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A Simple Argument Against the Auto Bailout: A Bailout Would Destroy Jobs.

I have hesitated writing about the GM bailout for two reasons. First, I like GM cars; I bought two of them in March, and every car I've ever bought was a GM car. Second, a professor with tenure should be somewhat circumspect in writing about the jobs of people who do not have the protections that we have.

But in watching CNBC debates on the Auto Bailout, I have been frustrated by the arguments of those who favor bailouts that government largesse will on balance lead to more employment, rather than less.

Those inclined against the bailout seem mostly to say, "When will the handouts end?"

Yet the best way to meet the "jobs argument" is with another jobs argument. Making bad, uneconomic investments in failing industries does not, on balance, preserve jobs; it tends to destroy more jobs -- and more good jobs -- than it saves.

If you give money to failing industries to save jobs, then you are probably taking even more jobs away from other industries who would hire or retain workers but for their higher expenses. In essence, throwing money down a hole may preserve jobs in the short term but should lose jobs in the medium and long term.

If you pay for an auto bailout with today's tax money, then over the next couple years you are taking jobs away from lots of people currently working.

If, on the other hand, you pay for today's auto bailout with an increased deficit, then lots of future workers will be unemployed or take worse jobs in order to pay for today's auto workers. Again, you would be taking jobs away from lots of people (mostly in the future) to preserve the jobs of auto workers and their suppliers today.

Heavily unionized businesses usually have trouble competing with non-unionized businesses. Unions are successful in getting above-market wages and benefits, which makes it difficult for the businesses to compete. In the auto industry, there are many more dealerships than necessary. And, according to Larry Kudlow, the average compensation and benefit rate for auto workers in Detroit is $72 an hour, compared to $44 an hour for foreign car workers at US plants.

Even if two of the three Detroit automakers were to go out of business, most of their workers and the workers for their suppliers would be able to get some sort of job. That the jobs they would get would pay a lot less suggests just how much they are overpaid now. If General Motors has become a health and pension plan that makes cars on the side -- in other words, unions pressured bad management to make promises they couldn't keep -- then inducing GM to go out of business should be on balance good for the economy. Any government bailout should go to the Federal Pension Benefit Guarantee Corporation, to provide money to cover partial pensions for the employees of companies in the bankruptcies certain to come.

As with so many problems, it is unlikely that GM would have made such foolish deals if the government had not forced it to bargain with striking workers, rather than simply replace them. As with mortgages in the banking industry, the federal government pressured businesses to make deals that were economically bad for the businesses involved.

If an industry is contracting and there is an oversupply of productive capacity, then the worst thing we could do is prop up that industry by taking jobs away from the healthier portions of the economy (including better run automakers). If government planners really were a lot smarter and better planners than business people (they aren't), then the government's strategy should be to try to drive bad businesses out of business quicker, not try to destroy the healthy companies by propping up the dying companies.

The argument that the auto unions and the auto executives have already made sufficient givebacks is not credible. And as the Congressmen pointed out, the Detroit executives could have flown to Washington on commercial flights (in first class), instead of in private planes. If a business is failing, union auto wages should be priced well BELOW what nonunion auto workers make, not well ABOVE what nonunion workers make. So until the unions have given back everything above the market value of their labor, they haven't given back nearly enough. I don't know enough about what goes into the $72 compensation rate, but perhaps the parties should consider having all current employees, both management and union workers, take a 50% pay cut.

The only job-saving justification I can think of for a Detroit bailout is if the problem were only temporary; then destroying jobs might be imprudent. If Detroit's business model were strong, if there were little or no overcapacity, and if Detroit's problems were only temporary, then one could reasonably think that a bailout might be efficient. But there is no temporary market failure here to redress. Detroit's problems have been here since the late 1970s.

Anyone who thinks that giving money to a company losing 2-3 billion dollars a month — with overpaid workers and overpaid executives -- would usually save jobs in the long run, rather than lose them, doesn't understand economics.

UPDATE: I see that David Yermack said it better.

In 1993, the legendary economist Michael Jensen gave his presidential address to the American Finance Association. Mr. Jensen's presentation included a ranking of which U.S. companies had made the most money-losing investments during the decade of the 1980s. The top two companies on his list were General Motors and Ford, which between them had destroyed $110 billion in capital between 1980 and 1990, according to Mr. Jensen's calculations.

I was a student in Mr. Jensen's business-school class around that time, and one day he put those rankings on the board and shouted "J'accuse!" He wanted his students to understand that when a company makes money-losing investments, the cost falls upon all of society. Investment capital represents our limited stock of national savings, and when companies spend it badly, our future well-being is compromised. Mr. Jensen made his presentation more than 15 years ago, and even then it seemed obvious that the right strategy for GM would be to exit the car business, because many other companies made better vehicles at lower cost. . . .

Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM's physical plant during this period was $128 billion, meaning that a net $182 billion of society's capital has been pumped into GM over the past decade -- a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.

As a society, we have very little to show for this $465 billion. . . . Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.

The implications of this story for Washington policy makers are obvious. Investing in the major auto companies today would be throwing good money after bad. Many are suggesting that $25 billion of public money be immediately injected into the auto business in order to buy time for an even larger bailout to be organized. We would do better to set this money on fire rather than using it to keep these dying firms on life support, setting them up for even more money-losing investments in the future.

Steve:
Even if two of the three Detroit automakers were to go out of business, most of their workers and the workers for their suppliers would be able to get some sort of job. That the jobs they would get would pay a lot less suggests just how much they are overpaid now.

To me, it suggests that we're in a recession. Let's see, put a million people out of work, and if they can't simply find another job paying comparable wages, that just proves they were overpaid in the first place! I guess this sort of reasoning makes it easier to sleep at night.

The argument in this post is not "simple," it is simplistic. It offers nothing deeper than an Econ 101 view of how the world works, shrugging off every bad outcome by attributing it to a market failure.
11.19.2008 7:43pm
R Gould-Saltman (mail):
Jim sez: "Heavily unionized businesses usually have trouble competing with non-unionized businesses. Unions are successful in getting above-market wages and benefits, which makes it difficult for the businesses to compete. In the auto industry, there are many more dealerships than necessary. And, according to Larry Kudlow, the average compensation and benefit rate for auto workers in Detroit is $72 an hour, compared to $44 an hour for foreign car workers at US plants."

Either that third sentence is one hell of a non-sequitur, or there's an economic argument I'm missing. Too many dealerships? That may have to do with dumb management decisions, dumb dealer and would-be dealer decisions, dumb government or regulatory policies which fostered the development of too many dealerships (Are the modern "auto rows" ever subsidized or encouraged by local government policies?), but, as far as I know, don't have much of anything to do with unionization.

But i could be wrong; heck, since I got rid of the '66 Buick I inherited from Grandma, I've haven't owned a Big-3 car, and the last major auto failure I experienced was the (second within 40,000 miles) blow-out of the (Mercury) transmission on my Mazda. . .
11.19.2008 7:51pm
David Welker (www):
Lindgren:

You have not addressed a couple of isues.

First: The economy is currently falling off of a cliff. Allowing the car makers to fail right now would be the opposite of economic stimulus.

Timing matters.

Second: Would GM, Ford, and Chrysler really be part of a "failing industry" if the economy were not in the position it is now? What defines a "successful business." One that can survive any economic condition, or one that can survive normal economic conditions?

It seems to me that any business, including those run by Toyota, Honda, and the rest would fail at some point if economic conditions got bad enough. I think that when you talk about "failing industries" you have to recognize that the performance characteristics one needs to have to be "successful" varies with macroeconomic conditions. Right?

I only bring this up because you seem to be making much out of the label "failing industries."

Overall, I do agree that failing companies should be allowed to fail. In most circumstances. However, I question whether the circumstances we now find ourselves qualify as "most circumstances." Especially when it is an entire industry, rather than a particular firm, that is facing failure.
11.19.2008 7:59pm
kenny m:
I agree with the general thrust of Jim Lindgren's short but thoughtful essay.

