U.S. Government Bailouts Essay Example | Topics and Well Written Essays - 1750 words

U.S. Government Bailouts - Essay Example The transport industry, for example, is the American economic backbone. The industry sustains trade and the travel of people throughout the fifty-two states. The country therefore requires an efficient and elaborate transport industry that does not face any serious financial challenges, which may weaken its operations (Muolo 41). To ensure this, the government provides tax reliefs and financial incentives to bigger corporations in the transport industry, which include oil companies, airlines among other stakeholders in the industry. The bailout is a maritime term inferring to the process of removing water from a sinking ship using smaller buckets. The term is used in the financial sectors therefor to refer to the nature in which the government gives financial aid to its major corporations during difficult financial times. Bailouts are often formulated and implemented through acts of parliament; the lawmakers discuss the economic situation and therefore determines the appropriate amount of money capable of ensuring that a corporation stays operational despite the financial challenges at the time. The government gives out the money in a form of a loan, which the company pays later after it stabilizes its operations. Additionally, the government gives out the bailouts in the form of grants or through the purchase of shares of a poorly performing corporation. The different methods of providing the bailout depends on the nature of the financial crisis and the size and importance of the corporation among others. Bailouts have consequences; the government draws its funding from the taxpayers. This implies that the government uses the taxpayers’ money in salvaging poorly managed corporations since every organization should have an effective emergency management strategy, which ensures it never becomes bankrupt. Bankruptcy is often a result of poor management of the public corporation, ineffective market surveys and projections. The use of the government money in bailing out such companies have serious economic consequences since he government operates on a tight budget annually. It therefore compels the government to replace certain economic activities to save the money for bailing out such failing companies. The redirection of the government money therefore results in inadequate management of certain government ministries, which had to reduce their spending (Shaanan 31). Additionally, the government may try to raise the money within a short period by increasing the rate of taxation. This results in the increase of price of some of the most essential commodities such as fuel at the expense of the citizens . The United States of America has often used bailouts as an effective method of revamping the economy thereby maintaining its position as the strongest economy in the world. In the last century alone, the country has faced five major financial crises, which prompted the initiation of expansive bailout plans to some of the leading corporations in the country. The five financial crises include the Great Depression, which affected the entire world following the end of the First World War. During this period, countries shied away from one another thereby paralyzing international trade. Additionally, the intense conflict that lasted years prevented any major economic activity such as agriculture and countries that had relied on agriculture but served as battlegrounds such as the Japan, Italy and Germany faced the worst. The slow economic activiti