Tuesday, May 5, 2009

A student's reaction to aspects of the bail out.

Here is a student's reaction to certain aspects of the financial bail-out. We had discussed in class how government spending is used to maintain employment and economic growth, since employment and growth will raise wealth and decrease poverty. Since the nation is going through an economic recession, we've been looking at some of the things a government can do to avoid recessions or let them pass quickly or mildly.

I am writing to say a few words on all the bonuses the large corporations’ executives are still receiving. While I do agree that we as a nation had to pull together and do some creative bailouts for save this country I do not understand why we did not put tight restriction and limits on how much and who should get the money. We are spending so much money bailing out Wall Street, yet we have forgotten Detroit. We now are talking about allowing these large companies to go bankrupt and yet we are allowing very little restrictions on our Wall Street beneficiaries. The large car makers of our county generate a large amount of revenue here, and they actually produce useful things, made up of parts and serviced by others in our country. I am afraid of the consequences if these companies are allowed to go into bankruptcy. We are not only talking about current employees but all the retirees who will be harmed. If they lose their benefits and health care these folks will be looking to the already strained Medicare system to help more. The Wall Street financial companies, in contrast, didn’t produce anything worthwhile, and they didn’t give us any good services. They just speculated and gambled and shuffled papers around and made deals that didn’t improve the world or create lasting benefit in our economy or society.

While I do not profess to know the answer to this situation I do know that we (and by “we” I mean the economists and the great minds employed by our nation to look at the entire picture) must study the deeper problems carefully, and not to jump at the first easy solution. We all know that the easiest is not always the best in the long run. If it seems easy to fix Wall Street and keep our banking system running, maybe there is a more difficult solution that would let the financial sector entirely fail as it has existed, and we could replace it with something entirely new and better, and devote more of our public dollars to saving industries and sectors of the economy that actually produce worthwhile goods and services.

The old saying is that the easiest path is not always the shortest. Sometimes we must take the long way for the best results.

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