enterprise or government, it's only as honorable as the people running it.

Chrissy
02-11-2012, 04:34 PM
Well, I just found it odd. Just state the formula you are using. We can verify it ourselves.

I am versed in (Canadian) tax (federal, provincial, GST, HST.) Working on my accounting degree at a tech school, which I understand is different than going to a university to do it. More practical learning of accounting systems than the universities. (I still can't believe that the FASB allows LIFO, for example.)

LOL. Happily, I only have a couple of clients with inventory (I hate inventory :)). And yeah, I learned crap in unversity. Tax theory and all that, with not much "real-world" application, plus there was a lot of audit in undergrad. (This was 1989-1997). I got my real knowledge of tax by doing. I think the tech school sounds perfect. Re: bolded part: EXACTLY. Best of luck.

j. Adams
02-11-2012, 04:39 PM
A truly bizarre assertion, one which could only come from a person who has not read my posts in this and other AW forums for the past 7 years.

It's usually overtly religious folk that have her type of reaction. They place a stupendous amount of faith on
issues that have no real facts to back them up.

j. Adams
02-11-2012, 04:58 PM
Because all-out depressions, like they used to have in the old days, are so much better.

I honestly think that explaining monetary policies to people that don't see the big picture is a losing proposition. The whole purpose of the Fed is to control inflation (That's its primary function)

What QE does is increase/reduce the money supply in the Economy. When you're near a 0% nominal interest rate (As we are now), you have very few monetary policies left that can affect the Economy. If real output grows by 2% or so (Which is the case), the increase in the money supply can be offset by the increase in output, which then subsequently means that the growth of inflation due to the increase in the money supply is either completely reversed or even improved upon. The net result is either stable inflation or reduced inflation.

This is all based on the quantity theory of money.

Money Supply * Velocity = Price level * Output(real)

So, Price Level = M*V / Real Output.

So if the increase in output > the increase in the money supply, the price level will probably decrease.

|That's what QE does...its aimed primarily at controlling inflation.

Chrissy
02-11-2012, 05:13 PM
It's usually overtly religious folk that have her type of reaction. They place a stupendous amount of faith on
issues that have no real facts to back them up.

It's always close-minded, judgemental people that lash out with unfounded insults.

j. Adams
02-11-2012, 05:28 PM
It's always close-minded, judgemental people that lash out with unfounded insults.

I'm as liberal as it gets, I just don't put any credibility on people that base their entire lives on the belief that a magical man behind the curtain exists.

I like facts, which is something that seems to escape you. :)

Chrissy
02-11-2012, 05:35 PM
I'm as liberal as it gets, I just don't put any credibility on people that base their entire lives on the belief that a magical man behind the curtain exists.

I am a social liberal, which puts me firmly outside the religious right. They probably wouldn't let me inside most churches.

I like facts, which is something that seems to escape you. :)

I know you like facts. I do too, and appreciate your posts of facts as you see them. I am trying to do better with links. I am learning.

And since you put a smilie:

:)

muravyets
02-11-2012, 08:11 PM
Yes, we agree.

But using the Kids for Cash example: It was found that the owners of the private jails offered bribes to the judges to give harsher/longer/more sentences. (This is one of the primary arguments against the free-market: that the free market has no conscience, it will do whatever it deems necessary to make the almighty dollar.)

But the judge was not a free-marketer. He was a judge. He was paid by the government, voted by the people or appointed by another government official. And the judge took the money. They judge also put the almighty dollar first.

I think it's safe to say that whether we're talking about free enterprise or government, it's only as honorable as the people running it.
Are you suggesting that there are no "free-marketers" working in government? You might want to tell Ron Paul and Paul Ryan that. They'll be surprised. (I'd better add a sarcasm marker to this one because this is the part where I'm teasing. The paragraph that follows is the serious objection to your argument. So here it is.) :sarcasm

ETA: "Both sides do it" is not a defense against criticisms that one side did it. If you make an argument that privatization is good, then you cannot brush off examples of corruption in privatization by saying that public officials were also being corrupt. That doesn't make the private enterprise less corrupt. If both sides are only as good as the people running them, then that undermines the argument that privatization is a good thing. In and of itself, it is neither good nor bad. Therefore, there is no basis on which to claim it is preferable to public programs.

rugcat
02-11-2012, 09:25 PM
It's usually overtly religious folk that have her type of reaction. They place a stupendous amount of faith on
issues that have no real facts to back them up.Really? Have you any idea of what liberal, fact based, Colorado Guy's religious beliefs might be?

You've been skating close to the edge as far as insults, both personal and specific, go. I strongly suggest that you stick to proving your points with facts, not personal opinions about other posters and their beliefs.

j. Adams
02-11-2012, 09:34 PM
Really? Have you any idea of what liberal, fact based, Colorado Guy's religious beliefs might be?

You've been skating close to the edge as far as insults, both personal and specific, go. I strongly suggest that you stick to proving your points with facts, not personal opinions about other posters and their beliefs.

That was more of a sarcastic dig than an insult.

I'll be sure to use the sarcasm alert emoticon next time. :)

Yorkist
02-12-2012, 01:37 AM
Yes, we agree.

But using the Kids for Cash example: It was found that the owners of the private jails offered bribes to the judges to give harsher/longer/more sentences. (This is one of the primary arguments against the free-market: that the free market has no conscience, it will do whatever it deems necessary to make the almighty dollar.)

But the judge was not a free-marketer. He was a judge. He was paid by the government, voted by the people or appointed by another government official. And the judge took the money. They judge also put the almighty dollar first.

I think it's safe to say that whether we're talking about free enterprise or government, it's only as honorable as the people running it.

Heh, Chrissy, I'm not a CPA yet but I've worked in (government) auditing for a few years now. The problem with the bolded statement is that it's not about honor or being a bad person or anything like that - thinking that way is a mistake. Thinking that way is, in fact, the reason fraud often goes undetected for so long. Does this sound familiar?- "Oh, our secretary is so wonderful, so nice to everyone, and such a great employee too. She hasn't taken a day off in four years!" Ya, that's 'cause she's lapping accounts receivable, 'cause she's got a gambling problem/her child has an expensive illness/her husband lost his job and there isn't enough money to go around/whatever. Fraud is a result of a combination of three things: motive, opportunity, and lack of internal controls. At my most recent CPE they called it the "fraud triangle."

