Patterico's Pontifications

11/17/2008

No Auto Industry Bailout

Filed under: General — Patterico @ 8:25 am



Using this Power Line post as a taking-off point, let’s discuss a possible bailout of one or more companies in the U.S. auto industry.

I wasn’t sure what to make of the bailout of the financial industry. The argument for unfettered capitalism was tougher there, because without action, innocent businesses were likely to go under due to a scarcity of credit.

The auto bailout strikes me as a different animal entirely. Either the automakers can put out a product that people want to buy, or they can’t. If they can’t, why should taxpayers pay money to ensure that these undesirable products remain on the market?

Naturally occurring forest fires are healthy because they clear out the deadwood, making catastrophic fires less likely. It’s temporary pain for long-term gain.

Similarly, we may need to see one of the automakers go under, for the long-term health of the industry.

109 Responses to “No Auto Industry Bailout”

  1. This is important because of all of the union jobs.

    JD (b96a9e)

  2. Obama will not be able to resist the mating call of the UAW. Mickey Kaus is worried, though.

    Get Me a Ron Burkle Type: It looks to me as if bankruptcy might be a better solution for GM than a federal bailout–union contracts could be redone, duplicative dealers axed–except for one factor: GM sells cars, and nobody wants to buy a car if they think the manufacturer isn’t going to be around to honor the warranty or provide spare parts. Formal bankruptcy would itself help sink the GM ship. A bailout could be a way to essentially do what a bankruptcy would do, but without the sales-killing stigma. Taxpayer money would be a lure to force the necessary dealer and UAW concessions. a) But do you trust Pelosi’s Congress to ever make either of these groups give up some of its pay or perks? No. That’s where the White House (either Bush’s or Obama’s) should come in. A job for Ron Burkle! (Talking unions into giving up contract gains was once his specialty.) b) Wouldn’t it be good PR if the UAW stepped up to the plate and unilaterally, voluntarily, offered a substantial package of givebacks in exchange for all that federal money (and maybe a cap on executive pay)? I don’t expect this to happen–for internal purposes, union leaders probably have to be seen as going down fighting for every dollar. But it would help get the money, no? [Also improve the unions’ image and help them pass “card check”-ed Sorry I suggested it.] 10:53 P.M.

    I think by the end of that post, he had thought better of it. It just won’t work but it will provide a useful indicator of where Obama will go. With luck, GM will run out of money before Obama is inaugurated. Then he won’t have to decide. I suspect he thinks so too.

    Mike K (2cf494)

  3. I agree no bailout, but politically that is not going to fly. So just saying no is stupid, unless you want to see a bailout and then blame the Democrats when the inevitable happens. Might make you feel good, but not exactly the smartest move for the country.

    So do it this way, structure the bailout for displaced workers and force the big three into Chapter 11. So long as the auto industry is restructuring and its creditors and unions are forced to deal with the majority of pain, there is hope. Cash infusion to these industries alone is nuts, it is like giving heroin to a junkie.

    Joe (dcebbd)

  4. The call to save the unions will have a huge impact on Obama. If the big three go under, then a huge segment of the manufacturing unions will be gone.

    The result is that 80-90% of the union employees will be govt employee unions.

    Joe - Dallas (85ffd2)

  5. I agree no bailout, but politically that is not going to fly. So just saying no is stupid,

    To me, this seems like a good example of where we allow government to go wrong. Rather than addressing whether or not the government has any right to interject itself, we just debate the manner in which it interjects itself. It is like we no longer even bother having the debate as to whether we should be doing things, we only argue about how much we are willing to spend, like we are trying to Dem-lite the Dems.

    JD (b96a9e)

  6. The result is that 80-90% of the union employees will be govt employee unions.

    So allowing them to go under would allow Baracky to increase his popularity amongst unions. Seems like a win/win for him.

    JD (b96a9e)

  7. Patterico-
    Amen.

    If O wants to do Dem type things he can bail out the workers who will lose their jobs, give them a scholarship or retraining money, guarantee their pensions, something like that.

    EdWood (c2268a)

  8. I think it should be allowed to go under. However, it would seem that 5-10 billion could be allocated specifically for the purpose of job retraining into a couple of defined sectors which are short workers, such as IT.
    Let the unions deal with the pension/health care issues. They broke it they own it kind of approach.

    voiceofreason2 (590c85)

  9. No bailout. As the commenter above said, it would be like giving cash to a heroin junkie. It’s not that Detroit can’t make cars that people want to buy, it’s that they can’t do it profitably. You don’t keep subsidizing losing enterprises. Restructure in bankruptcy. $25 billion is more than the market value of all three auto makers combined.

    The Democrats need to learn how to make tough decisions.

    daleyrocks (5d22c0)

  10. However, it would seem that 5-10 billion could be allocated specifically for the purpose of job retraining into a couple of defined sectors which are short workers, such as IT.

    I think that’s a good idea, but part of the problem (as I see it) is that Michigan is going to have a hard time attracting new manufacturers to come to Michigan. They know they will be dealing with union organizers, and it isn’t a right-to-work state.

    MayBee (4f6fae)

  11. Detroit has to restructure its’ business model, of that virtually everyone agrees.
    It has backed itself into a corner with its’ current, and future, labor agreements;
    it cannot sustain itself with the cost factors within those agreements.
    It has too many brands, and dealers.

    Bankruptcy would be the natural method of shedding itself of those things that cannot be disposed of through normal business channels:
    High labor costs can be restructured by the bankruptcy court, with a large degree of the pension problem sloughed off onto the Fed’s (which means that the rest of the manufacturing sector ends up paying for the problem through increased fees for that pension bailout fund);
    Excessive brands/outlets, which are difficult to shed due to the Franchise Laws of the various states
    (can a Bankruptcy Court override an individual state’s franchise laws, or all of them?).

    Congress, and the White House, could deal with all of these problems in one of their famous “comprehensive” legislative packages; but, that would require that individual politicians put the country’s interests above their particular political interests – and when was the last time that we saw that happen.

