Economics–CAN the Government Support You?

An excerpt from my economics lesson that seemed timely.

…government “aid” to business is sometimes as much to be feared as government hostility. This applies as much to government subsidies as to government loans. The government never lends or gives anything to business that it does not take away from business. One often hears New Dealers and other statists boast about the way government “bailed business out” with the Reconstruction Finance Corporation, the Home Owners Loan Corporation and other government agencies in 1932 and later. But the government can give no financial help to business that it does not first or finally take from business. The government’s funds all come from taxes. Even the much vaunted “government credit” rests on the assumption that its loans will ultimately be repaid out of the proceeds of taxes. When the government makes loans or subsidies to business, what it does is to tax successful private business in order to support unsuccessful private business. In the long run it does not sound like a paying proposition from the standpoint of the country as a whole. And experience has shown that it isn’t.

I thought that was such a good point that the governement cannot give financial help on its own.  The government does not earn money.  Its money all comes from taxes–from US.  And any of our money that the governement uses to help stuggling, businesses, struggling farmers, and struggling would-be homeowners is money that cannot be used by the people who actually have good credit or are running their business well and showing a profit.  The government uses our money for questionable loans that no sensible lender would risk.

 

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About dayuntoday

I'm a wonderer. I spend a lot of time mulling, pondering, and cogitating. This is just a place to park some of those thoughts.
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7 Responses to Economics–CAN the Government Support You?

  1. gsmith03 says:

    The same thing could be said for a bank.  The money they loan out is taken from other business people and consumers, so it really isn’t “their” money either.  When you deposit money in a bank, they proceed to loan that money back out (usually to businesses) and pay you for letting them loan out your money (by paying you itnerest).  I suppose one could say that having a checking account is more voluntary than paying taxes, but do you know too many people without a bank account?  Probably about as many as there are people who don’t pay taxes.  Paying taxes is a choice, too; even though not doing it may cause you to wind up in prison, it is still nonetheless a choice.  You can also choose not to have a bank account, let your money suffer the full effects of inflation (or risk it getting stolen without FDIC insurance), but it is probably just as bad of an idea.

  2. homefire says:

    @gsmith03 – Ah, but the difference is that if a bank makes too many bad loans, they go out of business.   Yes, banks are using other people’s money, but they have incentive to be somewhat responsible with it, because their own paycheck is dependent on their discretion.   Not so for the government. 

  3. If only most of America understood this.

  4. gsmith03 says:

    @homefire – Yes, and I do know first-hand that banks can have economic difficulties just like any other business.  The thing is, one of the biggest reasons we are in this current economic situation is because banks were too generous with giving out loans.  They extended too much credit, thinking that increasing loans would increase business, and then people started defaulting on those loans.  Businesses have trouble and can’t pay their loans, and can’t pay their employees.  Since businesses aren’t paying back the loans and employees don’t have as much money, the bank receives less money.  If the bank has less money, they have less money to loan out to struggling businesses, which creates more problems for businesses and it continues to spiral down.Making bad loans will not necessarily come back and bite the bank right away.  The problem is that banks have made so many bad loans that some of their good loans have become “bad” loans because of the ensuing economic issues.  In a way, FDIC is kind of a government bailout because it backs up the banks in case of a panic, and in itself prevents panics.  I suppose we could take it away, but I think that action alone would scare many people and investors and would only cause more problems.  But it is a “government bailout,” so to speak.  Here’s the question, though.  Banks are having so much difficulty, but do we let them collapse and cause people all across the country to lose their money?  I don’t really think that is going to help the economy.  We need a certain amount of bank regulation (and some form of FDIC) to keep that from happening, in my opinion.  I don’t think the government should have complete control of the banking industry (as Mr. Lenin suggested), but I think a certain amount of regulation is necessary.

  5. Good people who work hard and need loans never get them, I look down on the governement and how we are treated. Only God provides for us

  6. UR_MUSE says:

    Hello, I noticed that you are a member ofseveral Christian blogrings. I just put up a post about the concept ofthe End Times which are mentioned in the Bible and I’m interested tohear people’s opinions. If it’s a subject that interests you, pleasefeel free to stop by and leave a comment. Have a great new year!

  7. AngelAware says:

    Sigh….No comment about the government…LOL  BUT………H*A*P*P*Y  N*E*W  Y*E*A*R!!

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