Although I have no problems with the demise of Chrysler or Ford, I would surely miss the Corvette, Cadillac CTS-V, and Yukon Denali.

These are wonderful expressions of American automotive art and craft, just like the Trabant represents communism and the Ferrari represents Italy.
11.19.2008 8:00pm
darrenm:

It offers nothing deeper than an Econ 101 view of how the world works, shrugging off every bad outcome by attributing it to a market failure.


Of course the real reason is the "evil kapitalist". Let's see. Keep a million people in overpayed jobs and prevent a million other jobs from being created so people who don't have them can remain unemployed. That makes sense. So why stop with auto workers? The Government can subsidize everyone's jobs so they never have to worry again about losing them. What's so bad about being a third world country anyway?
11.19.2008 8:00pm
q:

To me, it suggests that we're in a recession. Let's see, put a million people out of work, and if they can't simply find another job paying comparable wages, that just proves they were overpaid in the first place! I guess this sort of reasoning makes it easier to sleep at night.

Lindgren gives other evidence, and there's also plenty of it he doesn't cite, showing that union workers are paid much higher than non-union workers within the auto industry. I don't see why that's such a controversial statement, one would wonder what the point of unionizing is if that weren't the case?
11.19.2008 8:19pm
q:

First: The economy is currently falling off of a cliff. Allowing the car makers to fail right now would be the opposite of economic stimulus.

Timing matters.

If you want an economic stimulus, there are much better ways of going about it than propping up businesses that were failing when the economy was booming. Also, it's strange to frame this as "allowing" them to fail. The economy is doing bad precisely because companies in many different industries are failing. You want to stimulate the auto industry? Fine, give it to the foreign car makers, at least it wouldn't be the equivalent of burning money.
11.19.2008 8:22pm
Frank H:

Especially when it is an entire industry, rather than a particular firm, that is facing failure.


You may want to qualify what you consider as the entire industry. If you are referring to an industry of US based automakers then you're right. But the auto industry as a whole isn't failing and a lot of foreign automakers actually make the cars here in the US.
11.19.2008 8:24pm
Mac (mail):
The entire US auto industry has been in a crisis since the early 70's. Does it really make sense to spend billions of dollars now and, inevitably, billions more dollars later and billions more dollars even later and so on, to save this industry?

They need to go into Chapter 11. GM is supporting more retired workers than active workers. It can't go on. Just like Social Security will go bankrupt, so will these companies with too many retirees to support compared to income.

It is ridiculous that the average Joe has to pay taxes to maintain 72 dollar an hour workers in the lifestyle to which they have become accustomed.

Ditto with the small business man. If Obama goes through with his plans, they will be getting hit with huge tax increases at 250,000 or 200,000 (Obama's words) or 150,000 (Biden's words) or 120,000 (Bill Richardson's words. Small business creates 90% of the jobs in this country. Who the hell is going to bail them out? No one. Ask your small business guy how he's doing the next time you buy something at one. It is grim and yet we are supposed to pump billions into this industry that has been failing for years and is bloated as hell on both the management and workers sides.

If the Government wants to help, then drill for oil, relax OSHA and other regulations, decrease the mileage requirements and undo all the other stuff that adds costs with very little benefit. The high price of oil and the companies everlasting shortsightedness got them here with a lot of help from the unions and Government. They cannot continue as they are and they don't want to make any real concessions and that goes for the workers as well. They can't even put out a car that will last with any reliability for more than 100,000 miles.

Re the dealership thing. The big guys got themselves into a mess with all the brands they have to carry as they have a contractual relationship with the dealers to maintain these brands. It is inefficient as hell and without bankruptcy, they will have to keep doing it.

Put the retiree's pensions into the Federal Program, give each active worker 300,000 or so to live on and get retrained. It would be a lot cheaper. The Unions and the auto companies made all the promises to the workers and got themselves where they are today together. It's not my job or anyone else's to bail them out when other people are hurting and no one is going to be there to help, I can assure you.

Between this Government, especially Congress, and Wall Street, we are headed into a royal financial meltdown. And, what is Obama giving us? Retreads from the Clinton administration. Why didn't we just elect Hillary? I had hoped for so much more from him. Oh well, I didn't really expect it. Just hoped.
11.19.2008 8:25pm
David Welker (www):

The Government can subsidize everyone's jobs so they never have to worry again about losing them. What's so bad about being a third world country anyway?


Do people really believe they are making persuasive points when they characterize a view in the most extreme way possible?

I think hyperbole is fine in limited circumstances. But it tends to be overused and unpersuasive.

Perhaps it is somehow emotionally satisfying to think that anyone who disagrees with you is not only wrong, but also crazy. I would be interested in understanding the motivations that go into these sorts of arguments.
11.19.2008 8:26pm
Robert Farrell (mail):
How does someone who thinks that there is a "market value" distinct from the actual price paid for a good or service, to which the latter can be compared? The "market value" is no more or less than what the market will pay.

It's the OP who doesn't understand economics. Price controls applied to the primary source of income of most workers -- their wages -- is just as socialistic as price controls on gas, or concrete, or food. But I forget: corporations maximizing profits through tough negotiations is capitalism; workers maximizing profits (wages and benefits per unit of labor) through tough negotiations is greed, laziness, and a threat to "competitiveness." Thus untethered from reason or logical consistency, the psuedo-libertarian argues for corporation profits and against the free market.
11.19.2008 8:26pm
Ted Frank (www):
NB that Kudlow's $72/hour figure includes fixed legacy costs for retirees (of which there are many more than current workers), and is not a true measure of the marginal cost of an hour of production.

Of course, that legacy overhang means that GM can't hope to be competitive and profitable without restructuring those contractual commitments, which would require the type of severe renegotiation that is often best accomplished through Chapter 11.
11.19.2008 8:42pm
AlanW (mail):
Regardless of the economic merits of the point (and I'm with the "timing matters" team), the politics of this stink. I don't see why Republicans think allowing GM to go under is going to win them elections in 2010 or 2012... or ever. In pure Atwater terms, it will give Dems an out (and a scapegoat) if the economy still sucks in two years. Seriously, the Republicans are going to get crucified.

We're going to be spending the $700 billion on the financial bailout plus a few hundred billion more on whatever infrastructure/stimulus plan the Democrats come up with in '09, plus god knows what else. A few billion for the major industrial industry left in the U.S. is not likely to be the worst thing to throw money at.
11.19.2008 8:44pm
Oren:

First: The economy is currently falling off of a cliff. Allowing the car makers to fail right now would be the opposite of economic stimulus.

No, the economy is experiencing a well-deserved correction to certain over-valued assets and overly optimistic growth. The crisis phase is over and this is now just a regular recession (not a happy thing, no doubt, but not the end of the world -- ask anyone that was around in 1989, somehow we survived).

Of course, if you don't accept that premise, the rest doesn't follow. . .
11.19.2008 8:44pm
Tatil:

First: The economy is currently falling off of a cliff. Allowing the car makers to fail right now would be the opposite of economic stimulus.

Even if one assumes that economic stimulus is desirable or effective, wouldn't giving that much money to healthier companies create even more jobs? How about giving that much money to start new universities? How about providing health insurance to unemployed people? This would lead more money to flow into health care sector, which employs a lot of people as well. It is my tax money, so I'd rather it is spent on the industry that I work in.
11.19.2008 8:45pm
Oren:
Rob, the problem is that often corporations collude with the government to put up barriers to effective competition and thus "fix" prices for their goods at a higher price than there would be in free competition. Similarly, unions often collude with the government to force barriers to labor competition (for instance, by forcing corporations to negotiate with the unions instead of just firing them all and rehiring at the prevailing market wage). Both sorts of collusion are classic situations in which the price becomes decoupled from the true market value (the latter is defined as the market price in the presence of an ideal free market).

