Broadly speaking, the U.S. welfare system divides into two parts -- the private, run by firms; and the public, provided by government. Both are besieged: private companies by competitive pressures; government by rising debt and taxes. GM exemplified the large corporation as private welfare state. In contracts with the United Auto Workers, GM promised high wages, lifetime employment, generous pensions and comprehensive health insurance. All this is ancient history: New workers get skimpier benefits. .......
Pressures on private and public welfare won't abate. The economic conditions that encouraged corporate welfare have long since vanished. In 1955, GM, Ford and Chrysler accounted for 95 percent of U.S. light vehicle sales, reports economist Thomas Klier of the Chicago Federal Reserve. With market dominance and technological leadership, the Big Three assumed they could pass along to customers the costs of job guarantees, high wages and fringe benefits........
In theory, expanding public welfare could offset eroding private welfare. President Obama's health-care proposal reflects that logic. The trouble is that the public sector also faces enormous cost pressures, driven by an aging population and rising health costs. The Congressional Budget Office projects the federal debt will double as a share of the economy (gross domestic product) to 82 percent of GDP by 2019.
Any sober examination of figures like these suggests that the system has promised more than it can realistically deliver. We are borrowing not to finance investment in the future but to pay for today's welfare -- present consumption. Sooner or later, the huge debt will weaken the economy. Nor would paying for all promised benefits with higher taxes be desirable. Big increases in either debt or taxes risk depressing economic growth, making it harder yet to pay promised benefits.
The bottom line is that if the Fortune 500 couldn't provide free health care to all their workers and dependents, it's hard to see how governments are going to do it--that is--without tradeoffs which politicians aren't going to disclose up front.
I also find it interesting that the most vocal Congresional proponents of "public option" health care are those politicians who came of age at the tail end of the Great Society---Ted Kennedy, Chris Dodd, Henry Waxman, et al.---all of whom would like to pretend that big government never really failed--it just got bad press. And we all know Barack Obama "missed the 1980's"
Roger Smith may seem to be a light year away from our suave , metrosexual President. But maybe not. When Smith took the reins at GM, the firm was challenged, but huge. Smith thought by sheer force of revenue he could buy GM's way out of trouble. He spent profligate sums on his vision--buying Hughes Electronics, buying Ross Perot's EDS, building huge new assembly plants like Poletown and Buick City even when GM had plenty of old plants, starting the new Saturn brand to compete with Toyota.
Ironically, when American business was in the process of reinventing itself by becoming nimble, flexible and customer-oriented, Smith remade GM into even more of a command and control organization than he inherited--removing divisional autonomy.
And a time when GM should have been trying to right-size itself with future demand, establish a realistic labor-management relationship and build its own organic resources, Smith brought his version of "Hope and Change"
How exactly is Barack Obama's economic vision different than Roger Smith's. He is trying to buy off the old labor establishment and spend his way past the problems we face--instead of forcing the painful but necessary reforms we will need to be competitive in a cutthroat global economy. And he is trying to impose centralized management upon a dynamic economy.
Let me make one other point. If we adopt "cap and trade" much of the heavy industry left in the Midwest will give up the ghost and move to Asia. Then the workers will be retrained for health care. But "health care reform" is supposed to cut costs. In practice, that means closing hospitals and firing employees. Out of the frying pan, into the fire. Jobless recovery, anyone...or "Player Piano"
It's sorta common knowledge that our President, a native of urban Chicago, is not a fan of the SUV.
One prominent auto magazine had this take on his mandate to massively increase the fuel economy of the American motor fleet.
Obama's CAFE Fuel Economy Standards to Create Fleet of Tiny, Expensive Vehicles - Car News
But we "know" "everyone loves the environment" and "everyone hates SUVs". So the car buying public is reacting positively to how the auto industry is being changed?
It might be gone. Even with the auto industry mired in depression – sales are down nationally 36.5 percent – big vehicles such as the Ford Expedition and Chevy Tahoe are in tight supply because of drastic production cuts that automakers imposed last year as sales began to plummet.
Now, a year after $4-a-gallon gas nearly killed SUVs, some dealers in this market are selling them for window-sticker prices. Moreover, most late-model used pickups and SUVs have regained all of the thousands of dollars in trade-in value they lost last summer, dealers say.
O.K. , this is Texas, the biggest , reddest and right now most prosperous part of the country. But don't think this is likely to be an aberration. And it is going to be a big problem in trying to recover much of our $100 Billion or so investment in Detroit.