    The primary obstacle here is the UAW, which IMO finds itself dangerously in the same situation with an entire industry, that the Machinist’s Union had with respect to individual companies in the airline sector.
    Will the UAW be able to save Detroit, and itself?
    Or, will it stand for its’ principles, and watch GM, Ford, and Chrysler go the way of Eastern Airlines (and so many others that the Machinists’ scuttled)?

    If the “Big Three” go into Chapter-11, parts of them may survive as subsidiaries of other auto manufacturers, but they will die.

    If the Feds pour money into them under the current business model, they will become “American Leyland”, slowly bleeding the Treasury, and just prolonging the death of a once-proud example of American industriousness.

    The solution lies in the boardroom of the UAW.
    I, for one, am not encouraged by that thought.

    Another Drew (a9bf4b)

  12. 1) The “Big Three” need to enter bankruptcy. Period.

    2) I don’t feel badly for any soon-to-be-displaced autoworkers. A good number of them have been collecting paychecks without even having to work at all for YEARS. If they decided to spend their money rather than re-train for another career, then they can queue up at McDonalds for the next available opening.

    3) The vast majority of those union employees are way overpaid “wrench-turners” getting paid $80+K for turning a bolt on a chassis as it passes them on the assembly line. Let’s not romanticize or build up these jobs into more than they are. Autoworkers are not especially noble individuals doing a job that “nobody wants to do.” Most of them are, in fact, way overpaid and underworked for the amount of marketable job skills they actually possess.

    4) The country would benefit from the decline in influence of the UAW.

    5) I have a host of relatives that have worked/are working for the auto industry. I’ve seen the faces up close and personal, and I know their stories so those who wish to respond to this post can save the “you don’t know” responses because “Yes, I do.”

    Jim B (95a401)

  13. Many of you know I agree with Obama and the Dems some 90% of the time, and 10% with Patterico. This is one of the times I agree with most of you here.
    One difference, you all blame the path on unions and I blame it on greed. (No need to discuss that part, we know where it will end up.)

    I am however tremendously concerned with the jobs that will be lost. Considering the enormity of jobs associated with GM, this alone could put us into the 10% unemployment range.

    All options need to be explored.

    Oiram (983921)

  14. either the UAW and the Big 3 figure out a way to restructure their contracts so that the industry can survive, or the 3 go under and UAW stands for “U ain’t w*rkin”

    life is tough, but it’s tougher if you’re stupid.

    no bailout.

    redc1c4 (27fd3e)

  15. Michigan could become a Right-to-Work state……..

    HHAHA, oh who am I kidding.

    Techie (62bc5d)

  16. I wish someone would do a thorough analysis of what bankruptcy would mean for the auto industry.

    I know the theory is out there that people won’t buy cars from a bankrupt company, but that doesn’t seem like a huge problem unless service is no longer available.
    Aren’t we all feeling good about America these days? Couldn’t some PR company make it rally patriotic to buy an American car to save an American company?

    MayBee (4f6fae)

  17. “I think that’s a good idea, but part of the problem (as I see it) is that Michigan is going to have a hard time attracting new manufacturers to come to Michigan. They know they will be dealing with union organizers, and it isn’t a right-to-work state.

    Comment by MayBee — 11/17/2008 @ 9:26 am ”

    I’m not as concerned with attracting manufacturers. Give the workers the skills and let them move to states where the jobs are at.

    California is losing workers due to excessive regs and taxes. Voting with one’s feet sometimes is the only way to force changes in governance.

    voiceofreason2 (590c85)

  18. Kind of related-
    You know what I would love to see?

    I would love to see a group of the guys that have made a boatload of money in the past few years- hedge fund managers, Automaker CEOs, Movie Studio Chiefs, Oil Company CEOs- donate some money to a new fund to encourage some of the displaced workers to try their hand at entrepreneurship.

    If each of them donated a couple $10 million, they could really get something good going.
    And it would generate enormous goodwill.

    MayBee (4f6fae)

  19. “Couldn’t some PR company make it rally patriotic to buy an American car to save an American company?

    Comment by MayBee — 11/17/2008 @ 9:33 am ”

    I’ve got a cousin who has worked in the Power and Gas industry for about 30 years in the Ohio area. When he started his co-workers gave him grief about his Toyota truck and why as a good union guy he didn’t drive an American car. He proceeded to point out one of their American made cars and said “you mean like yours whose engine was made in Mexico, brakes in Canada, and electrical system in another country?”
    They didn’t bring up the subject again.

    voiceofreason2 (590c85)

  20. Didn’t Pres. Bush indicate that he would agree to a $25,000,000,000 loan? Given that the prior loan to AIG is routinely conflated with the bailouts, is there any functional difference between a loan and a bailout, other than the hope that they will one day be repaid?

    JD (b96a9e)

  21. People fly on bankrupt airlines all the time.

    Techie (62bc5d)

  22. California is losing workers due to excessive regs and taxes. Voting with one’s feet sometimes is the only way to force changes in governance.
    Comment by voiceofreason2 — 11/17/2008 @ 9:36 am

    Yes, and as those “Reagan Democrats” and small-business owners have left, the lunacy in Sacramento has only gotten worse as there is no restraint upon the worst aspects of the Dem Party.

    Another Drew (a9bf4b)

  23. I’m not as concerned with attracting manufacturers. Give the workers the skills and let them move to states where the jobs are at.

    I agree, but moving is expensive. Especially if there’s nobody left to buy your house.

    MayBee (4f6fae)

  24. Comment by Another Drew — 11/17/2008 @ 9:41 am

    True, but the 2010 census will reflect the shift.

    voiceofreason2 (590c85)

  25. Comment by Techie — 11/17/2008 @ 9:39 am

    As was properly noted by a talking head over the week-end:
    An airline ticket gives you a relationship of a few hours with an airline;
    Purchasing a car is a relationship lasting several years or more.

    Apples and Oranges!

