There is some irony in the current situation.

We have a governing body and executive that have spectacularly mismanaged the economy and oversight of the financial industry to say nothing of two mismanaged wars. An they have the nerve to chastise industry on poor management--even though it's true.

In similar vein, Bush promised to manage government like a business. Is this what he meant?

You should do a little sidebar, so that we could keep track of how many times the NYT, Washington Post, USA Today etc. spout this silliness. You could also put up counters for: Clinton lost Congress in '94 because he'd veered too far to the left, Fannie and Freddie did the mortgage mess, the Democrats helped F&F do it, etc.

That way, you could just refer people to your previous posts on the subject, saving time for more fun stuff (or what passes for fun stuff if you're an economist).

I believe the $70.00 number includes the monies needed for funding previous retirees and their medical benefits. The net result is that Detroit has a real hourly labor cost in the $70.00 range even if the workers on the production line only get the $40.00 or so. But whether a UAW employee makes $40.00 or $70.00 an hour, the problem is that Uncle Sam is expecting the average US worker who make somewhere between $10.00 to $20.00 an hour with no pension and iffy medical benefits to subsidize the $40.00 plus pension and med benefits worker. Seems kind of unfair, where now the individual must sacrifice to benefit the greater good ( that is, the politically organized). Does not sound like the America I was raised in.

silverfox: EXACTLY!!!

I'd rather work to bring more high wage jobs to the country than tear down the ones we've got. I'm all about class war but not when the lower classes are encouraged to fight each other.

Funny, I don't understnad the losing a whoel car "industry"... we're only talking of letting the big 3 go...

Unless I'm mistaken, seems like the best cars being made at the best prices that are getting the most sales are coming from other car makers right here in the states... they seem to be doing just fine.

Many moons ago I helped negotiate a labor contract, small local independent union. retirement benefits were figured into the package. These legacy costs were negotiated years ago, and should have been paid for then, to claim then again doesn't seem ethical.

I think the latest wage structure for new hires is going to be about $14.00 a huge, huge sacrifice from what it was.

And--when are AIG workers going to take a similar cut?
Oh--and then those aristocratic newspeople too.

kathy:
I expect you will find the $14.00 per hour new hires to represent a very small percentage of Detroit's labor force, especially since the auto industry has been laying workers off rather than hiring them. Oh yeah, when they lay folks off it is by seniority, and the new hires are the first to go.

silverfox, as much as I hate it (for some of the reasons you mention), my instinct is to bail these %$#%@ companies out. $40/hr (total comp, not the monthly paycheck) is a lot, but it seems hypocritical for the people who went with the Wall Street bailout (which I did not support) to kick Detroit in the face. I've heard estimates like 1% of the workforce is in the US auto industry.. decent jobs with good benefits. Seems like the wrong jobs to be cutting. We should be trying to lift the others instead. And the $40/hr will decrease if Obama comes up with a decent health plan.

The alternative is to make the job situation a whole lot worse in the midst of a nasty recession.

The "individual" has already bailed out the $400/hr guy for the "greater good". I think an auto bailout is not asking for much, in comparison

Vara

It would be interesting to have two pie charts to contrast and compare:
1) The cost composition for a median income worker in the manufacturing sector in the US generally, vs
2) The cost composition for a median worker at GM.

Data would be good so we can see the whole picture, do you know of a good source?

The real issue is that Washington is leveraging the earnings potential of the lower paid wage earners to insure the continued success of those in the higher income or politically more powerful groups, whether Wall Street or Detroit, but showing no concern in doing anything positive to raise the incomes of all those expected to foot the bill. We are sliding into dangerous territory here, where we acknowledge that the well being of the group is more important than the well being of the individual. This is the kind of thinking that produces the Stalins, Hitlers, Mao's and eventually justifies the abolution of the rights of the weakest sectors of society.

Silverfox: you're forgetting that UAW members also pay taxes - so it's also their own money that's under discussion (for that matter, some of it is Ford and GM's tax money too).

That being said, let's not forget that lots of people pay taxes, not just people making $20-$40k a year (23.74% of all U.S households). Given that 44.93% of households make as much or more than your average UAW line worker, I don't think it's too unfair.

Steve

You are missing the point. I am not opposed to helping out UAW workers. I am opposed to the idea that since the 10,000,000 people currently out of work are not organized and politically powerful like the UAW is, they don't get the attention from our government that the one million UAW workers get. Washington is eager to subsidize the $40.00/hr plus pension plus medcial benefits the UAW workers get but is not making much of an effort to do whatever is necessary to get those ten millions unemployed into $40.00/hr plus pension plus medical benefits jobs. From government's point of view, an organized 1,000,000 workers is more important than 10,000,000 individual unorganized workers. This is the fundamental principle of dictatorship. Sacrifice the individual for the benefit of the many. Not what the Founding Fathers had in mind when they wrote the Constitution.

I think everyone agrees that one benefit of enacting universal health car is it allows automakers and other employers to offload their health insurance costs.

What if Uncle Sam goes further and takes on pension obligations as well? That is, transfer all defined benefit and 401(k) funds into the existing federal employee retirement system (which gives retirees both defined benefit and defined contribution pensions).

Obviously, we'd have to raise taxes to pay for this new obligation, but socializing the cost through the tax system puts every employer (and every employee) on a level playing field.

