This morning I'm seething - SEETHING - at the ridiculous but predictable behavior of Senate Republicans concerning the big three automakers' bailout. As other have pointed out, it is nothing short of class warfare. None of the things they're so concerned about regarding the automakers were even an issue in the Wall Street bailout. Nobody worried that those who worked on Wall Street made too much or insisted on having good health care. Why? Because the people who work on Wall Street look like, talk like, and dress like said Republicans. They live in the same neighborhoods, went to the same colleges, and share similar investment portfolios. Some of them even used to work alongside each other.
On the other hand, the auto workers are lowly blue collar folks who have been nothing but uppity all these years, demanding fair pay and good healthcare. In addition, many of the Senate Republicans who are so opposed to the bailout have state-subsidized foreign auto company plants in their states that are non-union, and who contribute tidy sums to their campaigns, as noted on the Rachel Maddow Show last night. But to me the big issue is the hostility Republicans feel for unions, especially one as powerful as the UAW. Finally being in a position to destroy the UAW has obviously given Senate Republicans a giant hard-on, and they're not going to back off no matter what the consequences to the economy. After all, their sector of the economy is not threatened. Those who have been voted out will go back to their private sector white collar jobs, and those who remain will continue to earn a tidy sum working in Congress.
Given that fact, they can smugly say "Fuck you, blue collar workers. Fuck you Michigan." And that is exactly what they're doing. So fuck them. Fuck Senate Republicans, who claim to be "the party of family values," but gleefully choose to put thousands of families on unemployment. Fuck their elitism, and their implicit insistence that they are the only ones who deserve job security and good healthcare.
OK, I'm done now.
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There are larger legitimate economic issues at play here than what you're describing. Failure to shore the levies of the backbone of the financial sector would have had far reaching and disastrous consequences to every corner of the economy because of the way that that industry is related to all capital transactions.
The fact is, even if we "bail out" these auto companies, why would we expect anything to change? They have been falling behind for decades. Their competitive advantage has been destroyed by the efficiency of the Asian car companies. Even if we bailed them out now, they would just be in this same spot within a few years. And yes, it is horrible that many people will need to lose their jobs. But I'm quite sure no one in congress is gleeful about their decision. But there isn't just a magic supply of money that we can ship to this industry. Every dollar they get is taken from the already strained pockets of the American taxpayer. And unlike the financial bailout, where the problem was low value securities that can potentially be salvaged in the future to return the governments investment and equalize the tax burden, simply shipping money to these car companies is just a black hole of dollars that will almost certainly be squandered as they continue to fail.
I sympathize deeply with the people involved, but the politicians have to face the bigger picture here.
Oh, and regarding Unions, "making too much" and having decent health care, those are the things killing this industry in the first place. Those unions manage to command salaries that are drastically higher than anyone else doing even similar work. You have largely uneducated unskilled people making $75 an hour trying to compete with companies that pay their equivalent workers a fraction of that cost. Economic reality in this case just doesn't correspond with what we would like in an ideal world. As long as operating costs destroy the profit margins of these companies, they're not going to be able to compete, they're going to fall behind, and they're going to go bankrupt or need to be constantly subsidized by the American consumer who is busy buying foreign cars anyway.
"largely uneducated unskilled people making $75 an hour"
Bullshit. Or "Republican talking points" but the two are kind of interchangeable. If that were true, everyone in the United States would be in Detroit trying to get one of these jobs. The only people who make that kind of money are the execs who did such a shit job in the first place.
Of course it's a complex problem. But nobody was complaining about how much the folks on Wall Street make. Nobody. And they've mismanaged things terribly as well, but the Republicans were more than happy to give them the money, with no strings attached. Of course, there are many, many ties between Wall Street and Washington. In contrast, the first thing Republicans did when an automakers bailout was suggested was start complaining about the unions. Unions workers have agreed to take certain cuts in order to keep the industry going, and the House had already put a lot of Congressional oversight of the industry in place. So I think that's why you would expect things to change. Don't just give them the money - put some conditions on it. But in the case of the Wall Street bailout, not only did they not complain about compensation, they basically put no conditions on it at all. This is clear evidence of a double standard.
