Tuesday, February 24, 2009

Government Policies Toward Competition

According to www.forbes.com, the federal government bailed out the airline industry to the tune of $15 billion dollars.  There has been no follow up to that bailout package, nor have we seen any accountability reports.  "For starters, the regulators could guarantee loans for troubled airlines That will probably go belly-up, wasting potentially billions of dollars."...Economists say it's questionable whether the bailout will even improve liquidity for such high-cost carriers such as US Air. The airlines need to sort their cost control, and improve return on capital.  

How is it that the government hasn't taken that bailout example into consideration this time?  Cite your sources. Read text p. 245 for more details on the airline bailout.  

13 comments:

  1. The government has not taken the bailout example into consideration because they feel that there will always be money available. If the government runs out of money, they can just run the bill to the tax-payers and let them pay the bill. Feeling secure about where the money comes from, the government, decides to pass a bill; or just order the people(tax-payers)to pay for them. Federal government hides the fees so the people will not get upset and possibly cause an uproar. "The government therefore should demand that airlines that accept loan guarantees be far more disciplined on cost control and improving return on capital." (Glencoe, Economics: Today and Tomorrow, pg.245) In other words, the government needs to keep their receipts, and bills in check. The only problem is that competition now a days is very harsh, companies will do just about anything to be on top. Also, past bills tend to be put aside, and the present is considered more important. Even though money is very tight these days, the American way is spend, spend, spend.

    Book Source: Glencoe, Economics: Today and Tomorrow

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  2. This $15 billion dollar bailout for the airline industry is pretty absurd. The fact that it is most likely useless and just giving money out is really sad and frustrating. If this was for a good cause then it will be worth it because the airline industry is pretty important to the world. The government hasn't taken this bailout example to consideration that it needs a new one because they are too lazy to look for answers and they wouldn't care if the airline indsutry would fall. Also the government probably does not have the money right now to save the airline industry because they just had a 787 billion dollar stimulus package to restruct the economy. It was a mistake to have this package in the first place because this package is worthless to some airlines because some airlines are going to run out of business even with this bailout package. You'd hate to try to save an airline that was going to go out of business already. However though, the bailout package could be a form of national security.

    "Our feeling is that, since airlines were ordered out of the skies by our government, we don't have a problem with the intent of this, philosophically," he said. "This act of terror – you could call it a war – used the airlines' property as a weapon," and they should not be made to suffer financially for that, he added. Also, he said, "the commercial air fleet in this country is the reserve military air fleet at the same time, under federal law. So I understand the importance of the commercial air fleet to our national defense system." - World Net Daily

    The airline indsutry has to be somehow more disciplined on cost conrol and improve to return on capital and reform the airline indstury. Everyone needs to fly so the government needs to fix this industry before it really falls and people won't be getting from place to place. The government needs to find an alternative.

    Source: http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=24684

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  3. RobertinoS1,KyleL1March 3, 2009 at 11:13 PM

    Kyle and I believe that this bailout of the airline industry is wrong in many ways. We shouldn't bailout an airline industry that is going down in the slumps anyway it is just another way of wasting taxpayers money. If the Government does bailout the airline industry they should better manage their cost and improve their return on capital. It will be harder for airlines to gain capital since there has been two crashes of planes recently which makes people avoid flying because of the thought that it could happen to them. The airline industry is important since it one of the biggest sources for travel, but the airline industries that are failing anyway should not be bailed out. This bailout bill would be a waste since some airlines would not even benefit from this. the government should make wiser decisions about this and not just use up all of the tax payers money.

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  4. The $15 billion dollar bailout is ridiculous because if anything it's just going to be a waste of billions of dollars that could be put to a better use and they are going to fall. "You'd hate to save an airline that was going to go under anyway"(245). The airline needs to hit bottom before anything will get better. Because of the bailouts it just adds up to the debt and waste of money that is just being handed out. Once the airline hits bottom, you can start over and learn from past mistakes. They just don't care because they feel pretty secure that the government and American people are going bail them out.Anything less than disciplined cost control and improved return on capital will break the industry rather than restore it.

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  5. I think the government hasn’t taken this bailout into consideration at this time, because other priorities have been on their minds. Some would be the election, and the financial crisis we are in right now. I don’t think they can focus on what they did in 2001, nearly 7 years ago, when we need economic relief right now. The airline bailout is most likely not brought up because the airline business is still in trouble and the bailout isn’t really working out for them. Citi group was given “$25 billion equity purchase by the feds,” and still its asking for more. The world isn’t working right now. Japan was in debt not so long ago, and spent “$6.3 trillion into public works projects of dubious economic value”, in 1991, in order to boost its economy but now the country is in the same boat as the rest of us. Economies are failing all over the world and bailouts are being issued to keep everything from falling apart. The airline bailout doesn’t seem like much right now because the country is shelling out billions of dollars just to keep us calm us from an economic apocalyptic meltdown. The airlines may have “lost their control” but everything is losing control right now. Banks didn’t monitor their clients, and shelled out money to people who were not financially stable. I think for years to come, we cannot forget the bailouts occurring right now, as we did with the airline bailout.
    http://www.ajc.com/services/content/printedition/2009/03/04/barred0304.html