I have no problem with a union negotiating as hard as they want with the corporation on behalf of their members, so long as they accept the consequence that, in a free country, the company has the right to fire them all and hire new people.
11.19.2008 8:48pm
Tatil:

it is unlikely that GM would have made such foolish deals if the government had not forced it to bargain with striking workers

says the guy with life long employment promise. Sorry, I could not resist. :)
11.19.2008 8:48pm
Oren:

NB that Kudlow's $72/hour figure includes fixed legacy costs for retirees (of which there are many more than current workers), and is not a true measure of the marginal cost of an hour of production.

Wow, that makes it even worse than I thought.

Step number one (IMO): force UAW to restrict voting rights to actual autoworkers or rescind their right to negotiate on behalf of autoworkers. It's one or the other -- either they represent the workers or they don't.
11.19.2008 8:50pm
Tatil:

Similarly, unions often collude with the government to force barriers to labor competition (for instance, by forcing corporations to negotiate with the unions instead of just firing them all and rehiring at the prevailing market wage).

I am not that well versed in labor issues, so forgive me for asking. How was government involved during the last GM strike? I thought GM could fire them all, but recruiting, hiring and retraining so many workers did not seem feasible, so eventually they agreed on a contract. When workers striked against supermarkets in CA, new workers were hired fairly quickly, as the required qualifications were that demanding. Union workers may have received a better deal that they could otherwise, but I am not sure why government is deemed responsible for GM's contracts.
11.19.2008 8:55pm
KeithK (mail):

workers maximizing profits (wages and benefits per unit of labor) through tough negotiations is greed, laziness, and a threat to "competitiveness."


It certainly is greed. But that's not a bad thing in the economic sense (elightened self interest and all that). However, if workers maximize their profits to the extent that their employers become uncompetitive then they should expect to lose their jobs and profits when their employer goes bankrupt. the government shouldn't step in and prevent this from happening.
11.19.2008 9:07pm
DiversityHire:
Anecdotal arguments ("my Citation has been running since 1984 on the same 4 quarts of 30 weight" vs. "I haven't considered a US car since I bought my first Citroën") aren't persuasive, but they do reveal a kind of attachment or identification people have with their cars (or lack thereof). There's a related cultural argument that places (positively or negatively) too much importance on the symbolism of auto manufacturing in the united states.

Foreign manufactures demonstrate that its possible to profitably manufacture cars in the united states. GM, Ford, and Chrysler, have show that they are able to design cars that people want to buy, but are unable to manufacture and sell the producible versions of their designs at a profit. I think management, organized labor, and the governments bear responsibility for this.

The solution is to dismantle the dysfunctional organizations and create a variety of organizations that will figure-out the best way to profitably produce automobiles (or fail trying). To do this, the government should agree to loans sufficient to ensure successful emergence from bankruptcy of a variety of automobile producers contingent upon smaller, more agile labor and management organizations replacing the "big three" and the UAW. Union-per-manufacturer should be one of the constraints.

For those that are kidding around about tenure, I think academia's time is coming as well. Not so much due to the (relatively few) tenured faculty (the priestly caste) but because the unintentional alliance of administrative and unionized service employees. The quality of product being shipped by education manufacturers is not commensurate with its expense.
11.19.2008 9:09pm
Smokey:
When U.S. television makers like RCA and Zenith couldn't compete they went out of business, and the taxpayers weren't forced to bail them out.

How is this any different?
11.19.2008 9:15pm
Robert Farrell (mail):
Rob, the problem is that often corporations collude with the government to put up barriers to effective competition and thus "fix" prices for their goods at a higher price than there would be in free competition. Similarly, unions often collude with the government to force barriers to labor competition (for instance, by forcing corporations to negotiate with the unions instead of just firing them all and rehiring at the prevailing market wage). Both sorts of collusion are classic situations in which the price becomes decoupled from the true market value (the latter is defined as the market price in the presence of an ideal free market).

Oren, without getting deep into the history of the American labor movement, let me just point out that there are laws that restrict what employers can do, and there are laws that restrict what unions can do, and neither set of laws would exist in an ideal free market. The reason they do in fact exist is the long and sometimes violent history of union-management strife over the last two centuries, during which the government typically had a heavy thumb on the employers' side of the scale.

Labor law was created first and foremost to protect owners, and later, because they were unable to destroy unions, some protections were enacted to molify them. Later unions acquired more political clout and were able to enact further protections, but it is still very much a two-way street; the only bargining tool the unions have, the ability to strike, has been greatly restricted.

Also, if it were really so easy to fire all the unionized workers and save all that money, the logic of the free market would suggest some other investor would have done so long ago. In reality, however, we have seen only the tentative nibbles at the market of the Southern transplant factories -- factories which depend on a corporate parent supported by their own (foreign) government, and were birthed only after the companies were lavished with state subsidies.

If your theory was correct, one would expect an enterprising venture capitalist would have driven the Big Three out of business long ago. That they have not suggests that the workers in question possess a knowledge and skills which are hard to replicate from scratch -- which is why they are able to charge a premium for their labor. In other words, labor is able to charge more for the same reason Apple is able to charge more for their computers -- their product is special, allowing them to charge more.

I have no problem with a union negotiating as hard as they want with the corporation on behalf of their members, so long as they accept the consequence that, in a free country, the company has the right to fire them all and hire new people.

Which in turn is fine, as long as you recognize an unlimited right to strike; anywhere, at any time, for any length of time. These strikes may target critical suppliers; strikers may force employers to agree to closed shops, deals with other unionized businesses, or any other deal they can persuade the companies to agree to. Unions are perfectly capable of playing without the pads. Labor law was created to protect owners from workers, not the other way around.
11.19.2008 9:16pm
Smokey:
Sure, Robert Farrell, unions can strike 'anywhere, at any time, for any length of time'.

But they don't.

What good is a union if it won't strike when necessary for the good of its members?

Answer: when the ossified union only cares about dues income.
11.19.2008 9:32pm
Vail Beach:
In testimony today, Wagoner couldn't say how much money GM would need to survive just 4 1/2 more months. Pressed to answer to a "worst case scenario," however, he said they would need much more than the amount of money on tap for the bailout.

Why would anyone, even the federal government, provide a 10-year loan to a company whose CEO says could go under in four months? We might as well burn up the money. Chances are we'll never see it again. A few creditors will get paid, workers will get 5-10 more paychecks, but the auto industry won't be "saved," which is what we're being sold.

The horrible effects bailout proponents say will follow from rejection of Detroit's pleas will happen whether we loan the money or not. The only public interest in this bailout is if it will forestall those effects, but there is only a small chance that it will work. We should pass.
11.19.2008 9:38pm
Robert Farrell (mail):
Labor law was created to protect owners from workers, not the other way around.

See, for example, arrests of union leaders in the wake of the Haymarket tragedy of 1886; the use of the Sherman Anti-Trust Act (and 2,000 troops) to break the Pullmen strike; the repression of the IWW following World War I; the Daugherty Injunction, Loewe v. Lawlor . . .

If we look back at a time before labor law existed as it does today, owners repeatedly turned to the government for protection from unionized workers. Had the strength of unions really been in the concessions won from the legislator, these naked unions would not have necessitated repeated applications to the courts and the gun.
11.19.2008 9:39pm
Elliot123 (mail):
We can fix all this with higher CAFE standards, more OSHA regulations, restricted oil drilling, high coal prices to cool the planet, cap and trade mandates, increasing the number who pay no income tax, increasing capital gains so we can punish hedge fund managers, and refusing to agree to Columbia dropping tariffs against American exports.
11.19.2008 9:42pm
Elliot123 (mail):
Damn. I forgot the huge contribution that card check would make.
11.19.2008 9:43pm
Robert Farrell (mail):
Sure, Robert Farrell, unions can strike 'anywhere, at any time, for any length of time'.

No, they can't, Smokey, that was my point.

