Skin in the game: Stake in outcome crucial for wise governmental decisions

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It is universally recognized that enterprises unencumbered by government regulations, and administered by individuals with their own fortunes at risk, make wiser decisions, more efficient allocations of resources and incur less risk than government decision makers.

Critics immediately pounce on this concept by pointing to the recent housing mortgage-market scandal that involved billions of dollars of bad-mortgage losses made by private financial institutions. This argument must constitute the biggest red herring of recent political history, because these organizations were subject to extreme regulatory pressure to make weak, dubious and bad loans. They were not free to pursue their own objectives.

AND GOVERNMENT continues to adhere to this odious practice by not only compelling such loans, but adding to the regulations
that mandate such practices through the unsound Dodd-Frank Act.

Put bluntly, we have a socialist, authoritarian government. To satisfy the definition of socialism, it is not necessary that resources be owned by the government; government control of private resources through growing government programs does the trick as well. And this insidious process has expanded in our nation like an unfettered malignancy. Indeed, we share a hospice state.

We can slow the demise of the state and enjoy the threads of personal freedom that remain. One way is through understanding the dimensions of this unfortunate transformation. This stranglehold of unchecked control has been attained through a century of unbelievable growth in regulations, both judicially and legislatively inspired. Making the populace aware of this atrocity is the first step in bringing this action to a halt, or even a rollback.

PRIVATE INVESTMENT (new equipment and machinery, working capital) plays a crucial role in the growth of gross domestic product and employment in a competitive, free-market economy. Capital investors provide the dollars for investment – the skin in the game. To enhance private investment, rewards must be forthcoming to those who invest and risk their capital.

These rewards are facilitated by low taxes and minimal government regulations, and the absence of threats for future increases in these burdens. When this capital is combined with management and employee skills, the rewards are distributed to those with skin in the game.

It is extremely difficult for governments to duplicate this decision process. Here the decision to invest is, by its nature, a political one, with taxpayer interests being smothered by a complex process of special interests. The foregoing implies that for taxpayers to obtain the wisest and most efficient use of their resources to the greatest extent possible, all current government ventures should be privatized.

For empirical support of this approach, witness the recent Solyndra, Fisker Automotive and A123 Systems’ scandals, in which neither politicians nor bureaucratic managers of the Department of Energy had any skin in the game.

Our Founding Fathers were more aware of this incentive problem than they are given credit. Signers of the Declaration of Independence declared to “mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.” Citizens of limited resources could offer only their lives, while those with greater wealth could offer both. They invested their fortunes for the benefit of future generations.

THIS UNHERALDED act has been virtually lost among historians. For example, the eminent scholar Charles A. Beard, in his famous book An Economic Interpretation of the Constitution of the United States, suggests that the Constitution was drafted to serve the economic interests of the wealthy, overlooking the financial risks they had assumed through the pledging of their fortunes at the outset of the Revolutionary War. Beard’s interpretation, while of dubious merit, has been widely, though basically uncritically, accepted by generations of historians.

There is another aspect to the skin-in-the game story: All voters should pay some taxes to enable them to act as responsible citizens. It is difficult enough to expect voters to be concerned with the wisdom of government policies, both fiscal and regulatory. But when the voter has no skin in the game, what incentive is there for voter concern over frugal fiscal policies, wise expenditures and the added national debt that politicians selfishly impose on future generations?

IN SHORT, TO BE alarmed at how private resources, through taxation and borrowing, are spent, except when such expenditures benefit them. As expected, their voting records correlate almost perfectly with their unconcerned, irresponsible instincts.

People are aware of the current absurdity that allows about 48 percent of federal income tax filers to skip paying federal income taxes, and that virtually all such filers are eligible voters. Such citizens, along with kindred voters, currently have the voting strength
to increase public benefits for themselves, decrease benefits to others, increase taxes to current taxpayers and reduce, or even eliminate, taxes to other favored groups.

That is not all. Many people who are non-filers potentially are eligible voters with no skin in the game. Their uncounted number lies in murky statistics, but grows unchecked.