    Another Drew (a9bf4b)

  26. I agree, but moving is expensive. Especially if there’s nobody left to buy your house.

    Comment by MayBee — 11/17/2008 @ 9:42 am

    When the oil bust of the 80’s hit in Houston and in parts of Louisiana many people defaulted on the loan. Starting over with a bad credit rating is not the optimal solution but hanging on by a thread waiting for the imminent collapse of the company is not much better.

    voiceofreason2 (590c85)

  27. True, but the 2010 census will reflect the shift.

    Anyone want to bet that the 2010 people does not count only actual people, but hypothetical people?

    JD (b96a9e)

  28. #16 Maybee, I would love to buy an American car bankrupt company or not. The problem is I’ve owned 5 cars in my life, two of them required long term commitment maintainanace and died at less than 100,000 miles. The other 3 lived well into the 100’s of thousands of miles. Guess which 2 were American?

    Come to think of it they were Chevy’s (GM).

    The market is working perfectly for me if GM goes under :( *gulp*.

    Oiram (983921)

  29. I would support a bailout of a different sort; let the auto companies’ stock trade free of capital gains tax for say the next ten years (or better yet, forever!). Also suspend the corporate tax on these companies for equally long amount of time. This would give them more cash and not require tax payers to be on the hook, plus their stock would look attractive for once, so if they need to raise capital it might be possible. Look at it this way, if they go bankrupt, the gov’ment isn’t going to see cap gains revenue or corporate income tax, so it can’t hurt.

    kevin (3310f1)

  30. There is an irony here in that much of the burden to pay for any bailout will fall on the younger voters who overwhelmingly voted for Obama. They also overwhelmingly refuse to even consider buying American nameplate cars and, on average, will be making much less in salary and benefits than the autoworkers whose salary and benefits they will essentially be paying for.

    John Casteel (ffb92e)

  31. Comment by voiceofreason2 — 11/17/2008 @ 9:43 am

    CA is already predicted to lose one Congressional seat in the 2010 re-apportionment,
    the first time in history that this has happened.
    Thank God! that we passed Prop-11 to remove state legislative district boundary drawing from the control of the legislature – but, there will be a blood-curdling battle over which Congressman is going to lose their seat in a sea of districts designed to protect incumbents of either party (a battle among state legislators looking for that next safe seat to move to due to term-limits and what Congresskritter looks to be ready for retirement, or can be pushed out).
    Another point needs to be made re Michigan:
    The tax policy of the current administration in Lansing has been disastrous for the economy of that state. Jennifer Granholm was thought to be a “comer” in the Dem hierarchy, and has followed the Left/Lib line in all that she has done, and driven MI into the dumpster. The economic figures for that state are an absolute disaster since she took office.

    Another Drew (a9bf4b)

  32. The tax policy of the current administration in Lansing has been disastrous for the economy of that state. Jennifer Granholm was thought to be a “comer” in the Dem hierarchy, and has followed the Left/Lib line in all that she has done, and driven MI into the dumpster. The economic figures for that state are an absolute disaster since she took office.

    Yeah, and she was at Obama’s Economic summit to represent the victims of economic downturn. Not looking for ideas to help improve her state, mind you.

    Is anybody looking at states that are doing ok and asking what they are doing right?

    MayBee (4f6fae)

  33. The market is working perfectly for me if GM goes under :( *gulp*.

    Sadly, I think it pretty much is the market working perfectly– except for the fact that GM hasn’t been able to freely work with its own employees. It has the union to deal with.

    You can tell a bailout isn’t a great idea because you don’t see anybody stepping up to try to buy GM right now, even though it’s cheap. Warren “Buy American” Buffet could afford it, couldn’t he?

    MayBee (4f6fae)

  34. Well, first thing, most are “Right-To-Work” states!
    Many have no individual and/or corporate/business income tax!
    Many have no Sales Tax!
    Some even have (are you ready for this)
    Republican/conservative legislatures and/or statehouses!

    Oh, the horror!

    Another Drew (a9bf4b)

  35. No bailouts for the UAW’s failed biz model.

    SPQR (72771e)

  36. Is anybody looking at states that are doing ok and asking what they are doing right?

    They are electing Republicans.

    JD (b96a9e)

  37. Another Drew-
    Funny you should mention that. On Ezra Klein today, he has a post up about racist voting, and says this:

    Broadly speaking, the more African-American voters in a given state, the more monolithically Republican that state is likely to be. It’s not white voters, in other words, who are racist, but white voters in states with lots of black voters

    So these people in states like GA are racist, see?

    But look at this-
    The 10 best cities for African Americans:

    1. Washington D.C.
    2. Atlanta, GA
    3. Raleigh-Durham, NC
    4. Houston, TX
    5. Nashville, TN
    6. Dallas, TX
    7. Charlotte, NC
    8. Indianapolis, IN
    9. Columbus, OH;
    10. Jacksonville, FL.

    The racists seem to create pretty good places for black people to live.
    I don’t see Detroit on that list anywhere.

    MayBee (4f6fae)

  38. Look, I’ve driven a beloved Chevy before. A 1986 Silverado 4WD. It was/is my dad’s and the first car he let me drive. It’s still going strong at ~188,000 miles on it.

    Techie (62bc5d)

  39. Comment by MayBee — 11/17/2008 @ 10:14 am
    Several studies have been done that bring into question the DoJ’s penchant for “minority-majority” districts under the Voting-Rights Act.
    What they have found is that these districts enable a sub-set of politicians who are narrowly focused as to their policies, and that they then have difficulty reaching-out to voters who do not conform to the “minority-majority” districts from which they have achieved success.
    This explains the difficulty of Black’s in attaining State-wide office in more that just a few particular instances.

    Another Drew (a9bf4b)

  40. Comment by Techie — 11/17/2008 @ 10:25 am

    It can join my 1971 Toyota Hi-Lux pick-up with 325,000+ miles, which has been relegated to a 3rd-car now, but when it was a daily-driver, racked up 18-25K miles/year.

    Another Drew (a9bf4b)

  41. Didn’t want to get into it………..

    But too much agreeing with you guys makes me gasp for air………….