I agree that Wall Street needs more controls in general. I was certainly complaining loudly about how much CEO's and top executives make. I actually think that's one of the worst problems in our society right now. I would support caps on compensation, and I think there are ways to do it without what the conservatives would undoubtedly anticipate as the implosion of capitalism. And I'm also angry about the tremendous unfairness and hypocrisy bailout situation. Very angry actually: but the basic fact is still that these are just bad companies, and bad companies should fail so they can be replaced with better companies. Bailing out companies at all is a slippery slope that ends in disaster.
I agree that in theory, if you have a free-market system, companies should be allowed to fail. That's the only way the infamous "invisible hand" would ever work. The problem is that, due in part to deregulation, many companies have acheived the "too big to be allowed to fail" status in our economy. So people who run around yammering about "socialism" and "the invisible hand" need to go back and actually read Adam Smith, who came up with the free market theories that are so often misquoted now.
I read The Wealth of Nations one summer back when I was teaching Business Ethics all the time, because the business students were always going on and on about the invisible hand and objecting to any gov't regulation. None of them had actually ever read Adam Smith. His theory applies to very small economies (like a small town), and he would be horrified by the predatory behavior of large corporations, mergers, etc. that go on in our economy today. So the invisible hand ideology just doesn't work in an economy like ours, and if we don't want to have to bail companies out and have the gov't constantly involved in the economy, we have to put some restraints in place that prevent the situation we're in now from developing in the first place.
Yeah. The Reagan de-regulation of big business was horrible. Like you said about scale, when companies get that big, and executive migration that easy, there is no incentive for leaders to care about the company or how it performs, because they can just extract money for it at the expense of almost everyone else. We have a system that is no longer equipped to make executives actually accountable to their shareholders. That's the real problem that needs to be addressed.
Exactly. And I just get pissed off when people suggest "painful" reform in blue-collar sectors while protecting the white-collar jobs.
Thank you so much for clarifying for many a topic few take the time to understand.
I think I am against a bailout. However, I am not against spending money to turn these factories into factories that will make something people will buy and hiring the same people or paying for these people to get educated in trade that is lacking workers. I don't know about there but we need electricians and such. Why are the only options bailout or no bailout?
There are other options: a much better alternative to a straight-up bailout would be for the government (or ideally government pressure on private banks) to provide debtor-in-possession financing for the auto companies so that they can go through chapter 11 safely and be reorganized into more competitive entities. Yes, it will hurt the unions and the dealers because their contracts will be renegotiated, but the pain is necessary for the long-term health of the industry.
They don't make $75.00/hr. That's been badly misconstrued. Auto workers at Toyota and other Japanese auto makers make more an hour than the big three.
"The average GM assembly-line worker makes about $28 per hour in wages, and I can assure you that GM is not paying $42 an hour in health insurance and pension plan contributions. Rather, the $70 per hour figure (or $73 an hour, or whatever) is a ridiculous number obtained by adding up GM's total labor, health, and pension costs, and then dividing by the total number of hours worked. In other words, it includes all the healthcare and retirement costs of retired workers." from a Portfolio.com article. Please get your facts straight.
What's actually causing the poor performance is relatively unrelated to the fact that the companies are failing. Unions might not be the problem, but something is, and as long as it is, it makes no sense to just give them money when they're probably just going to lose it.
But the bailout bill that passed in the House did have a lot of conditions on it, requiring profound changes in the industry. I agree that we don't want to just hand them a lot of tax-payer money to lose, but you can put conditions in place. What pisses me off is that nobody thought it was necessary to do the same in the Wall Street bailout.
That's inaccurate. As I understand it, the "bailout bill" gave statuatory authority to the treasury to purchase troubled assets (TARP) and possibly also equity in troubled companies. Those purchases have come with preconditions, including sometimes on executive pay. Also, there are no pure investment banks left in this country - they've all either been bought by banks that take deposits or converted into such. That means that they are subject to much stricter state and federal regulation.
But not the kind of regulation that we really need - like in the case of credit default swaps. Instead, the few have made big bucks from this kind of credit derivative and then passed the risk on to the tax payer. How is that fair?
...And doesn't it seem terrifically unfair that companies like AIG could receive $144 billion while we can't even give the automakers $14 billion to hold them over? And what is AIG using these funds for? That's not white-collar privilege? Seriously?