Passage of the 16th Amendment to the Constitution, which authorized the income tax, enabled the shift of political power to a non-income-taxpaying group, allied with similarly sympathetic taxpayers. This has occurred under the watchful eyes of vigilant politicians, political scientists, editorial writers and other scrupulous observers of the passing scene. Achieved through a majority vote, it represents another example of the “tyranny of the majority” through democratic rule.

Further supporting the need for voters to have some skin in the game, an early Congress provided for a nominal poll tax. However, it was quickly repealed. This was a big mistake. A voter tax with the crucial skin in the game would have gone a long way toward preventing the recent $4 trillion debt increase, which has been immorally and cowardly shifted to future generations.

THIS NON-SKIN-IN-THE-GAME voting bloc is allied with members of the academic, media, labor union and entertainment complex – a liberal left-wing group that provides articulate leadership. The no-skin voters have the power, with their kindred supporters, to grow their voting base, resulting in grave threats to our economic growth and well-being and personal freedoms.

This is the crux of a not-well-recognized dilemma: How do you slow, or halt, the expansion of the non-taxpaying group of voters?

(The writer is a professor emeritus of financial economics at the University of Georgia. He lives in Aiken, S.C.)

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Riverman1
83820
Points
Riverman1 03/16/14 - 06:04 am
8
0
Tocqueville warned us.

Tocqueville warned us.

corgimom
32304
Points
corgimom 03/16/14 - 07:16 am
2
5
"This is the crux of a

"This is the crux of a not-well-recognized dilemma: How do you slow, or halt, the expansion of the non-taxpaying group of voters?"

Well, when all the good-paying manufacturing jobs left the country, what did people expect to happen?

soapy_725
43676
Points
soapy_725 03/16/14 - 09:19 am
0
0
STATE government control without ownership is FASCISM.
Unpublished

STATE government control without ownership is FASCISM.

soapy_725
43676
Points
soapy_725 03/16/14 - 09:19 am
0
0
Is screaming socialism like "throw me in the briar patch"
Unpublished

Is screaming socialism like "throw me in the briar patch"

soapy_725
43676
Points
soapy_725 03/16/14 - 09:21 am
0
0
Totalitarian we are, Liberal or Fascist does not matter.
Unpublished

Totalitarian we are, Liberal or Fascist does not matter.

soapy_725
43676
Points
soapy_725 03/16/14 - 09:21 am
0
0
Hitler used both philosophies to gain absolute control.
Unpublished

Hitler used both philosophies to gain absolute control.

jimmymac
39556
Points
jimmymac 03/16/14 - 10:24 am
1
0
TAKERS
Unpublished

The takers in our country are quickly surpassing the makers. The Dems want to make millions of more takers citizens so they can make sure this calamity will happen. Illegals stream into this country and have overloaded our social services. Many are hard working decent people but millions are here for the "free" stuff. It's time to pull the plug on benefits to illegals and chronic takers.

localguy55
5477
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localguy55 03/16/14 - 11:28 am
7
0
Corgimom, please read the

Corgimom, please read the Letter again. Dr. William Beranek's synopsis of how our country has gotten to the sad state of affairs includes why jobs left. It is well written, However, I am afraid it might be too intellectual to be absorbed by some who, frankly, aren't that astute.

deestafford
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deestafford 03/16/14 - 12:18 pm
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The more I read of the good doctor...

The more I read of the good doctor the more I believe he is inching toward my pantheon of economic heroes Dr Thomas Sowell and Dr Walter E. Williams. Of course, no one reaches the exalted level of Milton Friedman.

He is so right about people not having skin in the game are voting on only what the government can provide them...I think the term is moocher.

Originally, the Founders wanted only property owners be allowed to vote because they had skin in the game. Wishfully thinking, there should be some criteria for a person to vote other than be breathing--which is not a criteria in places like Chicago and Philadelphia---but we will never reach anything like that because the left knows it would never win another election if voting was restricted to only informed people.