    Unions help protect the workers at GM that do what they are told manufacturing on the assembly line. The gas guzzling, 4 year life span lemon’s were invented by the company heads who made a fortune.

    But who’s blaming greed?

    Oiram (983921)

  42. I believe there is enough money in the 700B to help out the auto industry, and thousands of people get or keep jobs, 25B would leave 675B for wall street hogs, they want the money for themselves, and have no plans for how to use it now that we are watching!!!! How stupid is that. Someone should have given them a plan B!

    Wanda (2e40c6)

  43. Comment by Oiram — 11/17/2008 @ 10:38 am

    And when one of the union members orders a car through the employee purchase program,
    when that car starts down the line it gets a tag from the shop-steward:
    This one’s for one of the boys“.

    Quality starts on the shop floor!

    Another Drew (a9bf4b)

  44. The Bush Administration may leave up to $350B of the bailout for Obama to spend.

    DRJ (a50047)

  45. Oiram,

    Big 3 unions demanded and got almost twice what automakers like Toyota pay their employees: An average wage of $73.20/hour. There’s plenty of greed to go around in Detroit.

    DRJ (a50047)

  46. But who’s blaming greed?

    Comment by Oiram — 11/17/2008 @ 10:38 am

    I am and is on the part of the Unions primarily.

    In Japan, when a strike occurs the workers still go to work. They wear an armband to signify they are on strike. In addition the Union has a rep that sits on the Board of Directors so they understand bottom line issues and work with
    the company instead of against it.

    voiceofreason2 (10af7e)

  47. One difference, you all blame the path on unions and I blame it on greed. (No need to discuss that part, we know where it will end up.)

    The unions were greedy. They strangled their golden goose.

    Why is that so hard to comprehend?

    Rob Crawford (04f50f)

  48. Unions help protect the workers at GM that do what they are told manufacturing on the assembly line. The gas guzzling, 4 year life span lemon’s were invented by the company heads who made a fortune.

    Nobody is blameless.
    The cars aren’t invented by the company heads, though.
    The unions do help protect the workers that do as they are told, but they also help protect a lot of inefficient, expensive practices. The way they are structured, the employee need not be concerned whether the company is actually doing well.
    The guys who “invent” the cars can all be fired for doing a poor job.

    MayBee (4f6fae)

  49. Comment by DRJ — 11/17/2008 @ 10:48 am

    I posted the numbers on another thread on 11/15 from this
    It is surprising that they have lasted this long at this level of management incompetancy, and union piggishness.

    Another Drew (a9bf4b)

  50. DRJ @ #44 – I would have used the term squander rather than spend. Plus, I would not leave it for Baracky.

    JD (b96a9e)

  51. The unions saddled the automakers with salary and benefits packages that are unsustainable. The unions think that the tax payers should bail out their failed biz model and the tax payers who don’t have 70+ dollar an hour jobs, featherbedding union rules and fat pensions won’t stand for the unions’ greed.

    SPQR (72771e)

  52. I’ll agree that unions over time have created big problems, but there’s a downside to the loss of union jobs and influence. “Men in their 30s today are earning less than did the men of their father’s generation (men who were in their 30s in the 1970s). … [I]n 2004 the inflation-adjusted incomes of men in their 30s were 12 percent less, on average, than the incomes of men in their father’s generation at the same age.

    Date is from Feb 2008 report by the Brookings Institution, GETTING AHEAD OR LOSING GROUND: ECONOMIC MOBILITY IN AMERICA, BY JULIA B. ISAACS, ISABEL V. SAWHILL, AND RON HASKINS

    Peccator Dubius (0a6237)

  53. Bush will not heed Jesse J’s call to implement the policies of O! before his term begins…

    I realize that to progressives, it’s unfair to make folks pay the debt’s they’re responsible for; but O! will have to pay off the unions for their support-not Booooosh!

    The unions enjoyed fleecing GM when they were in high cotton; either they can make some concessions now or lose it all when GM goes chapter 11.

    And, we all need to be expressing our views to our representatives that we are not down with any bailout scheme that doesn’t include reducing all of the ridiculous and extravagent UAW extorted perks…

    I personally believe that it;s better for GM to go chapter 11, and emerge as a reorganized and stronger business-if that is possible. Of course it may not be since the UAW will wanna go all scorched earth on them. It’s kind of a watergate mentality…If they’re goin’ down, they wanna take everyone with them…

    Of course, come January 20, 2009, ever-thin’ gonna be allright again…

    Bob (99fc1b)

  54. Peccator, given the many problems with the CPI which greatly exaggerates inflation over the long term, I don’t find that statistic very significant.

    SPQR (72771e)

  55. Point taken, SPQR, I’m no economist.

    It’s still true, however, that in the industrial heartland the days where a guy could maybe not even finish high school, go to work at the factory where his grandfather and father did, and make enough money to support his family, own a house and a car, take vacations, all without his wife having to work too, are long gone. And like McCain said (and got hammered for), those jobs aren’t coming back.

    Peccator Dubius (0a6237)

  56. Peccator, those days are gone – but IMO more because people live in bigger houses, drive fancier and more cars, provide themselves and their children mobile phones, and have more expensive entertainment.

    SPQR (72771e)

  57. I wrote a post on this this morning. No bailouts. Let them go bankrupt.

    #dontgo has a petition up to send to Congress to protest bailing out US automakers.

    You can go here to sign it.

    Let’s not bail out the US automakers. Let’s allow them to declare bankruptcy and shed the unsustainable labor contracts. Let’s give the US automakers the same advantages that the foreign automakers here in the US currently enjoy.

    kimsch (2ce939)

  58. I’ll agree that unions over time have created big problems, but there’s a downside to the loss of union jobs and influence

    That is absolutely true. But.

    Businesses exist to make money for those that own them. If there is a business that
    a)makes a product there isn’t much demand for and
    b)cannot afford to pay its workers the price the workers demand (remember, the labor market in MI isn’t a free market)
    then what do you have? Really, what do you have?

