What is the proper role of government?


By Patrick   Follow   Sat, 4 Feb 2012, 4:34pm   13,806 views   129 comments
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I was just listening to an NPR show discussing Ron Paul supporters who cheered at the idea of letting people without health insurance die.

One of the points that came up on the NPR show is that the Democrats do not have a coherent message on the proper role of government.

Republicans do have a coherent message. They want the law of karma to function: you should reap what you sow. You should not reap what other people sow. They love Aesop's fable of the ant and the grasshopper. The ant works hard, the grasshopper does not. Then winter comes and the grasshopper starves to death. Republicans want the grasshopper to starve, and that's why Ron Paul supporters cheered at the idea of letting someone die. They do not want the ant to be forced to share with the grasshopper, ever.

So government's role, in the Republican view, should be pretty much limited to protection of individual property -- but there is a very important and always unspoken addendum: no matter how that property was acquired.

The very rich absolutely love this idea of never having to share no matter how they got their money, and so rich Republicans generously fund campaigns which appeal to poor and racist Republicans who fear having to share with minorities.

Democrats, in contrast, want to "promote the general welfare" of the country, as is explicitly written into the constitution. Their assumption is that we are all in the same boat, and we have responsibilities to each other. But then it gets very hazy. Exactly what are these responsibilities to each other, and who is going to pay for them?

Democrats, just like Republicans, always and everywhere fail to distinguish between productive work and non-productive extraction of economic rents.

Rent does not just mean rent paid to a landlord. Interest is also the rent paid on borrowed money. The point is that "rent" here means money you get merely by being the owner of something, not from doing productive work. It means money that you could "earn" even if you were in a coma, taking it by law from people who actually did the work.

The difference is not always obvious. When you literally pay rent to a landlord, which is it? Is it reward for the landlord's productive work, or is the landlord just leeching off the tenant?

The answer is both. The construction and maintenance of the building is productive work, and should be rewarded with a certain amount of rent. But the payment of the rest of the rent for the use of the land is completely non-productive. No one created the land. The landlord merely uses his ownership title, without work, to extract money from productive people.

So back to the proper role of government. Should the ant have to feed the grasshopper in the winter?

To answer that, you need to ask one more question: Did the ant get his money from his own work, or from rents?

Money from his own work should belong to the ant. But money from rents should be heavily taxed and used to benefit the society the rent was extracted from. This is the idea behind Georgism.

Finally, back to health insurance. Should the person who refuses to buy health insurance be allowed to die? The answer is that non-productive rent income should be heavily taxed and used to fund universal critical care coverage for every citizen, like other countries already have. So there would be no people without critical-care coverage and the issue would not arise.

The ants would have no basis for complaint, because the health insurance money would not come from any productive work which they did themselves, and they themselves would be entitled to the same coverage.

So the role of government should be the protection of individual property acquired through productive work, and the promotion of the general welfare via revenue from taxes on non-productive rent-seeking.

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  1. FortWayne


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    50   8:50am Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    wthrfrk80 says

    But what about unearned, inhereted wealth? Do we really want a permanent aristocracy in this country?

    That has nothing to do with "don't subsidize a behavior". This is more of a tax question, different topic all together.

    We had a housing bubble because government started subsidizing house buying, they still do to much extend which is why that market is so fubar and will never get better. Same goes for education, healthcare.... government gets into it and they screw it up.

  2. ¥


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    51   9:07am Tue 7 Feb 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    wthrfrk80 says

    But doesn't that make all farmers parasites, by definition? And the same would be true for all resource extraction (wood, coal, oil, metals)?

    Farmers labor to produce wealth (food) from the inputs. That labor is not parasitical at all.

    To the extent they strip nutrients from the soil they would owe a severance tax on the land. And to the extent they are enjoying income from land itself they might be subject to a "share the wealth" income tax if I were Dictator (since we all don't have the opportunity to own enough land to live off of, 400 million acres of cropland / 100 million households is only 4 acres per household).

    Funny how the descendants sitting on 640+ acres of good land given away by the government 100+ years ago are now the biggest anti-government conservatives around.

    I would be too, for Barry Goldwater wasn't always wrong about the stuff he was saying . . .

    As for natural resources, the secret socialists up in Alaska have the right idea with the royalties. As do the Norwegians, who have aggressively socialized their oil sector and now enjoy $100,000 PER CAPITA set aside in global equity funds, earmarked to cover old-age pensions.