Your point seems to be that not all unions do a good job. Since when has that been an argument against free choice and the free market? Good unions will succeed, bad ones will decline -- you're seeing that right now with the rise of the SEIU and the decline of the AFL-CIO. The existence of a union that does a crummy job is no more an argument against unions than the existence of greedy, short-sighted owners is an argument against capitalism.
11.19.2008 9:44pm
Vail Beach:

In pure Atwater terms, it will give Dems an out (and a scapegoat) if the economy still sucks in two years. Seriously, the Republicans are going to get crucified.


Unlikely. If GM goes bankrupt in a few weeks, the weight of the evidence will be that it was the result of decades of mismanagement, with the current recession only the straw that broke the camel's back.

Moreover, as the reorganization that would follow bankruptcy proceeds, it will become clear that this was the only route that could preserve the US auto industry.

If the Dems jam through a bailout next January and GM goes belly-up two months later, however, it will end Obama's honeymoon with a thud. He should be praying GM goes bust before Inauguration Day.
11.19.2008 9:47pm
Robert Farrell (mail):
Damn. I forgot the huge contribution that card check would make.

So if I understand you, 123, you're saying that to fix the Bush Depression we need to stick to the old reliable Bush strategies of cutting taxes on the rich, deregulating, encouraging construction of fuel-guzzling machines that contribute to global warming, and drilling in our few remaining patches of wilderness in lieu of an energy strategy?

Friendly word of advice, 123; you don't double down on a pair of sixes.
11.19.2008 9:51pm
John Burgess (mail) (www):
About the only government intervention I'd accept for Detroit is for the government to give every American citizen household a 50% down payment for the American car of choice. If you don't buy an American car, you don't get the money.

If you buy an American car, then Detroit gets lots of business, jobs are saved, and we can go through this same crap at a later date, possibly one not in the midst of a recession.
11.19.2008 10:20pm
arbitraryaardvark (mail) (www):
You seem to be confusing visible jobs with invisible jobs, and economics with politics. You are right, but so what?
11.19.2008 10:20pm
CONSTITUTIONWARRIOR (mail) (www):
All these altruistic dreams of bailing out the automakers for some mythical better tomorrow is leaving out one salient point.
it is NOT the job of the individual to bail out another for mistakes that they made.
The Big 3 or any of the banks made the choices they did in business with eyes wide open. The banks did so will full knowledge that the subprime loans were a disaster from the start.
The Big 3 are suffering from the same type of attitude.

When is this orgy of sacrifice for the greater good going to be stopped by someone saying LEAVE ME ALONE, IT IS NOT MY JOB TO BAIL YOU OUT OF THE MESTAKES YOU MADE!
11.19.2008 10:21pm
Mac (mail):
Robert Farrell wrote:


they have not suggests that the workers in question possess a knowledge and skills which are hard to replicate from scratch — which is why they are able to charge a premium for their labor. In other words, labor is able to charge more for the same reason Apple is able to charge more for their computers — their product is special, allowing them to charge more.


Then why are foreign auto workers paid less (even those in the US) and yet, they make a far superior product to the Big 3 workers?

Also, Apple makes a superior product, as does Toyota and Honda. You pay more, but you get more.
11.19.2008 10:25pm
Cornellian (mail):
I was a student in Mr. Jensen's business-school class around that time, and one day he put those rankings on the board and shouted "J'accuse!"

I suspect the significance of the term "J'accuse" was lost on most of his business school students, and not because they don't speak French.
11.19.2008 10:59pm
Coldwarkid (mail):
Very well reasoned!

I agree wholeheartedly. I'm also somewhat irked that, in essence, the proposed auto bailout demonstrates an alarming lack of appreciation for excellence. Not only is excellence not appreciated, it seems almost to be punished (not to allude to heavily to Obama's claim not to be "punishing" others' success, but rather just spreading around the wealth).

Are successful automakers rewarded? Are the Japanese companies that produce vehicles in factories in the heartland being thanked for providing sustainable jobs for Americans, and products that are well engineered and environmentally responsible?

I guess that's what troubles me the most, at the end of the day. Not only are the leftist illuminati suggesting that the enormous failures of an industry should be covered up; the consequence is frustration when real hard work, ingenuity, and excellence are treated as lacking value. That is very short sighted, and will end in brain drain.
11.19.2008 11:12pm
Elliot123 (mail):
"Friendly word of advice, 123; you don't double down on a pair of sixes."

And let's not forget the snail darter.
11.19.2008 11:29pm
Mac (mail):
At 72.00 an hour, if my math is correct (and it is always suspect), I calculate that the auto worker is making 149,760 bucks a year. A nurse making 30.00 bucks an hour only earns 62,000.00 a year after 2 to 4 years post high school education and passing national boards to prove competency. She/he has to make life and death decisions on a routine basis. A nurse has to get continuing education annually. Has to deal in stuff I won''t mention here, is exposed to infections, some of them very serious and has to know how to save your life. I could go on, but you get the point. Other health care disciplines would qualify here as well as many other professions. For retirement, they depend on their 401K and Soc. Security that won't be there. These folks are supposed to bail out the idiots in management and the union so these fools can maintain the ifestyle to which they have become accustomed?

I am sorry if the management is stupid and sorry if the unions are so dumb that they will cheerfully and blindly kill the company that pays their bills, but that is their decision, not mine. Let them pay, not me and not the nurse, the plumber, the truck driver or even the lawyer.
11.19.2008 11:39pm
road warrior99 (mail):
Can we really afford to do more bail outs? it just doesn't make sense to me. The liberal illuminati are going to do it if Bush doesn't it seems but i don't understand why we keep bailing out a failing industry. Lots of jobs, and connected products. but if we let some fail other will rise up. Maybe we need to let the failing one fail so other can grow in that space.
11.20.2008 12:42am
CrazyTrain (mail):
Shorter Jim Lindgren: Because CEO's took private jets to Congress, we should cut workers' wages. Makes a lot of sense.
11.20.2008 1:19am
Nick056:
Even Shorter: Let's punish bad financial decisions by making one, and killing ourselves.
11.20.2008 1:33am
David Warner:
Robert Farrell,

"But I forget: corporations maximizing profits through tough negotiations is capitalism; workers maximizing profits (wages and benefits per unit of labor) through tough negotiations"

How tough can negotiations be when those left footing the bill (future generations of autoworkers/managers/stockholders/customers) for all those gold-plated benefits don't even get a seat at the table?

The adversarial labor-relations model is broken.
11.20.2008 1:53am
Robert Farrell (mail):
At 72.00 an hour, if my math is correct (and it is always suspect), I calculate that the auto worker is making 149,760 bucks a year.

Let me stop you there. That's cost, not salary. The salaries of UAW members and Japanese car union members are almost the same. It's the healthcare and pension costs that get you to $72 an hour, of which salary is about half.

Healthcare, healthcare, healthcare. No other developed economy operates under this crushing burden of healthcare costs. There will be no recovery unless we fix the healthcare system.
11.20.2008 2:14am
Robert Farrell (mail):
And let's not forget the snail darter.

Keep talking, 123. It's that beautiful attitude that's sending your party the way of the Whigs. Funny creatures that they are, American voters don't like a party that sneers and whines its way through debates. So keep it up; as it is, the snail darter is looking as if it will last longer than your kind.
11.20.2008 2:19am
Robert Farrell (mail):
How tough can negotiations be when those left footing the bill (future generations of autoworkers/managers/stockholders/customers) for all those gold-plated benefits don't even get a seat at the table?

You could make that argument against any actor in a capitalist system pursuing the best deal. The central assumption of the free market is that acts of individual greed can lead to social good. If you don't believe that, fine. You can denounce greedy corporations and greedy unions in the same breath.

What I don't understand is people who claim to be about the free market, and will stand up for a CEO's right to take home a hundred million dollar payday, but when the subject is workers trying to secure healthcare and pensions, they sound like Karl Marx. All of a sudden everything is greed and shortsightedness and inevitable collapse.