Pension and healthcare obligations are part of what makes the Detroit companies non-competitive. Those obligations will have to be renegotiated, and the best way to do that is in bankruptcy court. Yes, that means that retired workers won't get what was promised them. It sucks but it's necessary if you want the homegrown auto industry to have a chance to survive.
Yeah, fuck those retired workers. They can eat dog food. Those executives NEED their jets and multiple mansions!
Check out my comment near the bottom. The execs take in about $39 million a year. The UAW workers and retirees, counting wages, benefits, and pensions, take in about $12 billion a year. That's what's killing them. GM has become a failing HMO with a side-business in making cars that people don't buy.
The executives are the ones who have made it a failing business, not the workers who simply come to work everyday and construct the crappy cars that the executives have decided should be made. But apparently docking the execs pay (or firing them and getting someone else, which is what us lowly workers would face if WE did such a crappy job at work) AND requiring the company to do their best to become viable again, rather than punishing people who have done their jobs and are only expecting fair compensation, is just too much for people like you to grasp.
What the executive would have to do is shrink production, overhead, and their distribution chain considerably. Whether or not the companies are too big to fail, they're certainly too big to compete and survive. They have too many people, too many factories and too many dealers making and marketing too many cars that people aren't buying.
The problem with a bailout is that it won't stop at $14 billion, or $25 billion, or probably even $50 billion. Capacity is going to have to shrink either way if the companies are going to be viable, and if the objective is just to pour money into them so no one has to lose their job, we're going to turn them all basically into gigantic, open-ended welfare programs, and we'll be pouring money into them forever. It'll be a government version of "Weekend at Bernie's", where we go on pretending that these companies are viable when they're not. Think about it, are you personally likely to buy a car from any of these three companies in the next year? Do you know anyone who is, especially now?
But it wasn't too much to give AIG $144 billion so they could continue with their spa weekends and executive bonuses? Of course not, 'cause they've got friends in high places.
I don't think anyone here is claiming that the workers won't have to compromise. The UAW had already agreed to make a number of concessions to help them stay in business. The CEOs, after being grilled on their choice of transportation, reluctantly agreed to take compensation cuts as well. The larger point remains - there is a HUGE double standard here between Wall Street and main street.
Uh, sorry to raise any annoying little facts here, but the Wall Street bailout was a Democrat thing, at least as far as the vote went. The "Emergency Economic Stabilization Act of 2008" passed the Senate 74-25 and the House 263-171. The breakdown of the vote by party was:
Senate Y: D: 40, R: 24
Senate N: D: 9, R: 15
House Y: D: 172, R: 91
House N: D: 63, R: 108
Nice story, but...
RECENT HISTORY FAIL!
Hmm, as I recall the Democrats fell in line after a lot of fear-mongering on the part of the Republican Bush Administration. And there were a number of Democrats who had an issue with the lack of oversight and conditions involved in the Wall Street bailout, but they were told that it was either aprove the bailout immediately or the entire economy would collapse, again, by the Republican White House. Vote counts don't tell the whole story.
The Democratic majority fell into line behind a Republican White House and the Republicans didn't? How does that make sense? Did the Democrats just not have as much nerve? Where were the Republicans helping out those people who "look like, talk like, and dress like said Republicans" and who "live in the same neighborhoods, went to the same colleges, and share similar investment portfolios. Some of them even used to work alongside each other"?
Speaking of annoying little facts, what about the "annoying little fact" that the Republicans were supposedly prepared to vote for the exact same thing but pulled the plug at the last minute supposedly over a few words that offended them (just like they did again this morning, in fact)? I can't decide if they chickened out or were too busy playing games with our economy to serve their political desires, but either way, they deserve a giant helping of the blame. At least the Democrats tried to do something rather than insisting on some mythical version of perfection and soothing words.
Not one of the Republicans, who ranted and raved yesterday about how much the auto workers get paid, raised an objection to the Wall Street bailout for similar reasons. No, their only concerns were about becoming a socialist nation, but other than that they fell into line. If you listen to each Republican speech yesterday, there's a strong consensus among Republicans that most of the problems with the auto industry are due to workers' salaries. Why weren't these guys worried about CEOs salaries?
