No Word Of Thanks From Foreign Automakers For Cash For Clunkers Program

Cash for Clunkers was a real bonanza for foreign automakers. Toyota's market share was 19.4 percent, Honda's was 13 percent, Nissan's was nearly 9 percent and Hyundai's was 7 percent. (Ford sales topped 14 percent, GM reported 17 percent and Chrysler's share was 6.6 percent.)

Correct me if I'm wrong, but wasn't the intent of Cash for Clunkers to stimulate domestic auto manufacturing by increasing sales (along with taking old gas-guzzlers off the road)? Oh, that's right, I forgot that when Democrat Betty Sutton proposed restricting the cash coupons to cars made in the U.S., foreign manufacturers threw a fit.

"The (Sutton) bill as written is unfairly protectionist," said a spokesman for Mazda North America.

"Any program must treat all manufacturers equally, regardless of where their corporate headquarters is located," said a spokesman for Volkswagen in the United States.

Foreign automakers got their way and it paid off handsomely, particularly for Toyota, which sold nearly 1 out of every 5 cars that were purchased. A "Thank You" would have been nice, along with a vow to treat workers "equally" with their domestic counterparts. Instead, this is how Toyota returned the favor for its uptick in U.S. market share.

Toyota said it would close its New United Motor Manufacturing Inc. plant in Fremont, Calif., in 2010, after General Motors decided to pull out of the 25-year-old joint venture as part of its broad reorganization plan. The NUMMI plant employs 4,500 UAW-represented autoworkers and an estimated 35,000 supplier and other spin-off jobs are expected to be indirectly impacted.

The NUMMI plant is also their only UAW facility in the country, which probably played a roll in their decision, especially considering the now-infamous memo from several years ago where Toyota's brass expressed their concern that "workers’ wages are growing faster than the company's profits." To rectify this situation, Toyota announced their newest plants would pay workers based on "local manufacturing wages" – not UAW scale. That's doublespeak for low wages in right-to-work states.

It doesn't appear Toyota bargained in good faith with the UAW either. As far back as 2007, the UAW started making nice with management, offering proposals for the increased use of temporary employees and other cost-cutting measures. And, according to this NUMMI employee, "'there’s plenty of blame to go around' and the union knows that they aren’t wanted. However, "the union has generally been willing to do their part to support the company. Toyota just hasn’t negotiated anything with the union. Our contract ended last month."

I've resigned myself to the fact that globalization is here to stay and people are free to spend their money where they want, but as Peter De Lorenzo wrote in The United States of Toyota...

Toyota earned a $13.2 billion profit in 2006. And where, exactly, did those profits go? It seems there's one very big thing that isn't American about Toyota, and that is where those profits go at the end of the day. To me, that makes Toyota a Japanese company, plain and simple. A company that is now inexorably woven into the fabric of this country, but a Japanese company nonetheless.

The profits earned by Honda, Mazda, Hyundai and other foreign manufacturers go back to their respective countries too. It infuriates me that these companies are given free access to the U.S. auto market, yet their home countries aren't as open, imposing higher tariffs and restrictions on the number of imported vehicles allowed. And, adding insult to injury, they intentionally strive to drive down the wages of American workers by locating in low wage, right-to-work states where they usually receive large tax subsidies to build their plants. I don't know about you, but I don't allow guests to dictate how I run my household, and I don't find myself inclined to buy these companies cars because I know that it comes with a price to my fellow Americans.

In Toyota's case, their lack of respect for American workers and families may be coming back to haunt them. According to Freep columnist Sarah Webster, the automaker is facing a lawsuit that could be a public relations nightmare, and "a former Toyota attorney is accusing the automaker of illegally withholding evidence in hundreds of rollover death and injury cases, in a "ruthless conspiracy" to hide evidence of "its vehicles' structural shortcomings."

Americans have opened their wallets to Toyota and other foreign automakers for decades, but maybe it's time for people to ask just what we've gained in return. I just don't see the benefits.

(Cross-posted at Blogging for MI.)

The Time for a National Manufacturing Policy was Yesterday

Employees of the Lordstown General Motors plant in Ohio are banking on the Chevy Cruze to keep them working. We should be cheering them on too. Why? Because Lordstown's story is being told in auto communities across the nation.

"The last eight months have been so chaotic," said Lordstown Mayor Michael Chaffee. "We went from the top of the world in August (2008), to treading water and praying in April."

But the Cruze gives Lordstown residents hope their plant will stay open. GM also hopes the smaller, more fuel-efficient vehicle will carry the smaller, more efficient car company through the next century.

Keeping the plant is one thing, but in an area that American industry has been leaving for 30 years, the loss of jobs from the last major manufacturing employer is huge.

Twenty miles from Lordstown is Youngstown, Ohio, a once-booming manufacturing and industrial community that relied on steel mills to sustain its middle class. When the mills downsized or closed beginning in the late 1970s, residents left to seek work elsewhere, and the standard of living declined for those who remained.

Unlike previous decades, when industry left the area for other parts of the nation, companies are now moving out of the country entirely, permanently erasing thousands of jobs. And it's not just the jobs that are fading, but also health care, pensions and other benefits that built the working middle class.

John Russo, co-director for working class studies at Youngstown State University, has been studying this erosion for years and said he finds the push for cheaper U.S. labor depressing.

"We seem to be willing to create jobs for a working people where the wages and benefits cannot support paying their basic bills," Russo said. "So, it seems to me, Youngstown's story, now Lordstown's story, is a part of America's story as we begin this next century."

President Obama believes “The fight for American manufacturing is the fight for America’s future,” yet he hasn't come up with a formal plan to address the decline. Granted, he has a lot on his plate, but maybe he could find a few minutes to share a beer with Ohio Rep. Sherrod Brown who is proposing a a national manufacturing policy that aligns federal actions with the goal of strengthening our manufacturing sector.