    If the government pays for a company to stay in business not for the product, and not for the profit, but because people must not be unemployed (or employed at a lower wage), then what you have is a government jobs program. With wage protections.

    MayBee (4f6fae)

  59. It’s still true, however, that in the industrial heartland the days where a guy could maybe not even finish high school, go to work at the factory where his grandfather and father did, and make enough money to support his family, own a house and a car, take vacations, all without his wife having to work too, are long gone

    Pardon the language, but bullshit.

    A forklift driver for Ford can make $100+k. If that isn’t a god damn living wage, such a thing doesn’t exist.

    Unions can be seen as a direct cause of the failure of the Big 3. That union members will suffer as a result SHOULD be a lesson…

    But not only would it not be a lesson, they won’t even suffer. Democrats in Congress will see to that.

    Scott Jacobs (a1c284)

  60. I love the duality here. A worker for GM should be able to live on $100,000 (unions or no unions….. they don’t all get that). Yet when Obama wants to taxe a small business making what some here think he will tax ($100,000) you cry fowl.

    Oiram (983921)

  61. SPQR, apparently, that’s gonna depend who you’re talking to (more from the Economic Mobility Project Report I mentioned – sorry for the length of the quote and the references to inflation adjusted numbers again):

    Based on new data, Chapter I finds that two out of three people have more inflation-adjusted income than do their parents. Thus, most adult children are doing better than their parents did. And yet there is a downside to this good news: one out of three Americans has a family income that is below what their parents’ was a generation ago. These changes in inflation-adjusted income may understate improvements in wellbeing since families tend to be smaller now and because various benefits that have increased in value, such as health insurance, are not included in the income measures used for the research in this volume.

    However, more of these families must rely on two earners to get ahead and pay the extra costs for child care and other work-related expenses that this entails. To some people, a finding that despite the increased work hours associated with the growth of two-earner families, one-third of American families are worse off than their parents is disturbing. They will argue that had economic growth been higher and more broadly distributed over the past 30 years, many more of today’s adults would have been able to climb the economic ladder. Others will emphasize the fact that two out of three people are better off than their parents. From this second perspective, there is much to celebrate and the hand-wringing about rising inequality of income could be viewed as unwarranted.

    One other point, in the past the amounts of personal debt, credit cards and otherwise, were much smaller than today.

    Peccator Dubius (0a6237)

  62. No, Oiram, it’s a different duality….the one here is that the union member at GM believes the job is supposed to pay that much, and is owed the job, while other companies manage to get the same job done for much less, and those employees are not dissatisfied…

    The job is not worth what GM has been forced to pay, and can no longer keep a market share…yet, Toyota, Nissan, et al., are managing just fine…

    Why???

    reff (b996d9)

  63. Oiram’s comment makes a lot of sense … to someone who thinks that the government should be deciding how much everyone gets paid.

    That’s not the country I live in, however.

    SPQR (72771e)

  64. I am against the bailout however if we are forced into this I would suggest under the following conditions.
    1) The Big 3 merge and eliminate layers of management.
    2) Operating from combo show rooms while closing others
    3) Weed out the vehicles that will not sell and close those plants. Produce no passenger vehicle that gets less than 20MPG.

    Dennis D (ae900a)

  65. Dennis, you don’t see the contradiction inherent in your item 3 ? Also, the automakers don’t own the showrooms.

    SPQR (72771e)

  66. To weed-out the dealer network will require wholesale repeal/revission of the Franchise Laws of the several states.
    Does Congress have that authority?
    Does a Bankruptcy Court?
    This is a 3-part problem:
    Management – Labor – Dealers

    Everyone will have to throw something into the pot for this segment of the auto industry to survive.

    Another Drew (a9bf4b)

  67. Comment by Oiram — 11/17/2008 @ 12:21 pm

    “…you cry fowl.”

    (I think you mean “foul”)

    Not certain who the “you” that is referenced, but if it refers to conservatives in general, then perhaps that brush-stroke was overly broad.

    I am conservative, but have no problem with anyone making a large salary; if an unskilled worker is able to command such a salary (union or otherwise), then good for that worker (and he should not be overly-taxed). It is not the fault of the worker for taking advantage of a dim or incompetent management.

    Some manufacturing companies have done quite well with or without unions, but Detroit auto-makers have stumbled. Their management failed to produce products with quality, failed to make products desired by the consumer, and failed to control costs (labor and otherwise).

    For our Country’s long-term benefit, they should have only two options: either take-off the training wheels (no bailout) and start competing, or fail.

    BTW:
    Someone making money (salary), versus money being taken from them (taxes), are two completely different terms.

    Pons Asinorum (e56816)

  68. I’m the opposite. Investment bankers perform but one function in society, to channel capital to efficient enterprises that produce welfare for individuals and society as a whole. Over the last eight to ten years, they have done the opposite, saddling us with too many identical brown stucco developments, too many McMansions, many built by imported labor. A huge waste of resources and one which we will be paying for a long way into the future. Every single investment bank, every mortgage repackager, should have been allowed to fail. The government could then have reorganized the financial sector simply by starting up new firms with fiat money.

    In the automaker’s case, they until relatively recently were giving the American public what they wanted, big heavy SUV’s. They got hit by exogeneous shocks, it takes time to re-tool . Give them some loans and they will come through just like Chrysler did in the 1980s.

    Mitchell Young (9b3ebd)

  69. Oiram, *facepalm*

    Yeah, those evil conservatives were asking the government to cut GM worker’s wages because we thought the were making too much.

    Roy Mustang (ad5f36)

  70. mr. patterico
    the u.s. auto industry were making cars that people wanted to buy and still do.it is because of the Eco-terrorist’s in government that have over regulated car manufacturing that is the problem.they cannot afford to make such changes to their assembly lines.which I do blame on them.having different lines in different locations only doing one thing.is,well stupid.whereas the Japanese can assemble 3-4 different makes of cars on one line.this goes beyond the auto industry.this is evil oil.liberals want oil out of this country almost as badly as they want Christians out.if there is an industry that should be kept alive,it is the auto industry.but beware,the coal industry will not be far behind.Obama has already stated his plans for them.which is to make it so hard and expensive,they will go bankrupt trying.the auto industry is their litmus test.if they succeed here they will go on to coal.

    chris (f10100)

  71. Once you’ve bailed out Wall Street, it’s a lot tougher to make arguments against bailing out everyone else.

    There is a good discussion to be hard with respect to what conditions the bailout should occur under though. Make it contingent on renegotiating the contract with the unions and I’m on board.