The top 5 executives at GM, Wagoner, Henderson, Lutz, Cowger, and Stephens earned a total of $5,841,667, according to this year's proxy statement to the SEC. If you want to add up their total compensation, options, retirement gains, everything, their total compensation came out to $38,954,972. This is from this year's proxy statement to the SEC.
Out of the 75,000 workers and 12,000 non-workers who are taking down $29 per hour, times 40 hours a week, times 52 weeks a year, you come out pretty close to $5.25 billion per year. Added to that, GM has annual pension and benefits obligations to those 430,000 retirees of about $7 billion a year.
Hmmm, let's see, executive compensation: about $39 million a year. UAW wages, benefits, and pensions: about $12 billion a year. $39 million here. $12 billion there. Is GM hurt more by having to pay $39 million a year? Or is the bigger problem the $12 billion a year? This shouldn't be a hard question.
But who deserves their compensation more? The people who came to work everyday and did their jobs or the executives who drove the business into the ground in the first place? Who is more valuable, more necessary to the company?
It's not about the cheapest thing to do, it's about the BEST thing to do. Going for the cheapest thing without a thought about quality is what has fucked us in the first place. I don't think the cure for the disease is the status quo.
It isn't a question about who "deserves" what in the abstract sense, whatever that's supposed to mean, but how these firms can operate in the long-term, if they can operate at all. At least a significant portion of the workforce of all of these companies simply isn't valuable or necessary: they're making cars that are just piling up in inventory and not being sold.
Yes, it is about who deserves it. Otherwise, you are punishing the workers for the crappy decisions the executives made. They are already going to be (are being) "punished" by the market; let's not treat them even more like shit on the bottom of our shoes.
Uh, no, that's the point of a bailout, they won't be subject to the market at all, we're all going to be paying for them to make things no one wants to buy.
Hey, the executives probably should be fired, which they probably would be by the new owners in a bankruptcy reorganization. I have no problem with firing the management. But none of these companies can survive unless they seriously cut back on their outstanding and open-ended obligations. A bailout is just letting them keep on with the same unsustainable structure.
And they sure did a bang-up job to earn that money didn't they? What would happen to one of their employees who did such a shitty job? They'd be fired. Why is it that nobody suggests that executives who run their companies into the fucking ground ought to be relieved of their duties? When they make shitty decisions, or take incredible risk with the investors money (as in the Wall Street case), why is there no accountability?
And do you really think it's a problem that 75,000 workers earned more than 5? Really? I don't get it.
But this is all beside the point. The way that Senate Republicans have handled these two bailouts amounts to class warfare. The 3 million people who stand to lose their jobs if the domestic auto industry fails are not "their type of people." So fuck 'em. And this, from the party of "family values." Right.
Again, the Republicans in Congress are the only ones who've been consistently against both bailouts. Remember when the first bailout failed the first time? It was the Republicans in the House who shot it down. I posted the numbers on the votes. These are the Democratic bailouts.
Ignorance is not strength. Two plus two does not equal five. And the Democrats supported the Wall Street bailouts while the only significant opposition came from Republicans. Plain and simple fact.
And as I said, I have no problem with the executives getting canned. They probably should be, and I would expect that these company's new owners are far more likely to fire them than the new "Federal Department of Chevy" is ever likely to do.
The Republicans were totally in support of the first bailout until they threw a hissy fit about Nancy Pelosi's comments concerning the Republican record on de-regulation.
Well, well, well. What have the good ol' boys in the Republican party been up to now on account of the executive friends? Check this out. So that's why they changed their method of disbursing the bailout funds. It all makes sense now.
There they go, our taxpayer bailout dollars, into the pockets of Wall Street execs. Bye bye.
All I know is that my Father was a manager at Bill Heard Chevorlet when it went under...and now he is out of work. He made a good living, but again now he is out of work and having a hard time finding a job because all the car dealerships are struggling. This bailout would have helped, but now it is a moot point. I think that it is bullshit that the bailout failed. Wall-street is stocks and bonds and banks and the only thing of those that I know most people have and use is banks...cars are cars. People all over the country drive not necessarily because they want to but because they have to. Transportation is a necessity, and right now the auto industry is hurting. They were asking for a significantly less amount from the government than Wall Streeters have...and they were denied I truly do not understand the justification. My father is a real person affected by this as is my family. 2 children in college and another in a private grade school. My mom has always worked and my dad as well because they both wanted to and needed to. Now we are hurting, but I guess the Republicans don't care much about that...