The competitors to GM and Chrysler have to follow CAFE too, but are under less intense pressure to be "green". Look for Ford and Toyota to maximise production of Explorers and Highlanders if GM and Chrysler are pressured to hold down production. And look for SUV prices and profits to rise further due to regulatory scarcity.
The Obama brain trust will force the two government owned car manufacturers to develop a product line that appeals to young urban sophisticates. ---not the traditional market of "apple pie and Chevrolet". Few of these folks are going to be pried loose from buying foreign brand automobiles. They've just become too accustomed to doing this. Sounds like Ford is going to gain lots of market share as the last "real American car company" if it can avoid running out of cash.
I'm certainly not arguing that the previous management of Detroit were a bunch of wise men. But Detroit made SUV's because they were profitable. The Chevy Volt will not be. So the new crew running the car business might lose even more money than the old crew did.
And make the SUV back into a huge status symbol due to its scarcity.
If Chrysler and GM had been permitted/forced to declare bankruptcy months ago then there would not have been massive amounts of government money owed by those two companies. As it was the debt owed allows the government to claim a majority ownership of both companies.If the single entity owning a majority of GM and Chrysler were not the US government would they be subject to a anti trust ruling from the federal government?How much collusion will there be between Chrysler and GM in the future with a common majority shareholder?
Here's a bargain for you. General Motors' current market value is about $500 million. In a breathtaking abuse of executive power, the Bush administration "loaned" GM $13.4 billion from the Troubled Asset Relief Program ("TARP") in December, 2008, plus an additional $4 billion in February, 2009. (Congress had not authorized the money to be "loaned" to GM.) On June 1, 2009, the Obama administration announced that it would invest an additional $30 billion in GM. About $41.2 billion of the "loans" will be converted into equity in GM, making the United States the principal shareholder with 60% of GM's stock. You, the United States, have paid $41.2 billion for $300 million worth of GM stock. Congratulations! You overpaid for GM stock by 137 times its value.
The bankruptcy petition GM filed this week has been its only reasonable course for a long time. Bankruptcy protection will allow GM to shed assets and debt and renegotiate labor contracts. GM's plea for your money to avoid bankruptcy on the ground that consumers would not buy their cars if GM were bankrupt never made sense, as the whole world has known for months that GM is insolvent. Had there been enough leaders in Washington with the courage to reject GM's demands for cash, GM would have petitioned for bankruptcy months ago and might even have emerged from bankruptcy by now.
The GM bailout is incredibly unjust. Over 5 million people have lost their jobs since the recession began. Those millions of Americans lost their jobs because their employers had to lay off workers to stay afloat, and those workers are no less important than GM employees. But GM has political power, and those other employers don't. GM's power has now forced all of us, including those people who have lost their jobs, to dramatically overpay to enable the failed automaker to postpone its inevitable bankruptcy until now. It's just that simple, and just that ugly.
As economist F.A. Hayek argued for over sixty years, a free society does not exist to serve any particular goal. Rather, it exists to enable the individuals in that society to pursue their own goals, which may be known to no more than a handful of other people. In such a society, the law must be a predictable part of the background information that individuals use to plan as they pursue their own goals. For that reason, it is essential that a free society be governed by general rules that apply to everyone equally. In contrast, a society that is organized to pursue specific goals must be governed by commands to specific groups or individuals rather than general rules applicable to all, because achieving the chosen goals requires direction, not freedom.
In this instance, our federal government has decided that the automakers must not be allowed to fail at any cost, so it has commanded you to buy GM stock. You have indeed paid an outrageous price for that stock, because the GM bailout cost more than money: it was also a grave injustice. And this injustice, like the bank bailouts that have made you the proud owners of failed financial institutions, is another step toward transforming our society into an organization that commands its powerless members to serve the interests of those with political power. If you have never read Hayek's classic The Road to Serfdom, read it now.
Scott Boykin is Chairman of the Alabama Republican Liberty Caucus
Totalitarianism is once again on the march. It's coming at us so fast and from so many directions it is difficult to see as a whole, though the pieces are quite familiar.
Let's start with President Obama's most recent encroachment on the private sector, the putative firing of GM's CEO. Nothing in the Constitution tells us that Presidents should maniuplate the leadership of private enterprise, or usurp the responsibilities of shareholders and boards. While I shed no tears for GM or its failed CEO, I wonder about Obama's vision of the Presidency when he behaves more like Hugo Chavez than Teddy Roosevelt, our most activist President when it came to clipping the excesses of big business.
When in modern times has a President taken such invasive action in the private sector, apart from Richard Nixon's imposition of wage and price controls?