    But having the state pump money into the unions so that they can pump money in the Democratic Party coffers is economic madness. It’s the probable outcome though. Change you can believe in!

    Subotai (e188eb)

  72. Once you’ve bailed out Wall Street, it’s a lot tougher to make arguments against bailing out everyone else.

    The banks should never have bailed out. The destruction of my 401K is worth the destruction of the careers of those who got us into this mess.

    Roy Mustang (ad5f36)

  73. The main argument against an automaker bailout is that no one has established why a bankruptcy case would not be adequate.

    SPQR (72771e)

  74. The main argument against an automaker bailout is that no one has established why a bankruptcy case would not be adequate.

    That’s the same argument made and ignored against bailing out the banks.

    Subotai (e188eb)

  75. Not exactly, Subotai, in the case of the banks, the issue is whether or not the credit market was functioning. There is no shortage of automobiles being manufactured.

    SPQR (72771e)

  76. No, the argument made for the financial sector was that it was the equivelent of a “utility”, in that its’ failure would effect all other aspects of society.
    The auto industry in general, and Detroit in particular, while large, is not a utility.
    General Motors 50-yrs ago controlled 50+% of the domestic auto/truck market,
    today that number is barely 20%.
    If they go under, just as in any industrial closing, the employees, their families, and the businesses they trade with will be effected.
    But, it will not negatively effect people working for Toyota/Honda/Nissan, or the vast majority of people in the United States.

    Another Drew (a9bf4b)

  77. Comment by Mitchell Young — 11/17/2008 @ 1:29 pm

    “In the automaker’s case, they until relatively recently were giving the American public what they wanted, big heavy SUV’s.

    It is true that auto-makers in Detroit were giving some Americans what they wanted for the last decade or so: SUVs. However, they failed to provide most Americans with what they wanted for the last three decades or so: fuel-efficient cars. Indeed Americans have been asking for such vehicles since the 1970’s and Detroit has not responded with products (just promises).

    Other manufactures did not fail to provide for this market and have survived the current economic trend. The “exogenous shocks” did not make them tend toward extinction as it did for the Detroit manufacturers.

    The issues of poor quality, unwanted product-lines and out-of-control cost are self-evident and are hallmarks of bad management.

    A government bailout (what you call loans) will not address the root cause; how to build a better car. The government does not know how to do this and will only waste resources and delay the inevitable. The current management of the Detroit auto-makers does not know how to do this, as demonstrated by their current situation relative to their competitors, which are stable.

    The institutional capability of the entire Detroit auto-makers has had three decades and is still playing “catch-up” in terms of quality, wanted-product, and cost.

    They have failed, let them. The sooner that happens, the sooner we can recover.

    Pons Asinorum (e56816)

  78. Oiram cries “chicken”.

    Icy Truth (aedb2f)

  79. in the case of the banks, the issue is whether or not the credit market was functioning.

    I think that the question was whether or not it’s the states job to manage the credit market.

    The problem was a lack of transparency in the credit market. The recent government actions have done nothing to rectify that, and were never even intended to. Lenders won’t lend because a) they don’t know who is a a creditworthy borrower and b) the government is anxious to be the lender of first resort itself.

    Subotai (e188eb)

  80. GM can be purchase for under $2 billion. Why don’t Democrats, who have been lecturing us for decades on how companies should be run, buy GM? Show how it done Democrats!

    Perfect Sense (9d1b08)

  81. No bailout!! I was against the credit bailout and I am against this one. Get government out of private enterprise. Would I feel sorry for the employees? No. It is simple, if you have something (goods, e.g. cars or labor) to trade (sell) for money and offer it to the marketplace and the market declines to pay your asking price, you have basically two options: 1) Remove your product from the market or 2) lower your asking price. The Big 3 labor is priced over market value. The only place that labor can command the asking price is the Big 3 and since the Big 3 is losing money, labor must ask itself is it willing to do a “market correction” or risk having no market for that labor (at any price).

    rls (14b9d3)

  82. Kill Chrysler. Just close it down. Sell the Jeep name and designs and maybe the plants, but the rest is just junk.

    Kill the UAW.

    With Chrysler gone, and a non-union workforce the Big Two have a chance and will be easier to help.

    Loan them money, yes, but fire the board of directors and the executives of both companies.

    Kevin Murphy (805c5b)

  83. #59 Scot writes and many of you agree with his sentiments:

    A forklift driver for Ford can make $100+k. If that isn’t a god damn living wage, such a thing doesn’t exist.

    This was the duality I was referring to in #60 (I didn’t want to use the word hypocrisy).

    Fowl, foul what’s the difference? It’s all good eating at $100,000 right Scott?

    Oiram (983921)

  84. Yes, but the “duality” was unconvincing.

    SPQR (72771e)

  85. Oiram- it’s funny, because I often think of the disconnect when Democrats will support any workers going on strike for more money, but criticize people that don’t want the government to take more money. In both cases, the worker has more money at the end of the day, but one is wrong.

    Anyway, it isn’t that our Ford Forklift driving friend is making too much money and should be willing to part with it. It’s that he is making more money than his company can really afford to pay him.

    MayBee (4f6fae)

  86. #85 Maybee,
    GM is a big company with a lot of Employees. Some would of called them a Monopoly (obviously not anymore).
    Striking employees didn’t all get their pay upgraded to $100,000, let’s remember that.

    How do you know the company wouldn’t of gone out of business sooner without a middle class afforded by unions?

    Someone had to buy the crap they were selling right?