One minor correction I would make to the column is in the first sentence. I would insert "that it is universally recognized by people with a minimum of economic common sense that..." Other than that the column is flawless.

stuaby
3902
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stuaby 03/16/14 - 12:34 pm
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Beranek: "How do you slow, or

Beranek: "How do you slow, or halt, the expansion of the non-taxpaying group of voters?"

You don't. Any attempt to do so would be met with the usual shouting from the left's opinion makers. "It's racist!" "It's discriminatory!" "You're warring against women and the poor!" "It's unfair!" Etc. etc.

deestafford
27564
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deestafford 03/16/14 - 12:33 pm
5
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Those who have no skin in the game can be...

Those who have no skin in the game can be led around by the nose by the liberals promising them a ride on the wagon if only they vote for them so they can punish those who got wealthy on the backs of the "less fortunate".

Throughout history central planners have preyed on the misinformed and uninformed ignorants to put them into power. They have always believed that socialism, fascism, communism or any of their irk would work if only someone as "smart" as they were in charge.

There are those who don't like the free market because they don't like the way it efficiently allocates resources:
---They can't find a way to produce something people will buy so they will be poor.
---They are unskilled and even though they work hard they may not produce anything of value and thus will have a low standard of living.
---They may not like the way the market produces with regard to income distribution where a boxer can make millions and a poet is starving. The market responds to consumer values not the "good intentions'' of the "rulers".

The bottomline is the poorest market economy will be better off than the most planned economies. It's too bad that the ones who have no skin in the game can't see that even the poor have a higher standard of living in countries with a market economy than in countries with a planned economy.

I guess the Bible verse about the poor always being with us could be modified to include, "so will the ignorant and lazy" but I guess that would be redundant.

stuaby
3902
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stuaby 03/16/14 - 01:02 pm
5
0
Beranek: "Making the populace

Beranek: "Making the populace aware of this atrocity..." (the stranglehold of unchecked [state] control)

Another impossibility. So many people celebrate state control now the same way they celebrate Christmas. Look at the adoration of (and feral defense of) the ACA by leftists, for example.

They will never come around to seeing state control as an atrocity. Moreover, with the Left's near-monopoly in our educational system and popular media, I don't see a way out of this.

jimmymac
39556
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jimmymac 03/16/14 - 12:52 pm
0
0
STUABY
Unpublished

The takers in society want as much government control as possible. The last think they want is to have to be in control f their own life. They'd rather sin on the behinds watching Jerry Springer and making sure the next liberal Demorat gets elected.

stuaby
3902
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stuaby 03/16/14 - 01:07 pm
4
0
@Riverman1

The part of "Democracy in America" in which Tocqueville talks about this should be required reading in high school.

localguy55
5477
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localguy55 03/16/14 - 01:08 pm
4
0
deestafford, Give the

deestafford,

Give the ignorant and the lazy a tool, any tool, that he has no idea of how to use, and the ignorant and lazy will not use this tool if they have no incentive. Given no choice, and they will learn how to use this tool to their advantage.

Leftist have known this and they longed for power. Their promise of largesse for the ignorant and lazy, was an attractive bait.

So, the leftist gave the ignorant and lazy the tool of politics, i.e. the vote, to gain an advantage.

The difference is the ignorant and lazy either possess no moral foundation or they have been conditioned to disregard this attribute.

As a result, they abdicate free will in favor of the illusion of equality.

And the leeches overwhelm the host.

Bizkit
31329
Points
Bizkit 03/16/14 - 02:09 pm
3
0
There are jobs to filled but

There are jobs to filled but no Americans smart enough to have figured out an obvious career choice so foreigners are grabbing a bunch of em. That entitlement attitude doesn't create a good work ethic and chose careers wisely that may be difficult and a real challenge.

ultrarnr
910
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ultrarnr 03/16/14 - 09:13 pm
0
0
next Step
Unpublished

Why didn't the writer take it one step farther and advocate limiting voting only to white males who own property. He could frame it in terms of the original constitution to hide his racist feelings.

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