These are the five areas Brown believes our country should focus on (click the link to read the details): Innovation, Supply Chains, Skills, Coordination, and Fair Trade.

Fact: The United States now ranks behind every industrial nation except France in the percentage of overall economic activity devoted to manufacturing. Since 2007, we've lost two million manufacturing jobs and more than five million since 2000, but even in its weakened state, manufacturing is still an essential pillar of our economy.

Manufacturing accounts for $1.6 trillion -- nearly 12 percent -- of the U.S. Gross Domestic Product (GDP). It accounts for nearly three-fourths of the nation’s industrial research and development (R&D) -- with four manufacturing industries alone (computers and electronics, chemicals, aerospace, and autos) accounting for 56 percent of private sector R&D. The industry also accounts for 35 percent of value added in world high technology product production.

Jobs in the manufacturing industry pay 20 percent more on average than service jobs. Each manufacturing job supports 4-5 other jobs throughout the U.S. economy. While employment in manufacturing has steadily declined, one in six private sector jobs is still directly or indirectly tied to manufacturing.

Stabilizing and boosting manufacturing would help our economy, put people back to work, and rebuild the middle class. Obama has been saying all the right things, but he's been sending mixed messages about manufacturing's future.

While Obama felt it necessary to distance himself from the “buy America” provisions put in the stimulus bill, China has no such compunctions. As the Times reports, “when China authorized its first solar power plant this spring, it required that at least 80 percent of the equipment be made in China. When the Chinese government took bids this spring for 25 large contracts to supply wind turbines, every contract was won by one of seven domestic companies. All six multinationals that submitted bids were disqualified on various technical grounds, like not providing sufficiently detailed data.”...

China is intent on dominating the new energy markets of the future. If its past practices are any indication, it will subsidize exports, manipulate its currency, buy China at home, force multinationals to transfer technology and partner with Chinese companies, and engage in industrial piracy to make its way.

And China is not alone: Other countries continue to erect barriers to block American goods and mercantilism and subsidies still reign supreme.

Other countries protect their manufacturing. We shouldn't expect any less from the U.S.

Takin' It To The Streets

This goes out to DJ, who's angry with conservative ideology that favors the rich over the poor and middle-class, and to Bruce Fealk, who wonders why Republicans "want to be so unpatriotic as to think Americans shouldn't earn good wages, have access to health care and a decent pension to live on during their golden years."

Bruce also asks, "When do we take to the streets en mass and call these idiots out? When do we say, ENOUGH!"

That day may be coming soon if Europe is any indication. Large demonstrations sparked by the economic crisis broke out recently in France, Greece, Iceland and Russia, and only a couple of weeks ago thousands of people marched in Dublin.

MORE than 120,000 workers surrounded the Dail, or Irish Parliament, to protest against bail-outs for wealthy bankers, soaring unemployment and the Fianna Fail government's attempts to force public-sector workers to take a pay cut. [...]

"There is anger, because everybody knows that this crisis is not our fault, that a business elite has destroyed our economy and has as yet to be made accountable for it," Mr Begg told the huge rally at Merrion Square in the heart of Dublin.

Workers are angry because the government plans on docking 7 percent from the paychecks of 350,000 Irish workers "amid revelations of shady dealings and irresponsible lending at banks now getting taxpayer's help." Sound familiar?

The Irish Times labeled it "a case of the bankers’ billions versus the worker’s mite."

The General Secretary of the Irish Congress of Trade Unions, David Begg, said "those involved in what he called corruption had done huge damage to Ireland and described their actions as economic treason." Addressing the rally, Begg also added that "there is anger, because everybody knows that this crisis is not our fault, that a business elite has destroyed our economy and has as yet to be made accountable for it."

And Patricia McKeown, president of the ICTU, decried the "casino capitalism that has brought this country to its knees."

"An economy cannot be built on shady financial deals, privatisation of public services and the ever insatiable greed of the very, very wealthy," she insisted.

"But we face a government which wants the workers who built the economy to now sacrifice while it protects and bankrolls those who wrecked it. We are not prepared to live in that type of society," Ms McKeown declared.

Ironically, John McCain bragged about Ireland's economy on the campaign trail last year, pointing to their low business taxes as an example of what they can do for a country. Just like DeVos missed indications that Michigan wasn't the only state showing signs of economic stress, McCain missed signs that Ireland was having problems too.

The roots of Ireland’s fall date to more than 20 years ago, when a clutch of economists, politicians and civil servants put their heads together in this very pub and planted the philosophical seeds for the Irish economic miracle. ....

Known widely as the “Doheny & Nesbitt School of Economics,” these beery musings soon became government policy that chopped taxes in half, sharply reduced import duties and embraced foreign investment...

So how is Ireland's economic miracle working out? Their housing prices have fallen by as much as 50 percent, bank shares have plummeted by more than 90 percent, and unemployment is approaching 10 percent. No wonder one of London's senior police officers is warning that law-abiding middle-class individuals who would never have considered joining demonstrations may now seek to vent their anger through protests this year.

The public's rage with the banks and the Government is growing by the day. Thousands are losing their jobs through no fault of their own ... Homes are being repossessed across the country, but not the penthouse flats and country piles of bank bosses who thought nothing of taking home vast seven-figure bonuses, and consider £1 million a year a modest income.

The innocent are being punished while the guilty continue to lead affluent lives.

British police are preparing for a "summer of rage" as people protest the growing economic crisis. Europeans have had enough. Americans have had enough too, and as David Sirota says, "It is only going to get worse if genuine change doesn't happen in short order."