And both my sister and I have jobs and loans, so we are not totally dependant on our parents, but we are also needing of help...
I think one of the problems with the US economy is that there's not enough unionization.
A lot of the job growth in recent years has been in ununionized sectors - unskilled work, service work; part-time, temporary, and elect-to-work jobs that pay little and offer no benefits or protections, and which are difficult to organize. Instead of unemployment, there has been underemployment. And as Barak Obama often mentioned on the campaign trail, wages have not been going up with the growing economy.
In an economy based on consumption, what kind of sense does that make? Henry Ford paid his employees enough so that they could each afford to buy a Model T. Today employers outsource jobs and work to undermine attempts to unionize, but they still expect Americans to buy all the shit that's thrown at them to drive the economy. At some point Americans would not be able to afford it anymore. That time is now.
The problem is that employers put their short term interests ahead of their long term interests by not treating workers decently.
You should think critically about what you're saying there. In one sentence, you say that there's not enough unionization, and in the next you point out that unionized sectors have lagged behind in job growth. Why would it be a good thing to support something that appears to cause a lag in job growth?
The problem at core is that we are losing human capital as the baby-boom generation retires and becomes dependents, and we haven't taken care enough to replace and develop human capital in the first place. Simply paying people more money to do the same work does not produce economic growth, especially when other people can do the job as well or better elsewhere for less. At core, the problem is that our educational and training establishments in this country are deeply dysfunctional, and can't produce enough workers with the proper skills and knowledge that would allow them to be productive in a transitioning economy. This isn't a secret, and it's been this way for about 30 years.
The problem at core is that we are losing human capital as the baby-boom generation retires and becomes dependents, and we haven't taken care enough to replace and develop human capital in the first place. Simply paying people more money to do the same work does not produce economic growth, especially when other people can do the job as well or better elsewhere for less. At core, the problem is that our educational and training establishments in this country are deeply dysfunctional, and can't produce enough workers with the proper skills and knowledge that would allow them to be productive in a transitioning economy. This isn't a secret, and it's been this way for about 30 years.
I would agree with this, but add that "free trade" agreements such as those governed by the WTO make it incredibly difficult to compete and also protect your workforce against exploitative practices, protect your environment, build or maintain a decent infrastructure, etc.
I'd agree that we could use better reciprocity in our free trade agreements on all of those issues. But free trade itself is a net gain. You might have noticed that Paul Krugman just got a Nobel demonstrating that this year. Oh, and all that fast credit that was keeping the economy going, and that Obama is going to have to borrow hand over fist now for the bailouts and the infrastructure and anything else: all foreign debts. The Chinese, Indians, and everyone else have been pretty tolerant with our profligacy for a reason.
There are so many suppositions and half truths in both the original post, and in the comments I don't even know where to begin.
Let me start here: I grew up in a UAW town. We have more McDonald's per capita than anywhere else. Two malls for a population of only 50K. This town was fat with union money, and sorely lacking in any education. And yes, people here really did average $75/hour with overtime.
This town is dying, rapidly. Both white and blue collar jobs are drying up, and businesses and people are leaving in droves. Would a bailout stop this exodus?
Not fucking likely. Those who are on forced layoff are still getting paid. 80% of their salary, for sitting around the house while they wait for their jobs to magically reappear.
I have nothing against unions. They are often necessary and useful. But we are at a point where a lack of union concession, and a complete lack of responsibility by automakers, is just as damaging as a lack of government intervention.
The government got it's ass handed to it in the Wall Street bailout. I'd rather not spend my tax money paying John Smith, Chrysler line worker to sit on his ass while the auto companies continue to fail.
I work on the peripheral of the auto industry, and yes, the lack of a bailout affects me, personally. However, unless the Big 3 produce solid, BELIEVABLE, ways the bailout will help them remain solvent, I will remain against it.
I'm sorry, but I missed the part where you explained which suppositions and half truths were contained in the OP. My claim is that the Republicans approach Wall Street in a completely different manner than Detroit. How is this wrong?