Introduction
When banks and large corporations have huge pending bills that they are unable to settle, they can turn to the government for a financial bailout. According to Casey and Posner (2015), a bailout is a transfer of resources, including money from the government to a private agent or even to an allied government. Government bailouts are aimed at preventing the potential collapsing of the economy by insuring the corporations against collapse. Notably, there was a substantial bailout in America after the 2008-2009 financial crises. While bailouts could have a positive effect, there are many arguments as to why they are harmful to the economy. This paper will argue against the case of government bailouts for banks and large corporations. …show more content…
Therefore, this adds the costs of the bailouts to taxpayers. Generally, these organizations and banks will be financed by the government to continue to thrive and make profits for themselves in the future while the taxpayer may have nothing to show for his or her tax contributions. Therefore, it goes against the idea of fairness and morality in the public’s eye. In laymen’s terms, it is not fair that businesses get to use taxpayers’ money to finance their irresponsible habits of poor investment decisions. Nicolaisen (2015) argues, “When the authorities bail out banks, some parties are spared the consequences of their own choices. Bailing out investors and owners using public funds conflicts with people’s ordinary sense of fairness.” Therefore, it is only fair if the bank or business is allowed to suffer the results of its inadequate decisions rather than lay the burden upon another party, in this case, the taxpayers. In fact, it could even be more costly to the taxpayers if the government does not recover the money used if the institution involved had such a substantial loss that is nearly impossible to …show more content…
This is because it salvages the situation when the company involved is too big to fail, which could be a harmful blow to the economy, both in the sense that it will lead to instability, as well as a loss of jobs. However, the consequences of bailing out banks and large corporations may be too significant to bear for an economy in the end. Generally, bailing out a company may lead to moral hazards where organizations disregard the risks involved when investing since they will automatically have a way out of their failures. Similarly, this could lead to high costs for the taxpayer who will incur the cost of the bailout. Moreover, there will be increased debts for the government in addition to the probability of the economy experiencing instabilities when a bailouts is given. Therefore, the issue of government bailing out firms from their financial pitfall should not be encouraged to ensure stability and reduce risks in the economy. That way, businesses will be more careful to ensure they do not face bankruptcy; they will consider every possible risk when investing. Moreover, this will reduce the burden on both the government and the taxpayers in covering for the
When banks and large corporations have huge pending bills that they are unable to settle, they can turn to the government for a financial bailout. According to Casey and Posner (2015), a bailout is a transfer of resources, including money from the government to a private agent or even to an allied government. Government bailouts are aimed at preventing the potential collapsing of the economy by insuring the corporations against collapse. Notably, there was a substantial bailout in America after the 2008-2009 financial crises. While bailouts could have a positive effect, there are many arguments as to why they are harmful to the economy. This paper will argue against the case of government bailouts for banks and large corporations. …show more content…
Therefore, this adds the costs of the bailouts to taxpayers. Generally, these organizations and banks will be financed by the government to continue to thrive and make profits for themselves in the future while the taxpayer may have nothing to show for his or her tax contributions. Therefore, it goes against the idea of fairness and morality in the public’s eye. In laymen’s terms, it is not fair that businesses get to use taxpayers’ money to finance their irresponsible habits of poor investment decisions. Nicolaisen (2015) argues, “When the authorities bail out banks, some parties are spared the consequences of their own choices. Bailing out investors and owners using public funds conflicts with people’s ordinary sense of fairness.” Therefore, it is only fair if the bank or business is allowed to suffer the results of its inadequate decisions rather than lay the burden upon another party, in this case, the taxpayers. In fact, it could even be more costly to the taxpayers if the government does not recover the money used if the institution involved had such a substantial loss that is nearly impossible to …show more content…
This is because it salvages the situation when the company involved is too big to fail, which could be a harmful blow to the economy, both in the sense that it will lead to instability, as well as a loss of jobs. However, the consequences of bailing out banks and large corporations may be too significant to bear for an economy in the end. Generally, bailing out a company may lead to moral hazards where organizations disregard the risks involved when investing since they will automatically have a way out of their failures. Similarly, this could lead to high costs for the taxpayer who will incur the cost of the bailout. Moreover, there will be increased debts for the government in addition to the probability of the economy experiencing instabilities when a bailouts is given. Therefore, the issue of government bailing out firms from their financial pitfall should not be encouraged to ensure stability and reduce risks in the economy. That way, businesses will be more careful to ensure they do not face bankruptcy; they will consider every possible risk when investing. Moreover, this will reduce the burden on both the government and the taxpayers in covering for the