  3. PersainCAT


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    52   9:08am Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Patrick says

    And I think both increased city density and decreased rural density are inevitable as we run out of oil anyway.

    whats the justification for this? i would tend to think the exact opposite

  4. ¥


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    53   9:11am Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    PersainCAT says

    whats the justification for this? i would tend to think the exact opposite

    $20 gas would force people to move closer to work.

  5. Patrick


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    54   9:29am Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    FortWayne says

    Same goes for education, healthcare.... government gets into it and they screw it up.

    Not always. Would you want to completely eliminate public elementary schools? Without them, the poor would have no schools at all. And that would harm us all in the long run. Our system of a public education option with private competition is pretty good.

    Where I really agree with you is that the government should not subsidize payments for anything. That just makes prices go up because it increases demand and not supply.

    So if the government just gave every family $10,000 to pay for private schools, what would happen? The price of private school would go up by $10,000. The rich students would still go to the same rich schools (but their schools would get extra money), and the poor would be right back where they were simply handing over their tuition voucher. Much better to simply increase the supply by having public schools with no tuition cost.

    Total "free marketism" is a religion. The reality is that markets sometimes fail:

    http://en.wikipedia.org/wiki/Market_failure

  6. Dan8267


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    55   10:51am Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Kevin says

    "Rent seeking" is usually a pejorative term used to describe someone hoping to extract money from people when they haven't actually provided value (good modern example: patent trolls).

    Agreed.

  7. PersainCAT


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    56   11:33am Tue 7 Feb 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Bellingham Bill says

    $20 gas would force people to move closer to work.

    $20 would shut down the ability to ship food from rural areas into the city too. It takes ALOT of energy/gas to run a city like new york city. I'd assume that $20 gas would see a mass exodus from the city and into the small town were food/shelter and clothing can all be created locally. I'd think that prohibitively expense gas would create a shift back towards an agrarian society no?

  8. Patrick


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    57   11:55am Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    There are some already-existing natural experiments. Gas in Europe is typically more than twice what is costs here.

    I think they do have denser cities, but the countryside is not depopulated either.

  9. FortWayne


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    58   11:56am Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Patrick says

    Not always. Would you want to completely eliminate public elementary schools?...

    No, I think we are saying the same thing.

    I do think they are screwing up education big time. College education is expensive because of huge amount of checks government is giving out. Lower education is screwed up because government is paying unions for attendance, not actual education. CA schools are a huge mess, mismanaged, widespread fraud. Way too many officials in the system just look the other way, and they will keep on doing so until the system collapses out of sheer greed and corruption.

    There is a lot of room for improvement.

  10. ¥


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    59   12:10pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Patrick says

    So if the government just gave every family $10,000 to pay for private schools, what would happen? The price of private school would go up by $10,000.

    The Swedes solved this problem by saying if you take a subsidized student, all you can get from them is the subsidy, not any more.

    I think the average IQ of the nordic people is higher than us. Might explain their lack of christianity . . .

    A people get the government they deserve. Perhaps the American people are just too stupid to get good government.

  11. ¥


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    60   12:11pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    PersainCAT says

    I'd think that prohibitively expense gas would create a shift back towards an agrarian society no?

    No, because there is not really any place that needs more ag labor. Well, we need migrant labor at harvest time for certain crops, but that's not what you're talking about.

    Food is only 1% of GDP. It might get more expensive as gasoline goes up, but other areas of the economy can and will deflate to compensate eventually.

  12. uomo_senza_nome


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    61   12:13pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Bellingham Bill says

    Perhaps the American people are just too stupid to get good government.

    I would replace 'Perhaps' with 'Indeed'.

  13. uomo_senza_nome


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    62   12:19pm Tue 7 Feb 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Vicente says

    Gold does not "impose the required honesty" it just sits there on a table, you could be a genocidal Austrian and it would not object

    The point is that gold is a barometer that can indicate clearly if the government is taking part in chicanery. They are doing it now, distorting all kinds of data. Do you really perceive the chicanery directly today?

    Governments Lie, Bankers Lie, Auditors Lie, Gold Tells the Truth - Rees Morg.

  14. Dan8267


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    63   12:37pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    FortWayne says

    College education is expensive because of huge amount of checks government is giving out. Lower education is screwed up because government is paying unions for attendance, not actual education.

    True on both counts.

    As for higher education, I say we should create a single, large, national, virtual university. There is no need for a campus or for physical books. Do a complete online learning experience. Pay an author $1 million to write the best damn Calculus, European History, Economics 101, Quantum Mechanics 407, etc. book. Peer review the crap out of the learning materials and come up with standardize course curriculums.