(Cross-posted at BFM.)

Buy American, Buy Local

In spite of the U.S. Chamber of Commerce's opposition to the "Buy American" provisions in the stimulus bill, the progressive movement (i.e. unions, consumer groups, the blogosphere) won according to David Sirota.

First, the Buy America provisions survived the conference committee and remain in the stimulus package. These provisions, which were vehemently opposed by multinational corporate lobbyists, encourage government agencies to purchase American-made goods in spending the stimulus money, so as to make sure the money creates as big an economic multiplier effect for our economy as possible.

Second, I'm told by Capitol Hill sources that the Sanders-Grassley amendment prohibiting bailed-out banks from using taxpayer money to outsource jobs remains in the final bill. The amendment followed the Associated Press's report that many banks were using the cash in conjunction with their ongoing efforts to abuse the H-1B program and outsource information sector jobs.

Of course, you won't hear the Mackinac Center, Republicans, or conservative mouthpieces like Lesley Stahl singing the praises of Buy American. They argue we're being protectionists and other countries will look upon these provisions as hostile. That's garbage according to this CEO who told 60 Minutes...

"The whole purpose of your stimulus package, and it's the right purpose, is to stop the bleeding of jobs and to create new jobs here in America, not overseas, not in China, not in Europe," Dan DiMicco, the CEO of Nucor ...

DiMicco said that the counter argument - trade retaliation by other countries - is not true. "It's all garbage," he told Stahl. "People can say what they want. What we have around the world, all right, is a trade war against the United States that we have not showed up for."

DiMicco denied he is a protectionist. "I am a person who says there's no such thing as free trade. Free trade is an academic luxury the real world doesn't enjoy. If you want to study it at Harvard, study it at Harvard. It doesn't work in the real world. It has no application."

The EPI agrees: "These companies are self-interested, simply wanting unlimited access to imports, many of which are illegally subsidized and unfairly traded."

Our economy is badly crippled and people are hurting. Taxpayer money should be used to help Americans and put our own house in order first, and that means the government has to make sure the money isn't used to widen the trade deficit, not if it wants to create and preserve jobs.

Suppose the government spends, say, $100 billion on bridges and buildings, and that $500 million of that is used to buy steel. If it is used to buy imported steel, and if that $500 million doesn't come back to the United States in the form of demand for its exports, then you can subtract $500 million from the stimulus. And you can be pretty sure--given our current trade deficit--that something like that would happen. So, without a requirement that these government projects use domestic steel (with mills currently running at 43 percent capacity!), there is a very great possibility that the government would be throwing away money rather than doing anything about the problem. [emphasis added]

Republicans are hoping Obama fails. What better way to make sure that happens than to push to use the stimulus money to buy materials from foreign countries?

How do most Americans feel about the "Buy American" provisions? A national poll found that 84 percent favor the requirements and only 4 percent strongly oppose them. The overwhelming support was consistent regardless of gender, age, income level, education, or region, proving once again that Republicans are out of touch with mainstream America.

Republicans are out of touch with local Michigan communities too. A group in Genesee County says it's important to think about the American economy, and they're going even further with a campaign to buy local. A series of business leaders in Grand Blanc, Swartz Creek, Flint and other communities recorded a series of messages that play regularly on four radio stations that are part of the local Cumulus Radio Group.

Jet Kilmer, President of the Grand Blanc Chamber of Commerce, recorded one message that explains how 83% of money spent with a local merchant stays in the community vs. 43% spent outside. The message urges people to consider buying local, or to hire local contractors to do needed work.

And according to Crain's Detroit, "the state Agriculture Department projected that if Michigan households earmarked $10 a week in their grocery purchases to made-in-Michigan food products, it would generate $30 million a week in economic impact."

What's good for big business isn't always good for Americans. If we don't have jobs and decent wages, we won't be able to buy what they're selling no matter how much they mark it down. That's why we need to keep the stimulus money in this country. Americans should come first. Period.

Senator Shelby owes Michigan an apology

Senator Shelby from Alabama has been pretty outspoken in his opinion that the Big Three shouldn't get financial aid from Washington. He had this to say on Meet the Press recently:

This is a dead-end, it's a road to nowhere, and it's a big burden on the American taxpayer.

And this:

We don't need government--governmental subsidies for manufacturing in this country. It's the French model, it's the wrong road, we will pay for it. The average American taxpayer is going to pay dearly for this, if I'm not wrong.

Senator, we don't take kindly to southern hypocrisy in the north, as Wizardkitten was quick to point out:

Turns out that Senator Richard Shelby has some authority to speak on being a "big burden on the American taxpayer". As of 2005, his home state of Alabama is No. 7 on the list of beneficiary states of the federal taxpayer dollar...They take in more and more federal taxpayer dollars, but yet keep falling behind the rest of the country.

Alabama taxpayers receive more federal funding per dollar of federal taxes paid compared to the average state. Per dollar of federal tax collected in 2005, Alabama citizens received approximately $1.66 in the way of federal spending. This ranks the state 7th highest nationally and represents a rise from 1995 when Alabama received $1.33 per dollar of taxes in federal spending (ranked 9th nationally).

FYI Senator: Michigan is a donor state. We pay more in federal taxes than we receive back from the government.

The Senator probably doesn't care what some blogger thinks, but he should care that Peter Karmanos, Jr. (CEO of Compuware Corporation and owner of the Carolina Hurricanes, Plymouth Whalers, and Florida Everblades hockey franchises) thinks his comments were inaccurate, over-simplistic and hypocritical.