In reality (I know -- reality. It's still out there) the UAW and the big three have agreed to givebacks that save $1,000 per car. Existing workers are keeping salaries they won in better days, while new workers are being hiring at rates comparable to non-union shops. The UAW has been both flexible and practical in responding the the automakers' troubles.
11.20.2008 2:28am
HA HA Guy:
I'm not sure 'failed industry' is the right term. The Japanese and Germans have eaten the US auto industry's lunch. The real irony is those are both socialist countries with tougher fuel and emission regulations than the US has. How's THAT possible? Head asplodes.
11.20.2008 3:22am
Perseus (mail):
The economy is currently falling off of a cliff. Allowing the car makers to fail right now would be the opposite of economic stimulus.

It would probably be cheaper to give cash to the workers directly.
11.20.2008 3:36am
A. Zarkov (mail):
What is going to happen to what's left of American industry when the new Obama administration opts for carbon taxes or other actions that will raise the price of energy? Does it make sense to lend money to the auto industry while taking other actions that will put it out of business?

The carbon tax, which won't apply to China and India, will shift more manufacturing and jobs off shore. His stimulus package will do more to increase employment in China than the US. His tax policies will result in less investment because they will reduce the return to capital.

Of course Obama thinks his "infrastructure" program will make up for his tax policies, but where is the investment capital going to come from. An increase in the income tax? More borrowing? Printing money? Those are the choices and they are all bad.

Treasury and the Federal Reserve have already committed $3.5 trillion in bailouts. Obama say he's not concerned about inflation. It appears to be off his screen.
11.20.2008 3:50am
A. Zarkov (mail):
"Healthcare, healthcare, healthcare. No other developed economy operates under this crushing burden of healthcare costs. There will be no recovery unless we fix the healthcare system."

How will we fix the system? Shifting the health care costs to the government does not make them go away. One way or another you have to pay. What good will it do to reduce the price of autos if you have less money to buy them because your taxes have gone up? If the government prints money to pay for health care, the inflation will drive price of cars up along with most everything else. There is no free lunch.

One of the reasons other countries spend less on health care is they get less of it because services are rationed. Do you think Americans will put up with this? Would you like to have to wait 6 months for an MRI scan? Would you like to get told that you can't have expensive treatment for prostate cancer because its not cost effective to treat people above a certain age?

Let's try to avoid magical thinking.
11.20.2008 4:02am
BarryD (mail) (www):

Answer: when the ossified union only cares about dues income.


I think that people miss this point about unions.

Unions are separate entities that exist in the market, apart from "workesr" and "businesses". They're businesses, themselves. They're almost 100% pure rent-seeking entities.

Workers may be members of a union, but in reality, that's like being a member of Costco. Unions, as they currently exist and operate, are not a grassroots movement, and this isn't the 19th century. Citing the history of unions does very little to elucidate the role and nature of today's labor unions.

There's a lot of mythology surrounding labor unions. But then again, there's a lot of mythology surrounding Ford. The difference is that we understand that the Model T is ancient history, but many seem not to understand that 19th century unions are, too.

Can we talk about what labor unions today really ARE, instead of some outdated (at best) notion of what they are?

The UAW is a big business, that exists to enrich its management. If, as some have suggested, GM is a pension plan that makes cars on the side, then we need to come to grips with the fact that the UAW is a rent-seeking entity with strong ties to government, that gets its members pensions and benefits on the side.
11.20.2008 7:53am
Alan Gunn (mail):
Furthermore, as Greg Mankiw points out this morning, the Japanese car companies make millions of cars in the US. Bailing out the "domestic" competitors of foreign firms that build factories here will discourage foreign firms from building factories here. The Americans who work for Toyota and Honda have jobs, too. We should reward success, not failure.
11.20.2008 8:16am
Ten (mail):
One of the most frustrating things about these debates is these debates: Government simply isn't in the business of overhauling the private sector.

Once we adopted the stance that these Keynesian follies were perhaps feasible, off we went into mountains of words and even greater mountains of cash experimenting with them.

Why, I ask? Why aren't we outraged to the point of storming our "representative's" offices because all this is not enumerated fundamental right? Or maybe we are outraged, and as with the bank bailout with well over 90% opposition, they ignore us.

What's needed are SC cases once and all stopping government interventions. Surely there must be a means to do so?
11.20.2008 8:16am
Mark in Texas (mail):
A.Zarkov: What good will it do to reduce the price of autos if you have less money to buy them because your taxes have gone up? If the government prints money to pay for health care, the inflation will drive price of cars up along with most everything else. There is no free lunch.

Ah, but after enough hyperinflation, I will take a wheelbarrow full of cash down to Wells Fargo and pay off my mortgage, credit cards and car loan (assuming I still have a job and that my value in the labor market remains proportional to the new value of money).

The hyperinflation will also serve to reset house prices into a more normal range proportional to incomes so that more young couples can afford them. That is going to have a positive effect on the economy. Hyperinflation will also allow the Big 3 car companies to renegotiate their wage and benefit structures to be more in line with other companies making cars in the United States.

To me it looks like inflation is the next best thing to free lunch.
11.20.2008 8:45am
Dan Weber (www):
"Healthcare, healthcare, healthcare. No other developed economy operates under this crushing burden of healthcare costs. There will be no recovery unless we fix the healthcare system."

How will we fix the system? Shifting the health care costs to the government does not make them go away. One way or another you have to pay.
Well, Robert Farrell didn't say to push it to the government. (In this post, at least. He may have said so elsewhere, in which case he is making a logical error.)

An efficient health care system is orthogonal to whether the government runs it. Expensive and mediocre health care: Medicare and private health insurance, who operate on a pay-per-procedure model with heavy emphasis on specialists. Moderately-priced and excellent health care: VHA and Mayo Clinic, which have paid doctors, mostly GPs, with a strong evidence-based practice.
Would you like to have to wait 6 months for an MRI scan? Would you like to get told that you can't have expensive treatment for prostate cancer because its not cost effective to treat people above a certain age?
The problem is that lots of MRIs are totally useless, and "expensive treatment for prostate cancer" is very different from "good treatment for prostate cancer." 1 in 3 men die with cancer in their prostate; often the best thing is just leave it alone. Expensive treatment is invasive treatment that will leave lots of men incontinent, and all to combat a cancer that they probably weren't going to die of anyway.

It's of course hard to break people of this thinking, that more tests and more medical care is better for your health. It's not.
11.20.2008 9:04am
Elliot123 (mail):
"Keep talking, 123. It's that beautiful attitude that's sending your party the way of the Whigs. Funny creatures that they are, American voters don't like a party that sneers and whines its way through debates. So keep it up; as it is, the snail darter is looking as if it will last longer than your kind.

Let's think on the positive side. Obama's a forward thinker. He told the folks in San Francisco he wants to bankrupt the US coal industry and send electric rates through the roof. If he succeeds, should we bail out the coal industry and the United Mine Workers? Could we then bail out other industries burdened with high electric rates? And then really send a caring and sensitive message by subsidizing electric bills for the poor, historically disenfranchised, and UAW retirees.

Remember, if we don't do the ground work now, we won't have any bankruptcies in the pipeline for our children.
11.20.2008 9:31am
Splunge:
If your theory was correct, one would expect an enterprising venture capitalist would have driven the Big Three out of business long ago.

Um...isn't that exactly what Toyota, Honda, Kia and so forth are doing? And which we, the taxpayers, are being asked to prevent?

If we look back at a time before labor law existed as it does today, owners repeatedly turned to the government for protection from unionized workers.

I missed the part where you proved this was a Bad Thing. Is it just that, for you, "unionized workers" is a sanitizing phrase, like "undocumented immigrants," that turns what might well be lawbreaking monsters (or not -- but you've adduced no evidence either way) into plain innocent folks?

