The Instigator
JoeYYC
Con (against)
The Contender
distraff
Pro (for)

Corporate Bailouts

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Voting Style: Open Point System: 7 Point
Started: 12/10/2016 Category: Politics
Updated: 1 year ago Status: Debating Period
Viewed: 397 times Debate No: 97702
Debate Rounds (3)
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JoeYYC

Con

This is a badly understood concept and when analyzed thoroughly there are NO justifications for corporate bailouts for several reasons.

1. The argument that "if we don't save company "xyz" the loss,of jobs and damage to the economy will be too great or "stunning" - I believe was the word you used.

This is unverified, not widely accepted and has no theoretical basis to justify in the first place. How do you know what the impact of this company going under would be to the economy and what's the basis for your argument? You have no idea if there would be ANY measurable impact and even less of an idea of how long any impact IF occurred would LAST. Furthermore there's actually far more theoretical basis for the argument that the ECONOMY would do BETTER if the government didn't step in and save some particular struggling company! The only way a company can be "struggling" is if they are making a product that no one wants or they might be making a product that people do want, but they are being managed so poorly they can't produce it and make money. Either way, this is CLEARLY an example of resources being POORLY managed and by the wrong people and they absolutely should go bankrupt as that's the one way in our capitalist system that we have to help ensure the best use (most optimal/efficient)! of the limited resources we have! At least if the company goes bankrupt there's a chance it's bought by a good operator who then would be more likely to create more jobs not to mention government revenue by being profitable!

And you want to take away by way of corporate welfare the one and best mechanism in our system to help ensure the best use of limited resources and ensure resources are used in the public interest??

It would even be better(still awful but at least better) if the money that was going to the bailout instead be randomly given to various entrepreneurs looking for startup capital sat least with startups we don't know what the chances are of them being successful but even that's better than choosing a company we KNOW is mismanaged or producing a product no one wants. The Government bailing out a struggling company is like an investor when trying to decide which company to invest in and VOLUNTARILY chooses the one that one they know for sure isn't doing well! Your pretty much guaranteed it's a bad investment as bling it out means it will just continue the way it was and you'll have to either bail it out again or let it die next time (weird sounds like a certain industry in N. America, something "automaker" ish.. that was supposed to only need help this one time in the 1980's because of the unfair trade from Japan!.. sorry how many bailouts are we at now??

But that's only the economic argument. I haven't mentioned the total lack of any moral or ethical justification why (if your reasoning for the bailout is because it's unfair to the workers to lose e jobs because of bad management which is commonly argued). Sure it probably is "unfair".

1. Who ever said life was fair.
2. What is the rational and justification in bailing out company "xyz" on the basis to protect just those particular employees? Companies/businesses - entire industries - are constantly going under, causing job losses for all their employees too. How is it even remotely ethical for the use of public funds to just arbitrarily save some jobs and not others? Is the 20 year worker at the copper mine who just got laid off when commodity prices crashed somehow less deserving than the 10'year guy at the Ford plant?

To summarize:

1. Little to nojustification from an economic arguement. If anything it's more likely to hurt the economy by bailing out poorly run companies by continuing a bad use of resources. (By the way there are more arguments I didn't mention, think about the moral hazard as certain companies in some industries recognize over time that the government always bails them out!, they'll start to behave more and more recklessly knowing the ultimate downside doesn't apply to them).

2. ZERO basis,for arbitrarily valuing and using public funds to save some jobs and not others. Totally unjustified and very unfair to the people who lost the jobs in the "unfavourable companies - in the eyes of the government- If the people in society want to help people who lose jobs at no fault of their own (which is a reasonable position) the help should be for ALL employees, anything else if offensive and just plain wrong.
distraff

Pro

Actually the damage from the collapse of our banks was verified in the great depression and is exactly what happened. The stock market was massively over-valued and when it crashed people, banks, and businesses lost everything. As a result they spent less money resulting in less revenue for businesses and more people losing their jobs and spending less money. Also everyone tried to get their money out of the banks but only so much is in the banks at one time and so the banks went bankrupt when they couldn't pay. This resulted in people and businesses losing their life savings, spending less, and businesses losing more jobs as a result.

This destructive cycle continued from 1928 to 1933 until the government called a banking holiday and gave them financial assistance that allowed them to open their doors again one by one. But by that time unemployment had risen to 25%, 30% of our GDP disappeared, and industrial production fell by 50%, It wasn't until 1945 or 17 years later that we fully recovered.

Thanks to the bailout the big banks didn't collapse and out lowest point was 2010, 2 years later. Now our unemployment is back down to 4.6% and wages are growing again. The peak unemployment was only 10% and we lost only 2% of our GDP.
https://www.britannica.com...

Even good businesses can fail during a depression. If all your money just disappears because your bank collapsed, or all your customers lost their jobs so you don't have any sales, then you are in big trouble no matter how great your business is. Small recessions can trim the fat but an economic collapse will take a lot of meat and bone with it.

I agree that many of these big banks didn't deserve to be saved but if they fell a lot of small businesses and people who do deserve to be saved would have been ruined too. So giving to the big banks was really giving to America since it helped save our economy.

Another big point is that the bailout wasn't a gift to banks, it had to be paid back. From the 621 billion paid out we actually got back 693 billion and this is actually an 11% profit from interest.
https://projects.propublica.org...

The government passed restrictions to keep something like this from happening again so we don't have to give the big banks taxpayer money. There is debate over whether more or fewer regulations are needed and whether we should break up the big banks so we don't have to depend on individual ones so much.
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