Should the Government Issue Subsidies
In the late seventies, Chrysler Corporation was facing bankruptcy during hard economic times. While Lee Iacocca worked hard to help Ford Motor Company succeed, his ideas and skills were not enough to keep Chrysler afloat. During these hard times, Iacocca knew that he needed help, and the only place to go was to the U.S. Government. While it seemed a long-shot, Iacocca explained to Congress that “if Chrysler collapsed it would cost the country 2.75 billion dollars alone in unemployment benefits” (Cole, 2004, Method section, para 20). In addition, Iacocca decreased management salaries considerably (including his own for $1 year) and went to work. With the government subsidy, Chrysler initiated a new, aggressive campaign and “…paid back the loans a full seven years ahead of their due date” (Cole, 2004, Method section, para 25). Chrysler – and Iacocca’s – success is an example of how government subsidies, when managed properly, are a positive action in the government.
WHAT ARE GOVERNMENT SUBSIDIES
Subsidies are, in its most basic terms, funds provided by the government or other party to businesses to supplement construction or operating costs. There are several different types of subsidies issued by the Government. Among them:
• Loans and Loan Guarantees: These can be short- or long-term and must be paid back. The interest rates are dependent on the borrower’s creditworthiness.
• Debt Forgiveness: The money owed by the borrower is forgiven or deemed a non-recurring subsidy.
• Tax Forgiveness or Deferral: Tax payments are either less than owed or deferred.
• Provision of Goods and Services: The government provides goods and services to a company for less compensation than valued.
These and other types of subsidies can be used for health care, education, and businesses, as well as other industries in times of hardship.
CASE STUDY: AGRICULTURAL SUBSIDIES
The focus on the need for agricultural subsidies was never more evident than in 2004 when 4 successive
WHAT ARE GOVERNMENT SUBSIDIES
Subsidies are, in its most basic terms, funds provided by the government or other party to businesses to supplement construction or operating costs. There are several different types of subsidies issued by the Government. Among them:
• Loans and Loan Guarantees: These can be short- or long-term and must be paid back. The interest rates are dependent on the borrower’s creditworthiness.
• Debt Forgiveness: The money owed by the borrower is forgiven or deemed a non-recurring subsidy.
• Tax Forgiveness or Deferral: Tax payments are either less than owed or deferred.
• Provision of Goods and Services: The government provides goods and services to a company for less compensation than valued.
These and other types of subsidies can be used for health care, education, and businesses, as well as other industries in times of hardship.
CASE STUDY: AGRICULTURAL SUBSIDIES
The focus on the need for agricultural subsidies was never more evident than in 2004 when 4 successive
References: Retrieved February 26, 2005 at http://jacksonville.com/tu-online/stories/060504/bus_15784907.shtml Cole, David http://www.saintrochtree.com/zones/lifestyle/articles/2001-02-17-08.htm Compton, Liz (2004) Retrieved February 26, 2005 from http://www.florida-agriculture.com/news/09-10-04.htm Jacksonville Economic Development Commission (2004). A Guide to Understanding Economic Incentives Mann Library at Cornell University (2004). Agricultural Income and Finance Outlook. Retrieved February 26, 2005 from http://usda.mannlib.cornell.edu/ Mathis, Karen. Shipyards could end up in good hands. The Times-Union. Retrieved February 27, 2005 at http://jacksonville.com/tu-online/stories/100604/bum_16828926.shtml McElroy, Terence (2004). Bronson Lauds Assistance To Ag Industry;Vows Florida Growers Can Now Get Back To Producing