What I don't understand is people who claim to be about the free market, and will stand up for a CEO's right to take home a hundred million dollar payday, but when the subject is workers trying to secure healthcare and pensions

Dude! Wake up, this is 2009, not 1909. CEOs don't have any right to a $100 mil. They only have the ordinary free speech right to ask 100 million customers to fork over $1 apiece, in exchange for some valuable service or product. Not in the least the same as GM retirees wanting the Feds to guarantee their pensions in perpetuity by robbing the taxpayers at gunpoint. The issue of consent here is pretty crucial, hmmm? That's what's "free" about the free market, after all.

Healthcare, healthcare, healthcare. No other developed economy operates under this crushing burden of healthcare costs. There will be no recovery unless we fix the healthcare system.

I'm sorry, but this is just first-class early 20th century idiocy. Healthcare is not a burden, silly person, healthcare is one of the few stunningly successful, high-wage, job-growth, strong export sectors of the economy, which makes an amazing product (good health and longer life) that is in such demand that it can pay its employees nearly as much as GM pays theirs.

The cost of unions is a crushing burden on the economy, because it serves no useful purpose, generally merely screwing one class of workers (e.g. those without seniority, those who move a lot, or shift employers or fields) to enrich others arbitrarily. Pure grit in the gears. On the other hand, for the massive amounts of money we spend on healthcare we get healthcare outcomes as patients that are better than anywhere on the planet by far, and we get great jobs with great futures for our kids graduating from school.

What is it about this year? Is it that election? I have never heard such a load of circa 1970 reasoning since, well, 1970. Bizarre.
11.20.2008 9:37am
Preferred Customer:
John Burgess:

The idea of giving a 50 percent subsidy on a new car is great...until you think about what that will due to the value of used cars. That hurts not only the individual that owns a used car, it also takes a wrecking ball to the balance sheets of the captive finance arms of the auto companies, who have lots of leased vehicles out there.

A decline in the value of used cars means that those leased assets are worth less when they come back off lease, meaning more huge write-downs (this is actually part of what precipitated the current crisis, when the values of leased SUVs declined so sharply during $4/gal gas).
11.20.2008 9:41am
Aultimer:

Robert Farrell (mail):
At 72.00 an hour, [] That's cost, not salary. The salaries of UAW members and Japanese car union members are almost the same. It's the healthcare and pension costs that get you to $72 an hour, of which salary is about half.

Healthcare, healthcare, healthcare. No other developed economy operates under this crushing burden of healthcare costs. There will be no recovery unless we fix the healthcare system.


You're comparing apples to Asian pears, when you should be comparing apples to Carolina peaches.

The $72 is hourly cost for US union shop workers, counting retiree union shop worker costs.

The $44 is hourly cost for US non-union (foreign car) shop workers.

What Japanese union workers make is irrelevant. Or are you suggesting that the $28 differential is NOT the problem faced by GM, but rather the healthcare costs borne by union and non-union workers alike?
11.20.2008 9:54am
J. F. Thomas (mail):
As with so many problems, it is unlikely that GM would have made such foolish deals if the government had not forced it to bargain with striking workers, rather than simply replace them. As with mortgages in the banking industry, the federal government pressured businesses to make deals that were economically bad for the businesses involved.

So if you believe this nonsense, how can you possibly defend the use of bankruptcy? Isn't bankruptcy just a tool supplied by the government to allow corporations to avoid their legal obligations and contracts. GM and all its shareholders should be responsible for every penny of their debts. They signed these contracts, they should be forced to honor them.
11.20.2008 9:57am
cbyler (mail):

Unions are successful in getting above-market wages and benefits,

I think you mean "unions are occasionally successful in offsetting the oligopsony power of employers to get below-market wages and benefits".

Unless you want to break all corporations into sizes too small to manipulate the labor market *even locally*, unions are an imperfect solution to employer manipulation of the labor market that is often better than nothing.

Decrying the unfair bargaining power of unions (which, BTW, must provide value to their members or they would quickly cease to have any) while ignoring the impact of oligopsony on the labor market just makes you look like an idiot.
11.20.2008 10:37am
josh:
Can this discussion really be relevant w/o explaining what the current UAW contract provides? My understanding is that a great deal of what the anti-union voices on this thread are asking for will be enacted in 2010. See http://biz.yahoo.com/ap/081119 /fact_check_autos_labor_costs.html.

For example, in 2010 a UAW fund will begin paying healthcare costs, and pay of new hires will be more in line with competitors than it has been in the past.

The union probably needs to make more concessions, as Obama has stated, and probably will. But the agreements to go in effect in 2010 seem to do some of what is already being called for in this thread.
11.20.2008 10:47am
Elliot123 (mail):
"Isn't bankruptcy just a tool supplied by the government to allow corporations to avoid their legal obligations and contracts. GM and all its shareholders should be responsible for every penny of their debts. They signed these contracts, they should be forced to honor them."

Of course they should. But, I didn't sign the contracts. Did you? I sure hope you don't want to force me to honor them.
11.20.2008 10:49am
Per Son:
Josh:

You need to understand several things about these forums:

1 - unions are a priori bad.

2 - the 2nd Amendment reigns supreme over everything

If you know those 2 points - all threads start making sense.
11.20.2008 11:16am
b:

Existing workers are keeping salaries they won in better days, while new workers are being hiring at rates comparable to non-union shops. The UAW has been both flexible and practical in responding the the automakers' troubles.



In any other industry those "existing workers" would be laid off for having salaries that are no longer supportable. "Salaries they won"? What is this, a game show? You get salaries and pensions in perpetuity, no matter what, end of story?

If that's what passes for "flexibility" in the UAW's eyes, it's not just the big 3's car designs that are lacking imagination...
11.20.2008 11:50am
Robert Farrell (mail):
You're comparing apples to Asian pears, when you should be comparing apples to Carolina peaches.

You're plunging into fruit metaphors, when you should be reading the post I responded to, which estimated that UAW workers make 150k a year. Which is false, of course. The point is that the labor cost differential between, say, GM and Toyota is overwhelmingly a function of healthcare and legacy costs. The per-hour wage is almost the same between the two groups.

Incidentally, the same point can be made about the broader economy; during the Bush years, unit cost of labor went up by 25%, while wages did not rise at all. The difference went straight into healthcare premiums.

As for the satellite assembly plants heavily subsidized by desperate Southern backwaters -- I'd say that is your apples to oranges comparison. When they are making cars under their own brand, without subsides, and negotiating with people who didn't vote overwhelmingly to put Sarah Palin in the White House, then I will consider their example germane.
11.20.2008 11:53am
ken in sc (mail):
If we are going to bail out the auto industry, I think it should be retroactive. I want Studebaker, Tucker, Packard, and Nash to be included. They made some pretty cool cars—like the 1964 Avanti. There's also the 1951 Austin-Nash roadster. Since the bailout seems not to make any economic sense, it ought to at least be some fun. Seriously, we ought allow creative destruction to do its work as was allowed to happen in the past. Detroit should do their best without my help. The auto industry in in South Carolina is doing just fine, thank you.
11.20.2008 11:55am
Smokey:
Robert Farrell, instead of being so snarky with anyone who disagrees with you, why don't you just answer this simple question about bailing out failures:

Vail Beach:
In testimony today, Wagoner couldn't say how much money GM would need to survive just 4 1/2 more months. Pressed to answer to a "worst case scenario," however, he said they would need much more than the amount of money on tap for the bailout.

Why would anyone, even the federal government, provide a 10-year loan to a company whose CEO says could go under in four months?
And if unions were giving value to workers, this wouldn't be happening.

Rewarding failure by bailing out companies that are unable to compete with similar companies in the same industry is the most astonishingly stupid idea to come along since the multi-trillion dollar carbon sequestration idiocy. It punishes successful companies by using the taxes they pay to prop up their failed competitors. It creates resentment among the millions of other workers who routinely get laid off because their own companies blew it, but are too small to get federal taxpayer handouts. And it only postpones the inevitable reckoning, while completely wasting $billions of taxpayer dollars.

