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Michael Barone has studied at both Harvard and Yale, where he was editor for publications from both colleges. He has also served as an editor for ...
Read more about Michael Barone.
Michael Barone has studied at both Harvard and Yale, where he was editor for publications from both colleges. He has also served as an editor for ...
Read more about Michael Barone.
Detroit Automakers a Relic of the Past
Michael Barone
Barack Obama has noted, carefully and correctly, that we have only one
president at a time. Yet on at least one issue he has taken the lead
and nudged the man who will soon be his predecessor in a direction
that he might not have taken without prompting.
It is an issue, moreover, that points up the tension between Obama's appeal to young voters and his calls for creating a new America on the one hand and, on the other, policies that he backs which seem designed to freeze in place the America we have.
The issue is whether the federal government should bail out, with a capital injection the size of what would have been unthinkable four months ago, General Motors and perhaps the other two U.S.-based auto manufacturers, Ford and Chrysler.
As one born and raised in Detroit and its suburbs, who once lived next door to Big Three factory workers and later went to school with the children of Big Three executives, I have mixed feelings about this proposal. My native Michigan is ailing, with the highest unemployment in the nation, plummeting housing values and cascading foreclosures. Its economy, despite the efforts of two previous governors -- Democrat Jim Blanchard and Republican John Engler -- is dangerously dependent on what used to be called the Big Three and are now called the Detroit Three.
The bankruptcy of one or more of them would deeply impact the personal lives and dash the seemingly reasonable expectations of those who, directly or indirectly, have depended on them. I can't help but think of these people when the issue is raised.
And yet the implications of a bailout are frightening. The Detroit Three were unprofitable well before the current financial crisis hit, and GM is reportedly hemorrhaging $1 billion a month. The huge cost of lavish employee and retiree health care benefits, negotiated with the United Auto Workers (UAW), makes it impossible for the companies to sell for a profit anything but the big cars and SUVs that, after gas prices hit $4 a gallon last spring, almost no one wants to buy.
No one in the private sector is willing to pony up a dime for this business plan. GM stock is below its 1946 price, and one investment house has priced it at zero.
The Detroit Three are taking advantage of the passage of the $700 billion financial bailout to argue that they, too, need government money to go on. But as Megan McArdle of The Atlantic argues, the finance firms are different. If credit coagulates, everyone suffers, while if the Detroit Three go bankrupt, their shareholders lose their stake, employee and retiree pay and benefits are cut, and real estate values go down in areas where the companies and their suppliers operate -- but life for most of us goes on.
McArdle, native of a similarly bedraggled industrial area (Upstate New York) and an Obama supporter, further argues that the capital invested in keeping the hulk of the Detroit Three operating pretty much as they are, unprofitably, will not be available to those whose startups could morph into the Microsofts and FedExes of the future. We don't know who today's Bill Gateses and Fred Smiths are, but markets sure have a better chance of finding them than the federal government.
Obama's presidential campaign was an entrepreneurial enterprise whose success owed much to harnessing individual initiative through an innovative management structure and creatively using emerging technology. The campaign, as well as the candidate, helped inspire under-30 voters, who preferred Obama by an unprecedented 66 percent to 32 percent margin -- as opposed to his 50 percent to 49 percent margin in those 30 and over.
But keeping the Detroit Three in their present form, with their extravagant health care benefits and the union's 5,000 pages of work rules, is an exercise in preserving in amber the America of the past.
And of course the Detroit Three will not be the last flagging enterprises to line up for government subsidy. Michigan is not the only state that has a talented congressional delegation capable of enlisting allies on relevant committees and from states with economic stakes in failing companies. Other unions, noting the UAW's success in maintaining benefits, will be standing in line.
George W. Bush may well acquiesce in a Detroit Three bailout. GM could run out of cash over Christmastime (Big Three plants don't operate between Christmas and New Year's), well before Jan. 20. If so, I will feel happy for the respite provided my friends and relatives in Michigan. But I will wonder if in preserving the past we are giving up the chance to get to a better future.
========
To read more political analysis by Michael Barone, visit www.usnews.com/baroneblog. To find out more about Michael Barone, and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com. COPYRIGHT 2008 CREATORS SYNDICATE INC.
Copyright 2008 Creators Syndicate Inc.