I trust it is safe to say that when you refer to “government subsidies,” you are referring to subsidies provided by both federal and state governments. And if this is in fact true, then I am sure you were adamantly against the State of Alabama offering lucrative incentives (in essence, subsidies) to Mercedes Benz in the early 1990s to lure the German automobile manufacturer to the State.

As it turned out, Alabama offered a stunning $253 million incentive package to Mercedes. Additionally, the State also offered to train the workers, clear and improve the site, upgrade utilities, and buy 2,500 Mercedes Benz vehicles. All told, it is estimated that the incentive package totaled anywhere from $153,000 to $220,000 per created job. On top of all this, the State gave the foreign automaker a large parcel of land worth between $250 and $300 million, which was coincidentally how much the company expected to invest in building the plant.

With all due respect, Senator, where was your outrage when all this was going on? … I certainly don’t recall you going in front of the nation (as you did this past Sunday) to discuss what a big mistake Alabama was making in providing subsidies to Mercedes Benz. If you had, however, you could have talked about how, applying free market principles, Alabama shouldn’t have had to resort to subsidies to land Mercedes Benz. Competitively speaking, if Alabama had been the strongest candidate under consideration (i.e. highest quality infrastructure, workforce, research and development facilities, business climate, etc.), then subsidies shouldn’t have been required.

The fact is that Alabama knew that, on a level playing field, it could not compete with the other states under consideration and, thus, to lure the German car builder to the State, it offered the aforementioned unprecedented subsidies. In effect, Alabama — your state — did exactly what you said government should not do: provide subsidies for manufacturing.

Karmanos ended his letter by saying, "It’s no great mystery why Alabama politicians went to such dramatic anti-free-market measures to secure Mercedes Benz — they did it for the betterment of their state through job creation and increased tax revenues. And who could blame them? Is that so different than what would occur by providing financial aid to help rescue the domestic auto industry? Such aid would save millions of jobs and millions of dollars in lost tax revenue."

Jobs and tax revenue that would probably finds its way back to Alabama.

Think losing the Big 3 will be a mere blip? Think again.

Why is Paulson allowing this kind of wheeling and dealing to take place with the $700 billion dollar bailout fund? It should be used to help save the jobs of hundreds of thousands of auto workers, who also happen to be productive, taxpaying consumers. You know, the same consumers Bush called on after 9/11 to help keep the economy going.

What a double-standard, one that could very well touch your life or that of someone you know. Watch the video and you'll get a good idea of just how many people's lives are affected by Detroit's auto industry.


I wanted to mention those $71 dollar an hour autoworker wages and benefits the papers keep talking about. What they don't tell you is those figures are based on old contracts and include the projected cost of lifetime health care and pensions. Under a new contract negotiated last year, union employees will make considerably less than that, some as little as $14 per hour, and benefits have been reduced too. (Another reason we should have universal health care.)

Union workers aren't the fat cats the media makes them out to be. In fact, UAW members are actually losing their edge against foreign automakers. From the Detroit Free Press, February 2007:

Workers for foreign automakers don't pay union dues, but they do share the costs of insurance and retirement plans. UAW-represented autoworkers get health insurance and a full pension after 30 years -- valuable perks they will fight to keep during contract negotiations this year.

But even accounting for Toyota employees' health care spending -- $700 per year on average, according to the company -- the [Toyota] Georgetown workers still made more in 2006.

General Motors Corp., which lost $10.6 billion in 2005 and didn't issue profit-sharing checks last year, paid its production workers an average of $27 an hour, GM spokesman Daniel Flores said. That would be a base of about $54,000 a year, based on a 2,000-hour work year. The $30 average at Toyota's Georgetown plant, which includes a bonus, equals $60,000 a year.

Ford Motor Co. and Chrysler Group representatives said GM's base pay figures are similar to theirs. Only Chrysler, which had a 2005 profit, paid a bonus last year. The $650 bonus was not enough to surpass Toyota's pay. [...]

Assembly workers for Detroit automakers last year remained a bit ahead of Honda's U.S. hourly workers, who made an average $24.25 an hour, or $26.20 with the $4,485 bonus they received. In November, Honda paid bonuses for the 21st consecutive year, the longest streak in U.S. auto history, said Ed Miller, Honda spokesman.

Nissan workers are paid $24 an hour in Mississippi and $26 an hour in Tennessee, but company officials would not disclose employee bonuses.

Hyundai Motor Co. pays its U.S. production workers less than other automakers. Wages at its Alabama plant start at $14 an hour and grow to $21 an hour after two years on the job, according to a January 2004 company release.

Detroit's automakers have been shedding workers by the thousands over the past decade and the average wages will continue to fall, but the difference between union and non-union autoworkers isn't as vast as the media makes it out to be. In fact, by 2011, Toyota's labor costs could exceed the Big 3 because they've been here for 30 years now and a growing number of their workers are paid top wages.

The domestic automakers are competitive with foreign ones, but they currently find themselves in trouble not of their own making. Credit has dried up, people can't get loans, and cars aren't selling. Don't blame the middle-class auto workers, blame those highly compensated Wall Street and Washington types who made a mess of things.

UPDATE: Dean Baker did a better job of clarifying claims that GM auto workers are paid $70 an hour than I did: "The trick is to add in GM's legacy costs, the pension and health care costs for retired workers. These legacy costs are a serious expense for GM, but this is not money being paid to current workers. The person on the line in 2008 is not benefiting from these legacy costs."

Modern Day Charles Dickens Era

In the midst of the bailout crisis, I worried that taxpayers were being played. It looks like my concerns were well-founded. Via Dean Baker:

Remember way back to last week when it was going to be the end of the world if Congress didn't pass the bailout package? Remember the Washington Post's account in which Treasury Secretary Henry Paulson told President Bush, "there is no Plan B."