Mixing government and a profit-seeking enterprise inherently increases all three of those. First, it (substantially) increases motive. A government prison has no incentive to increase its number of detainees; a private prison does. Second, it increases opportunity because governments have mostly fixed budgets and not a lot of extra cash floating around. Third, it decreases internal controls because there's more than one organization at work. Audits are less likely to detect fraud because one organization audits the government and a different organization audits the private enterprise.

The majority of large-scale fraud that I hear about in the trade in some way involves mixing government and private enterprise. Jeez, just google "fraud + contracts + Hurricane Katrina" or "fraud + contracts + US military." Even in the small scale stuff I do, there's the related parties problem, e.g. "Oh, we uh, totally need a road here" (not so much) "so I'll just take bids now" (so I can let my brother-in-law who owns a construction company know what bid to place).

Incidentally, most government waste that I see also results from the combination of two or more governments. (That's just an observation; evaluating waste isn't my job.) Most government agencies, in my experience, are actually well-oiled machines; they're pretty damn efficient. When they get all mixed up together, though, a SNAFU of red tape, cock-blockery, and bureaucracy typically results.

Anyway, there's another big problem with prisons being privatized that's reflective of why government and business should not go together. The companies that run these prisons hire lobbyists to convince state legislatures to enact stiffer penalties for crimes, three strikes laws, etc. And then they donate to the campaigns of legislators who do so. I find that extremely scary.

Chrissy
02-12-2012, 04:59 AM
Hi Yorkist, and welcome!

The problem with the bolded statement is that it's not about honor or being a bad person or anything like that - thinking that way is a mistake. Thinking that way is, in fact, the reason fraud often goes undetected for so long.

No, this is why we audit. Not sure why you're presuming from my statement: I think it's safe to say that whether we're talking about free enterprise or government, it's only as honorable as the people running it.that I'm saying there is no need for auditing?

All of your definitions of fraud risk are duly noted, BTW.

However, re: bolded:

Mixing government and a profit-seeking enterprise inherently increases all three of those. First, it (substantially) increases motive. A government prison has no incentive to increase its number of detainees; a private prison does. Second, it increases opportunity because governments have mostly fixed budgets and not a lot of extra cash floating around. Third, it decreases internal controls because there's more than one organization at work. Audits are less likely to detect fraud because one organization audits the government and a different organization audits the private enterprise.

is very misleading. "No incentive to increase business" and "not a lot of extra cash floating around" are not strong arguments against the existence of fraud; especially non-monetary fraud (the surrendering of legal rights; misrepresentation of facts) nor do they protect against inefficiency of taxpayer dollars and flat-out negligence as it pertains to prisoners... and in the case of government-run prisons, who's auditing them? Oh, that's right, another government agency. Plenty of incentive there to detect fraud. (Since we all seem to be needing these: :sarcasm )

Not going to quote it, it's too long, but check out the AICPA definition of Fraud from Black's Law Dictionary.

It's in here, too: http://fraudauditing.net/FraudDefinitions.pdf which is a pretty decent read for the lay person.


The majority of large-scale fraud that I hear about in the trade in some way involves mixing government and private enterprise. Jeez, just google "fraud + contracts + Hurricane Katrina" or "fraud + contracts + US military." Even in the small scale stuff I do, there's the related parties problem, e.g. "Oh, we uh, totally need a road here" (not so much) "so I'll just take bids now" (so I can let my brother-in-law who owns a construction company know what bid to place).

Incidentally, most government waste that I see also results from the combination of two or more governments. (That's just an observation; evaluating waste isn't my job.)

Sounds like you're saying it would be better if governments didn't put out bids for projects. Hmmm. So it would just be one big giant government happy family? You probably wouldn't even need to audit anything then, huh? ;)

Also, I understand you don't evaluate waste, but waste of taxpayer dollars IS a form of fraud.

Most government agencies, in my experience, are actually well-oiled machines.

In case it hasn't been clear, I've been talking about the federal government. I'm rather happy with my particular state/county agency accomplishments and efficiency. Having said that... Most? You must have quite a bit of nationwide experience to say that.

Anyway, there's another big problem with prisons being privatized that's reflective of why government and business should not go together. The companies that run these prisons hire lobbyists to convince state legislatures to enact stiffer penalties for crimes, three strikes laws, etc. And then they donate to the campaigns of legislators who do so. I find that extremely scary.

I depise lobbying of every kind. Whole other issue. (But hey, politicans can be "bought" and in my opinion, that's a strong argument against more government, or at the very least, it weakens the argument that the free market has so much more motive.)

Also, I believe the subject of privatized prisons has been addressed to most everyone's satisfaction. If you want, read over the posts that pertain to it and hopefully you'll see what I mean.

But again, if we're not willing to put anything in the hands of the free market, and we're not going to mix the two... the result would be, well, in my opinion, it sounds an awful lot like the "C" word.

Everyone can go ahead and freak out now. :D

Chrissy
02-12-2012, 06:42 AM
ETA: "Both sides do it" is not a defense against criticisms that one side did it. If you make an argument that privatization is good, then you cannot brush off examples of corruption in privatization by saying that public officials were also being corrupt. That doesn't make the private enterprise less corrupt. If both sides are only as good as the people running them, then that undermines the argument that privatization is a good thing. In and of itself, it is neither good nor bad. Therefore, there is no basis on which to claim it is preferable to public programs.

On the contrary, I certainly can make the argument that corruption is not exclusive to the free market. That is my argument against the idea that free market is "bad" because all they care about is "the almighty dollar."

If both sides are only as good as the people running them, that doesn't undermine the argument that free market is good. It undermines the argument that the government is better simply because it lacks free-market motivation.

Circular reasoning, which I believe you're using at this point, is not cutting it for me.

Love ya anyway :)

Xelebes
02-12-2012, 09:13 AM
Waste of taxpayer money can be attributed to many things:

Efficiency variances
Price variances
Spending variances

Fraud is not always the first thing you look at when auditing the cost structure of operations. Fraud is covering up of abuses within a system. You would first need to have cause to suspect fraud might be behind the inefficiency to start investigating the cost of it. It's a crude import of Occam's Razor that auditors have to do - search for the elephant in the room rather than the flea.

muravyets
02-12-2012, 10:43 AM
On the contrary, I certainly can make the argument that corruption is not exclusive to the free market. That is my argument against the idea that free market is "bad" because all they care about is "the almighty dollar."

If both sides are only as good as the people running them, that doesn't undermine the argument that free market is good. It undermines the argument that the government is better simply because it lacks free-market motivation.

Circular reasoning, which I believe you're using at this point, is not cutting it for me.

