Saturday, November 22, 2008

The Big Three, or the Big Two?

Have some MI pride: if the auto industry collapses, Detroit will die. While liberal Californian commentators argue that Detroit must die,” I am sure they wouldn't be so direct if I wrote a column that San Francisco must die. I am tired of taking the brunt of the nation's recessions, while being criticized or ignored for it. Michigan's long-sitting Congressmen are openly attacked by Nancy Pelosi and her "Coasters." These Coasters then attack our hard working Michigan employees as being greedy and lazy. Even Mitt Romney, son of Michigan Governor Romney, dismissed Michigan and blamed those who were responsible for building the arsenal of democracy. Congressmen, try telling the seventy year old retiree who now has carpal tunnel syndrome from working in the shop that she was just too lazy and greedy to expect her retirement. Our industries are allowed to fail without condolences, but with massive applause.

Now, I will be the first person to admit that these CEOs were stupid for taking separate private planes to the same city and the same meeting. Yet, our Congressmen reminded me of angry children who just wanted to get back at the kid on the playground who has all the toys. Our Senators seemed content to sit back and watch it all happen; after all, they won’t be near Ground Zero here in the Midwest when things get chaotic. They will be content down south, to the east, and to the west ruminating about how great their states are doing, while ignoring this national security issue. It is about time that Michigan tell the rest of the Nation that enough is enough, we won’t be the Nation’s crutch like usual.

Cramer may be a little eccentric in the clip above, but boy does he summarize the importance of this bailout and hit the nail on the head. The financial sector is only half the problem here. The problem is systemic and has been slowly gathering momentum since the late 1970’s. American wages have been either stagnate or declining since, while every other cost has been rising. This problem should not be revelation for most rational human beings, but the majority of economists have been ignoring this problem in favor of promoting the trickle-down theory. This is what happens when intellectuals sell out.

Since the end of WWII, the capitalist economy has been based around consumerism, which requires a strong middle class with the resources to spend, spend, and spend. Yet, as mentioned above, wealth has concentrated and the middle class has shrunk. So who picks up the tab necessary to keep this economy circulating? For the last three decades, we have been acting on a binge, spoiled by credit to keep the bubble from exploding. However, our national economic policy has continued this slow pace toward chaos through deregulation, unfair trade agreements, and the destruction of safety net programs designed to stabilize the country after the Great Depression. Let’s not be partisan, this was the general direction even under democratic leadership.

While I am not saying we should move backwards, I also realize the days of trickle-down are over. The concept is antithetical to consumerism. We want as many people as possible to have disposable cash, decent jobs, and low costs. This sounds like a difficult objective, and it is to the point of being practically impossible. But there is some clarity: the assumption that a small group of concentrated wealth will share that wealth in a capitalist economy has been forever tarnished.

The last thing this country needs is 3 million more unemployed, millions of failed pensions plans for the Pension Benefit Guaranty Corporation to pick up, the failure of support industries, the fail of small businesses, and the huge numbers of uninsured that will all result from the collapse of the American auto industry. The market will handle it you say? No, they won’t because no one has disposable cash on hand to start up new companies that are more efficient than the current companies. Bankruptcy? I think everyone is misunderstanding bankruptcy. GM will not cease to exist. However, it might as well. Who will buy cars from a bankrupt company that will not honor its past service and parts guarantees?

Bankruptcy mostly impacts employees. GM can void its union agreements. All those pension benefits are still guaranteed by the United States government through the Pension Benefit Guaranty Corporation. Yet, there is no way they will be able to live up to those pension agreements. Health care? Gone too. Many will lose jobs working at insurance companies. What about the wages we need to maintain a consumer economy? Definitely gone. Oh, and heavy layoffs is the last thing our economy needs to jump start after the financial crisis. Bankruptcy also voids other contracts forcing the burden on small suppliers. If they tank, the Big Three tank.

Next, stop bad-mouthing the UAW. They cut the salaries of their new-hires by half. They picked up millions of pensions and health insurance costs. They have been cooperating with layoff after layoff. Everyone deserves the right to be compensated for their work. Last time I checked, that's the goal of capitalism. Just because the rest of middle class American has collapsed does not mean the last bastion of the middle class should collapse as well. Again, how does that help our consumer based economy??? I'm not saying we should remove all blame from the shoulders of the UAW, but there are deeper problems at work here that are diminishing GM sales.

GM is a company that has lobbied against the future. They have done everything to prevent the natural progression of history and technology. It was only a matter of time until the rest of the world moved on without them. That being said, this is not a company that is unsalvageable. This is a company that needs a new direction that Congress should prepare to give it one like they did during WWII.

Unfortunately, we won't be getting a bailout for middle class working American under this Congress full of Coasters with their economic blinders on. Hopefully, Obama can wrestle these ego-centric and narrow minded senators into making the right choice.


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