    Sure the initial set up would be expensive, but the average cost per bachelor degree would be on the order of $100 within ten years. Imagine being able to get any bachelors, masters, or PhD degree for just $100 plus the time and effort to do the work.

    In the information age, the transfer of knowledge should be dirt cheap.

  15. Dan8267


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    64   12:39pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    uomo_senza_nome says

    Bellingham Bill says

    Perhaps the American people are just too stupid to get good government.

    I would replace 'Perhaps' with 'Indeed'.

    Do we really even need to debate this?

  16. freak80


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    65   1:14pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Dan8267 says

    In the information age, the transfer of knowledge should be dirt cheap

    Agree. The problem is, too many powerful, smart people in the universities would lose their paychecks.

  17. Dan8267


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    66   1:30pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    wthrfrk80 says

    Agree. The problem is, too many powerful, smart people in the universities would lose their paychecks.

    I'd rather pay them for production or research than teaching. Plus, professor salaries are only a small portion of the cost of education. Books, physical campus, profit taking by college, bank profit taking, etc. all adds up to considerable cost. We could keep the professors employed at the same rate in other areas and still save a lot of money.

    If you are teaching subject X and X is worth teaching, then subject X must have some useful value in industry Y. So simply work for industry Y.

    College should be about teaching useful skills and preparing the workforce. So there's no reason we shouldn't be able to retrain those professors for industry work or research.

  18. American in Japan


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    67   4:17pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    @Dan8267

    > Plus, professor salaries are only a small portion of the cost of education...

    And this has been a shrinking % in the whole pie (of expenses). In another thread it was indicated that one of the rapidy increasing parts of the expense universities face is for administrators' salaries.

    Not much else to add, other than excellent thread here.

  19. Patrick


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    68   4:48pm Tue 7 Feb 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Dan8267 says

    Pay an author $1 million to write the best damn Calculus, European History, Economics 101, Quantum Mechanics 407, etc. book. Peer review the crap out of the learning materials and come up with standardize course curriculums.

    I think some very fine textbooks could come out of the Wikipedia. Seriously. It already competes pretty well with the Encyclopedia Britannica.

    I myself have often wanted to correct textbooks when I found errors in them.

    So no need to even pay $1M for each textbook.

    I totally agree about standardized course curriculums. The undergrad material could and should be standard. Then you just study, take tests, and get your degree.

    Of course the highly paid university administrators are not going to like this one bit.

  20. Patrick


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    69   5:27pm Tue 7 Feb 2012   Share   Quote   Permalink   Like (1)   Dislike  

    Racist inflammatory comment about Obama personally crashing the economy has been deleted.

    I'm pissed at Obama for signing the NDAA and generally acting like a Republican, but the economy was clearly crashing during the Bush presidency.

  21. SiO2


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    70   6:51pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    The guys who say that renting is smarter than owning, and only fools own, also denigrate the landlords as parasites. Which is it, is an owner a fool or a rich parasite? How can one enjoy the carefree renter lifestyle without a landlord willing to buy the place and rent it out? If there a huge tax on owning land, then landlords won't want to own places to rent out.

  22. SiO2


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    71   6:52pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    having said that I agree that labor shouldn't be taxed at a higher rate than investment (via reduced cap gains or dividend tax).

  23. ¥


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    72   8:08pm Tue 7 Feb 2012   Share   Quote   Permalink   Like (1)   Dislike  

    SiO2 says

    The guys who say that renting is smarter than owning, and only fools own, also denigrate the landlords as parasites.

    ? I do the latter but not the former.

  24. Kevin


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    73   9:07pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Sorry, the argument that the value is in the land is bogus. Nobody is going to rent an empty lot.

    Now, if there's a monopoly on land, and nobody has the freedom to choose who to obtaining housing services from, we have a problem...but that does not appear to be a serious situation in the united states today.

    There are exactly zero resources which any human being created. The value is entirely in terms of converting those resources to usable goods:

    - Forests turn to lumber
    - Land turns to housing and other buildings, food, or transportation corridors
    - Underground turns to coal, iron, and other minerals

    Yes, natural resource ownership is a complicated subject, and the people who live in an area where the natural resource comes from should be fairly compensated for it (usually in the form of taxes on the resource's assessed value), but I still don't see any argument here as to how land ownership is any different from fishing, logging, or mining rights.