Love ya anyway :)
I love neither you, because I don't know you, nor your argument because I do know it by now. And I'm not the one running in circles here because I'm not the one arguing that bad = good, i.e. that since private enterprise is at least as likely to be corrupt as public programs, that makes private enterprise better than public programs. You know what doesn't cut it for me? An argument that is based entirely on fantasy and false claims and is defended by illogic. That would be yours. I'm tired of it.

Yorkist
02-12-2012, 12:21 PM
Hi Yorkist, and welcome!

Hello, and thankya. OK so, I must be suffering from a lack of clarity in my writing today or something, 'cause I'm not getting where you get some of this from my post. ETA - ugh, sorry, I wrote a novel.

No, this is why we audit.That's only part of it. Yes, we audit to detect fraud (though fraud can go undetected by audits for years, and it's worth noting that not all organizations, public or private, have a yearly audit). Ideally, though, fraud can be prevented - and/or detected - by reducing motive and opportunity, and enacting internal controls. For instance, accounts receivable lapping can be prevented/detected by having mandatory annual vacations. Much more cheaply than an audit can.

Not sure why you're presuming from my statement: that I'm saying there is no need for auditing?I don't know where you're getting this?

is very misleading. "No incentive to increase business" and "not a lot of extra cash floating around" are not strong arguments against the existence of fraud; especially non-monetary fraud (the surrendering of legal rights; misrepresentation of facts)On the first point, I say again: motive is a strong component of fraud. Removing profit from the equation is a disincentive for this particular type of fraud. A government-run prison has no incentive to increase its number of prisoners, while a privately-run prison does.

Obviously there are other kinds of fraud - misappropriation of assets is a big one, the most common one, in both governments and private enterprise. But that's not what we're talking about here. Actually we're talking about two different things - the private prison issue is important because it's a miscarriage of our justice system, and the contracts fraud I refer to is important because it rips off the taxpayer. Both are, I think, of greater import than, say, a government employee "borrowing" a laptop for his kids to write their school papers on.

nor do they protect against inefficiency of taxpayer dollarsSome types of fraud constitute massive inefficiency of taxpayer dollars. Are they the only example out there? No. Doesn't mean we shouldn't try to prevent it before it happens.

and in the case of government-run prisons, who's auditing them? Oh, that's right, another government agency. Plenty of incentive there to detect fraud. (Since we all seem to be needing these: :sarcasm )This doesn't make sense...? The government isn't a monolith (and referring to the federal government as such makes no more sense than referring to a state government as such).

I just don't get this - you think that the employees at government auditing agency A want to protect employees participating in fraud at government agency B out of some sense of loyalty that "we're all government?" You've never worked in government, clearly. It just doesn't work that way.

Sounds like you're saying it would be better if governments didn't put out bids for projects. Hmmm.Not exactly. I think you're completely misunderstanding my point. This isn't a value judgment. I don't think that seeking profit is bad, or that the government is good, or certainly that the government should take over private enterprise. I think, however, that the two should remain as separate as possible. Not just because of the increased risk of certain kinds of fraud, but also because their missions are entirely different. Mission creep causes waste in its wake.

Also, I understand you don't evaluate waste, but waste of taxpayer dollars IS a form of fraud.I disagree, but ok. Most government waste is not intentional. You mentioned adding measures to "improve accountability" earlier. In my experience, "improved accountability" = endless paperwork no one reads = waste.

Tangent here, but another HUGE source of government waste is when governments micromanage each other. For example, my state has a government board that makes up all of the rules for the universities in its system, from the salary of position X to how many times a student can cheat before they fail a class. It's basically the hand of the governor. It duplicates decision-making at the top and requires a veritable buttload of employees at the bottom. Plus, since the governing board is made up not of educators but of "business leaders" and friends of the governor, the universities constantly have to waste resources fighting rules that are enacted as a result of the board having no clue how universities actually work (for example, the governing board tried to institute a rule that would force a professor to put in an extra 10 hours of work per instance of a cheating student. This would be, like, an entire extra part-time job).

This same board has also instituted MANY measures for the "accountability" of its professors. Which is stupid, university departments and chairs, as well as the tenure process, ensure the accountability of professors. Sure, one in a hundred bad apples slip in (probably far fewer than in most professions, b/c tenure is a hell of a process; it makes the CPA exam look like small potatoes), but the cost of trying to prevent that one totally exceeds the benefit.

As a result of these things, tuition in my state is double most of our neighbors', though the cost of living, salaries, etc. are pretty much constant. Thanks to layers upon layers of bureaucracy. (I'll never understand why my very conservative state loves big government in its own turf so much.)

In case it hasn't been clear, I've been talking about the federal government. I'm rather happy with my particular state/county agency accomplishments and efficiency. Having said that... Most? You must have quite a bit of nationwide experience to say that.OK, add "Judging by a small sample size..." to my previous sentence somewhere and let's call it a day. :)

I probably said this wrong anyway. There seem to be a lot of people who think size of government = inefficiency of government. That's not really true; there are very well-run large governments (the U.S. military is one of the most efficient organizations, private or public, that I can think of - I mean, hello, it invented linear programming, which is basically the mathematical study of efficiency) and very poorly-run small ones. What is true, is that governments tend to become inefficient when they have mission creep.

It's just like private enterprise in that way, really. People also tend to have this myth that private enterprise is "totally more efficient" than government, because of the profit and reducing cost motives. This is an unfounded myth because it assumes (1) perfect rationality, (2) perfect information, and (3) perfect intelligence. No organization has any of those, much less all of them. The free market may take care of that, but it often doesn't.

Anyway, private enterprise can just as easily become huge, bloated, inefficient behemoths due to mission creep. Try dealing with AT&T lately?

But again, if we're not willing to put anything in the hands of the free market, and we're not going to mix the two... the result would be, well, in my opinion, it sounds an awful lot like the "C" word.Again, you can not mix the two (or mix them as little as possible) without getting rid of either one. In fact, what I'm saying doesn't define, in any way, which functions should be governmental and which shouldn't. Most of us can agree about the justice system, but roads? I have no problem with private toll roads. But if the private enterprise builds the road, and makes money with the road, they should also maintain the road. Maintaining the road definitely shouldn't be up to the taxpayer.

Anyway, IMO, there's only one thing that the government should take from private enterprise, and that's cost/benefit analysis. Good government agencies already do that, but Congress does not (and state legislatures do not). Most of them are freaking attorneys, so they tend to be really bad at envisioning potential financial consequences of their actions or even interpreting them after they occur.

