Should the United States Have Used Taxpayer Money to Bailout Big Business?

Should the United States Have Used Taxpayer Money to Bailout Big Business?

Recession is a term that a majority of Americans have become familiar with and some families have become more familiar with it than others. Said to be the worse financial crisis in the United States of America since the Great Depression of the early 1930s, everyone from the high class to the low class has felt this recession in some way. According to the Wall Street Reform, "Trillions of dollars in household wealth were erased and over 8 million jobs were lost, in large part, because of failures in our financial system." With unemployment at its highest, it is no wonder that organization such as Occupy Wall Street exist. Although Americans are ready, able and want to go back to work, there are simply no jobs for them. We have seen how the recession has changed the country, but one big question remains in the minds of many people; "Should the government have used tax payer's dollars to bail out Wall Street?" Although the government exists to provide a source for economic growth when corporations cannot, it is necessary to investigate what lead to the financial crisis to begin with. Not only were banks lending money to people, for mortgages, who normally would not qualify for them, but there was also corruption in the upper echelons of the companies in Wall Street. Many argue that the money from the use of the bailout was to provide bonuses and raises to upper management, rather than to invest it back into our economy. This has led to many vocalizing their dissatisfaction and demanding government oversight of how the "bailout money" is being put to use, but has not been enough to reverse the belief that the need for the bailout was to stop a sinking economy from going completely under.

The formation of big businesses as corporations is for taxation purposes. These companies receive large tax breaks to stimulate the economy by producing a profitable business in creating jobs for business specific employees, and money for these business' shareholders. The funds they spend locally on parts, products, and everything else essential in running the company should stimulate the economy in turn providing jobs for the employees of the business they patronize. When funds are improperly spent on high dollar wages for the big business's upper management, these companies stop serving their purpose. In attempt to cut costs and produce equally these big business executives, use the remainder of funds, after their bonuses have been paid of course, to finance overseas endeavors instead of hiring local companies and workers. These companies also participate in effective tax planning. "Multinational corporations have opportunities to avoid income taxation by locating operations in low-tax countries, by shifting income from high-tax locations to low-tax locations, by exploiting differences between the tax rules of different countries, and by taking advantage of tax subsidy agreements with host countries" (REGO, 2003. Many Americans would see this as unpatriotic, unethical, and a waste of our tax dollars. Our government should not use the United States citizen's tax money to bail out companies that do not properly supporting our country and economy to begin with.

"I think President Bush did properly diagnose it when he said the problem was that Wall Street got drunk and has a hangover. The problem is the people who are asked to clean up all the broken furniture, they didn't get invited to the party," said Rep. Lloyd Doggett, D-Texas. "That's why so many of the people that are contacting me are not just against this bailout, they're very angry they're even being asked" (Isidore, 2008).

When big business go bankrupt the business does not usually close, it will have a change of ownership/management. The bailout has the potential to lead to more potentially chaotic economic downturn. "The bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources" (Miron, 2008). In turn if these companies were not offered the option of a bail out, one would assume they would hold themselves more financially accountable, not counting on the government to rescue these big businesses from their mistakes in the future.

One must take examine closely what may happen if the government had done a bail out for Wall Street. According to Isidore, bailing out Wall Street would be the best way for the effects of the failures on Wall Street would not affect the American people. If the whole financial system fails the banks will no longer be able to lend money. If the banks do not lend money than small business will not be able to get the funds necessary to build their business. Many people will loose their jobs and business if this happens. The greed of Wall Street has a direct cause and effect on every American. President Obama stated in news conference held October 6, 2011 "[...] in order to make sure that we prevented a financial meltdown, and that banks stayed afloat. And that was the right thing to do, because had we seen a financial collapse then the damage to the American economy would have been even worse." One cannot imagine the unemployment rate being higher than it is today but had the government not made the decision to bail out Wall Street we would have seen unemployment numbers much higher. Although the government did bail out Wall Street, the banks did get tougher with their lending. The requirements to obtain a loan for a mortgage have gotten more difficult. the banks are being more conscious and cautious when making the decision to lend money. The interest rates also began to soar. The idea of boosting the economy