Making federal employee benefits and work rules the standard for every employee seems like a decent target to shoot for. And its not without precedent. The Americans with Disabilities Act's protection of every disabled person in the workplace was preceded by two decades with the Rehabilitation Act which provided such protection for disabled federal employees.

That $70/hr number always did seem a little fishy to me. Here's the original source that everybody is citing:

http://chryslerlabortalks07.com/Economic_Data.rtf

From that data, there's actually a simple way to calculate how much they're really making. The typical Major Assembler profile they list is estimated at making $64,100, and his hourly compensation is really close to the average. The Assembler is making about $38 an hour after health care and benefits, so that's probably close to the real average.

Silverfox:They ARE getting attention, in a round about way. What do you think the effects of having a million more unemployed would have on their chances of finding a job?

It would make it harder, and when they find it, it would pay less. Full stop.

You protect the 40 an hour job so the 10 doesn't go down to 8 an hour.

"Silverfox:They ARE getting attention, in a round about way."

The two sentiments expressed in this sentence seem mutually exclusive.

Is it possible to get attention in a roundabout way? Fascinating notion.

Just kidding, not really fascinating, just a good way to explain your personal selfishness, eh? Easier than simply stating you are selfish. If you care about the UAW only, why not just say so?

....well, General Motors itself says that $70 + labor cost is TRUE.

http://www.media.gm.com/manufacturing/handbook/other_benefits.pdf

The total of both cash compensation and benefits provided to GM hourly workers in 2006 amounted to approximately $73.26 per active hour worked. This total is made of two main components: cash compensation ($39.68) and benefit/government required programs ($33.58).

The average annual cash compensation for hourly employees in 2006 was $39.68 per hour. Included in average earnings are straight-time pay, Cost of Living Allowance (COLA), night-shift premiums, overtime premiums, holiday and vacation pay.

Benefit/government required programs in 2006 added an additional $33.58 for each active hour worked. These costs include: group life insurance, disability benefits, and Supplemental Unemployment Benefits (SUB), Job Security (JOBS), pensions, unemployment compensation, Social Security taxes, and hospital, surgical, prescription drug, dental, and vision care benefits. "

How great does the economic collapse have to be before the USA remembers that this country was built on living wage jobs with benefits.

We are now, once again, on the brink of a great recession, having averted disaster in 2001 by the creation of a debt bubble. The financial condition of the USA is comparable to an impoverished third world country, with home prices and employment in free fall, and a 50 % drop in financial asset values that may reach 65 % before it is over. The government is frantically trying to transfer borrowed money to the former consumer classes to keep the business class in business.

The proponents of the new "low" wage, benefit light America, with open access for any and all foreign mercantilist products must be completely thrilled with today's economy. Well, we can look forward to more of the same if we continue to keep our heads in the sand. Maybe WWIII will pull us out of the next great depression.

Auto Crisis -- "The 15% Solution"

I am not an economist or someone with influence. I expect my practical approach stated is too pragmatic or too slow moving in that the car makers do not get a huge infusion of cash instantly (but perhaps some up front cash with strings & the instant rebate & 100K mile warranty). See below:

'The 15% Solution"

One possible approach to dealing with the auto crisis -- The federal government would give any one who buys a fuel efficient car from the Big 3 US automakers a 15% instant rebate back on the selling price. This program could have an 18 month time limit. The total of the rebate dollars might then constitute a loan the auto makers would have to pay back.

If effective, this solution would immediately jump start US auto makers by giving them a huge advantage over the competition while they work on the remaining legacy issues. Auto makers would stay employed and no money would go directly to the car makers. I realize there may be issues in that the auto makers don't get a needed big $$$ infusion instantly, and that they may not be able to produce enough fuel efficient car because of the need to retool.

The feds might also think about underwriting an extended car warranty program for this period. Again, the total dollars to do so, could constitute a loan to the auto makers. (by the way, this could be done in a bankruptcy scenario as a way to off set the arguement no one will buy a US maker car if we let them go into bankruptcy)

If the dollars don't proof out or if this approach does not infuse enough cash into the US automarers quickly enough because the pacing of sales and/or retooling not yet in place some concept is we worth exploring.

More.....
A quick direct "15%" instant government rebate (say averaging around $3,000) from the Dept of Treasury paid to consumer with purchase of a US auto maker lower mileage car might make these cars especially attractive.

The problem with the fed using IRS tax return deductions is you only get indirect value (a lower tax payment) and but once a year (April 15)....and higher wage earners get more real dollar benefit.

If you could buy a Camry priced today at $20,000 for $20,000 versus a Malibu priced today for $20,000 for $17,000 (plus get a100K mileage warranty), which would you buy?

Giving a bailout just keeps them from going bankrupt while they try to get a higher % of americans to buy their cars. They have not suceeded in doing that over the last 20 years. Assuming Americans were motivated to buy fuel efficient Gm-Ford-Chrysler cars, the biggest stumbling blocks might be that the auto makers could not retool fast enough to produce enough low mpg cars to get profitable, that they could not get rid of their gas guzzlers, and that they can not work out union entitlements.
I am about to buy another Toyota, but as a US citizen if I was presented with a good alternative to going American I would. GM and Ford are building some good cars now.

Joseph Hare
JoeHareJr@Aol.com
617 755 0898