Chrissy
02-12-2012, 04:57 PM
ETA - ugh, sorry, I wrote a novel.
I like novels, and I like your style.
That's only part of it. Yes, we audit to detect fraud (though fraud can go undetected by audits for years, and it's worth noting that not all organizations, public or private, have a yearly audit). Ideally, though, fraud can be prevented - and/or detected - by reducing motive and opportunity, and enacting internal controls. For instance, accounts receivable lapping can be prevented/detected by having mandatory annual vacations. Much more cheaply than an audit can.
I agree with everything except "reducing motive". Your example is of reducing opportunity + increasing detection/internal control. How does one reduce motive?
I don't know where you're getting this?
Sorry, misunderstanding perhaps.
On the first point, I say again: motive is a strong component of fraud. Removing profit from the equation is a disincentive for this particular type of fraud. A government-run prison has no incentive to increase its number of prisoners, while a privately-run prison does.
Okay. Here you give an example of reducing the motive of what amounts to prisoner abuse. I tend to agree. Just in case you didn't read it, I'm going to quote myself from page 3 of this thread (before you arrived):

Having said all of that, this isn't an area of privatization that I would go picketing over.

The reason I listed the justice system and the legal systems as areas I feel are best run by the government is because of the need for impartiality and the fiduciary aspects in matters of law. Obviously there are places where "efficiency" isn't in the best interests of the people.

Some types of fraud constitute massive inefficiency of taxpayer dollars. Are they the only example out there? No. Doesn't mean we shouldn't try to prevent it before it happens.
I very much think we should try to stop it before it happens. In fact, this was the origin of the thread, with the idea that government should be run more like a business.
This doesn't make sense...? The government isn't a monolith (and referring to the federal government as such makes no more sense than referring to a state government as such).
I have very different views of federal and state government, generally speaking. It has a lot to do with how much taxpayer money each one requires :D But I also live in a very cool state. No personal income tax, only property and sales tax. I realize it's different in other states, the state gov being as much of a "monolith" as the federal gov. California comes to mind...
I just don't get this - you think that the employees at government auditing agency A want to protect employees participating in fraud at government agency B out of some sense of loyalty that "we're all government?" You've never worked in government, clearly. It just doesn't work that way.
No, I've never worked in government. So how does government auditing work?
Not exactly. I think you're completely misunderstanding my point. This isn't a value judgment. I don't think that seeking profit is bad, or that the government is good, or certainly that the government should take over private enterprise. I think, however, that the two should remain as separate as possible. Not just because of the increased risk of certain kinds of fraud, but also because their missions are entirely different. Mission creep causes waste in its wake.
I can agree with the separation of the two. (Okay, now we have to decide who's going to do what :D)
I disagree, but ok. Most government waste is not intentional. You mentioned adding measures to "improve accountability" earlier. In my experience, "improved accountability" = endless paperwork no one reads = waste.
<insert your university example here>

This is great example of inefficiency of government, and I'm absolutely NOT suggesting we need more committees. That is precisely the kind of waste I'm talking about. Improving accountability doesn't have to turn into a clusterf***. ;)
I probably said this wrong anyway. There seem to be a lot of people who think size of government = inefficiency of government. That's not really true; there are very well-run large governments (the U.S. military is one of the most efficient organizations, private or public, that I can think of - I mean, hello, it invented linear programming, which is basically the mathematical study of efficiency) and very poorly-run small ones. What is true, is that governments tend to become inefficient when they have mission creep.
This U.S. military is an excellent example. But, IMO, it's an anomaly.
It's just like private enterprise in that way, really. People also tend to have this myth that private enterprise is "totally more efficient" than government, because of the profit and reducing cost motives. This is an unfounded myth because it assumes (1) perfect rationality, (2) perfect information, and (3) perfect intelligence. No organization has any of those, much less all of them. The free market may take care of that, but it often doesn't.
Anyway, private enterprise can just as easily become huge, bloated, inefficient behemoths due to mission creep. Try dealing with AT&T lately?
LOL. True about getting huge, but inefficient? Are they? I don't know, but AT&T has customers and shareholders, and if either are unhappy, they can go sign up with Comcast or buy stock in Sprint.
By and large, if businesses, especially small/medium sized businesses are inefficient, they will die. If government is inefficent, we suck it up and pay.
Again, you can not mix the two (or mix them as little as possible) without getting rid of either one. In fact, what I'm saying doesn't define, in any way, which functions should be governmental and which shouldn't. Most of us can agree about the justice system, but roads? I have no problem with private toll roads. But if the private enterprise builds the road, and makes money with the road, they should also maintain the road. Maintaining the road definitely shouldn't be up to the taxpayer.
Anyway, IMO, there's only one thing that the government should take from private enterprise, and that's cost/benefit analysis. Good government agencies already do that, but Congress does not (and state legislatures do not). Most of them are freaking attorneys, so they tend to be really bad at envisioning potential financial consequences of their actions or even interpreting them after they occur.
I share the above opinion with you. I think we're more or less on the same page.

Xelebes
02-13-2012, 12:41 AM
I agree with everything except "reducing motive". Your example is of reducing opportunity + increasing detection/internal control. How does one reduce motive?

You can't reduce motive on an individual basis. That is, if the motive for one abuse is because the person is in poor health or is having straining familial relations, how is the employer going to remove that motive for abuse and cover-up? What the government can do is provide a pool of resources for individuals to seek out so that abuses can be minimised. Private employers have less resources to pool and provide and does not have as much incentive to do such.

j. Adams
02-13-2012, 01:12 AM
On the contrary, I certainly can make the argument that corruption is not exclusive to the free market. That is my argument against the idea that free market is "bad" because all they care about is "the almighty dollar."

If both sides are only as good as the people running them, that doesn't undermine the argument that free market is good. It undermines the argument that the government is better simply because it lacks free-market motivation.

Circular reasoning, which I believe you're using at this point, is not cutting it for me.

Love ya anyway :)

What he's trying to say is that there is no evidence to suggest that a privately run, free-market oriented government program, would be any better than the same government program run by public officials.

That's the reality of the entirety of this discussion no? You're saying that it would be better (With no real evidence to back this up) simply because according to you private business runs more efficiently.

j. Adams
02-13-2012, 01:16 AM
Very interesting article on the private prison system in the US.

http://corpwatch.org/article.php?id=867

US: America's Private Gulag
by Ken Silverstein, Prison Legal News
June 1st, 2000

What is the most profitable industry in America? Weapons, oil and computer technology all offer high rates of return, but there is probably no sector of the economy so abloom with money as the privately run prison industry.

