Tax Bailouts and the Conflict Theory - Essay Example

The motive behind most bailouts is to contain the losses, which may occur due to the business lacking the usual funds to finance it. Mostly, such companies usually employ large numbers of people in a manner to believe that the economy would be able to sustain a huge jump into unemployment if the business is not funded (Roose web). Bailouts can take many forms such as bonds, stocks, and taxes. However, all of them have the same objective of financing the business investment, which is under the verge of collapsing.

Tax bailouts affect all the people in the economy since it involves using the countries money. A major example of a tax bailout plan was the bailout that was given to the American international group during the financial crisis. The aim of this bailout was to allow the company not to pay the tax for a certain fiscal period in order to allow the company to get back into profitable means and to reduce the losses. Members of the now-obsolete Congressional Oversight Panel for the Troubled Asset Relief Program gave a statement decrying AIG getting a tax exemption in 2008.

However, their demands were not met since the US department of treasury went ahead and issued the tax bailout. Other large companies, which benefited from these large bailouts from the federal government, were the Citi Group, and General Motors (Foldvary web). The tax bailouts from these companies directly affect the population in that the companies create employment for a large number of people, not only in America, but also in the rest of the world. The tax bailouts allowed these large corporations to have some money to retain the employees of these companies.

Were it not for the tax benefits from the government, the country could have seen a large number of people lose their jobs if the companies opted to lay off some workers to cut their losses. Consequently, unemployment brings some devastating effects into the economy (Roose web). One of them is that the employment level is directly related to the value of the currency. An increase in unemployment leads to the loss of the value of the currency. This in turn means that the value of the shares for other companies would reduce thus people would loose on their investments.

In addition, the value of the currency would reduce against other currencies in the world. Consequently, the value of exports for the country would reduce drastically thus some exporting companies would run at losses. These exporting companies would in turn look for new ways to reduce the losses that they make, one of them being reducing the number of workers, therefore contributing to more unemployment in the economy. This would form a vicious cycle of unemployment and investments whereby the actions of one sector of the economy would lead to a devastating effect to the other (Roose web).

Moreover, unemployment would lead to loss of the value of the currency thus leading to a decreased demand for the currency. This means that the currency would depreciate thus more of the country’s currency would be required to buy a goods from other countries, importing. However, the tax bailouts given to AIG were against the interests of the public since they broke the transfer’s policies, whereby the benefits were more to the company’