Should the United States government have assumed control of General Motors? If you were to read a story in the news that a government had assumed control of a private company, what country might come to your mind? Possibly Russia, Cuba, China, maybe even Vietnam? Probably the United States would be the furthest from your mind. Not everything the United States government does should be considered socialistic, but obtaining control of the private company General Motors was an act of socialistic behavior.
As Lake Land students majoring in business and maybe future business owners, would you want the company that employed you or which you owned to be controlled by the government? Many government officials make the argument that this was the right decision, because it saved many jobs during tough economic time. This, however, is not a good enough reason to move toward socialism. The government should not have bought General Motors. How did this all come about? First General Motors filed bankruptcy in the spring of 2009.
The reason why General Motors went bankrupt was because they didn’t manage their money properly. It’s as simple as that. General Motors ran out of money and needed to be bailed out by the government. The decision to bailout this company came from several sources in government. Barack Obama was the President who was responsible for pushing this action. However, it was the Congress who passed the bill to bailout General Motors. As for the cost of this bailout, the government had only one source of money to use.
They used tax dollars for what was called stimulus spending. According to an unknown author writing in the Chicago Tribune, they state that tax payers have paid up to $50 billion and the government also took up to $700 billion from the Trouble Asset Relief Program and from stimulus spending. This is a tremendous amount of money spent, considering the hard economic times our nation was facing. The Government’s purchase of General Motors, was a trade of stock for money. According to co-authors David Shepardson and Gordon Trowbridge, “The U.
S. House approved a $14 billion auto bailout…” The agreement to this bailout, according to Kimberly Amadeo, was that “GM asked for $18 billion in loans, of which $4 billion was needed to avoid bankruptcy before the end of 2008. In return, GM agreed to give the government warrants for common stock, preferred stock, and a promise to repay the loan in 2012…” Since the government received common and preferred stock, they assumed control of General Motors. There are two very different positions to what the government did in this action.
Not all, but most of the government officials that supported the government control of General Motors were democrats. Those who supported the government control do have a couple of good reasons for this bailout. The primary reason was the saving of many jobs. According to an unknown author writing in the Chicago Times, they state “In the short run, the government bailout of GM worked. It saved many jobs that would have been lost…” This was extremely important since unemployment was around 9%. Jobs, however, were still lost even though the government bailed them out.
Part of the agreement with the government was that General Motors had to sell Saab, Saturn, and Hummer divisions and that cut down their employment from 96,000 to 45,000(Amadeo, par. 5). General Motors does not only provide tens of thousands of jobs, but it is one of the largest car companies, in the United States Howard Wial, writer for the Los Angeles Times, states that he believes that if General Motors went into bankruptcy, then this would give other auto makers in other countries a chance to buy the company.
This would hurt the economy of the US, practically giving one of the top companies in the U. S. to another country. Helping General Motors gives them a chance to change and make their vehicle production better. Bailing out General Motors saves jobs and keeps the car industry strong in the United States, but it also helps the economy out as a whole. An unknown author, who writes in the Journal Star, states that he/she agrees with the government’s decision. The author does state that he/she does not believe the government should bailout just any business that needs help.
He thinks the government made a good choice by bailing out General Motors because of the size of the company. If General Motors went bankrupt then they would have to fire a lot of employees. This would not only hurt the company and many families, but it would affect the whole economy. The fewer jobs in this country the less business all the other businesses will receive because the unemployed will not be able to spend money they don’t have. Works cited Amadeo, Kimberly. "The Auto Bailout . " US Economy 31 Dec. 2009: n. pag. Web. 6 Mar.
2011. . Ikenson, Daniel J. , and Howard Wial. "What Was the Point of Bailing Out GM? " Editorial. Los Angeles Times 3 June 2009: n. pag. Latimes. Web. 13 Feb. 2011. Shepardson, David, and Gordon Trowbridge. "HOUSE OKS BAILOUT . " Detroit News 11 Dec. 2008: A. 1. Midwest Newsstand . Web. 6 Mar. 2011. "GM Bailout Would Help Whole Economy. " Editorial. Journal Star [Peoria ] 30 Nov. 2008: A. 4. Midwest Newsstand. Web. 13 Feb. 2011. "GM Has its Price. " Chicago Times 19 Nov. 2010: n. pag. Chicago Tribune. Web. 14 Feb. 2011.