The article
http://www.freep.com/article/20081122/BUSINESS01/81122047/1014
Summary
General Motors has reviewed the possibility of bankruptcy. GM basically said to themselves - No! We cannot be bankrupt, it is not an option! Their plan is to receive a share of $25-billion low-cost loan from the government to survive the economic downturn. They argued that consumers are unlikely to purchase vehicles from an automaker in bankruptcy. The congressional leaders said, "if the plans are convincing, they would hold more hearings on a domestic auto loan bailout program."
Connections
General Motors is a privately owned company. It is not owned by the government in any way and now they are requesting money from the government. The 3rd party effects in this case are society as a whole. If GM goes bankrupt, many, many people will be laid off. This is related to Economic stabilization because if GM gets more money, they may get people spending again, which "hopefully" leads to a stabilized economy. On the other hand, if they don't help GM and GM declares bankruptcy, we may fall from a recession to a depression. This is indirectly related to the government because the government absolutely does not want people to be laid off. So adjustments or loans can fix things. This benefits population as a whole, but it will charge people revenue (more tax) for the adjustment. The government wants to get involved in this market (automobiles) because of the economic downturn and in this case, it fits into the "Possible shortcomings of the Free-market System." category.
Reflection
General Motors is not the only company that will fall if the government doesn't step in. Ford and Chrysler is also in the same position. These privately owned companies have possible shortcomings and if these companies survive, it is a positive 3rd party demand since people will have jobs, higher incomes, and a better economy. The government even considering to help privately owned companies is a good thing for the economy. I guess the government will have to adjust their spending's and tax policies to help the economic condition.
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2 comments:
I agree with your positive and negative third party affects. Yes, if the government is going to bailout the automakers, people will remain working. However, I disagree on the fact that this will stabilize our economy. Helping the automakers is a small portion to the economy, but it does prevent it from declining even further. In my opinion, I don't think there is or will be a safe plan to revive and stabilize our economy. There might be a plan to restore our economy for a very short period of time, but it wouldn't guarantee if this would happen again. Even if the government manages to bailout companies, we're still losing big money. And also, what can these companies do in return? Most people are too afraid to purchase "their" stocks because: 1. economy still poses a great risk even if you're purchasing a mutual fund 2. People just don't have the money to gamble. Another option the government has right now is probably decreasing tax, but what good does that really do? That means they have less money to solve bigger issues. Ultimately, we're facing a dilemma here. Hopefully, our economy revives itself soon.
- Henry M.
I agree with your connection of the article to the third party effect part of chapter three. You make a point about the economic stabilization if General Motors gets more money and how that would cause a ripple effect of people spending money again which would increase the economy. Though I definitely do not want people to be laid off, I don’t agree with the fact that the money used to support GM would be from tax revenue. This would only decrease the government’s tax income therefore issue higher taxes on goods. I also find that throwing money at a company that has failed to fix their business the first time, will only delay their eventual march to complete bankruptcy. Hopefully whatever decision is made will not lead to the economy declining any more.
- Stephanie M
Block F
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