Consider the growth of the Corrections Corporation of America, the industry leader whose stock price has climbed from $8 a share in 1992 to about $30 today and whose revenue rose by 81 per cent in 1995 alone. Investors in Wackenhut Corrections Corp. have enjoyed an average return of 18 per cent during the past five years and the company is rated by Forbes as one of the top 200 small businesses in the country. At Esmor, another big private prison contractor, revenues have soared from $4.6 million in 1990 to more than $25 million in 1995.

Ten years ago there were just five privately-run prisons in the country, housing a population of 2,000. Today nearly a score of private firms run more than 100 prisons with about 62,000 beds. That's still less than five per cent of the total market but the industry is expanding fast, with the number of private prison beds expected to grow to 360,000 during the next decade.

The exhilaration among leaders and observers of the private prison sector was cheerfully summed up by a headline in USA Today: "Everybody's doin' the jailhouse stock". An equally upbeat mood imbued a conference on private prisons held last December at the Four Seasons Resort in Dallas. The brochure for the conference, organized by the World Research Group, a New York-based investment firm, called the corporate takeover of correctional facilities the "newest trend in the area of privatizing previously government-run programs... While arrests and convictions are steadily on the rise, profits are to be made -- profits from crime. Get in on the ground floor of this booming industry now!"

A hundred years ago private prisons were a familiar feature of American life, with disastrous consequences. Prisoners were farmed out as slave labor. They were routinely beaten and abused, fed slop and kept in horribly overcrowded cells. Conditions were so wretched that by the end of the nineteenth century private prisons were outlawed in most states.

During the past decade, private prisons have made a comeback. Already 28 states have passed legislation making it legal for private contractors to run correctional facilities and many more states are expected to follow suit.

The reasons for the rapid expansion include the 1990's free-market ideological fervor, large budget deficits for the federal and state governments and the discovery and creation of vast new reserves of "raw materials" -- prisoners. The rate for most serious crimes has been dropping or stagnant for the past 15 years, but during the same period severe repeat offender provisions and a racist "get-tough" policy on drugs have helped push the US prison population up from 300,000 to around 1.5 million during the same period. This has produced a corresponding boom in prison construction and costs, with the federal government's annual expenditures in the area, now $17 billion. In California, passage of the infamous "three strikes" bill will result in the construction of an additional 20 prisons during the next few years.

The private prison business is most entrenched at the state level but is expanding into the federal prison system as well. Last year Attorney General Janet Reno announced that five of seven new federal prisons being built will be run by the private sector. Almost all of the prisons run by private firms are low or medium security, but the companies are trying to break into the high-security field. They have also begun taking charge of management at INS detention centers, boot camps for juvenile offenders and substance abuse programs.

The Players

Roughly half of the industry is controlled by the Nashville-based Corrections Corporation of America, which runs 46 penal institutions in 11 states. It took ten years for the company to reach 10,000 beds; it is now growing by that same number every year.

CCA's chief competitor is Wackenhut, which was founded in 1954 by George Wackenhut, a former FBI official. Over the years its board and staff have included such veterans of the US national security state as Frank Carlucci, Bobby Ray Inman and William Casey, as well as Jorge Mas Canosa, leader of the fanatic Cuban American National Foundation. The company also provides security services to private corporations. It has provided strikebreakers at the Pittston mine strike in Kentucky, hired unlicensed investigators to ferret out whistle blowers at Alyeska, the company that controls the Alaskan Oil pipeline, and beaten anti-nuclear demonstrators at facilities it guards for the Department of Energy.

Esmor, the number three firm in the field, was founded only a few years ago and already operates ten corrections or detention facilities. The company's board includes William Barrett, a director of Frederick's of Hollywood, and company CEO James Slattery, whose previous experience was investing in and managing hotels.

US companies also have been expanding abroad. The big three have facilities in Australia, England and Puerto Rico and are now looking at opportunities in Europe, Canada, Brazil, Mexico and China.

Greasing the Wheels of Power to Keep Jails Full

To be profitable, private prison firms must ensure that prisons are not only built but also filled. Industry experts say a 90-95 per cent capacity rate is needed to guarantee the hefty rates of return needed to lure investors. Prudential Securities issued a wildly bullish report on CCA a few years ago but cautioned, "It takes time to bring inmate population levels up to where they cover costs. Low occupancy is a drag on profits." Still, said the report, company earnings would be strong if CCA succeeded in ramp(ing) up population levels in its new facilities at an acceptable rate".

"(There is a) basic philosophical problem when you begin turning over administration of prisons to people who have an interest in keeping people locked up" notes Jenni Gainsborough of the ACLU's National Prison Project.

Private prison companies have also begun to push, even if discreetly, for the type of get-tough policies needed to ensure their continued growth. All the major firms in the field have hired big-time lobbyists. When it was seeking a contract to run a halfway house in New York City, Esmor hired a onetime aide to State Representative Edolphus Towns to lobby on its behalf. The aide succeeded in winning the contract and also the vote of his former boss, who had been an opponent of the project. In 1995, Wackenhut Chairman Tim Cole testified before the Senate Judiciary Committee to urge support for amendments to the Violent Crime Control Act -- which subsequently passed -- that authorized the expenditure of $10 billion to construct and repair state prisons.

CCA has been especially adept at expansion via political payoffs. The first prison the company managed was the Silverdale Workhouse in Hamilton County, Tennessee. After commissioner Bob Long voted to accept CCA's bid for the project, the company awarded Long's pest control firm a lucrative contract. When Long decided the time was right to quit public life, CCA hired him to lobby on its behalf. CCA has been a major financial supporter of Lamar Alexander, the former Tennessee governor and failed presidential candidate. In one of a number of sweetheart deals, Lamar's wife, Honey Alexander, made more than $130,000 on a $5,000 investment in CCA. Tennessee Governor Ned McWherter is another CCA stockholder and is quoted in the company's 1995 annual report as saying that "the federal government would be well served to privatize all of their corrections."

In another ominous development, the revolving door between the public and private sector has led to the type of company boards that are typical of those found in the military-industrial complex. CCA co-founders were T. Don Hutto, an ex-corrections commissioner in Virginia, and Tom Beasley, a former chairman of the Tennessee Republican Party. A top company official is Michael Quinlan, once director of the Federal Bureau of Prisons. The board of Wackenhut is graced by a former Marine Corps commander, two retired Air Force generals and a former under secretary of the Air Force, as well as James Thompson, ex-governer of Illinois, Stuart Gerson, a former assistant US attorney general and Richard Staley, who previously worked with the INS.