Well, it looks like the Fed has discovered a Plan B. It turns out that the Fed can buy commercial paper directly from non-financial corporations needing credit to maintain operations. This will keep the credit markets working even if the zombie banks aren't up to the task. In other words, the threat of a complete meltdown in the absence of a bailout was nonsense and the media once again got taken for a ride by the Bush administration.

Adding insult to injury, we now find out that the limits on executive compensation were essentially meaningless too. When do we get our bailout, or do we have to work till we drop over dead? That scenario becomes more probable with each passing day.

Via the AP:

Americans' retirement plans have lost as much as $2 trillion in the past 15 months, Congress' top budget analyst estimated Tuesday.

Public and private pension funds and employees' private retirement savings accounts — like 401(k)'s — have lost some 20 percent overall since mid-2007.

Rep. George Miller, D-California, summed it up best: "Unlike Wall Street executives, America's families don't have a golden parachute to fall back on. It's clear that their retirement security may be one of the greatest casualties of this financial crisis."

China is not impressed with Paulson

Eighteen months ago, Henry Paulson told the Shanghai Futures Exchange that China risked trillions of dollars in lost economic potential unless it freed up its capital markets.

``An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention,'' Paulson said.

That was then, this is now, and the grasshopper is not impressed with the master according to Bloomberg.

``The U.S. financial system was regarded as a model, and we tried our best to copy whatever we could,'' said Yu Yongding, a former adviser to China's central bank. ``Suddenly we find our teacher is not that excellent, so the next time when we're designing our financial system we will use our own mind more.''

They've noticed the hypocrisy too:

The recent moves by Paulson, the former chief executive officer of Goldman Sachs Group Inc., contradict what the U.S. told Asian governments over the past decade. Thailand, South Korea and Indonesia were urged to let unviable banks fail during the 1997-98 Asian financial crisis.

``It's the end of an era,'' said Shanghai-based Andy Xie, a independent analyst who was formerly Morgan Stanley's chief Asia economist. ``In 1989, when the Berlin Wall fell, socialism was discredited and the whole world turned right. Now financial capital has been discredited and the whole world, including the U.S., is turning left.''

China learned something from our failures and plans to make some changes:

That road may be different from the one Paulson proposed 18 months ago, according to Arthur Kroeber at economic research company Dragonomics Advisory Services Ltd. in Beijing.

``China's made it clear it won't listen to these snake-oil salesmen who come from Wall Street, even if they're wearing suits issued by the Treasury Department,'' he said. ``It's strengthened the hands of all the people who are very skeptical about financial liberalization in China.''

The question is...will we learn from this, or will it be business as usual?

Obama talks about fair trade

Obama addressed more than 1,000 people at Flint's Kettering University today. Christine from Blogging for Michigan attended and took some pictures that you can check out, and I helped do some live blogging and posted my comments there too.

Obama's speech was: "Renewing American Competitiveness." How appropriate for Flint and Michigan in general. Manufacturing jobs have been leaving here for years and being sent to places like Mexico and China, and along with those jobs went pensions and health care. Workers are ready for change because, as Obama noted, we've "lost confidence in that fundamental American promise that our children will have a better life than we do."

Click the link above to read his speech. There's something in there for everyone. Obama touches on health care (he states he will push for universal coverage), green jobs and energy policy, broadband access, education (college education must not be a privilege of the few – it should be a birthright of every single American), jobs, trade and more. Because trade is responsible for decimating manufacturing jobs here in Michigan, I pulled out that part of his speech for you to read.

But even as we welcome competition, we need to remember that our economic policies must be supported by strong and smart trade policies. I have said before, and will say again – I believe in free trade. It can save money for our consumers, generate business for U.S. exporters, and expand global wealth. But unlike George Bush and John McCain, I do not think that any trade agreement is a good trade agreement. I don't think an agreement that allows South Korea to import hundreds of thousands of cars into the U.S., but continues to restrict U.S. car exports into South Korea to a few thousand, is a smart deal. I don't think that trade agreements without labor or environmental agreements are in our long term interests

If we continue to let our trade policy be dictated by special interests, then American workers will continue to be undermined, and public support for robust trade will continue to erode. That might make sense to the Washington lobbyists who run Senator McCain's campaign, but it won't help our nation compete. Allowing subsidized and unfairly traded products to flood our markets is not free trade and it's not fair to the people of Michigan. We cannot stand by while countries manipulate currencies to promote exports, creating huge imbalances in the global economy. We cannot let foreign regulatory policies exclude American products. We cannot let enforcement of existing trade agreements take a backseat to the negotiation of new ones. Put simply, we need tougher negotiators on our side of the table – to strike bargains that are good not just for Wall Street, but also for Main Street.

I think that last sentence makes an important point. It's too late to put the genie back in the bottle and rescind NAFTA and other trade agreements, but there's no reason we can't change those agreements so that labor gets their fair share of the pie too.

This is how the system works now according to Ezra Klein:

Put broadly, opening ourselves up to trade is really good for people who buy things, and less good for people who make things. Now, a lot of folks both buy and make things, so the story is complicated. But one reason the elite classes are so hegemonically enamored with trade is that they don't really make anything at all, and so experience none of the downsides of trade. As Dean Baker likes to point out, we've structured our trade deals such that unskilled manufacturers face a lot of international competition while reporters, say, face almost none.

If we really value all work in this country, then tweaking these trade agreements is the only right thing to do.

McCain to Gov. Blunt: Wassup?

Missouri Gov. Matt Blount had been mentioned as a possible running mate for McCain; however, that was prior to InBev of Belgium's unsolicited bid to talk over St. Louis-based Anheuser-Busch. You see, McCain denounces protectionism, while Gov. Blunt favors it:

“I am strongly opposed to the sale of Anheuser-Busch and today’s offer to purchase the company is deeply troubling to me. I have said that while I am supportive of action to prevent the sale there is no immediate tool available at the state level to block it.

