Democrats aim to bail out their union donor base
11/18/2008 - 9:01am
A possible federal bailout of the Big Three automakers will be a topic of furious discussion in coming months.
Yesterday, the Senate proposed another $25 billion in loans to the auto industry, but it's not likely to go anywhere in the face of unanimous or near unanimous opposition among Senate Republicans. But it's just a warm-up for what Democrats hope to do in the next Congress, with the next President.
In anticipation of that discussion, here's the basic idea, as I see it:
If there’s one sacred cow which the Democrats will want to protect, it’s the autoworkers unions, which represent one of the Party’s largest sources of campaign contributions. One or more of the Big Three should be allowed to file for bankruptcy – which is not necessarily the same as permanently closing down all operations. (Think of United Airlines, for example.) A car maker could get out of much of its legacy costs (health care and insurance expenses contribute more to the cost of each GM car than steel does) as well as their outrageously high hourly wages. (A Big Three worker makes an average of $73/hour in total compensation, more than 50% more than an American worker for Toyota and 50% more than the average American management employee.)
Stratfor puts it nicely: "This is what recessions are supposed to do.... recessions reveal weak businesses and destroy them, freeing up resources for new enterprises."
Be very clear about this: The Democrats will try to make American taxpayers loan money to the Big Three despite the fact that one or more of the companies will likely fail anyway. On 60 Minutes this past Sunday, Barack Obama said “It's my belief that we need to provide assistance to the auto industry. But I think that it can't be a blank check.” Just what kind of check does he think it will be? A $25 billion loan to the industry in September was followed within less than two months by demands for another $25 billion. Once we have $50 billion “invested”, won’t we “have to do whatever is necessary" to support the companies forever? Won't having spent $50 billion guarantee that government sees the Big Three as "too big to fail"?
The Big Three and the Democrats will make pretty noises about creating a new generation of desirable efficient renewable-energy vehicles…while the Japanese companies will make those same types of cars better and cheaper right here in America. And Detroit will remain as uncompetitive – and as supportive of Democrats – as ever.
[Thanks to Ike for adding this good point:
Let's not forget the extra $10 billion that the city of Detroit is lobbying for:
http://www.freep.com/article/20081112/NEWS01/81112065/1199/PRINT
(If only Kwame had paid for the unlimited text-message plan...) ]
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Kaminsky's "Worthless" Screeds.
The RUSE comes by it honestly. In this bit of righty quackery the RUSE uses the usual subterfuge to make his "worthless" point. Russ says the big three auto workers make $73 an hour twice as much as an American worker at the non-union Toyota. Fair enough. But theres more the Ruse glossed over in his rush to judgement. Lets check the numbers.
The average UAW employee for the big three averages $27 per hour basic wage, $20 per hour for health insurance, and about $27 per hour for a defined benefit retirement plan and disability insurance. The employee gets a basic wage, plus full health benefits paid for by the company (The employee pays a $10 copay for doctors visits and a small co-pay for prescription drugs). The company also provides for a defined benefit retirement plan for the employee funded by the company. Thanks to the union this is a good secure job that provides for familys to buy homes, autos, pay the bills and help keep the economy up and running. Thats the way we used to do business in America until corporate friendly free market wing nuts like Kaminsky came along and wormed their way into Congress and the executive and gutted the american worker and their benefits.
Toyota pays on average about $47 per hour. $30 per hour base wage and about $15 and hour in health benefits. Toyota pays the health benefit. There is no defined benefit retirement for the worker. They have the 401k matching option only. The health benefit is not as comprehensive as the UAW health benefit and the employee pays a portion of the monthly cost. The Japanese auto makers have indicated they are looking to reduce costs by $300 million by 2011. Guess who's going to help out with this plan. You guessed it. The employees who will be paying more for their health benefits.
Whether you agree with the bail-out or not or whether you agree with union or management in this battle the fact remains Kaminsky didn't present the entire picture. He distorted the facts to confuse in this "WORTHLESS" rant.