"He has the massive will of the American people behind him -- and he has been granted permission by us to do what he sees fit. If you liked this week's all-net 3-pointer, stay tuned."
To do what he sees fit. We're a long, long way now from the American political heritage of Rousseau, Locke, Burke, and Jefferson when we think like this.
Tough economic times are opportune moments for totalitarianism, and sometimes it comes with charismatic leaders who buff it up with charm and soaring rhetoric. Finally, though, all they offer are their own beliefs about what is fair, just and right. And when the timing is right, a lot of people will agree with them.
What is fair, just and right is usually defined against a fearful backdrop of scoundrels, represented by dehumanized stereotypes: The rich, bankers, lawyers, hedge fund managers, and usually Jews (don't worry -- that's coming).
Consider Glenn Beck's questioning of Connecticut's Attorney General, who could not offer any legal grounds for harrassing the bonus babies of AIG. Finally, he fell back on his perception of popular sentiment -- that AIG employees got "money they don't deserve."
Who's to be the judge of that, if not your boss? Apparently, more and more people feel comfortable making Obama the final judge of more and more things: What should taxpayers subsidize, who should be taxed more, what people ought to earn, what constitutes social justice.
To do what he sees fit. It is really no different than what Germans, Argentinian Peronistas, Spanish Francists, Italian fascists, and Nicaraguan Sandinistas granted to their leaders.
Come now, you say -- Obama's no Hitler! He is not. But National Socialism and every other fascist movement took root with government control of private industry and institutions (especially universities, and press). Private ownership, government control. Take away the funny mustaches and silly uniforms, and that's what totalitarianism is. Sometimes it is accompanied by imperialism and mass slaughter, but sometimes it is quieter than that (Tito, Castro, Peron, Chavez). Only the scapegoats change to suit the Leader's needs.
You won't catch President Obama wearing a funny uniform, but his minions in Congress just passed a bill that triples funding for Americorps, and organizes them into "local cadres," with uniforms, military-style discipline, and a committee to consider compulsory service for Americans of all ages. Even the San Francisco Examiner, hardly a conservative oracle, called it "creepy authoritarianism." And those same minions are considering passing his reduction of tax deductions for charitable contributions -- a move no doubt designed make the non-profit private sector more dependent on government, and less on private donors.
All of these policies, and more, show us a President who is a classid statist, with a profound distrust of the individual, and a will to curb individual freedoms in the interest of groups -- favored political classes of people. Most people won't be among those favored groups when it's all said and done.
The rising totalitarian sentiment is not confined to the left. It's worth remembering that our modern left and right, Communist and fascist movements, both originated from the dialectic philosophy of Hegel. Increasingly, we see fascist and Communist flags in public demonstrations in the streets of London and Paris, not to mention long-forgotten fascist flags and insignia increasing displayed at professional football matches in Europe.
Unconnected things, perhaps. I think not. I think we're seeing social phenomena -- Obama is one example -- that reflect people's reactions to widespread economic insecurity and fear for the future, a call for someone to just fix it, to make things right again. To do what he sees fit.
I've allowed the dust to clear after last week's late night auto bailout debacle. In the passage of time, Senator Dodd's performance looks sorta like this
Indeed, one wonders why Dodd bothered at all, since he seemed to not care what sort of dreck the federal government generated on an issue of rather pressing concern...saying of Bob Corker
"If perfection was supposed to be his goal, he was sent on a mission he could never complete,"
An effective chairman would have rounded up his votes and forced some form of temporary compromise between the GOP and the UAW to pass a bill that offerred some meaningful relief. But after the TARP disaster, http://www.thenextright.com/ironman/chris-dodd-on-the-bank-bailout-yep-i-pulled-a-plaxico Chris Dodd's delivery skills might be better employed at Domino's
It's not just that Dodd is a liberal, or as my CT compadre Artful Doddger points out, his act back home is wearing very thin http://theartfuldoddger.blogspot.com/2008/12/this-was-not-good-weekend-for-publicity.html. It's that he just isn;t very effective at what he does anymore. And after almost 30 years in the Senate, there's little reason to expect improvement.
I would also suggest to the "save the planet" people out there that the market is indicating that in the immediate term, a massive retooling to electric cars is going to be an exercise in fiscal insanity. If Toyota doesn;t see that much of a market for the Prius until maybe 2011, http://www.courant.com/business/nationworld/wire/sns-ap-toyota-plant,0,7578590.story, perhaps a more prudent short to mid term strategy for Detroit might be to maximise revenue selling conventional vehicles?