Leaner and Meaner?

The companies that dominate the private prison business claim that they offer the taxpayers a bargain because they operate far more cheaply than do state firms. As one industry report put it, "CEOs of privatized companies... are leaner and more motivated than their public-sector counterparts."

Because they are private firms that answer to shareholders, prison companies have been predictably vigorous in seeking ways to cut costs. In 1985, a private firm tried to site a prison on a toxic waste dump in Pennsylvania, which it had bought at the bargain rate of $1. Fortunately, that plan was rejected.

Many states pay private contractors a per diem rate, as low as $31 a prisoner in Texas. A federal investigation traced a 1994 riot at an Esmor immigration detention center to the company's having skimped on food, building repairs and guard salaries. At an Esmor-run halfway house in Manhattan, inspectors turned up leaky plumbing, exposed electrical wires, vermin and inadequate food.

To rachet up profit margins, companies have cut corners on drug rehabilitation, counseling and literacy programs. In 1995, Wackenhut was investigated for diverting $700,000 intended for drug treatment programs at a Texas prison. In Florida the US Corrections Corporation was found to be in violation of a provision in its state contract that requires prisoners to be placed in meaningful work or educational assignments. The company had assigned 235 prisoners as dorm orderlies when no more than 48 were needed and enrollment in education programs was well below what the contract called for. Such incidents led a prisoner at a CCA facility in Tennessee to conclude, "There is something inherently sinister about making money from the incarceration of prisoners, and in putting CCA's bottom line (money) before society's bottom line (rehabilitation)."

The companies try to cut costs by offering less training and pay to staff. Almost all workers at state prisons get union-scale pay but salaries for private prison guards range from about $7 to $10 per hour. Of course the companies are anti-union. When workers attempted to organize at Tennessee's South Central prison, CCA sent officials down from Nashville to quash the effort.

Poor pay and work conditions have led to huge turnover rates at private prisons. A report by the Florida auditor's office found that turnover at the Gadsden Correctional Facility for women, run by the US Corrections Corporation, was ten times the rate at state prisons. Minutes from an administrative meeting at a CCA prison in Tennessee have the "chief" recorded as saying, "We all know that we have lots of new staff and are constantly in the training mode... Many employees (are) totally lost and have never worked in corrections."

Private companies also try to nickel and dime prisoners in the effort to boost revenue. "Canteen prices are outrageous," wrote a prisoner at the Gadsden facility in Florida. "(We) pay more for a pack of cigarettes than in the free world." Neither do private firms provide prisoners with soap, toothpaste, toothbrushes or writing paper. One female prisoner at a CCA prison in New Mexico said: "The state gives five free postage paid envelopes per month to prisoners, nothing at CCA. State provides new coats, jeans, shirts, and underwear and replaces them as needed. CCA rarely buys new clothing and inmates are often issued tattered and stained clothing. Same goes of linens. Also ration toilet paper and paper towels. If you run out, too bad -- 3 rolls every two weeks."

Cashing in on Crime

In addition to the companies that directly manage America's prisons, many other firms are getting a piece of the private prison action. American Express has invested millions of dollars in private prison construction in Oklahoma and General Electric has helped finance construction in Tennessee. Goldman Sachs & Co., Merrill Lynch, Smith Barney, among other Wall Street firms, have made huge sums by underwriting prison construction with the sale of tax exempt bonds, this now a thriving $2.3 billion industry.

Weapons manufacturers see both public and private prisons as a new outlet for "defense" technology, such as electronic bracelets and stun guns. Private transport companies have lucrative contracts to move prisoners within and across state lines; health care companies supply jails with doctors and nurses; food service firms provide prisoners with meals. High-tech firms are also moving into the field; the Que-Tel Corp. hopes for vigorous sales of its new system whereby prisoners are bar coded and guards carry scanners to monitor their movements. Phone companies such as AT&T chase after the enormously lucrative prison business.

About three-quarters of new admissions to American jails and prisons are now African-American and Hispanic men. This trend, combined with an increasingly privatized and profitable prison system run largely by whites, makes for what Jerome Miller, a former youth corrections officer in Pennsylvania and Massachusetts, calls the emerging Gulag State.

Miller predicts that the Gulag State will be in place within 15 years. He expects three to five million people to be behind bars, including an absolute majority of African-American men. It's comparable, he says, to the post-Civil War period, when authorities came to view the prison system as a cheaper, more efficient substitute for slavery. Of the state's current approach to crime and law enforcement, Miller says, "The race card has changed the whole playing field. Because the prison system doesn't affect a significant percentage of young white men we'll increasingly see prisoners treated as commodities. For now the situation is a bit more benign than it was back in the nineteenth century but I'm not sure it will stay that way for long."

Chrissy
02-13-2012, 01:34 AM
j. Adams, re: your post on prison privatization: :deadhorse

What I'd like to do is come up with some other examples that don't include people who are under the control of the institution in question (ie, people to whom there is a fiduciary duty). But, I also really want to watch the Grammy's Red Carpet Live. So... maybe tommorrow?

Cheers!

P.S. Try to avoid getting this thread locked while I'm gone, k? ;) (I'm joking)

j. Adams
02-13-2012, 01:36 AM
This thread isn't as polarizing as that other thread. :)

I actually have to do some background reading on privatization as I'm not really up to speed on it.

Yorkist
02-13-2012, 07:17 AM
BAH! I wrote a long post and AW ate it.

Anyway, Chrissy, we obviously agree about private prisons. I used your post as a jumping off point, really, more than to argue/pick on you specifically. To respond to a couple of points in your post:

The relationship of a government auditor to a government employee is just like that of CPA's. Sure, we tend to become buds, but that doesn't mean we wouldn't expose crimes that we discovered, which is our whole freaking duty
. (I mean, just think about how many auditors have put their asses on the line for NO benefit to them - like that whistleblower CPA who worked at WorldCom. I'm pretty sure that, not only was she sacrificing her own job, but her life was actually threatened.) Auditors have to remain skeptical or we're crap at our jobs. That's why, IMO, it's important to keep good/evil precepts out of fraud, and assume that anyone is capable of it.

Also, government auditing is pretty boring. I'm trying to get into cost accounting or project management, but alas. Times are tough.

Re: government agencies; the EPA is also pretty damn efficient. I think Health and Human Services is, too. The worst government departments in terms of efficiency, I think, are the ones all snarled up in each other - FEMA + Homeland Security, for example, was a huge failure.