I haven't heard about the $10 billion for Detroit but I'm skeptical. Anything this clown writes lately is sure to be questionable wing nut snake oil.
Typical liberal lack of economic understanding
I didn't give the "entire" picture, because that would take a book, but I did not give a misleading picture. I didn't say that the pay packages were equivalent between Toyota and GM. In fact I said just the opposite. Still, Toyota doesn't have any problem hiring good workers at those wages, so why should US taxpayers subsidize overpaying GM workers? It wasn't us who negotiated those contracts with the unions and it's not us who should suffer for them.
Just like those people who bought houses they could afford (or rented instead of buying) shouldn't suffer for the errors of the people who bought more than they could afford, or the people who lent them money.
Furthermore, as is typical in economic analysis by leftists who don't actually think about anything, you talk about the money to union workers as if it falls from the sky. No, the higher cost for a GM vehicle because of those costs comes from American consumers, leaving them (if they buy a GM car) with less money for other things, whether a better house, a better retirement, a better education for their kids, or even just a nice vacation.
For every economic benefit you want to ascribe to unions, you must recognize the cost borne by consumers, shareholders, etc.
Kaminsky is stuck in the 17th century.
I have to hand it to you Russ. You know how to spin, twist, flip, and flop. Back and forth up and down sideways and bothways like a fool. I don't think you know a tenth of what you think you do.
You could write a book giving us a misleading picture which is the norm for you. You didn't "give a misleading picture" you say. "Toyota doesn't have a problem hiring good workers". Nice try Russ. You did give a misleading picture.
You said the "auto makers could get out of their high legacy costs, health care and insurance, as well as their high hourly wages" of $73 per hour. Thats 50% more than an American worker makes working for Toyota. Thats a blatant distortion. The big three average hourly wage is $27 hour. Toyota's average wage is $30 and hour. The $73 includes company paid health care and retirement funding for each employee. But you didn't mention this as it would have entailed writing a book on your part. The truth is just the opposite of the moonshine you're peddling.
Toyota is able to find "good workers" because they locate their manufacturing plants in economically depressed rural areas where average hourly wages are about $10. Who wouldn't jump at the chance for a $30 and hour job under those circumstances.
You claim you don't like "unions for government workers". Whoopee doo for you cowboy. Just what do you like. Who are you to say whats good for government workers. You're a free market player, a financier extraordinaire, a 17th century pseudo economist with extremist right wing credentials. You're "simply", to borrow one of your favorite blowhard adverbs, a squeeky wheel about to come loose.
For every economic benefit you want to ascribe to the free market you must recognize the cost borne by consumers, shareholders, ect. Right Russ.
The pot calling the kettle misleading
John,
You imply that Toyota doesn't pay for their workers' health care. That's simply not true, though they don't pay health care for their retirees. (Not a big issue, at least today, since they have very few retirees.)
You also imply that somehow the locations of Toyota plants are in poor places. Actually, they're in various locations, including California...hardly a low-cost location:
http://www.toyoland.com/toyota/plants.html
And it's not as if Detroit is an economic powerhouse. They've had a one-state recession going on for most of this decade. I'm sure they would have killed to have a new Toyota plant there, except that the unions are so dominant in that state that Toyota would be stupid to go there.
There's a whole set of structural issues which makes Detroit non-competitive, and they won't become competitive until they get rid of their current union contracts. Here's a CNN story on the subject, so you can't just say I'm quoting a "right-wing" source:
http://money.cnn.com/2007/01/26/news/companies/pluggedin_taylor_ford.fortune/index.htm?postversion=2007012611
And if you're willing to read a conservative source, here's a good short summary from just today:
http://www.heritage.org/Research/Economy/wm2135.cfm#_ftn6
At the end of the day, you and your friends can try to defend very high wages for Detroit workers and the result will simply be a huge number of auto workers in Michigan without jobs. The people who you seem to believe are underpaid by Toyota will be pleased to still be employed (though I would expect all car makers to have to cut back somewhat in this economy.)