Sure it's unplesant and dull, but I've yet to see anyone explain how this works even for the purposes of postponing a bankruptcy until better economic times unless the Detroit 3 cut costs and sell profitable cars http://thenextright.com/ironman/can-hope-change-a-spark-plug
(as an aside, I figured out why the image is a) Detroit only sells big SUV's and b) no one buys their cars. I was in lower Fairfield County this morning. That's the deal down there--the only GM products I saw were Escalades and Tahoes--yuppies assume that's how it works for the whole country)
I might also suggest much as the auto industry is a big picture, it isn't the biggest picture. Since the election of Obama, we have seen the Dow plummet and recover, but as the zeroes on the proposed stimulus package get larger, the value of American currency gets smaller.
The hard reality is that the Big Three automakers could be facing bankruptcy if they don’t get a combined $14 billion in “loans” in order to stay in business and support their business model. However, the reality is that this is really a bailout of the United Autoworkers who need this bailout to keep their wages and benefits even as General Motors, Ford, and Chrysler go down the tubes.
Everyone has been talking about how we need manufacturing jobs and not bankruptcy of the Big Three. However, I will give you the reason why Ford, General Motors, and Chrysler need to pursue a Chapter 11 bankruptcy filing. I give you Delta Airlines.
As early as 2004 and in to 2005, Delta pursued cost-cutting measures that ended up cutting service, but did nothing for both executive pay and the pay received by union employees working for Delta. Everything came to a head with the company’s Chapter 11 filing on September 14, 2005 citing fuel prices and high labor costs.
While the company was in bankruptcy, unionized airline pilots took a cut in pay of 14 percent, executive officers took one of 15 percent, and CEO Gerald Grinstein took one of 25 percent. Also, the company laid off somewhere between 7,000 to 9,000 of the 52,000 employees.
On April 25, 2007, Delta had their bankruptcy strategy approved and emerged from bankruptcy five days later. This proves that a Chapter 11 filing will not kill a company, but restructure it so that it can function free of constraints from management and the unions and make a profit in order to stay viable.
According to the Heritage Foundation, GM, Ford, and Chrysler are paying $73.26, $70.51, and $75.86 in per-hour wages and benefits respectively. By comparison, the foreign carmakers like Toyota, BMW, Nissan, Honda, and Mercedes are profitable thanks to their locations in right-to-work states like Alabama, Georgia, Tennessee, and South Carolina at a fraction of what the Big Three pay in wages and benefits. This does not include the new Kia plant that will employ 2,500 new autoworkers in West Point, Georgia at just $17 per hour in wages. On a side note, the average American makes only $25.36 per hour in the same category.
Business executives and owners (past and present) are irritated by the difference in the earnings between the two biggest car-selling companies in the world, GM and Toyota. Last year, both companies sold 9.37 million cars each. The difference became the labor costs with GM posting a loss of $38.7 billion (a loss of $4,130.20 per car sold) versus Toyota making a profit of $17.7 billion ($1,889.01 in profit per car sold). The Big Three are fighting a losing battle thanks to the UAW who wins if the bailout passes.
What would be simple to avoid any bankruptcy would be for both sides to agree to necessary pay cuts. The UAW isn’t willing to do it because they will lose all leverage in negotiating. Where are the CEO’s telling these union thug bosses that they can either have their jobs at a lower wage or have no jobs at no wages?
All of this has led to Americans losing sympathy for the unions, who have been noticeably absent in the media’s coverage of the ongoing behind-the-scenes work on the bailout. As it would turn out, there are reasons why the American people no longer want to support the unions.
First, more Americans work in white-collar jobs that pay higher wages and provide more benefits because of the skill and education required to obtain and keep those times of jobs. When Americans were making more money during the 1980’s during the Reagan years and the new types of business leaders that were making changes for the better while maintaining and increasing profitability, the sympathy for unionization went out the window and down the drain.
Second, there are the list of high-profile unions that have gone on strike and why they did. Consider that in my lifetime, the biggest strikes were in Major League Baseball, the National Football League, the National Basketball Association, the National Hockey League, and the Screenwriters Guild. All of them wanted just one thing: more money.
When you have even the bluest of blue-collar workers being told to support millionaires on strike, even they begin starting to think the unions have outlived their usefulness. No longer are they fighting overbearing bosses, dangerous working conditions, or oppressive hours. The unions are fighting for the almighty dollar and for political influence and clout.
It’s time to tell the automakers to drop dead to force bankruptcy so that we can restructure the costs of the manufacturing sector so as to compete with the global economy. As long as we are bailing out failed companies in pro-union states thanks to the unions at the expense of taxpayers in successful right-to-work states, America will never be able to compete with the rest of the world.