    If a person builds housing units and offers them for rent, they are providing an essential service. This is not predatory, evil, or even remotely inappropriate. To call it "parasitic" is downright absurd.

  25. woppa


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    74   10:20pm Tue 7 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    SiO2 says

    The guys who say that renting is smarter than owning, and only fools own, also denigrate the landlords as parasites. Which is it, is an owner a fool or a rich parasite? How can one enjoy the carefree renter lifestyle without a landlord willing to buy the place and rent it out? If there a huge tax on owning land, then landlords won't want to own places to rent out.

    Thank you my friend, I have been wondering this for a while now but I wanted to watch and see how many of them would go on saying two completely opposing opinions in the same breath practically.

  26. thunderlips11


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    75   5:48am Wed 8 Feb 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    Dan8267 says

    In the information age, the transfer of knowledge should be dirt cheap.

    Sadly, the big textbook publishers will make sure it's DoA.

  27. freak80


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    76   6:40am Wed 8 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    GameOver says

    Face it: although Obama did NOT cause this economic melt-down, he has done NOTHING OTHER than CONTRIBUTE TO IT. Hence, HE is JUST as responsible now, four years into the fact, as Bush was in creating it.

    There are plenty of reasons to dislike Obama. But, there's not really much he (or any president) can do to revive an economy that's suffering from the collapse of a debt-fueled bubble-based economy. After an artificial boom comes a disasterous "hangover" of debt repayment and liquidation of mis-allocated resources.

    To Obama's credit, he has not put forth big tax increases. There's a good case for raising the taxes on the "super-rich" like Warren Buffet. Even Buffet agrees. But Obama didn't do that. On economic issues, Obama isn't much different than a moderate Republican.

    But, I'm getting off topic.

  28. ¥


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    77   9:27am Wed 8 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Kevin says

    Sorry, the argument that the value is in the land is bogus. Nobody is going to rent an empty lot.

    Try building a 'income property' in Caliente, NV and see how much rent you can get.

    Do the same in Los Altos.

    If a person builds housing units and offers them for rent, they are providing an essential service.

    No they're not. "Essential services" can be identified by removing the agent from the picture and seeing if anything changes, wealth-wise.

    A person who builds apartments could easily have built condos instead.

    Don't even get me started on the specuvestor leechfucks buying up SFHs now and in the recent past.

    There is some friction in home purchasing but this is due to market failure and the rife rent-seeking going on at all levels.

    This is not predatory, evil, or even remotely inappropriate. To call it "parasitic" is downright absurd.

    You're just talking your book now. The wealth transfer from poor to wealthy via ground rents is immense in this country -- hundreds of billions of dollars per year.

    You can fulminate and string together all the protests you want, but that's the fact, jack.

    It doesn't have to be this way, but we live in a fallen world, one that is getting worse, largely thanks to all the rent-seeking going on -- in land, health care, energy.

    This shit is obvious, not "absurd", and I've got the hundreds of economists and moral philosophers behind me to demonstrate it.

    One of the better arguments I've read is here:

    http://www.prosper.org.au/2007/11/01/letter-to-gorbachev/

  29. uomo_senza_nome


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    78   11:18am Wed 8 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Bellingham Bill says

    Try building a 'income property' in Caliente, NV and see how much rent you can get.

    Do the same in Los Altos.

    That one simple example should make Kevin's point moot about land value. Land value stems from the site where it is located which will be desirable for people to live/work/play etc.

    Bellingham Bill says

    There is some friction in home purchasing but this is due to market failure and the rife rent-seeking going on at all levels.

    The whole system is perversely biased towards more rent-seeking.

    http://www.macroresilience.com/2011/11/07/rent-seeking-the-progressive-agenda-and-cash-transfers/

  30. ¥


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    79   3:32pm Wed 8 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    uomo_senza_nome says

    The whole system is perversely biased towards more rent-seeking.

    good stuff:

    "In a nutshell, my argument is that rent-extraction can avoid these limits by aligning itself to the progressive agenda – the very programs that purport to help the masses become the source of rents for the classes."

    Section 8 rentals is a prime -- canonical, even -- example of that. This subsidy is pushing $20B/yr, or $15/month per household in the US. Small enough to "fly under the radar" as the guy said, but man is it fucked up.

  31. ¥


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    80   4:00pm Wed 8 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    ah, I see the argument loses the plot here:

    "But there is another option – complex programs with egalitarian aims should be replaced with direct cash transfers wherever feasible. "

    This won't work, either, since that just powers the consumer to pay the rents.

