Auto bailout

[ciphergoth]

Auto industry: labour costs 10% or $1.7B, must cut worker salaries to receive $17B bailout.
Financial industry: labour costs 90% or $490B, can have $700B bailout no strings attached.

Bush Loans $17 Billion to the Auto Industry

President Bush brought down the wrath of a large piece of the Republican Party on himself for giving the big three car manufacturers a $17 billion stopgap loan. The loan has a condition in it that members of the United Auto Workers union give back wage and benefits that bring them into line with what the Japanese companies pay at their plants in the South. The Republicans objection is that this condition is not written into law and Barack Obama could easily eliminate it after January 20th.

It is increasingly clear that what southern Republicans really want is to break the back of the UAW (which habitually supports the Democratic Party). Thus while demanding lower wages and benefits as part of the $17 billion loan to the auto industry (where labor costs are 10% of total expenditures) is crucial to them, they didn't make a peep about lowering salaries as part of the $700 billion bailout of the banking industry (where labor costs are 70% of the total). In other words, the $1.7 billion worth of labor costs in the (unionized) auto industry is a big deal but the $490 billion worth of labor costs in the (nonunionized) financial industry is a nonissue.

-- Andrew Tanenbaum

Comments

[ajva.livejournal.com]

I'm completely against the auto industry bailout - but then I was completely against the financial industry bailout too, so at least I'm consistent.

[ciphergoth.livejournal.com]

*surprised* what would you have them do?

Not that I know what to think one way or the other, mind...

[ajva.livejournal.com]

Well, this is, I suppose, where what you could call my right wing streak lies. I am very much a non-interventionist in cases like this where we are talking about problems which are long-term and structural rather than temporary blips (where it would be perfectly valid to offer short-term support to help companies through bad times). I would let these companies fail, let the disastrous knock-on effects happen, and *then* offer support for people hurt by it, rather than throwing good money after bad in an unsustainable attempt to solve the problem by keeping unviable businesses going. Money that could - and should - be spent on something that's going to benefit more people in the long run. This is on the grounds that I believe that a sharp bout of economic agony for a couple of years, though bloody awful, is much less destructive in the long run to everyone than a decades long death-of-a-thousand-cuts that will see industries like the American car industry destroyed anyway though pointlessness, with the money chucked after it as it sinks lost forever. Far better it be forced to turn itself into something viable (even if it means cutting back on its generous pension benefits) rather than be encouraged to keep making cars fewer and fewer people want any more.

Of course, politicians will tell you that this problem *is* essentially a short-term blip. But of course, you can't blame them for that, since that's what everyone's *hoping* it is - and since politicians have to be seen to do *something* - then it suits politicians to claim that that is what it is. But I'm pretty sure it isn't.

I make a similar case against financial bailouts, which puts me in an even smaller group of people, I'm aware. :o) (In fact, I do not subscribe to the seemingly growing consensus that letting Lehman fail was a mistake; I think in time to come it will be seen as a necessary move - a pawn sacrifice, if you will. :o) ) However, one of the additional reasons against I would have given then would have been "where does it end? If you bail out Wall Street, how can you then refuse to bail out everyone else?" And, indeed, your post is making this point eloquently.