What the hell are they thinking??
11.20.2008 12:04pm
Robert Farrell (mail):

I'm sorry, but this is just first-class early 20th century idiocy. Healthcare is not a burden, silly person, healthcare is one of the few stunningly successful, high-wage, job-growth, strong export sectors of the economy, which makes an amazing product (good health and longer life) that is in such demand that it can pay its employees nearly as much as GM pays theirs.

Wow, where to begin. You don't work in heathcare, I take it? I do. We are spending twice the OCED average per capita, by far the most in absolute terms of any country in the world, and our system is ranked 38th by the WHO in terms of effectiveness. Compare it to a well-run system and you'll see why. IT is inconsistently used (one out of five primary care offices, for example) and where it is used, different systems do not talk to each other. 50 million people have no coverage, 25 million people have shitty coverage, so preventative care doesn't get done and we end up managing full-blown chronic diseases and their complications when we could have halted or delayed the progress of the disease at an early stage.

Medicare, Medicaid, private insurance and the uninsured are all billed at different rates via a Byzantine system of ICD codes and work unit equivalents. This requires at least one full-time billing specialist in every well-run office.

Private insurers make maximum profits when they can cover the health and exclude the sick, so a considerable amount of our healthcare spending goes into these companies' administrative efforts to find preexisting conditions, before or after the fact, or other excuses to deny care.

Though there are good people in the system (and I hope I am one of them) it is a nightmare of inefficiency and sloppiness and fully deserves its poor reputation.
11.20.2008 12:06pm
Robert Farrell (mail):
Robert Farrell, instead of being so snarky with anyone who disagrees with you, why don't you just answer this simple question about bailing out failures

Smokes, you seem confused. I haven't advocated a bailout. And if any workforce doesn't like their union, they can vote it out just like they voted it in. People in this country died for the right to organize and bargain collectively. If you're going to disregard that reality in favor of some corporatist fantasy in which owners do everything out of the decency and goodness of their hearts, I'd say that deserves a snark or two.
11.20.2008 12:13pm
Robert Farrell (mail):
He told the folks in San Francisco he wants to bankrupt the US coal industry and send electric rates through the roof.

And right on schedule we have the lies and the smears. Don't ever, ever change, 123. Go on just as you are. I hope you like getting plowed at the ballot box.
11.20.2008 12:17pm
b:
Is that a lie? Pretty sure Obama is on tape saying that he intends to pass laws that will bankrupt the coal industry. Did I miss something?
11.20.2008 12:25pm
Robert Farrell (mail):
How will we fix the system? Shifting the health care costs to the government does not make them go away. One way or another you have to pay.

You don't have to pay 16% of your GDP in a well-run healthcare system. The UK, France, Germany, Japan, Italy, all pay much less than that and live longer, healthier lives. It starts by covering everybody, which is a big cost savings.

One of the reasons other countries spend less on health care is they get less of it because services are rationed. Do you think Americans will put up with this?

They already do. Any scare good gets rationed; you should know that. It's just that our decisions as to who gets what in America have very little to do with who need what and a lot to do with where you live and who your insurance carrier is.

Would you like to get told that you can't have expensive treatment for prostate cancer because its not cost effective to treat people above a certain age?

Are you suggesting we can have a health care system that ignores cost effectiveness? Do you know what an indolent cancer is? Do you understand that a major operation in an 88-year-old to remove a cancer that may kill him 10 years down the line doesn't make sense from a health perspective, let alone a cost perspective?

Let's try to avoid magical thinking.

I couldn't agree more. I'm so tired of people who know nothing about our healthcare system but are convinced it must be the best -- just look at all the shiny machines. Or they tell you that even though we spend more than twice what OCED countries spend on average to cover every single person from crandle to grave, they say there's no way to do it for less.

Take the thirty richest countries in the world. The other 29 will spend less on health care than we do. They will all have some form of universal care. And they all have populations that are longer-lived and healthier than ours. Yet, some people want to pretend everything's fine. Talk about magical thinking.
11.20.2008 12:32pm
Robert Farrell (mail):
Is that a lie? Pretty sure Obama is on tape saying that he intends to pass laws that will bankrupt the coal industry. Did I miss something?

Yep, you did.
11.20.2008 12:33pm
b:
Which was what? Was there a ventriloquist making Obama say those things? Or is this more of that "nuance" we hear so much about these days?
11.20.2008 12:35pm
Per Son:
Obama said this (and note that the plan is from the Lieberman McCain Amendment):

"So if somebody wants to build a coal-powered plant, they can; it's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted."

He is not referring to the coal industry, but entities that build coal burning energy facilities. There are already coal burning plants that would purchase coal, and coal burning plants being built could use systems of scrubbers or sell carbon credits.
11.20.2008 12:53pm
Smokey:
Robert Farrell doesn't understand the central problem in the U.S. health care industry.

Why has the cost of corrective eye surgery and plastic surgery fallen by half in the past 12 years, while other medical costs have skyrocketed?

They are both medical procedures, no different in principle than removing a wart or stitching a cut. But the cost of the first two examples has been cut in half, while the cost of the latter two examples has risen sharply.

The answer is government intervention in healthcare. That is the difference between someone shopping around for vision correction, which is not covered by insurance or government mandates, and someone walking into a hospital, which has no choice but to treat them whether they can pay or not.

Competition works, as the plummeting cost of corrective vision and plastic surgery attests. Therefore, a government takeover of health care will result in inefficiency and much higher costs.

If you think government healthcare is the answer, you just watch what happens. The result will be no different than in other countries, in which unaccountable, politically appointed bureaucrats assume that they can run a giant healthcare industry from their government perch better than businessmen competing with each other for customers.
11.20.2008 12:53pm
Per Son:
Smokey:

Who is accountable for health care now? I mean the insurance company or physician can make a horrible mistake, and ERISA preemption pretty much limits recoveries to nothing.

Moreover, states with tort reform do not have lowered health care costs as promised.

Can you point me to where optical and plastic surgery costs have gone down as a result of competition? Also, has dental gone down as well?
11.20.2008 1:15pm
Per Son:
Smokey:

Nevermind - a found a source on the competition bit. How do you think non-elective surgery plays into it. Are you saying it would be better to make open heart surgery uninsured, and hopefully the price comes down? I doubt it will come down, as the people needing will be dead before there shopping around plays out.
11.20.2008 1:29pm
Elliot123 (mail):
"And right on schedule we have the lies and the smears. Don't ever, ever change, 123. Go on just as you are. I hope you like getting plowed at the ballot box."

First you hope the soft balls keep coming, then you hope I get plowed? Calling Dr. Freud...
11.20.2008 1:31pm
Aultimer:

Robert Farrell (mail):
The point is that the labor cost differential between, say, GM and Toyota is overwhelmingly a function of healthcare and legacy costs.

You're changing your argument now that I've called you on your fruit.

The difference between GM and Toyota workers IN THE U.S.A. is NOT "healthcare and legacy costs" it's just legacy costs. Or is your next dodge going to be to suggest Toyota workers in the US have lower healthcare costs?
11.20.2008 1:46pm
Slocum (mail):
For example, in 2010 a UAW fund will begin paying healthcare costs, and pay of new hires will be more in line with competitors than it has been in the past.

The UAW fund will pay health care costs if the Big 3 can come up with the cash to fill those funds -- what are the chances of that happening now? Where is all that money going to come from?

And...WHAT NEW HIRES? Given how fast they've shrinking and how much more shrinking they have to go, just how many new hires are the Detroit automakers going to bring on new in the next few years? Sounds like the 'lower cost new hires' is more a theoretical than actual form of cost savings.

