Post Only Supports Bailouts for Robert Rubin, Not Autoworkers
We all know how hard it is to get by on tens of millions of dollars a year. That is why the Washington Post was near hysterical in its support of the Wall Street bailout earlier this month. They argued that if we didn't give $700 billion to the banks right away that all hell would break loose.
Those who wanted to put conditions that ensured that the money didn't go into the pockets of shareholders or top executives, or even that the bailout was done the right way through direct injections of capital (as it eventually was) were denounced as reactionary Neanderthals. So, the bailout went through and the Wall Street executives are now getting tens of millions in compensation, courtesy of average taxpayers.
Now the occasion comes to bailout the auto industry and the Post goes ballistic the other way.
After all, the average autoworker makes $56,650 a year. That's almost as much as Robert Rubin makes in a day. Who do these autoworkers think they are?
There are serious issues that should be asked about any bailout of Detroit, but it is a bit obscene to see a paper that in both its editorial and news pages was an active supporter of handing tens of billions of dollars to rich Wall Street bankers suddenly turn around and get hysterical about the idea of helping workers making $57,000 a year. And remember, none of these autoworkers are responsible for wrecking the economy.
The class bias at the Post is so thick that most people should know to treat this one as a leftover from the comics section. But it is still pretty disgusting to see people who make six figure salaries and who anxiously promote policies to help people who make seven and eight figure salaries, get outraged over a policy designed to help people earning $57,000 a year.
While the Post may indulge in the irony of bailouts for the relatively wealthy, their point ultimately is that decisions to allow failure are here.
Should taxpayers bailout an industry that ISN'T critical to the country? If so then be prepared to bailout everyone whether they need it or not.
October 27, 2008 8:35 AM | Reply | Permalink
The workers on the line did not make the Detroit big three build cars no one wanted.
October 27, 2008 10:22 AM | Reply | Permalink
shooter,
The executives who run the auto companies fought against every good marketing innovation that came online in the last 25/30 years. They fought against seat belts, better quality cars, safer cars, more fuel efficient cars, cleaner burning cars. Every innovation was going to "cost jobs", "keep us from being competitive" babble babble. Remember how the Japanese moved into our market in the 80s?
Until recently auto executives pushed high profit SUVs and trucks, regardless of the cost and fuel efficiency. When the price of these high profit vehicles became too high for the general public, the actuaries at the auto companies came up with a version of the sub prime loans....leasing programs that allowed people to get these high priced vehicles at a time their pocketbooks said they shouldn't. Today the auto companies are sitting on inventories of their folly and facing bankruptcy, perhaps because of it.
None of these decisions were made by the unions.
October 27, 2008 10:26 AM | Reply | Permalink
Baker, as he often does, only uses half truths. $57,000 may be average as a paycheck but comes nowhere near the cost of a union employee in Detroit. From what I gather their benefits are exceeded only by those in the US Senate. Here is a story about how some 12,000 workers are paid (with benefits) not to work.
Detroit (complete with felonious mayor) is an excellent example of the destructive effects of socialist thinking. Like all such attempts reality is knocking on the door.
October 27, 2008 11:48 AM | Reply | Permalink
shooter,
every benefit union members have was signed onto by the executives of the Big 3.
By the way, check out any auto assembly line and note all the robots that replaced union members. And lets not forget the machiladoras across the Rio Grande that manufacture el cheapo parts for the auto industry, these are plants that used to be located here. Union members have paid in many ways for the benefits they received.
Responsibility is on those who make the final decisions.
October 27, 2008 12:58 PM | Reply | Permalink
More interesting though... can we count this as your capitulation to the idea that labor is merely a tool in the capitalist process, with no value other than that given it by management? Heh.
October 27, 2008 2:10 PM | Reply | Permalink
shooter asks;
I capitulate to the idea that labor is part of the tools in a capitalist society. I also capitulate to the idea that, relative to the company, they have no value other than that assigned by management.
Now according to you:
If $57,000 comes nowhere near the cost of a union employee in Detroit, then the value management assigns these employees, and which you seem to resent, seems to be quite a high value.
October 27, 2008 3:51 PM | Reply | Permalink
Bloomberg.com: "The failure of Ford or GM could result in the loss of up to 2 million jobs, potentially bringing down hundreds of already weakened auto-parts suppliers and possibly some automakers based overseas, said David Cole, chairman for the Center for Automotive Research in Ann Arbor, Michigan." You're right -- doesn't sound critical to the economy at all.
October 27, 2008 1:02 PM | Reply | Permalink
GReece,
truly.....for the want of a nail a shoe was lost.....yadda yadda yadda.
October 27, 2008 1:10 PM | Reply | Permalink
I agree with the Washington Post, but only because we shouldn't be bailing out Detroit.
We should be bailing out Las Vegas!
I've got to admit my view, though, is selfish. "Gearheads" are so yesterday. "Parrothreads" rule! What? I'm supposed to put my visit with Jimmy at Harrah's new "Margaritaville-themed casino in Mississippi" on hold just because there's been a little bump in the road to America's destination -- casinos 24/7?