Re: state versus federal taxes; unless you live in a very rich county in a very rich state, you'd probably be very surprised to see how much of your state and local budget are derived from federal money. Check the financial statements for your locale (keyword: "grant"), especially the road and public works funds.

Re: accountability. I'd still like to hear examples of "improving accountability" that wouldn't just be a buttload of paperwork that no one will read. Just like in the previous example - we have public financial statements for almost all units of government, and I seriously doubt more than a handful of people who are not CPA's or government employees directly involved with their production or review have ever even glanced at them. Or even know that they exist.


What I'd like to do is come up with some other examples that don't include people who are under the control of the institution in question (ie, people to whom there is a fiduciary duty).

*cough* Enron *cough*

Dommo
02-13-2012, 11:14 AM
As someone who manages projects for the government, the system is screwed, mostly because of congress and specific earmarks and the like.

Let me give an example.

We're required to give priority on many of our projects to disabled, veteran, minority, HUBzone, woman-owned, etc. businesses. Now, I understand the reason, but the problem, is that many of these businesses basically just have the "disabled, veteran, female" woman as a figurehead so they get first dibs on contracts. Because this VASTLY reduces competition, our prices are considerably higher than if the jobs were competed on a totally open competition (I understand some limits, with respect to business size, but I don't see why we prioritize in the way we are). With the number disabled, minority, female owned, veteran businesses we've got in Oklahoma, I really start to wonder.

So all you female AWer's, especially those of you with military service. You need to get off your asses, and start up some construction/supply companies and start serving the government lightbulbs at 50% mark up.

blacbird
02-13-2012, 11:54 AM
Something like 90% of business start-ups fail within the first two years.

caw

Chrissy
02-13-2012, 04:41 PM
BAH! I wrote a long post and AW ate it.

I hate it when that happens. Before I post anything, I highlight it, right click, and select copy. That way if you need to you can paste it in a new post box.


The relationship of a government auditor to a government employee is just like that of CPA's. Sure, we tend to become buds, but that doesn't mean we wouldn't expose crimes that we discovered, which is our whole freaking duty. (I mean, just think about how many auditors have put their asses on the line for NO benefit to them - like that whistleblower CPA who worked at WorldCom. I'm pretty sure that, not only was she sacrificing her own job, but her life was actually threatened.) Auditors have to remain skeptical or we're crap at our jobs. That's why, IMO, it's important to keep good/evil precepts out of fraud, and assume that anyone is capable of it.

Just to confirm, I don't think it's about good or evil either. I think the only reason the debate has gone there is because there's a conception that the free market has that "almighty dollar" mentality, which opponents argue (though no one's come out and use the word) is the equivalent of greed, and therefore has no place in what people perceive as the altruistic government.

Interesting re: government auditing. I wouldn't say CPAs are buddies with the companies they audit, at least public/non-internal audits. CPAs have a duty to the shareholders, creditors, and any other users of the financial statements, and if they fail *cough-Arthur Anderson-cough* they are done. Over. Finito.

Whereas... to whom do government auditors have a duty? The taxpayers, I suppose, but I don't see government auditors in that same position as the public accountant. The subject is somewhat of a derail, but I like the topic.

I want to emphasize that I'm not saying government is more capable of fraud. Really, I'm still on the topic of efficiency vs. waste, not outright theivery. What is the motivation to decrease waste, if it isn't profit (ie, free market?) I'm fully aware that I have a capitalist mindset, and I'm open to new information.

Re: state versus federal taxes; unless you live in a very rich county in a very rich state, you'd probably be very surprised to see how much of your state and local budget are derived from federal money. Check the financial statements for your locale (keyword: "grant"), especially the road and public works funds.

I wonder how much scrutiny goes into a given state's expenditures and efficiency when they are using federal funds? Maybe that's a natural check and balance right there (for the state, anyway).

Re: accountability. I'd still like to hear examples of "improving accountability" that wouldn't just be a buttload of paperwork that no one will read. Just like in the previous example - we have public financial statements for almost all units of government, and I seriously doubt more than a handful of people who are not CPA's or government employees directly involved with their production or review have ever even glanced at them. Or even know that they exist.

Check this out. Direct Democracy as a Safeguard to Public Spending. http://www.voxeu.org/index.php?q=node/7608

Chrissy
02-13-2012, 05:17 PM
As someone who manages projects for the government, the system is screwed, mostly because of congress and specific earmarks and the like.

Let me give an example.

We're required to give priority on many of our projects to disabled, veteran, minority, HUBzone, woman-owned, etc. businesses. Now, I understand the reason, but the problem, is that many of these businesses basically just have the "disabled, veteran, female" woman as a figurehead so they get first dibs on contracts. Because this VASTLY reduces competition, our prices are considerably higher than if the jobs were competed on a totally open competition (I understand some limits, with respect to business size, but I don't see why we prioritize in the way we are). With the number disabled, minority, female owned, veteran businesses we've got in Oklahoma, I really start to wonder.

So all you female AWer's, especially those of you with military service. You need to get off your asses, and start up some construction/supply companies and start serving the government lightbulbs at 50% mark up.

Ha. Right? My take on this is that congress (or whoever) has implemented (yet another) law, in this case, to try to compensate for lack of equal opportunity in the past or to give more opportunities to minorities, etc (a very admirable goal, to be sure) and what has happened because of it? "Enterprising" indivduals have found ways around it. Without going all moral on said enterprising individuals, what has the government really accomplished? Apparently nothing. But they did spend quite a bit of cash. Ie., waste.

Xelebes
02-13-2012, 09:15 PM
Yep, it's a question of admirable thinking with a lack of foresight that cause a lot of the inefficiencies - a problem because admirable thinking is more likely to get votes than it does with good foresight. A runner always looking back at the crowd.

Yorkist
02-13-2012, 09:40 PM
Interesting re: government auditing. I wouldn't say CPAs are buddies with the companies they audit, at least public/non-internal audits.

I meant, CPA's are buddies with each other. CPA's stick together, right? Unless one of them is freaking stealing. No one's better at fraud than a CPA, so they have to police each other, even though they're friends. That's why we have peer reviews.

CPAs have a duty to the shareholders, creditors, and any other users of the financial statements, and if they fail *cough-Arthur Anderson-cough* they are done. Over. Finito.