Are taxpayers going to kick in billions so existing workers can keep their inflated wages and their gold-plated retirement health benefits (that are better than yours and mine). If so, WHY?!?
11.20.2008 1:52pm
Ted Frank (www):
Toyota workers probably do have lower healthcare costs, as gold-plated healthcare benefits are one of the concessions the UAW extracted from the Big Three over the years.
11.20.2008 1:54pm
Mac (mail):
b:

Is that a lie? Pretty sure Obama is on tape saying that he intends to pass laws that will bankrupt the coal industry. Did I miss something?


b,

I am pretty sure you are exactly correct.
I love how Obama's words get "nuanced" to cover his tracks. However, dear Biden went to coal country in Penn. and, with his usual diplomatic aplomb, expressed the same sentiments.
11.20.2008 1:58pm
Dan Weber (www):
The government can run a health-care system well, like in the case of the VHA, or poorly, as in the case of Medicare.

Going to government-run health care may be an answer; however, it doesn't follow that it will be better, or is the only way to improve health care.
11.20.2008 2:12pm
William Freismuth (mail):

Mr. Farrel,
As a former Teamster I find your comments about
getting rid of the union rather naive.
I think that calling most current unions, including
teachers and government workers "Rent Seeking Entities"
is a polite euphemism for racketeers.
I am pretty sure that the UAW would treat anyone
suggesting a dissolution vote the same way the
Teamsters would.
Maybe we can get James R. Hoffa to give us an
opinion or suggestion on this.

Will Freismuth
11.20.2008 2:27pm
Robert Farrell (mail):
Mr. Freismuth,

As a current Teamster who has seen three up-or-down votes on the union in six years of employment, I find your cartoonish libel on the unions rather amusing, and though my cynicism pains me, I doubt very much whether your supposed first-hand experience is anything of the kind. Absent a method of verification, perhaps you could offer some evidence for your assertion?
11.20.2008 2:47pm
Robert Farrell (mail):
The government can run a health-care system well, like in the case of the VHA, or poorly, as in the case of Medicare.

Going to government-run health care may be an answer; however, it doesn't follow that it will be better, or is the only way to improve health care.


True, which is why I say "we have to reform the health care system" not "we have to have a National Health Service." The one is not a code for the other.
11.20.2008 2:49pm
Robert Farrell (mail):
Toyota workers probably do have lower healthcare costs, as gold-plated healthcare benefits are one of the concessions the UAW extracted from the Big Three over the years.

What exactly do you think "gold-plated" health insurance entails? Low co-pays, high caps, the knowledge that if you get sick or injured the cost won't bankrupt you? Is that really an unreasonable expectation for an American worker to have?

I'm very serious about this. Think for a minute about what good healthcare actually means. Realize that what you are describing as an indulgence is a level of security most workers in the developed world take for granted.
11.20.2008 2:54pm
Robert Farrell (mail):
You're changing your argument now that I've called you on your fruit.

No, what I'm doing is pointing out that you didn't understand the original argument and instead are arguing with a straw man. Do Detroit workers make $150k in salary? No. End of discussion.

Now you want to start another discussion about a facile comparison between the six-toed assembly workers for foreign automakers and the UAW. And I'm declining to have that discussion with you, as you are not in possession of any substantive argument.
11.20.2008 3:00pm
Smokey:
Enough with the bold text. Italics works fine.

K thx bye.
11.20.2008 3:01pm
Barbara:
Yes. Please. Bold should be used sparingly. It's hard on the eyes.
11.20.2008 3:06pm
Robert Farrell (mail):
The result will be no different than in other countries, in which unaccountable, politically appointed bureaucrats assume that they can run a giant healthcare industry from their government perch better than businessmen competing with each other for customers.

Since the OP has posted an update with some estimates of the money wasted on Detroit, here is another number to bear in mind: the amount of money we spend over and above the average spent by OECD members like the UK, France, and Germany: $900 billion dollars per year.

That is the money that would be freed for savings and investment if we spent what other rich countries do on health care. Maybe we could only grab half of that. That's still a savings of $450 billion dollars a year.

The idea that reform must lead to government control is a fallacy. The idea that government control must lead to lesser efficiency is also a fallacy. Also recall that via Medicare and Medicaid, the VA and government employee's benefits, the government is spending more than half the healthcare budget as it is. Even if you dislike government entitlements in general, you should be able to recognize that there are more and less distortive ways to apply government funds to social welfare.
11.20.2008 3:11pm
Bravo587:
Sounds like an argument for fascism
11.20.2008 3:37pm
Sophie:
Per Son:
Smokey:
Nevermind - a found a source on the competition bit. How do you think non-elective surgery plays into it. Are you saying it would be better to make open heart surgery uninsured, and hopefully the price comes down? I doubt it will come down, as the people needing will be dead before there shopping around plays out


Non-elective surgery plays into it exactly like Smokey said, FREE MARKET = competition = lower prices or some other added value with the same price.

Not everyone who gets open heart surgery needs it right away.
Insured people have NO idea how much things cost.
Friend in law school stubbed her toe really hard and it hurt a lot. I told her that even if it was broken they don't do anything for little toes. She said she did not care, she had insurance and would go to the doctor. I asked her if she would go if it cost her $100. She said no.
Her toe was not broken. They did nothing for her, except charge her insurance who knows what.

I used to go to a dentist and a doctor who had "cash prices," this even meant if you paid with a credit card.
It was faster, easier, and cheaper for them to just have payment than to bill the insurance companies. Often the discount was 15-20%. That is a lot of discount.

Also, when I was grinding my teeth, it was recommended that I get a custom fitted mouth guard. I asked him how much it cost, and he knowing that I would not have purchased it if it was "too much," gave me a $100 discount. I think it was because I was a student too. But, the free market let him decide what he wanted to charge. If he were willing to make less profit that day, then he could lower his prices.

Also, yeah, people might live longer in those other countries but I do not think it has to do with healthcare. More likely has to do with Americans do not regularly use walking as a form of transportation, other countries do.

Also, when I went to London last year. A local resident was complaining to my mom that the latest law to be passed was that residents could no longer use ladders. You had to have a permit to use them now or be a professional or something. Why? Because the government did not want to pay for ladder related injuries.

Me, I would rather pay for myself and use a ladder if I wanted to.


Just think what would happen to gas and oil change prices if it these maintenance, not disaster, services were included in your car insurance.
11.20.2008 3:50pm
Robert Farrell (mail):
Enough with the bold text. Italics works fine.

In the hierarchy of rhetorical strategies, somewhere below "Argue the law" and "Pound the table" there must reside the "Take issue with the formatting" gambit.
11.20.2008 3:58pm
Per Son:
Sophie:

You stated: "Non-elective surgery plays into it exactly like Smokey said, FREE MARKET = competition = lower prices or some other added value with the same price."

How free should the market be? Should one still posses a license, should the hypocratic oath be abolished . . . ?

I don't know many open heart surgeries where people have much time to shop around, but taking that off the table, what about emergency surgeries? According to Smokey's logic, an emergency bypass would be cheaper if there was no governmental barriers or insurance. It would be cheaper, because most people would die, because they would be able to afford them at all unless you had great wealth.
11.20.2008 4:28pm
Mac (mail):

The idea that government control must lead to lesser efficiency is also a fallacy.


Mr. Farrell,

Surely you jest? While the VA is a fine organization, it would soon go bankrupt if it were not a government entity. It is bloated with bureaucracy, slow to change, even slower to adopt new techniques no matter the patient benefit and cost savings. The least amount of money in their budget goes into actual patient care. Due to the unions and Federal regulations, it is almost impossible to fire anyone, no matter how egregious the act or how negative the consequence to the patient.

As I said, surely you jest?
11.20.2008 6:10pm
Smokey:
Robert Farrell,

It is not just two of us who object to the constant use of bold text. You're new here, so you may not know what's considered acceptable. Just look at the very limited use of bold in all the other posts.

If you're not new here and have just been lurking, then you are well aware that this has been a recurring issue.

Note that most others don't use bold, and if they do, it's used very sparingly. This request has nothing to do with 'rhetorical strategies.' It's a request for common courtesy.

Italics is just as effective, and as Barbara noted, it's much easier on the eyes.

Please have some consideration. Thanks.
11.20.2008 6:15pm