The Auto Worker Bailout, Part I: Corporate Welfare
It seems like yesterday that seedy Michael Moore was ranting and raving about General Motors laying off thousands of workers in a year when the company’s profits were in the neighborhood of $5 billion. Too bad he didn’t get his way, because it would have put GM out if its misery a lot sooner.
It’s hard to believe that just fifty years ago GM controlled 50 percent of the U.S. car market (now down to about 22 percent). Who could have imagined that, after the harsh consequences of Pearl Harbor, the Japanese would have the temerity to invade such unglamorous heartland spots as Ohio and Tennessee with their efficiently run auto plants?
And now, the big question is: Will Michael Moore be motivated to picket the United Auto Workers union (UAW) to accept lower wages and longer working hours in an effort to save its members’ jobs? Gosh, we’ve heard nary a peep out of him.
Listen up, Americans: The Big Three automakers must be allowed to go broke! Any money given to these companies, whether via loans, investments, or outright taxpayer gifts, will do nothing whatsoever to improve their long-term prospects for survival.
While it’s popular to refer to government subsidies of big business as corporate welfare – and it certainly is — when you drill down to the core of the matter, you realize that giving money to the automakers just to keep them alive is primarily a transfer of wealth from taxpayers to the employees of those companies.
In other words, when the Big Three bailout comes about — and, in all likelihood, it will — what will really be occurring is that some of your earnings will be transferred to the auto workers. Oh, and in case you weren’t aware of it, the recipients of your unintentional largesse will be guys and gals who make as much as $140,000 a year.
Worse, thousands of those recipients don’t even work. The infamous “Jobs Bank” concocted by the UAW years ago forces automakers to pay laid-off workers for not working. All they need to do is report to a specified room every day and lie around, play cards, read, watch television … just about anything to relax their pampered little brains and bodies.
In addition, GM is obligated to pay hundreds of thousands of retirees’ pensions and health-care benefits, which industry analysts estimate adds an average of $2,200 to the price of every car the company produces. And that, in turn, makes GM even less competitive with the foreign carmakers that have already brought it to its knees.
No wonder middle-priced restaurant chains have had one-to-two-hour waiting lists every night of the week for years. The heck with a college degree. Get a job on an auto assembly line and let the good times roll … fabulous salary, lots of paid vacation time, the best health insurance, and, if you’re lucky, you may get laid off some day and be paid for playing pool in one of the company’s Jobs Bank lounges. Corporate welfare will keep the good times rolling, too.
Violating universal principles to create false prosperity for a select group of workers is the ultimate in corporate masochism. But rest assured that the end to this kind of insanity is near at hand — and the end will be excruciatingly painful. Someone is going to have to figure out a way to come up with a lot of red meat in a hurry.
While all this is going on, media pundits (including many “conservatives”), insist that there is too much inequality between the pay of top executives and their workers. Are they right? Remember, any answer you give to a question based on a false premise is wrong.
The false premise here is that it’s a good thing to have the ratio of executive pay to worker pay be as low as possible. The truth be known, a high ratio is neither good nor bad. As a matter of act, it’s completely irrelevant.
In Part II of this article, I’ll explain what I mean by that.
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Copyright © 2012 Robert Ringer
ROBERT RINGER is a New York Times #1 bestselling author and host of the highly acclaimed Liberty Education Interview Series, which features interviews with top political, economic, and social leaders. He has appeared on Fox News, Fox Business, The Tonight Show, Today, The Dennis Miller Show, Good Morning America, The Lars Larson Show, ABC Nightline, and The Charlie Rose Show, and has been the subject of feature articles in such major publications as Time, People, The Wall Street Journal, Fortune, Barron's, and The New York Times.
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Michael Moore showed up on Larry King the other night. I only saw a portion, but in his radiance Mr. Moore said GM was struggling because it was building vehicles nobody wanted — those SUVs that provided a huge chunk of their profit for years until gas prices spiked. He also said GM wasn’t producing cars Americans wanted — small, fuel efficient things like the Chevy Aveos and Cobalts and the Saturn Aura that have low profit margins and don’t sell in huge numbers because… because Americans really DON’T want small cars that much. The looming Mr. Moore said union workers have devoted their lives to the company so the company should take care of them (I’m paraphrasing but that was the essence).