Whereas... to whom do government auditors have a duty? The taxpayers, I suppose, but I don't see government auditors in that same position as the public accountant. The subject is somewhat of a derail, but I like the topic. CPA's, first and foremost, have a duty to the public, as you know. Government auditors, who are by and large CPA's (other than recent grads at the bottom of the totem pole, who are supervised pretty closely), also have a duty to the public. Same thing - that's what differentiates a profession from a vocation. The only difference is that one entity has to worry about losing clients, and the other one doesn't. Governmental audit agencies don't lose clients to opinion shopping.

Each CPA is individually accountable - they can be ruined just like Arthur Andersen - and it's not like there's going to be an agency-wide conspiracy. (Also, audit agencies, just like internal audit departments, are independent. It's not like the governor can call in and have someone fired.) The standards of the profession come before everything else.

I feel like you're only missing this because you've just been doing tax and business services for so long, and if you were in an auditing mindset it would be perfectly clear.

In my state, most government audits are done by small public accounting firms or individual CPA's, but the state auditor's office rotationally audits each government unit every five years or so. For instance, if my firm audits county X for five years, I have to give up the sixth year for the state to do its audit. Then I can resume county X on the seventh year. That policy is in place for the same exact reason that CPA firms can now only audit public companies for a maximum of five consecutive years, thanks to Sarbanes-Oxley.

Moving on now, as we are totally boring everyone else...

I wonder how much scrutiny goes into a given state's expenditures and efficiency when they are using federal funds? Maybe that's a natural check and balance right there (for the state, anyway).For states, it's probably all good because it's just a fund transfer. For some governments - I'm thinking of universities here - that is a major frakking problem. In fact, universities are probably the most wasteful governments, on average, out there. And it's not because of professors' salaries or tenure or anything that's in vogue in the current war against higher ed. I could write a book about that but it's OT, alas.

Check this out. Direct Democracy as a Safeguard to Public Spending. http://www.voxeu.org/index.php?q=node/7608Wouldn't we have to completely restructure our government and change our Constitution to do this? I like the idea, but I suspect that the U.S. public just isn't smart enough.

Like, I remember all this post-Katrina - or was it post-tsunami? - controversy about the American Red Cross because it was reported that most donated funds went to operational costs, rather than goods to be distributed to disaster victims. Because, you know, food and emergency medical supplies cost so much more than the ability to travel to a place without infrastructure before the military (who can build an airport in the desert in less than eight hours) is even able to. I remember even hearing people say that it was wrong that the employees of the American Red Cross were paid, that they should work out of the goodness of their hearts. This is how stupid people are.

I used to work for a department of a state government agency whose primary functions were to (1) ensure that public water supplies and the streams that fed them weren't contaminated with sewage or other noxious chemicals, and (2) ensure that seafood in our primary fishing areas was safe for public consumption (fish absorb environmental toxins like nobody's business - in certain parts of the country, freshwater fish tissue has *DDT* in it, which hasn't been used since, oh, the late 70's), which was important not just for the health of our citizens - since where I hail from, the average person probably eats fish at least 2x a week - but also because seafood was our second greatest export. I just shudder to think what could happen to that agency if public referendum determined whether or not they should exist. My old state is very conservative and has very low population density (i.e., pollution is not a noticeable problem for the layperson), so they tend to be all, "environment, whut?"

Ha. Right? My take on this is that congress (or whoever) has implemented (yet another) law, in this case, to try to compensate for lack of equal opportunity in the past or to give more opportunities to minorities, etc (a very admirable goal, to be sure) and what has happened because of it? "Enterprising" indivduals have found ways around it. Without going all moral on said enterprising individuals, what has the government really accomplished? Apparently nothing. But they did spend quite a bit of cash. Ie., waste.

While this is exactly the sort of financial consequences I was talking about - that would probably be foreseen by an intelligent, non-attorney, but we have so few of those in Congress - some women, veterans, and minorities probably do benefit from this. My mother firmly believes that if it weren't for this policy, her own small public accounting firm (specializing in governmental audits, natch) would be shut out by the good ol' boy network. (I tend to believe that the same is true for the black CPA firms in my home state.) As it is, they - that is, the all-white, all-male, all former fraternity member firms - take the best and most convenient audits via connections. It's corruption, but what can ya do? Institutionalized sexism and racism may be over, but there's still a massive opportunity differential, except through government. I think that's worth a little sacrifice of efficiency, but mileage may vary.

This could potentially be somewhat curbed by changing it from a "woman or minority owned business" to a "woman or minority owned business with mostly women or minority employees," though.

Xelebes
02-13-2012, 10:28 PM
For states, it's probably all good because it's just a fund transfer. For some governments - I'm thinking of universities here - that is a major frakking problem. In fact, universities are probably the most wasteful governments, on average, out there. And it's not because of professors' salaries or tenure or anything that's in vogue in the current war against higher ed. I could write a book about that but it's OT, alas.

Just a taste?

I'm thinking it has to do with easy access to government backed loans that allows the administration to pad their salaries or to waste it on athletics?

Yorkist
02-14-2012, 12:35 AM
Just a taste?

I'm thinking it has to do with easy access to government backed loans that allows the administration to pad their salaries or to waste it on athletics?

You know, I started working on a post and it got really long because it's a pretty complex and multi-faceted problem, so whenever I get done I'll post a new thread about it.

But to answer your question, nope, not really. I mean, athletics may be a contributing factor (it's hard to tell, I am working on this right now actually), but in most schools, probably not so much. And it's definitely not administrative salaries, except maybe in the aggregate (due to too many administrators). Government-backed loans (as well as private loans that can't be discharged during bankruptcy) have helped allow the increase, but there are economic and cost components.

But as I have to run to the grocery store before I get snowed in, I shall make an epically long post about this later.

Xelebes
02-14-2012, 02:15 AM
You know, I started working on a post and it got really long because it's a pretty complex and multi-faceted problem, so whenever I get done I'll post a new thread about it.

But to answer your question, nope, not really. I mean, athletics may be a contributing factor (it's hard to tell, I am working on this right now actually), but in most schools, probably not so much. And it's definitely not administrative salaries, except maybe in the aggregate (due to too many administrators). Government-backed loans (as well as private loans that can't be discharged during bankruptcy) have helped allow the increase, but there are economic and cost components.

But as I have to run to the grocery store before I get snowed in, I shall make an epically long post about this later.

Maybe a new thread then.

Romantic Heretic
02-15-2012, 04:06 AM
An interesting article on why business people are bad at government. (http://www.addictinginfo.org/2012/02/12/9-reasons-why-business-people-are-terrible-at-governing/)

Thought of this thread the second I read the page.