This news arrived on: 11/15/2008
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Posted Comments:
11-18-2008 20:27
JCE wrote:
If the government had done its job, we never would have had a need for unions. If the government did its job, unions would not have turned in to rich mans thugs. If the government does its job, the unions will become impotent, and die out. By not doing its job, it gives the union the things it needs to stay in control. If the government would just not act like one big union and do its job....
11-17-2008 02:46
Sunshine49 wrote:
To Casey42
My grandfather helped to start a union in Wisconsin way back when unions were just getting started. Once the union "bosses" took over, everything changed and the unions became like Mafia. He ended up hating unions for what they were doing to the companies that they "ruled" through strikes. The union bosses were getting astronomical salaries and using union dues to help get politicians elected. They would tell their workers who they had to vote for. Unions helped to destroy the work ethics of this country. Read HHJ's post again. In the 70s and 80s they were bankrupting cities with their strikes. Unions may have been good in the beginning but they have done more damage then good in the long run.
11-17-2008 02:02
JCE wrote:
I don't think that government should have to provide health care. It should, however, insure that all citizens have it within their means to have a good job in order to take proper care of themselves and their families, without both having to work and struggle and live in fear. That means keeping a small government, doing as it was intended to do, and not letting business, unions, and the rich do whatever they want at the expense of the people. People should have to work, should be allowed to work. We have enough of everything to go around as long as we don't just hand it too the rich. And being a preacher or lawyer or politician is still the best way to get rich, but honest hard work should be.
11-17-2008 00:11
Michelle wrote:
Automobile bailaout
The Republicans really don't want to help the automobile companies because they see this as an opertunity to kill the unions. This was an operation that began with Reagan when he killed the airtraffic control unions. Where the Republicans are strong the workers have few if any rights and are at the mercy of big business and their small business partners. This is also why minimum wage has not kept up with inflation. If mimimum wage had kept up with the cost of gasoline it would have been near twenty dollars and hour to have the same buying power minimum wage hsd in the 1960s and 1970s.
The Republicans simply want to kill the Unions and if the American automobile industy must die thats a price they are willing to pay.
The Republicans simply want to kill the Unions and if the American automobile industy must die thats a price they are willing to pay.
11-16-2008 22:09
Texas Katie wrote:
Socialism
I read something this past week that was very succint and I quote:
George W. Bush began his Presidency as a Social Conservative. He is ending it as a Conservative Socialist.
How true! And, I am not so certain that it is even "conservative" socialism after the bank bailouts.
There is a fine line between 'providing for the people that which they cannot provide for themselves' such as transportation ie: railroads, highways, bridges, etc. and providing healthcare, etc.
No matter how you slice it, we have been fairly deep into creeping socialism for a very long time. Furthermore, it is naive to place the blame on either party because both have been voting for legislation that leans toward or is downright socialistic all during the 75 years of my lifetime.
Even war - whether defensive or offensive on our part - has many aspects that could conceivably be called socialistic such as paying Sunni's, etc. to fight for our side. There is a lot of that going on in this war and very little is being mentioned about it or just how it works, etc.
My plea for those of you who are so upset because President-Elect is a liberal leaning socialist is this: PLEASE, FOR THE SAKE OF OUR COUNTRY, GIVE THIS MAN A CHANCE! The odds are very great that he will be no more of a socialist than the current administration, and perhaps even less!
George W. Bush began his Presidency as a Social Conservative. He is ending it as a Conservative Socialist.
How true! And, I am not so certain that it is even "conservative" socialism after the bank bailouts.
There is a fine line between 'providing for the people that which they cannot provide for themselves' such as transportation ie: railroads, highways, bridges, etc. and providing healthcare, etc.
No matter how you slice it, we have been fairly deep into creeping socialism for a very long time. Furthermore, it is naive to place the blame on either party because both have been voting for legislation that leans toward or is downright socialistic all during the 75 years of my lifetime.
Even war - whether defensive or offensive on our part - has many aspects that could conceivably be called socialistic such as paying Sunni's, etc. to fight for our side. There is a lot of that going on in this war and very little is being mentioned about it or just how it works, etc.
My plea for those of you who are so upset because President-Elect is a liberal leaning socialist is this: PLEASE, FOR THE SAKE OF OUR COUNTRY, GIVE THIS MAN A CHANCE! The odds are very great that he will be no more of a socialist than the current administration, and perhaps even less!
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