Give an example of government failure in the U.S. economic history.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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This is somewhat a matter of opinion because different people will have different ideas as to when government has failed.  That said, here are a couple of possible examples:

  • The housing bubble and resulting crash that led to the financial crisis of 2008.  According to some, this was an example of government failure because it was government action that helped to create the bubble and to create a situation in which there were so many bad loans.  The argument is that the government pushed for firms to lend to people who were not truly creditworthy.  This led to the creation of bad loans and to an inflated housing market.
  • On a much smaller scale, we can look at the government funding of Amtrak.   This is a case in which the government pours money into a company that is simply not economically viable.  Amtrak runs too many routes that are not profitable and constantly needs to be bailed out.  This, in some people's minds, constitutes government failure.

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