question archive There have been significant discussions on the government's fiscal policy during the Great Recession
There have been significant discussions on the government's fiscal policy during the Great Recession
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There have been significant discussions on the government's fiscal policy during the Great Recession. In particular, many did not like the government's actions in salvaging the auto industry in providing guaranteed loans to GM and Chrysler. Provide economic reasons for those actions.
One point that was raised regarding salvaging any company, or industry for that matter, was the question of "moral hazard". Explain.
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When you bail out an industry or company using government funds you are essentially taking away the downside risk of actions. You are sharing the risk without sharing the gain and thus companies will take more risk in the future because they know they government is sharing it with them. This will only lead to more crises and thus helping a company to help the economy might produce worse problems.