    Oiram (983921)

  87. How do you know the company wouldn’t of gone out of business sooner without a middle class afforded by unions?

    That is why they (probably) are going out of business. They need a much larger market share than just those employees that are overpaid.

    rls (14b9d3)

  88. How do you know the company wouldn’t of gone out of business sooner without a middle class afforded by unions?

    Other car companies have gone out of business.

    Look, I appreciate what unions can do for their workers. The problem is when the company can no longer operate under the terms the union has set, and yet the state forces them to negotiate with the union.
    If good pay was keeping GM in business, then GM would recognize that and continue to pay well. But it obviously isn’t enough, because GM is hurting and can’t meet its commitments.

    Does it make sense for the taxpayers to just give the money to GM so GM can continue to pay them more than they can afford?
    That only works if it is a short-term problem with a big payoff at the end.

    What is the incentive for a union to negotiate reasonably if they can count on Congress to step in, bail them out, and continue to force the company to negotiate with them?
    What is the incentive for GM to make better products if their profit is low, or if they are certain the government will bail them out again?

    I promise you, I want everyone to make a good living and not lose their job.

    MayBee (4f6fae)

  89. GM’s core problem is that it doesn’t have either enough day-care or sensitivity training.

    Ha Ha.

    Perfect Sense (9d1b08)

  90. “It is true that auto-makers in Detroit were giving some Americans what they wanted for the last decade or so: SUVs. However, they failed to provide most Americans with what they wanted for the last three decades or so: fuel-efficient cars.”

    Two comments on this:

    1. They were at a big competitive disadvantage to foreign competition because of high wages, medical and pension costs. They built full size trucks and big SUV’s for a reason – they could make money – they had good profit margins on those since for quite a few years there was less foreign competition in those segments. They had very low profit margins on fuel efficient automobiles subject to foreign competition.

    2. What Americans wanted – Advertising creates demand, particularly on products such as cars that have a strong emotional component in the purchase decision. 25 years ago no woman understood that she was a bad mother if she didn’t protect her children by driving them around town in a small military vehicle – she thought a minivan or a station wagon (remember those) was sufficient. All those adds stressing safety touched a big nerve. Same is true with us guys, all those ads that made it clear you would be bigger, stronger, more manly and have better luck with women if you had a really big strong truck to drive to the office. A modern version of the Marlboro man ads. [I’m cheap, all I got was a Frontier – but it’s still my TRUCK!]

    Peccator Dubius (0a6237)

  91. I think a large part of the problem that the Big 3 is having is that the legacy benefits to retirees is based on the 50’s 60’s and 70’s churn model. I can remember when automobiles were done at 100,000 miles, that meant that new autos were needed and the market wasn’t flooded with quality used cars.

    The legacy cost per unit was spread over many more units. As technology improved the auto and reduced the churn, not only were less cars being sold but the market for quality used cars was met. Couple that with the influx of quality foreign autos and the legacy cost per unit, being spread over less units, increased significantly. I believe it is right at $1500 per unit right now which is equivalent to Ford’s loss per vehicle produced.

    rls (14b9d3)

  92. 2. What Americans wanted – Advertising creates demand, particularly on products such as cars that have a strong emotional component in the purchase decision.

    And somehow, the Big Three were kept from getting infront of this how?

    Seriously, One of the Ford kids FIRED himself as Chairman because his stock-prices were so low.

    When you go “Shit, I’m costing mysel a crap-load of money” and toss YOURSELF out, you MUST be a screwup…

    This was the duality I was referring to in #60 (I didn’t want to use the word hypocrisy).

    It is only a duality in your own mind.

    I have no problem someone getting a pile of money for their job. None. Heck, I just wish it happened to me…

    My issue is that said $100k+ job is way, way WAY outside the norm. I mean WAY outside. Average is in the high $30k, I believe.

    My problem is that the unions have bled GM and Ford and Big C (can’t spell it, sue me) dry, getting raise upon raise upon raise until hourly people made three times occupational average.

    THAT is my problem with it. The Unions saw this coming the last several years, saw the upcoming crunch (they had to, the companies would show them the numbers during contract disputes trying to claim poverty), and ignored it to line their pockets for the short term – and ignored the long term.

    If they care so little about future employment, I care even less.

    They made their bed, and now they get to lay in it.

    Scott Jacobs (90ff96)

  93. Why don’t we use the bail out money to help the automakers make the public transportation we need instead of promoting adding more automobiles to the congested roads we have? By the way this also would help to balance the huge trade deficit, improve the air we breathe and give us more time to be with our families instead of being stuck in traffic.

    Amalio Escobar (cebe56)

  94. Amalio Escobar, because automakers don’t make public transportation.

    The reality however is that public transportation projects have done nothing to reduce traffic and little to improve air quality.

    SPQR (26be8b)

  95. Bail outs should be done in bankruptcy court. Like we’ve been doing it for how many decades?

    Bel Air (802704)

  96. Comment by SPQR — 11/17/2008 @ 8:31 pm

    Doesn’t GM make transit buses?
    Plus, there are locomotives from the Electro-Motive Division.

    Another Drew (a9bf4b)

  97. Instead of bailing out the auto makers, the government could offer to buy back gas guzzler, air polluting cars and trucks for $4,000.00 each. Provided the money is applied to a new fuel efficient big three auto, with an additional $4,000 credit. This would result in getting 625,000 obsolete vehicles off the road and replacing them with cleaner, more efficient new models. The demand would breath life into auto industry and clean the air. The cost? %50 billion.

    valvem8 (c28dd1)

  98. AD, yes but those are separate divisions with no capacity to absorb the autoworkers.

    valvem8, how does that change GM’s business model to suddenly become profitable? How does that remove the stifling mountain of pension liability from GM?

    It does not.

    SPQR (26be8b)

  99. valvem8 – I am not looking forward to seeing parking lots full of green Edsels and Corvairs that Baracky would require Detroit to manufacture but nobody would like to purchase.

    daleyrocks (5d22c0)

  100. People are acting as if this is 1979 and Detroit is turning out land yachts. It isn’t. Over the last two decades it innovated. How short your memories are! Five years ago, 3 years ago, it was the shizzet to have an Escalade. Now everyone wants Priuses. Detroit, given some backing, can retool. Think Chrysler in the 1980s — Lee Iacocca, etc.

