Friday, October 31, 2008

Bush Says No Welfare for Detroit

The Bush administration ruled out financial assistance for a possible General Motors and Chrysler merger, essentially kicking the problem down the road and making it the next president's problem.

Barack Obama said, “My hope is if I’m elected, that I’m immediately meeting with the heads of the Big Three automakers as well as with the United Auto Workers... And to sit down and craft a strategy that puts us on a path for an auto industry that can compete with anybody in the world.”

John McCain said he would do whatever he thinks needs to be done to save it, but said the focus should be on disbursing the $25 billion in loans already authorized by the U.S. Congress to help the auto industry.

Bottom line: If Obama doesn't win the election, the Big Three are toast. McCain is as anti-worker as Bush and the national media is falling in line behind them. The WaPo recently ran an editorial called Welfare for Detroit that argued against a bailout for many reasons. This was one of them:
[T]his bailout taxes the less well-off to protect the relatively privileged. The average individual General Motors production worker, whose job would be saved by the bailout, makes $56,650 per year, according to the Center for Automotive Research, and that doesn't count better-paid, white-collar types. Meanwhile, half of all households-- which typically include more than one earner -- make less than $50,000 per year. Where's the justice in that?
Justice? In case they didn't notice, banks are using government money to make dividend payments to shareholders and pay bonuses to executives on Wall Street. In fact, the WaPo reported yesterday that more than $80 billion from the Treasury Department will be used to pay dividends over the next 3 years. G.M. had reportedly asked for $10 billion in new funding.

Besides, as Dean Baker said, "none of these autoworkers are responsible for wrecking the economy." Very true, and working class Americans aren't responsible for the financial crisis on Wall Street either, but they're being taxed to protect the relatively privileged there.

An executive at G.M. saw the WaPo editorial, came to a similar conclusion and wrote a letter to the editor defending the auto industry and workers.
It was breathtaking to see the Oct. 27 editorial "Welfare for Detroit" blithely dismiss the domestic auto industry's contribution to the U.S. economy.

The nation's financial turmoil is not of the auto industry's making, yet its effects threaten the livelihoods of millions of workers, the social pact made between company and retiree, and the health of state and community revenue and services. More troubling, the economy's problems are hindering automakers' transformation into stronger companies that build new vehicles with new technologies that consumers want to buy.

Almost 4 percent of U.S. gross domestic product is auto-related, representing 10 percent of U.S. industrial production by value. One in 10 U.S. jobs is connected to our industry, and we provide health-care benefits to 2 million Americans and support nearly 800,000 retirees and spouses with pension benefits. David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., has said that if Ford or GM fails, as many as 2 million jobs could be lost.

It was also stunning to see The Post describe the workers who build automobiles as relatively "privileged" because they earn about $56,000 a year. Auto assembly plant workers' base wage is about $28 per hour. For a newspaper that serves some of the most affluent communities in America to suggest that $28 per hour is too much reflects a profound disconnect between the editorial writers and the world outside the Beltway.

Vice President
Global Communications
Welfare for Detroit? During the last eight years, President Bush's economic policies have effectively redistributed the nation's wealth from the bottom to the richest Americans. They got their welfare. When do working-class Americans get the help they need?

(Cross-posted at Blogging for MI.)


abi said...

To answer your last question, January 20, 2009, when Obama is sworn in.

K. said...

Good for Steve Harris.

I'm not big on a bailout, but at the risk of sounding socialistic, a federal investment investment in the auto companies might not be a bad thing. It would not only provide the immediate cash, it would afford taxpayer leverage on them to move to green cars.

Kathy said...

Abi, you're correct, but I shudder to think what might happen if he loses. Actually, let me correct that...more of us will be working for less if McCain wins.

K, I'm not crazy about bailouts either, but this is a loan, and hopefully they'll be able to pay it back when our economy improves under Obama. Chrysler paid back their loan under Iacocca.

Also, as this article points out:

Detroit is a big worry for Washington... And taxpayers must bail out their auto industries. The number of people employed in this industry totals 4.15 million, equivalent to the population of Los Angeles (America's second largest city) or 12.5% of Canada's population. This is a 2007 figure and includes 996,500 involved in manufacturing and the rest involved in auto-related dealerships and suppliers.

That's a lot of people who be affected. Ultimately, it will cost government from the national level on down to local communities a lot more if they all end up bankrupt.

Lew Scannon said...

Why is an autoworker making $56K more overpaid than a plumber making$250K?

Kvatch said...

I am curious though...

Given that the economic situation in the US is not the fault of Big Auto, is it not the case that their current financial distress is partly their own fault? And I don't mean the line worker here, but management and executives that failed to move their companies in the direction of building a compelling product. (Well, I suppose that would be Chrysler aside, since Daimler-Benz really did them in.)

Loans are fine, bailouts are not. Though...all things being equal, I'd rather see GM get a bailout than AIG. But even if we rescue the Big three, won't we just be here again in 10 years.

Kathy said...

Lew, good one!

Kvatch, I absolutely agree that top management was short-sighted and failed to take serious steps to change direction. However, that being said, Washington didn't help the situation any. The Bush administration turned its back on the auto industry. Consider the following:

Who relaxed regulation rules for Wall Street? Who gave businesses tax write offs to send their work offshore? Who failed to strengthen trade and tariff laws so our auto industry could compete with foreign car makers? Who repeatedly failed to meet with top auto officials?

All of those actions were taken to help Wall Street and hurt unionized workers. Republicans have been picking and choosing who to help and who to hurt for sometime now, and workers at the bottom are getting slammed.

Will be here again in 10 years? I'm sure it's possible, but can our economy survive in the present if we allow these companies to fail? It's a matter of morality too. If we're going to help Wall Street employees making six figures then we should help auto workers making five figures too.

One other point, is it in our best national interest to let our manufacturing die? Auto plants were used during WWII to build planes for the war. If we find ourselves in a similar situation down the road, are we going to have to go to China or some other country for help?