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  6. I agree with Lupita. I also think that the government hasn't taken the airline bailout into consideration because they think they have all this money that they can just save industries that might just go "belly-up" once again. The government isn't worried about "running out" of money and the reason is because if the government does run out of money, they have us tax payers to pay it off. I personally don't think that we'll ever be able to pay off the debt that America has. And the reason is because the debt is still growing and we're not doing anything to stop that. I don't think that there is something we can do that will definitely stop the debt from growing. A big factor to our debt, I think, is the competition between companies. Because consumers will only pay a certain amount for a product. That's where the credit debt comes in. And besides the credit debt that we have, there's also all these bailout that the government has decided to pass.

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  7. I agree that our country, although we are in a depression and our economy is in the "crapper", as Americans we believe we'll never really run out of money. Sure our stock market just suffered a huge crash but look, our governments going to help everyone out with huge bailout plans. Not to mention all that money were sending to Iraq every month. Obama said he was going to fix the war and all the ungodly spending but yet the spending is still the same as the Bush administration. We're dishing out money like there's no tomorrow but pretty soon we'll be begging everyone else for it, as if we haven't already tried. The airline bailout is just another example of a bailout stimulus with no positives to show for it.

    In 2001, George W. Bush signed a very similar airline bailout package. After the 9/11 attacks, the airlines lost around a billion dollars. Even then people were saying, "If congress bails out the airline industry, who's next?". Sounds pretty familiar to me. Just 7 years have gone by and yet again, the airlines are being bailed out. I see a definite problem with that.

    http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=24684

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  8. In short, the government thinks that there will always be money around somewhere. Well, that's not true; the amount of money is determined by how much gold, silver, or bronze there is and that is converted to dollars and coins. What if we run out of currency. Then our value on the dollar will drop significantly. According to Dasbach, television networks are already claiming to have lost some $500 million in advertising revenue in the week following the attack. And investors lost an estimated $1.4 trillion when the stock market went into a historic free-fall last week. In the article I found called "Free-market supporters and at least one political party have come out in opposition to Congress' $15 billion airline industry bailout plan in the wake of the terror attacks in New York and the Pentagon." "There is not a single American, nor a single American company, that has not felt the personal or economic impact of the horrific events of Sept. 11," he said. "But we shouldn't give politicians the power to decide who gets taxpayers' dollars to deal with that impact."

    http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=24684

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  9. So miracle man Obama is still throwing money to the wind. I thought he was supposed to make things better, what happened? I heard a big fuss about Bush's bail out what about the MULTIPLE BAIL OUTS Obama passed. Looks like you've been dooped. After all his promises to cut the budget in half he has to increase it. Very smoke and mirror isn't it?

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  10. I am quite surprised that I did not know about this airline bailout at all, especially because my dad worked for United Airlines for most of my life. I’m also shocked that this bailout was not put into effect sooner. Our economics book does not say why the bailout did not follow through. I think that the government hasn’t taken this into account because there are more pressing companies that need more of a bailout, such as the banks (so people can pay for airplane tickets!) The book also mentions that “regulators could guarantee loans that will probably go belly-up, wasting potentially billions of tax dollars.”

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  11. I do not believe in these bailouts, none of them seem to be helping any of these companies. It is essentially wasting billions of tax payers’ dollars that we will spend generations trying to pay back. Most economists agree that there should be no bailout for these companies. They made poor decisions and it should not be up to the tax payer to save them, especially when the companies are paying millions to their executives. Most of the bailouts supporters believe that if these intuitions fail that we will have an economic “Armageddon”. If the intuitions fail they will give raise to stronger companies. Most of the country is upset that the bailout will go to companies and not into the pockets of the American people where it would be help them pay mortgages, so that they would not have to go into foreclosure.

    http://topics.nytimes.com/topics/reference/timestopics/subjects/c/credit_crisis/bailout_plan/index.html

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  12. So miracle man Obama is still dishing out the cash huh. It funny how much protesting there was to Bush's bail out, and absolutely none to the multiple bail outs Obama has passed. And he also promised to cut Bush's budget in half but how is that possible when he has already increased it. Looks like he wasn't all he was cracked up to be. But apparently he thinks it's funny that we are in a depression because he started laughing during an interview about the economic struggle we are going through. Is it really that funny?

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  13. I agree with Zita, I don't believe any of these bail outs are good. The economy is a natural process and you can't save things that don't work out because those things are meant to be broken. I can see why they bailed out the airline industry because our nation needs planes to keep business' running but is bailing out the airline company the right decision? We are messing with Darwin's theory of survival of the fittest. We are saving the weak but only the strong companies should be the only ones still working because they know how to run their company right.

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