Is is just me or is anyone else confused by the double standard for bailouts? Although I am opposed to all of them, I am having trouble understanding how lawmakers (or is it just King Paulsen?) decide who gets corporate welfare and who doesn’t. Apparently it caused quite a stir when the execs from the Big 3 arrived separately in their private jets to beg for a bailout. I wonder what the execs from AIG, Citigroup et. al arrived in when they came calling? Apparently it is okay to bailout the financial industry while they continue to do business as usual, but the Big 3 have to prove that they are going to use their bailout $$$ wisely?
I agree with Robert, the Big 3 and all the rest just need to be allowed to go broke. Any other option just delays the inevitable pain and suffering that will come when we all finally have to face up to the consequences of corporate and government actions. As for executive compensation when that sad day finally arrives??? Here’s my plan, a nice striped suit and 3 meals a day. Maybe for good behavior a workout room and some trashy reading material.Or maybe they could get work release time in which they retool all those vacant auto plants to make more fuel efficient cars?
I never understood Unions.
Now with the knowledge and listening to savvy people, I have no doubt of the absurdity of “achievements” like paying people (very high wages, btw) for *not* working.
It just does not make any sense.
But, alas, that’s all in name of the “Spread the Wealth” principle.
I could not be a socialist, left-winger or whatever they are called, just because it goes against logic.
Unions create a wrong (meaning “not realistic”) mindset on people whose professional goals are “to get a good job with a good pension”, and while on that, make their leaders very wealthy.
Anyway, leaving the natural course to work (these automarkers going broke) it would be an excellent juncture point for a fresh start to set reasonable compensation, retirement plans based on savings while being productive, and very important: to develop the new cars using alternative energy.
This could be a great opportunity for USA automakers industry to take the lead again for the coming decades.
As I was watching the news this morning I had the very thought that the automakers need to be allowed to go broke! I am gratified that you think the same. This whole bailout thing is ridiculous and can only lead to more of the same trouble we’re already facing and will surely bring on a total collapse of the economy. I don’t know how politicians and economists are able to sell this to the people of this country. I say let them cave in. Let the banks answer for their foolishness too. As individuals, we have to be accountable for how we spend our money. No one is going to come along and give me a bailout if I run out of money. I simply lose my ability to purchase, pay bills and provide for myself. Although the lesson is painful, probably devastating, continuing to do the same wrong thing over and over again expecting a different outcome is the definition of insanity. Let’s do something different — make the automakers and the banks and the cities and states — take care of themselves and regain our sanity and balance in this out of control society. Let’s stop letting the feds tell us what’s good for us. Let’s make them all fiscally responsible just like you and I have to be in order to survive. Maybe then we can keep more of our own money and put it to much better use than the federal government does.
Back in the summer of 1973 while I was attending college, I was employed as summer help at a northern Ohio Ford manufacturing plant. I can vividly remember many fellow employees sleeping in cars and drinking on the job. I had a pretty lousy job since I was only summer help, but I did make a lot on money and was tempted to drop out of college and stay and work full-time. Today, I am glad that I didn’t since the factory closed it’s doors for good about 10 years ago.
Unfortunately,I think the car manufacturers will get some bailout money using the reasoning that thousands and thousands of workers including those that supply parts, truck drivers…on and on…will all lose their jobs. They should have to file bankruptcy and work their way out of their problems like every other company like United Airlines was forced to do.
I hate to see this happen to our American cars but I for one do not think that taxpayers dollars should be spent bailing out any company.
My only comment is that your predictions made in the late 70s and early 80s are coming true. I read you then and my understanding of the world we live in was enormously enhanced for life by reading you. In fact, I have been wondering for a long time just how long it would take before the logically inevitable that you explain so well beagn to happen so overwhelmingly that NO ONE would have the power to explain it away or stop it. I am convinced that time has arrived. At least, thanks to you, I have had nearly THREE DECADES of being intellectually, emotionally, and otherwise prepared for this. The same is not true for over 99% of the population, I am sure. Thank You.
- Is it not the American Dream to better yourself and to get the most out of your life that you can ?
I am a union employee at the big three and because of my education, training, talents,efforts,a little bit of luck and seinority I have been able bring home an above average wage, (some years over 6 figures).