“I have directed the Department of Economic Development to explore every option and any opportunity we may have at the state level to help keep Anheuser-Busch where it belongs - in St. Louis, Missouri.”

Ironically, Blount recently criticized Obama for being a protectionist:

"Now is not the time to adopt the policies of Herbert Hoover -- of protectionism.

The sudden flip-flop is puzzling since Republicans have never been too concerned about sending jobs out of the country any other time. On the other hand, flip-flopping is a Republican trait typical of McCain too, so Blount may still have a chance after all.

Getting back to Anheuser-Busch, the Economist had the money quote about the possible sale:

Could anything symbolise America’s loss of economic supremacy more clearly than for its favourite beer to fall into foreign hands?

McCain relies on "experts" for economic advice

You've probably heard that John McCain is considering Carly Fiorina for vice-president and that Phil Gramm is his main economics guru. This shows that McCain really is "Vintage Bush." (Thanks michmark.) He doesn't have to know anything, he just needs to consult with the not so right people.

Let me start with Carly Fiorina, who will be addressing the Detroit Regional Chamber's Mackinac Policy Conference today. As you might recall, Fiorina was ousted from her position as CEO at HP for mismanagement and failing to produce the returns and corporate profits expected. Her position didn't work out too well for workers either. Fiorina executed a merger between HP and Compaq and thousands of employees were laid off as a result. Don't feel too sorry for Fiorna though. She walked away with a $21 million dollar severance package, which was 2.5 times her base annual salary.

Fiorna's employment with HP was a lose-lose proposition all the way around, but that doesn't seem to matter to McCain, possibly because Carly is all for cutting taxes. The Michigan Business Review interviewed her and these quotes pretty much set the tone:

So we've got to get our climate for business better. We have to lower the tax rates at both a federal and a state level. We have to get useless paperwork, bureaucracy and regulation out of the way. We have to motivate businesses to invest.[...]

But Michigan needs to think very long and hard about the tax climate it has compared to the other states.

She was also asked about Hewlett-Packard possibly acquiring EDS and what kind of impact she thought it would have on this state.

And frankly I just don't know enough about it to know what the specific impact on Michigan will be.

But what I can tell you, having done a massive merger myself and executed it successfully, one of the first questions that a chief executive is faced with is, when you are consolidating two businesses, where will the jobs go?

In HP's case, those jobs went overseas to China and Russia because, as Carly said, "there is no job that is America's God-given right anymore."

Not all vice-presidents play an active role in influencing policy, so Fiorina may be benign in that area, but not so Phil Gramm. McCain has made it clear that Gramm is his main economic guru, or as David Corn calls him, Foreclosure Phil.

Who's to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Sen. Phil Gramm. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown. Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America? Hardly. Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. John McCain's presidential campaign and advises the Republican candidate on economic matters. He's been mentioned as a possible Treasury secretary should McCain win. That's right: A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.

Tax cuts, free trade, deregulation. McCain is pushing the same agenda that's worked well for the rich at the expense of average Americans, and he aided and abetted by people like Gramm and Fiorina. McCain is simply more of the same from a party that has nothing to offer average Americans.


(Cross-posted at BFM.)

Fighting over crumbs

Here's something to ponder as you're filling up your gas tank or digging deep into your pocket to pay for groceries.



In case you're interested, the gentleman in the video has a blog:
The Hillbilly Report.

Outsourcing a threat to workers and national security

As I wrote earlier in the month, the aerospace industry is sending jobs to Mexico - including those in airline maintenance.

At least one U.S. airline, Delta, is already sending entire planes to Mexico for maintenance work. In 2006, it signed a deal handing heavy maintenance of 120 of its planes over to Aeromexico, an airline.

My concern was for the number of good paying jobs being lost, but that pales in comparison to the security risk our country faces. Teamsters President Jim Hoffa explains [emphasis mine]:

The outsourcing of aircraft maintenance is another major concern—just ask the United Airlines mechanics and related workers. Some 9,300 of these skilled workers resoundingly chose to join the Teamsters last month because we understand the real danger the outsourcing of aircraft maintenance poses to national security.

From 1996 through 2006, major U.S. airlines' outsourcing expenses increased from 37 percent to 64 percent, and the number of foreign repair facilities grew from 344 to 698 over a comparable period.

As outsourcing expanded, regulatory standards and oversight have failed to keep pace. Background checks, duty-time limitations, and alcohol and drug testing are much more lax at foreign stations than they are in the United States. For example, supervisors and inspectors who sign off on maintenance work at foreign repair stations are not required to hold a Federal Aviation Administration repairman certificate or an airframe and power-plant certificate, and neither are mechanics working on the aircraft at these facilities.

Increased outsourcing is a domestic security risk. In the U.S., FAA-certificated repair stations have standards for personnel background checks and restricted access to aircraft. Foreign repair stations lack these precautions. Outside of our borders, only flimsy safeguards prevent a terrorist from exploiting an opportunity to do us harm by tampering with airline systems or inserting explosives into aircraft while they are undergoing maintenance. (Despite a mandate in 2003 to create a security standard for repair stations and audit foreign stations, the Transportation Security Administration has yet to do so.)

My son-in-law recently graduated from airline mechanics school after 22 months of studies. He's in the process of taking three written tests and two oral tests in order to receive his certification so he can work on planes. I should also mention his education was very expensive. That 22 month program cost him nearly as much as four years in college.