Donor Base Reply
Naturally somebody always has to be assigned political blame and you regressive Republicans always blame unions first. Never mind that many experts have made the case that management misdirected the company's mission in all of the "big three". They made the wrong vehicles at the wrong time and never mind that American consumers love big trucks and never mind that your party's trickle down economics has ruined the economy. And of course it is ok for business to finance the Republican party (both parties for that matter) but unions should dare not get involved in the political process. Employees should sit back, shut up and be thankful to have a job and dare not try to bargain for a better life. Only business should be sign contracts and collectively bargain, huh? Your party lost the election because of their tired pattern of blaming and economic elitism.
Read what I wrote
I did NOT write that the companies' problems are solely due to the unions. It takes two to tango, and the companies' managements are as guilty as anyone...or more guilty than anyone for the Big Three being in their current situation.
What I did say was that the political implications surrounding the unions was probably the biggest concern for Democrats and Republicans alike in the debate over whether to bail out the automakers, and I stand by that assertion. A close second is the moral hazard involved in bailing out more private companies, particularly when you can't make a good argument that they're necessary cogs in our financial system, which was the argument for the bailout. And a close third is the fact that money lent or given to the automakers will almost certainly be lost to taxpayers.
Yes because the unions are
Yes because the unions are darling little angels that have no political involvement whatsoever....
You blame regressive Republicans for always blaming unions. Funny, you socialist Democrats always blame business. Go figure.
Companies should be allowed to fail if their incompetence leads to the diminishing demand for their products. It’s called the invisible hand.
And to say, “Your party lost the election because of their tired pattern of blaming and economic elitism” is just ridiculous. How dare we try and give businesses the tools to succeed instead of burdening them with windfall-profits taxes when they make “too much money”. How dare we try and keep minimal regulation so they can compete in the global economy. How dare we not want businesses beholden to unions who line their pockets with company money then complain about the greed of those they have bent over an assembly line. $70/hr would never survive in a free market system. Their skills aren't worth anywhere near that.
I’m sure when we over-tax, over-burden, over-regulate and force unionization down the throat of every business, this economy will just rebound like never before…
Here we go again ......
I made no claim that unions are not involved in the political process. They are, so what? And I have never met a union official, including myself, that wants to keep a business from opening or disagrees with their right to exist, in fact the opposite is true for clear reasons. Unlike some business leaders, unions do not seek to separate labor from capitol. We understand that both are necessities. We seek only to be part of the process and not expendable parts as in "at will" dictatorships which sometimes devalues labor and betrays the importance of people's work.
Business interests however, often go to extraordinary lengths to keep unions from existing under the claim of free market economics. Adam Smith would probably turn over in his grave if he were alive today. I refuse to take the position that all the banks and business that failed in this country are "incompetent". I guess that is your version of the "free market", which helped cause this recession. It was sure not necessary government regulation and intervention. If we can help banks with no guarantees then why not help one of the important industries in the country? As for your comment on taxation, I can only say, that we have a progressive tax system. People and companies that make more are supposed to pay more and most people understand that. A few states call it the "commonwealth" because it is about collective interest and not just the wealthy. In your view, that makes me a "socialist" That is not to say I think taxes should prevent the accumulation of wealth, but those who makes more should pay more. Talk about greed. The disparity between CEO's and workers in our country is second to none and off the chart.
Allowing employees to collectively bargain does not "beholden" anybody to unions. It simply gives employees the same RIGHT that the owners have. I think the previous post by ryecatcher pinpoints why the wages are different between companies, but again, if I express the opinion that health care should be considered a right, you will probably call me a Marxist instead of a socialist.
Your claim, my claim
I made no claim that unions should not be legal, even though I don't like them generally, especially for government workers.
My argument here is that the unions demanded unsustainable compensation and the companies stupidly agreed. So why should taxpayers be left holding the bag?
Healthcare is NOT a right. Where are you going to get "free" health care without stealing from others to pay for it?
Your omission, very telling
Kaminsky left out that under the new GM contract, already ratified by the union, GM's average hourly worker cost in two years will be about $45, competitive with Toyota. Big surprise.