Tuesday, February 11, 2020

Should United States governors balance their budgets by raising taxes, Research Paper

Should United States governors balance their budgets by raising taxes, cutting spending, or a combination of both - Research Paper Example It is only natural to realize that some things that have happened in the past will directly affect what happens in the future. Therefore, one has to consider specific scenarios that have occurred in the United States which began in the 1980s with the mergers, acquisitions, takeovers, and buy-outs. Nothing happens without future consequences. Mergers, acquisitions, takeovers, and buy-outs are all a part of the business â€Å"game.† It’s merle an exchange of ownership that commonly involves stocks and assets that are transferred to another owner in exchange for up front cash or stock options in most cases that benefit high level executives. The â€Å"game† presents no investment in the future of the company or corporation, its merle an exchange of wealth. This scenario contributes many problems to the current operating business atmosphere. Mergers bring about immediate economic problems that include, loss of markets to foreign competitors, continuing trade deficits, inadequate operating capital, declining productivity, debt heavy corporations, and loss of many jobs. The debt is due mainly to financing in order to carry out the merger. These problems plus lagging research and development add to the complications of business operations after the merger is finalized.Another factor that has played a significant role in the situation of state and federal government budgets now are government financial bailouts. The first of these was the Savings and Loan Bailout of 1989 due to more than half of America’s Savings and Loans failing between 1986 and 1989. This was primarily due to lax government lending policies. These business bailouts have directly affected the budget, deficits, and economic stability of our federal and state governm ents. The US passed the Emergency Economic Stabilization Act in October 2008 for a $700 billion financial sector bailout. This resulted in the bank rescue of 2008, which called for a $250 billion cash infusion into the banking system. The bailout of Bear Stearns in April 2008 ended in lending the firm $29 billion to JP Morgan to buy the troubled firm. Fannie Mae and Freddie Mac collapsed in the late summer of 2008. The federal government committed up to $200 billion to save both these giant mortgage lenders. Also $100 billion in cash credits was guaranteed to each of them to prevent bankruptcy. In September 20089 the federal government took control of American International Group (AIG), who was one of the largest insurance companies in the world. The government took control of the company and guaranteed them $85 billion in loans. In addition, the government took a 70.9 percent equity position in AIG, making this the first time in history that the government controlled a private insu rance firm. These are all major contributors to the economic environment of today. Can the government continue to bail out troubled businesses and over-extend themselves’ with even more debt? Economics is unpredictable and no one can say what the future holds. But within this scenario, the federal and state budgets and deficits have to be controlled by some means. With these factors in mind, would an increase of taxes on a federal and state level fuel the growth of the economy? In retrospect the government must look for ways to cut budget spending with little or no detrimental feedback to private businesses and corporations. It’s the common public consensus that government, both federal and state, need to make cuts; and unnecessary government spending seems to be one option. There are several arguments about government bureaucracy, but its obvious that there is a great set up for civil servants. When hired, they are put on probation for one year, after that they are gr anted tenure unless they do something illegal or make an unforgiveable error; their job security is all but ensured. This alone, would prevent federal and state representatives from

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