October 27, 2008 10:07 AM | Reply | Permalink
Hi Ellen I do enjoy your facetious waggery. I think your attitude is summoned up by the expression "We can either laugh or cry." I have noticed it is a bit easier to understand you in the mornings than it is after about 5 pm. :)
October 27, 2008 10:59 AM | Reply | Permalink
Hi yourself Faroff.
My comment re Las Vegas was sardonic, but now, I'm serious. It's Sotheby's we should be bailing out.
My God! Sotheby's has had to pull Picasso's Arlequin from auction. And poor Sotheby's is down 62% in 30 days!
Bail. Bail. Bail.
October 28, 2008 11:09 AM | Reply | Permalink
The one "industry" in America that should never be given even one small thought about being bailed out is the MBA industry - those schools that taught today's generation of business executives. In fact I would cheer if the government were to dump a load of anchors on the backs of that industry. Never before in history has an educational industry so failed in its job. Their failure is so complete they are unsalvageable, even anchors are too good for them - use unsellable SUVs instead. Perhaps a China style re-education campaign for executives is in order here.
October 27, 2008 12:08 PM | Reply | Permalink
hoppy,
many years ago a story in the Philly newspapers told of a portrait of Michael Milliken being stolen from the wall of the Wharton School at U of P. Milliken received his MBA from Wharton. The Wharton administrators were quite upset about the loss and as luck would have it, the Dean of the school, a woman, appeared on C-SPAN's Washington Journal. The newspaper stories came up and she bemoaned the loss of the portrait. I was able to get through on the phone and I told her I was puzzled by her attitude concerning the purloined portrait of a convicted felon and I had wondered why she hadn't taken the portrait down herself after Milliken was convicted. I ended the call by telling her she seems to be suffering from a case of misplaced priorities.
October 27, 2008 1:08 PM | Reply | Permalink
Well, one thing my wife and I did recently as part of a reassessment of our family budget priorities is cancel our newspaper subscription, since we now get almost all the news we need online. So maybe the Post and others will soon be writing about a newspaper industry bailout.
October 27, 2008 12:40 PM | Reply | Permalink
Ha! Love it . . .
October 27, 2008 1:29 PM | Reply | Permalink
Dean,
Two steps to getting this to work right.
1) Forced asset write-downs
2) Equity positions
nb: the public better get used to these bailouts outside the financial sector...as we were predicting a little while back.
Remember in the first days of Gulf II, when we got the estimate the war would cost 400,000,000? The relation of that figure to the final cost, is approximately the same as the 700,000,000,000 original bailout figure to what will be the final cost of stabilizing the economy. We will be lucky if the figure comes under 20 trillion.
And the government is going to feel a lot like the early occupation generals in Iraq as the stabilization problem is very similar... A breakdown in infrastructure, exasperated by financial equivalents of insurgents, wrecking well-intentioned efforts.
The country is sliding into a liquidity trap and the governments are sliding into the equivalent of a financial occupation of the equivalent of a failed state.
October 27, 2008 1:29 PM | Reply | Permalink
Even President Bush (this is the only time in 8 years I have used his title)does things right occasionally.
I have been hollering "liquidity trap" for a while since the banks here and in the EU have been squirreling away their bailout monies presumably waiting for some economic spring to arrive. This leads to problems, big problems.
I notice on the wire that the WH has issued an admonition against that practice. We all owe President Bush (that's twice)a bit of gratitude here.
October 28, 2008 2:43 PM | Reply | Permalink
And why was Robert Rubin on "Face the Nation" representing Obama? And why did he think it made me feel more secure that Obama talks to his closest advisors Paul Volker, Lawrence Summers and Laura Tyson. These are the same old same old economic theorists that should be retired not listened to. Lawrence Summers and Robert Rubin along with Greenspan and Arthur Levitt silenced Brooksley Born in 1997 when she as head of the Commodities Futures Trading Commission warned that unregulated trading in "derivatives" would lead to disaster. They had congress take away her power.
Levitt did a mea culpa on C-Span two weeks ago.
John Heineman on Chris Matthews said that Summers was going to be the Treasury Sec. So much for change.
October 27, 2008 3:12 PM | Reply | Permalink
John Heineman on Chris Matthews said that Summers was going to be the Treasury Sec
Just read the same suggested here:
October 27, 2008 3:42 PM | Reply | Permalink
The auto companies don't 'make' a whole lot anymore. Most all assemblies are outsourced. I don't believe there are many suppliers that are unionized any longer. Or if there are they're running out the last union contract they'll ever have. This shift in automotive manufacturing is represented by a sizable portion of the automotive labor force. I know that nationwide this trend has resulted in labor cost reductions typically in the 30 percentile range plus losses of retirement benefits. So for those who might think things are all rosy for labor in the automotive sector you couldn't be more wrong. The industry has been in transition in this way for years and its not over. The big three had decided to get out of manufacturing a long time ago and has shed a lot of jobs as a result. They now buy the parts from non-union suppliers at far less cost than before. This same scheme will occur if one of the big three fails. Whoever picks up the remains will operate as a new corporate entity with a non-union shop. I've heard rumblings that parts suppliers are looking to push wages down to the $12-$15 range. This means workers who once made $24 an hour will face the possibility of losing their homes. I suspect this whole thing is one of the primary goals of the industry restructuring. As it happens the foreign manufacturing plants that have popped up all over the south have overall better long term prospects for workers than their contemporaries working in jobs that support the Big 3.