    The only way to break the rent-seeking is to socialize the service such that supply simply overpowers demand.

    For housing this would mean keep building housing until every area is as over-supplied as Las Vegas is currently.

    For health care this means something like the NHS on steroids (perhaps Norway, Sweden, or Germany's system???).

    For energy, this means severance taxes on production, to capture the rents at the source.

  32. CL


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    81   5:59pm Wed 8 Feb 2012   Share   Quote   Permalink   Like (1)   Dislike (1)  

    FortWayne says

    College education is expensive because of huge amount of checks government is giving out.

    Huh? Tuition has increased exponentially over the last several years. Was there an increase in government checks I don't know about, or was that a result of financing?

  33. TMAC54


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    82   7:24am Thu 9 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    GOOD people elect GOVERNMENT to protect them from BAD people.
    We have become so Complacent, gubmint is joining ranks with the dark side.

    http://www.washingtonpost.com/business/economy/26-billion-settlement-announced-on-foreclosure-mortgage-fraud/2012/02/09/gIQABVJN1Q_story.html

    The GOOD people will each be given about one months mortgage payment and banks will be given immunity for largest fraud case in history.

  34. Patrick


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    83   9:33am Thu 9 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    TMAC54 says

    The GOOD people will each be given about one months mortgage payment and banks will be given immunity for largest fraud case in history.

    We will get only the government that we demand.

    So we have to unify and demand good government. How can we most effectively do that? The left-right split is used very effectively to divide us and prevent us from challenging the corporate control of government.

  35. CL


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    84   9:44am Thu 9 Feb 2012   Share   Quote   Permalink   Like   Dislike (1)  

    Patrick says

    So we have to unify and demand good government. How can we most effectively do that? The left-right split is used very effectively to divide us and prevent us from challenging the corporate control of government.

    Direct democracy instead of representative? I'm not sure it is a net plus, but it seems our system guarantees that, once elected, the Representatives can vote different than their campaign promises, make sweetheart deals for contributors, feather their own nests and run for re-election. Often times, they'll know they will be the winner next time too, unless they are in a district that is evenly split.

  36. Patrick


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    85   9:51am Thu 9 Feb 2012   Share   Quote   Permalink   Like (1)   Dislike  

    I love the idea of direct democracy. We would then have no one to blame but ourselves, directly.

    I'm sure the idea of rule by the 100% is horrifying to the 1%.

    But also, when I float the idea, I often get the reaction "OMG, you mean let just anyone vote directly on laws? Like the people I'm in line with at the DMV? No way!"

    So there is also a general mistrust that the 100% is smart enough to do the right thing.

  37. freak80


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    86   11:04am Thu 9 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    So there is also a general mistrust that the 100% is smart enough to do the right thing.

    Yep. And the fact that direct democracy is just two wolves and a sheep voting on what to have for dinner.

  38. CL


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    87   11:28am Thu 9 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    I think ballot initiatives show us another facet of Direct democracy. That said, I don't see a way out as long as the Pols need money to fuel reelection, and they know that you'll decide you're better off with them, despite what they don't do, than you are with their opponent, based on what they MIGHT do.

  39. FortWayne


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    88   3:39pm Thu 9 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    Patrick says

    I love the idea of direct democracy. We would then have no one to blame but ourselves, directly.

    I'm sure the idea of rule by the 100% is horrifying to the 1%.

    But also, when I float the idea, I often get the reaction "OMG, you mean let just anyone vote directly on laws? Like the people I'm in line with at the DMV? No way!"

    So there is also a general mistrust that the 100% is smart enough to do the right thing.

    How will you stop the 51% from voting in themselves money from the other 49%?

    I think our system now is flawed because of the big government, but giving everyone a vote might just make the bad system a lot worse making everyone equally poor instead. Such a society would not progress at all.

  40. Patrick


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    89   4:25pm Thu 9 Feb 2012   Share   Quote   Permalink   Like   Dislike  

    FortWayne says

    How will you stop the 51% from voting in themselves money from the other 49%?

    This is America! The rich are beloved as examples of virtue for all humanity and the poor blame only themselves for what the rich manage to take from them. So that's not the problem.

    The problem is that we currently have the 1% voting themselves money from the 99%. BIG TIME. Your taxes go to Wall Street bonuses, the Federal Reserve prints up money to buy bad bonds from the 1%, and endless layers of legislation guarantee that all profits are privatized while all losses are socialized.

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