It just doesn't make sense for our country to mandate higher education and licensing requirements for jobs that we then turn around and allow employers to outsource without equal standards. Americans can't compete with the lower wages and now it appears we're fighting against reduced educational requirements. That's crazy. Why should our young adults spend thousands of dollars to get an education if a person in Mexico or some other country is allowed to do the job without any advanced training or certification?

We definitely need to level the playing field in this country so our workers can compete and our national security isn't compromised.

(Cross-posted at Blogging for Michigan.)

Following in the steps of the auto industry...

Another industry is going south of the border.

Aerospace companies are streaming to Mexico, drawn by lower wages, enthusiastic government promotion, a new safety agreement with the United States and an increasingly sophisticated workforce.

In a new plant in the central Mexican city of Querétaro, workers who make $3.50 an hour are building rudders and bundles of wiring for airliners. Across town, engineers at General Electric's research center are designing jet engines. In a nearby industrial park, workers are overhauling landing gear at a gleaming new plant.

Engineers fare a little better. They earn anywhere from $5.80 to $8.70 an hour. The lower costs translate into a 30 percent savings on parts even after transportation gets added back in. Mexico's aerospace-related exports have more than tripled since 2004.

How are American workers supposed to compete with those wages? The impact on jobs has been minimal so far, but workers see the writing on the wall.

Companies say that, because of a booming market for aircraft worldwide, the move to Mexico has not resulted in major layoffs in the United States. But American unions are afraid it might if aviation takes a downturn.

"This is a technological base, an important industrial base for our country, and we're just giving it up," said Ron Eldridge, aerospace coordinator for the International Association of Machinists and Aerospace Workers.

Industry officials liken the trend to the 1980s, when U.S. companies moved from making auto parts in Mexico to assembling entire vehicles there. Now, Mexico exports $42 billion in cars and auto parts every year.

"Mexico's vision is to do the same thing they did with the auto industry," said Real Gervais, head of Bombardier's operations in Mexico. "There's a lot of potential."

So much for the myth that NAFTA was going to help American workers. When is the United States going to sign an agreement that benefits workers here at home?

Airline maintenance is also heading south, which hits my family personally. My son-in-law recently graduated from an airline mechanics school. He picked that career because he felt it would be stable employment and couldn't be outsourced. We all did, but it looks like we were wrong.

Mexico also is becoming a center for maintenance as airlines look for cheaper places to have their planes fixed. [...]

At least one U.S. airline, Delta, is already sending entire planes to Mexico for maintenance work. In 2006, it signed a deal handing heavy maintenance of 120 of its planes over to Aeromexico, an airline.

The Mexican government is hoping exports will grow even faster in the wake of a new Bilateral Aviation Safety Agreement signed with the United States in September.

The pact allows Mexican officials to certify new aircraft parts instead of shipping them to the United States for inspection.

"It's a great logistical advantage," Roch said. "It's going to be a detonator for the industry."

Yeah, right, and it's going to blow up a whole lot of American jobs too.

It's no longer enough for a person to play by the rules, get an education and work hard. There will always be someone in another country willing to work for less. Where is it all going to end? Who will save us? We know we can't depend on the Republicans so it's up to the Democrats. I sure hope they win the White House and lots of seats in November. Workers can't hold on much longer.

(Cross-posted at Blogging For MI.)

"Don't worry, be happy" is a bunch of bunk

This isn't news to most middle-class Americans.

Even when experts were declaring the economy healthy, many Americans voiced a vague, but persistent dissatisfaction. ...But to many people, something didn't feel right, even if they couldn't quite explain why. [...]

A year ago — months before economic alarms went off — nearly two of three Americans polled by The Rockefeller Foundation said that they felt somewhat or a lot less economically secure then they did a decade ago. Half said they expected their children to face an economy even more shaky.

Other polls have registered similar unease in the past few years, showing large numbers of Americans dissatisfied with the economy, and worried about retirement security, health care costs, and a declining standard of living.

This unease reflects a disconnect between the "our economy is strong" rhetoric coming from Republicans and the reality we're living. Why are Americans feeling so insecure?

Except for the late 1990s, pay has been stagnant for more than a generation, barely keeping pace with inflation. In 1973, the median male worker earned $16.88 an hour, adjusted for inflation. In 2007, he earned $16.85.

For many families, the stagnation has been moderated by the addition of a second paycheck as more women went to work, and their pay rose over the same period.

But the largest gains went to workers at the top of the pay scale. Now, economic worries are rising fastest in households with smaller paychecks, and that chasm is widening.

"Over the past decades, whether inflation was much higher or lower, or incomes grew faster or more slowly, there has never been such a wide divergence in the experiences" separating richer households from poorer ones, Richard Curtin, the director of the University of Michigan's consumer survey said in summing up the most recent figures.

Workers also feel anxious because new jobs being created in this economy come with few assurances:

Rennie Sawade, the son of a Michigan auto worker, majored in computer science because he saw no future on the assembly line. He was rewarded with a job at Oracle Corp., but lost it in late 2005 when the company shifted his department's work to India. Sawade, who lives in Woodinville, Wash. near Seattle, has been unable to find a full-time replacement, instead jumping from contract job to contract job.

The contractor offers a 401(k), but contributions are entirely up to workers. When Sawade's wife was diagnosed with thyroid cancer last year he missed the equivalent of two weeks work — and pay — to take care of her. The job has health insurance but still left the family with a bill for more than $2,000. Contractors call to offer other jobs, but the pay is frequently disappointing, he says.

"It was pretty well known when I was working on my bachelor's degree that the auto industry was going to move overseas," he says. "Everybody said get into technology because you'll have a career. Now it looks like the same thing is happening to technology."