October 27, 2008 3:35 PM | Reply | Permalink
thepeople..
I see what is happening to the auto indusrty as an example of what is happening all over the country, a race to the bottom. As companies look for lower and lower wage and benefit employees you will find a corresponding drop in our standard of living. Is the public ready to give up that 2 to 4 weeks vacation? The holidays they get? That second car in the driveway? 24/7 air conditioning? The TV in every room? CABLE TV? The house with a little ground? The swimming pool out back? Annual raises? The disposable income? The retirement package? College for the kids?
And finally, the American dream; the idea that their children will have it better than they did?
What made us the "greatest country in the world" may have been our standard of living, and we're now on the verge of putting it in retrograde.
October 27, 2008 4:05 PM | Reply | Permalink
What's more telling would be a comparison between labor wages lost and the rise of profits and stock values. One better would be wages lost and executive pay raises. Still further, wages lost and the rise in the budget deficit(the Iraq war and bank bail out are sending money out of the country). Think about it, people keep claiming wealth is created, but it's simply not true. Wealth, in terms of control of assets, is simply shifted from one member of a society to another. It may be a semantic exercise, but it matters deeply in terms of how the situation is viewed and thus what solutions we might arrive at. Giving tax money to the wealthy has proven to be a mistake. It is the lower class that has quit spending, and can't afford the current valuation of assets.
October 27, 2008 4:34 PM | Reply | Permalink
zeno,
excellent thoughts.
October 27, 2008 5:43 PM | Reply | Permalink
The reduction of disposable income in the pockets of 98% of the populace reduces commerce. It can't be simpler than that.
Real income growth has suffered for that 98% for going on three decades. There are a number of reasons for this but the result was all too predictable and a matter of common sense. Which proves greed and common sense are incompatible notions of human behavior.
Unfortunately, unless a person actually lives a life of being very poor and being well off they understand neither. The obtainment of explicit knowledge can be both pleasant and unpleasant. Arriving at a balanced perspective is a messy affair.
October 28, 2008 3:39 AM | Reply | Permalink
First, almost all labor contracts in the US begin with a provision that affords management control over a whole raft of decisions--labor is specifically excluded from those decisions. This is not true in all countries--some allow quite a lot of labor input into management decisions--but it is decidedly true here.
Second, I don't see how all the outsourcing and wage-reductions have done the Big Three any good. Indeed one wonders whether they might have done better over the years to re-think design and the like, rather than reducing the union labor force and outsourcing production.
Third, we've already tried reducing wages and living standards. That's part of how we got ourselves into this mess.
October 27, 2008 4:52 PM | Reply | Permalink
The Post is missing the point on extending emergency loans to the automakers.
They present the situation as giving money to paper over long-term structural problems at essentially unsound companies. There can be sound social and systemic reasons to do it, but one should be highly skeptical, as such bailouts have a pretty poor track record globally.
However, that's not actually the situation we're in today. The automakers were already in a bad way when the financial crisis hit, but it's the lack of credit caused by that crisis that's pushing them over the edge. In short, they have liquidity problems.
It ought to be a no brainer to extend loans to tide them over until financial markets normalize. It will be a harder question if they're still on deaths door after that.
October 27, 2008 6:02 PM | Reply | Permalink
The government wouldn't have to do this if the commercial paper market hadn't hit a brick wall back in September.
Problem is worldwide in the auto sector. Even mighty Toyota is hurting bad..
October 27, 2008 6:32 PM | Reply | Permalink
Two -- no three -- different problems.
There's been overcapacity in the global auto business for years and now, manufacturers face reduced demand.
But the supposed freezing up of the CP market isn't the General's problem. Its problem is that it's headed for insolvency and bankruptcy -- and nobody knows when it'll happen.
Thus, no money for you, big fella, unless, of course, your government gives it to you.
October 27, 2008 10:47 PM | Reply | Permalink
and the question, Ellen, is once we give it to them, how will they use it?
October 28, 2008 2:45 PM | Reply | Permalink
But you guys don't understand. There's an auto worker in Detroit, named Joe Carwash. Every day when he gets off work, all the CEOs of the big banks are lined up at his phone, waiting for him to tell them what to do.
What happened to Lehman's? Joe had a sniffle that day (and when Joe sneezes the whole Wall Street World catches cold).
;-)
More seriously, I decided many years ago to never buy another car from Ford, GM or Chrysler. If there are many people like me, perhaps that explains something about Detroit's troubles.
October 27, 2008 7:25 PM | Reply | Permalink