    BTW, I know that Ford at least makes fine, compact, hi mileage cars. I know this from cruising on the autobahn in a Ka [youtube movie for a year or so.

    Mitchell Young (9b3ebd)

  101. Should we “bail out” The Big Three? Absolutely not! They’ve been in bed with Big Oil for decades now. If one morning you wake up in bed and look over at your spouse and realize they are unreliable, ugly and self serving…you go to counseling! You pay for it out of your pocket. There ya go Big Three, ask your bed-mate for some cash. It’s worked for married couples across America since her birth! Then, if The Big Three want to keep spitting out cars that suck fuel, eat away at consumer confidence, and can’t compete, America will find a sweeter, younger, prettier mistress to court. My analogy is true and tried. That’s capitalism! The Airline industry made it through tough times, even post-bankruptcy. Let a non American (or NEW American) car maker open up plants here, giving GM, Ford and Crysler time to enjoy their bankruptcy and reformat in an ethical, earth-friendly, economically sound entity.

    Cori (acf7bb)

  102. Petition Congress:

    http://www.rallycongress.com/no-bailout-for-the-auto-industry/1409/

    NO BAILOUT FOR THE AUTO INDUSTRY
    Nancy Pelosi, with the help of Barney Frank, wants to bail out yet another failed sector of the economy. It is not government’s role to reward incompetent, overpaid executives pursuing a failed and anachronistic business model. The American auto industry is in trouble because it produces a shoddy, polluting, gas guzzling product at noncompetitive prices driven by trade union benefit packages. It is a waste of taxpayer money to try to shore up an industry that needs to be radically restructured. The Big Three should be allowed to fail and file for reorganization under Chapter 11 of the Bankruptcy Code. They will not cease to exist, but will be restructured under the supervision of the bankruptcy courts. Congress cannot do a better job than the courts. The courts will supervise the reorganization of the industry without being tempted to reward lobbyists, campaign contributors and unions for their political and financial support.
    Congress must allow the economy, existing laws and judicial bodies to resolve the Big Three’s financial problems and not throw more taxpayer money away under a hasty and ill conceived bailout.

    Holly201 (e6bea7)

  103. “…it produces a shoddy, polluting, gas guzzling product at noncompetitive prices driven by trade union benefit packages…”

    Many of the vehicles produced in Detroit lead the quality rankings every year.

    All vehicles sold in the U.S. must meet the pollution standards set by the EPA. A Cadillac must meet the same standard as a M-B S-class; a Chevy Malibu meets the same standard as a Honda Accord.

    Corporate Average Fuel Economy…all manufacturer’s, foreign and domestic, must meet CAFE standards under pretty stiff monetary penalties.

    The great misunderstanding is over SUV’s, which are used as cars by the buying public, but which have always been treated as light-duty trucks (upon which they are based) by the government regulators.
    There are several things that explain the popularity of SUV’s:
    1- The downsizing of vehicles in the 80’s brought a realization among the car-buying public that size does matter. In a crash, the small-car always loses (ATBE).
    2- The luxury-taxes of the late-80’s restricted the ability of businesses to write-off the costs of luxury cars (at that time you couldn’t write-off anything over $30K), but put no restriction on commercial (including light-duty) trucks. This brought an explosion of the luxing of trucks starting with the Suburban (begetting the Tahoe, Escalade, Explorer, Excursion, Navigator, etc).
    This allowed the self-employed, among others, to have a nice ride, even a “performance” ride, and still get to write it off as a business expense (and even one for his wife too, as long as he had her listed as an officer in the company).
    3- Trucks also, have a different CAFE standard than do passenger vehicles (cars). This is because of the nature of the beast. These vehicles are designed to haul stuff – large amounts of it in some cases. BTW, who do you call when you need to move a refrigerator? Your brother with the 3/4-ton pick-up, or your aunt with the Prius?
    4- And, that is another reason why they are wide-spread – people like having something they can load the entire family into for a vacation, and hitch the boat to the back for that week on the river.

    Prices….If Detroit can un-load these uncompetitive labor agreements, you will not see any lowering of prices. What you will see in an increase in the profitability of the corporations that build these vehicles.
    Who knows, they actually might start reporting a profit, instead of the mind-boggling, multi-Billion $ losses they have been having.

    Another Drew (57c107)

  104. Bankruptcies for the American electronics industry did wonders to rejuvenate that industry.

    jpm100 (b48b29)

  105. Obama needs to put a stop to the handouts for people who made their beds. this is something that could have been avoided with better management practices, but the Great One will probably bow to the UAW pressure and sign his leftist illuminati signature to the bailout.

    Jeff (49888f)

  106. SPQR – I would like to get the studies that back up your claim that public transportation does not ease traffic or ameliorate pollution. Also, the automobile industry can retool itself to make public transportation, it did retool itself to make tanks during the war.

    Amalio Escobar (cebe56)

  107. Amalio, per capita mass transit ridership has been declining over the past decades despite massive spending in places like Los Angeles. In fact, the MTA in Southern California is a great example of what a boondoggle mass transit is. The MTA spends more than half its operations ( and budget on heavy rail and subway projects that actually serve less than 10% of their total ridership – and that subsidizes the wealthy suburban commuter thousands of dollars per rider annually. And have cost local and national taxpayers many billions in construction costs. All while failing to get more than a fraction of projected ridership.

    Meanwhile, traffic congestion increases and so does air pollution in the LA basin.

    SPQR (26be8b)

  108. “Also, the automobile industry can retool itself to make public transportation”

    Amalio – Would there be any guarantee they could make public tranportation products more efficiently, better, or cheaply than firms already in that business?

    daleyrocks (5d22c0)

  109. NO Bailout, let them go bankrupt and flush this country of Unions. Unions are killing our country. UAW is the root of evil in this country and this is a chance to fix it!

    JimT (4b29d2)


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