One of the main explanations that members of the media give for the failing economy and high unemployment rates seems to involve big corporations being evil and that their big profits taking money away from people. There are three ways a company can stay in business and get bigger, 1)make profits 2)get government assistance or 3) receive a combination of the two. A company that stays in business through profits does this by being able to have more revenue coming in than money going out. The only way a company can have money coming in, is for consumers to spend money with that company and that company have less expenses and liabilities than what money it has received. No person is forced to spend money at any company so if a company is not providing what consumers want, the consumers can simply stop paying. Which brings me to the government, which does not need profits to stay in existence, nor does it need people’s consent for the use of their services like police and schools, nor does it need people’s consent to tax. The government’s involvement in the market place has negative effects on the economy and employment because of it miss-handles the distribution of resources.
When I say miss-handle resources, I mean that when the government decides to give money to anyone, it has to first take it from someone else. Although the government can borrow from the federal reserve to get money, high interest rates and high prices will be the penalty down the road for the governments actions. If a company fails, it fails and it should fail, so that resources stop going to that company and someone else can use those resources. If the government gives a failing company money that means someone else could not get that money, not only that, all the resources that the failing company purchases with the government money now, can’t flow to another company or person that may have needed those resources.
The government’s answer to help the economy is always the same and can easily be summed up with: increase taxes, decrease taxes, provide a stimulus to the economy through tax breaks, subsidies to individuals, and subsidies to large corporations. The reasoning’s behind stimulus packages,bailouts and subsidies should not seem favorable for the economy or unemployment, but many people think the government’s reasoning behind these actions are good, because of the belief that the government’s intention to help is good enough to allow it. Most people have not been taught how to look at the results from government intervention in the market, nor how to analyze the government’s argument for the use of a bailout.
A subsidy is any money that the government gives to a person or business. The subsidy can be a government grant, bail out money, welfare money, student loans, money to produce more of something like ethanol or corn, or produce less of something. Now the subsidy money comes from the government either taxing working people or borrowing from the federal reserve bank. None the less a subsidy is government help and just like the hated “Welfare Mother” ,companies that receive bailout money and other subsidies are receiving government money at the expense of all tax paying people.
Now a private business has to use its own resources to make and sell their product or service and cannot survive without a profit for very long (unless the government bails them out of course!!). businesses fail all the time because of several reasons, but if it can’t stay in business, should everyone else have to suffer economically just to keep them in business? I think not!! Now since big businesses have to protect it self from failing it using the government for contracts, subsidies, policies, and laws that reduce competition. Big businesses do this with large sums of money they use to lobby for laws that are beneficial to the survival of their business. It is not businesses fault for trying to do all it can to ensure their business survives. But the government is the institution that provides businesses with so much power enforcing the laws that businesses just paid the government to implement. Big businesses have enough money to purchase the unfair advantage that is created by the government. If the government was not involving itself in the market place with its regulations that favor who has the most money or who has the most connections we would see our economy and employment situation look totally different.
I had to ask myself why would our government provide subsidies or money to these big corporations to stay in business? If the government’s reasoning is that the economy would crumble if these big corporations were allowed them to fail, then what does that say about our economy, if our best hope are companies that can’t survive without government help. I thought people were against people leaching off the system, because the system is a collection of tax dollars and no one wants their pay check short so someone can sit at home and watch Jerry Springer all day. I thought that’s why the stereotype “Welfare Mother” was created, because this was a person that could find work but instead does not work and survives off the money the government gives them. But I know that many public and private schools do not explain how governments are funded nor do they explain what a government subsidy is, nor do they explain what happens to the economy when people are taxed or what happens when subsidies are handed out.
The government can do all of these things because it has legitimized power to create laws, enforce laws, run deficits, borrow from the Federal Reserve, and forcefully collect tax dollars in order to keep running its programs. Borrowing money, higher interest rates, higher prices for products and services will definitely be a result of running deficits, borrowing from the Federal Reserve, and handing out subsidies. This brings me to my question of who is really evil and who is really to blame for the failing economy and rising unemployment rates. Is it big businesses that have to rely on paying customers to fund its operations or the government who picks and chooses who to give money to and who can survive by leaching off of working businesses and people to fund its operations? Which organization is better for the economy, companies that survive only on the profits it receives or the government who can partner with businesses and create unfair advantages that are only favorable to those involved in the governmental agreement?
therodneysmith 