To do this I worked many, many, many extra hours, weekends, nights, double shifts etc, etc, etc.
The amount of union workers making this amount of money is ONE IN A THOUSAND – that’s .01%.
Don’t blame everyone because a few take advantage of the Job Bank that was a company idea in the first place!
Union wages are about 9% of the cost of manufacturing, but seem to be responsible for 90% of the blame for all the problems in the industry.
The union worker is not to blame for bad coperate decisions that result in a product being out of favour to the buying public. High fuel prices, uneven quality parts bought from the lowest bidder, dealers crapy sales and service policies, company warranty problems, the ecomony, etc, etc, etc are NOT the responsibility of the union worker. The problems in the auto/truck industry will still be there even if the union workers worked for free.
TOUGH TIMES DON’T LAST ~ TOUGH PEOPLE DO
dlb
To quote Warren Buffet: “Turnarounds seldom turn.”
Thanks for the truth.
As to the false premise
It has always been the way of the Unions to make the worker and management (business owners) enemies.
The Unions over stepped their bounds back in the sixties and have been destroying Business since. I have watched it since 1967 and no-one wanted to see. Was called Crabgrass.
Jim
Response to Robert Ringer
You are 100% correct–although some bleeding-hearts might take offense about you advocating the demise of the Big Three automakers by allowing them to go broke. It is obvious they have been defying the consumers most urgent desires for years. The wages the auto workers are paid are ridiculously high–definitely far above the market wage. And the generous benefits—. This alone guarantees they can’t compete with more efficient producers of automobiles. No company can suffer excessive costs and remain in business.
Saving the Big Three with bailouts is downright theft–the transfer of wealth from the taxpayers to people whose services are no longer desired–as expressed on the marketplace.
It is evident we live in a society where some people believe they are entitled to unearned benefits. If the consumers no longer require your services–force them at the point of a gun to accept them anyway. This type of theft is more dishonest than the crime a holdup man commits when he insists you hand him all of your money. At least he doesn’t pretend his criminality is for the benefit of society–or that it is your patriotic duty to support his criminal enterprise.
We can conclude that all government bailouts are theft and therefore criminal acts against innocent victims.
By the way you mentioned something about false premises. When someone spouted something that was obvious nonsense, Ayn Rand would tell the person to “Check your premises.” Unfortunately, many people lack the integrity to do this.
The “Big Three”, like other domestic manufacturers, have been at a tremendous disadvantage when they attempt to compete with a country like Japan. A lot of people, especially “Conservatives” (who don’t like labor unions) point the finger at the auto workers- saying that the auto workers’ pay and benefits are too generous. They point out that Japan’s auto makers aren’t saddled with pension and healthcare costs like we are.
That is correct, but, they all hope that you don’t ask why Japanese auto makers aren’t saddled with pension and health care costs. They hope you will just blame the auto workers for the competitive disadvantage of the “Big Three”. Here’s a little secret that they don’t want you to know: the reason why Japanese auto makers aren’t saddled with health and pension costs: Japanese auto makers are subsidized by the Japanese government. In other words, the health care (among other things) of the Japanese auto worker is provided by the Japanese government. This is why the “Big Three” were at a disadvantage for years, as well as the fact that auto plants in the States were more strictly regulated than plants located in Japan.
In case you were wondering, the Japanese work force is more unionized than ours.
The U.S. believes in “free trade”, but there is no “fair trade”. The figure-heads in Washington yawned while our trade deficits with other countries grew and grew. Our domestic industries had to compete against countries with nationalized health care- which meant that foreign companies had more free capital to compete against us (because they aren’t saddled with health care costs), and then there were those that artificially manipulated their currency, like the Chinese. It goes on and on…
Blaming the auto workers for the problems that the auto industry is simplistic, to say the least, and only hurts our country in the end.
Response to kat52
I like your idea of self-accountability, an idea that is unknown to our political and financial leaders. If you or I make a mistake ( I don’t know about you, but I’ve made my share.) nobody comes along with an offer to bail us out. And how fortunate we are. Imagine never learning from your mistakes. Imagine never having the incentive to do better. What we don’t learn from wisdom we learn through woe. Our government policies guarantee that woe will be in abundant supply.