Workers have a choice. They can keep voting against their own self interests (translation, voting for Republicans) or they can vote for leaders who support living wages, unions, fair trade, universal health care, retirement security and a progressive income tax (translation, vote for non-corporate owned Democrats).

Same old Republicans in a new world

The website TomPaine.com has a new look, and one of the features I always make a point to check out is in the lower right-hand corner: The Case, Straight Talk For The Common Good. It presents a conservative talking point (spin) with a progressive response. I thought this was a particularly good one:

CONservative spin: “Governments can't choose winners. Competition lets consumers choose, and efficient companies win. The last thing we need is more taxes to support big government programs.”

PROgressive response: Ironically, under President Bush, we've been hemorrhaging private manufacturing jobs. The largest source of new jobs under the Bush administration has been publicly-funded jobs—created by the military buildup, homeland security and state and local governments. Too many companies have used the tax cuts to merge, purge workers and outsource jobs abroad. And on some issues government can’t wait for "market solutions.” For example, our urgent need to move to a clean-energy economy means ending subsidies to big oil and mobilizing science and technology to develop alternative energy sources and improve energy efficiency. That will generate jobs and new industries.

Republicans are the dinosaurs of politics. They care more about protecting the interests of oil companies, privateers and cronies than they do generating jobs and new industries. This is a new century and a new world. If the Republicans continue to follow the same old path, they may soon find themselves extinct.

(Click here to read more Pro vs. Con.)

What goes around, comes around

This was in yesterday's Financial Times

Everybody’s thoughts may be on Iowa, so maybe it is appropriate to spare one for George W. Bush, entering the last year of his presidency. In so doing, there is no reason to be charitable.

I thought it was worth highlighting that statement. It shows how little respect the rest of the world has for Bush. There are no kind words for him because he hasn't left the world a better place.

Sadly, there are no kind words for our country either. This is how the Toronto Star described us in a recent article: Welcome to Third World, USA

Apparently, the Wall Street Journal insulted Canada in the mid-1990s by calling them "an honorary Third World country." Now that the tables have turned, they're more than happy to reciprocate.

Ironically, the U.S. today has many more features in common with Third World status than Canada ever did back in the mid-1990s.

What is usually meant by a Third World economy? A half-century ago, the term was associated with the economically underdeveloped countries of Africa, Asia, South America and Oceania. The common characteristics of these Third World countries were high levels of poverty, income inequality, high birth rates and an economic dependence upon the advanced countries. Third World countries were simply not as industrialized or technologically advanced as Western countries.

But what are some of the distinguishing characteristics of contemporary Third World countries? They go beyond these nations’ fiscal position or undue concentration on natural resource exports.

The glaring features today include poverty, lack of democratic institutions, controlling oligarchies and the unequal distribution of income and wealth. In other words, the few enjoy a rich lifestyle while the many share subpar incomes and poverty.

Another characteristic of Third World countries is that a major portion of their fiscal expenditures is allocated to the military. In many Third World countries, the military is controlled by an elite or a small collection of the wealthy.

Finally, in many Third World countries one finds that leadership is passed from one generation to the next, often via a close relative.

Check, check and check. They also point out that there's an ideological difference between us and other countries:

[...] most Western democracies see the elimination or reduction of economic inequality as a good idea. Indeed, it is a generally accepted principle that the underlying causes of economic inequality based on such non-economic differences as race, gender, or geography should also be minimized or eliminated.

In other words, there is a strong predilection in most Western countries to level the economic playing field as much as possible. This seems not to be the case in the United States. [emphasis added]

This is our country after decades of Republican control and two terms under Bush. No wonder "change" resonated with the voters in Iowa yesterday.

Canada post-NAFTA: An era of economic insecurity

Americans aren't the only ones unhappy with NAFTA. A new study from the Canadian Centre for Policy Alternatives reaches a similar conclusion: Free trade has failed to live up to its promises.

Twenty years after Canada signed the Free Trade Agreement its biggest boosters have grown wealthier but promises of better jobs and rising living standards fell short, says a study released by the Canadian Centre for Policy Alternatives.

The Canada-US Free Trade Agreement was signed on January 2, 1988. The study examines what’s happened since: It takes a sample of 41 Canadian Council of Chief Executives (CCCE) member companies – the leading supporter of free trade – and finds they shrank their workforce by 19.6% while their revenues grew by 127%.

“Its promoters said free trade would create more and better jobs but that promise was clearly hollow,” says the study’s author, CCPA Executive Director Bruce Campbell. “There are fewer jobs today in the traded goods sector than there was before free trade.”

“And contrary to the CCCE promise of better public services and social programs under free trade, governments slashed programs by 26% -- more than six times deeper than the OECD average – largely at the urging of lobby groups like the CCCE.”

Among the study’s key findings, between 1987 and 2006:

The 41 companies’ combined revenue grew from $142 billion to $310 billion while they shrank their combined workforce by over 118,000.

The Big Three automakers shrank their Canadian workforce by over 50%--from 87,626 to 43,000. Their revenue grew by 70%, from $38.9 billion to $67.3 billion.

Despite the massive Alberta oil boom, the three major oil companies in the sample cut their combined workforce by almost one-third, from 22,500 to 15,428. Their revenues soared from $13.7 billion to $53.4 billion--a 290% rise.

Corporate profits are at a 40-year high, but Canadian workers’ wage share of the economy has fallen steadily.

Only the richest 5% of income earners saw rapid growth in their inflation-adjusted incomes from 1992-2004.

[all emphasis added]

Shrinking workforces, corporate profits at record highs, falling wages and rising inequality. Canada's experience under NAFTA pretty much mirrors our own. Free trade did create some new jobs over the past 20 years, but about one third of them were in the services sector at lower average wages than those lost. Sound familiar?