Recent writing reveals the duplicity of the Auto Industry Bridge Loan controversy. My thoughts are in bold font. Larry Kudlow of the National Review Online compares apples to oranges and notes that they are both round, therefore they must be the same. All kidding aside read the journal entries to his “Bailout-nation saga”.
He may not be representing the truth.
The bailout-nation saga continued today as the Little Three carmakers from Detroit testified all day in front of the Senate Banking Committee. So far, the best thing I heard was from Sen. Robert Corker of Tennessee.
In the next entry the $69/hr wage for 2008 and benefit package for the UAW is inflated to $75/hr. Note Mr Kudlow fails to mention, actual wages are equivalent, it is the pensions and health benefits that would need to be cut to former employees.
This is true since there are more American retirees from the UAW than from the relatively new American plants of foreign carmakers.
Bailout nation is in trouble today as reports circulate that the little-three bailout deal does not have the votes in the Senate to pass. Also, Nancy Pelosi wants a lot of Republican votes in the House, but it doesn’t look like she’s gonna get them. One key point missing from the Democratic proposal is a strict compensation condition, whereby GM wages and benefits must equal Toyota’s. The difference right now is roughly $75 for GM and $48 for Toyota. This is the Sen. Bob Corker proposal, and he himself is opposed to the bill because of the absence of any strict compensation conditions. Nancy Pelosi calls the deal a barbershop, where everybody will take a haircut. However, there is no UAW haircut. Moreover, that may turn out to be a real deal-blocker.
Here we have a classic case of disinformation. Mr. Kudlow stated that the most promising or in his own words “the best thing I heard was from Sen. Robert Corker of Tennessee.” Sen. Corker proposed that the UAW agree to cut labor costs so that they were on a par with non-union shops. Several items from this statement strike me as being disingenuous
First, to have union jobs pay the same as non-union jobs would negate a major selling point of a union. Second, the union has recently negotiated concessions with the big Three Automakers to lower benefit costs and announced that all new hires would start at $14.00-16.00/hr. Notice in the December 4 statement Mr. Kudlow remarked that the wages that he cited included pension and health benefits. On December 9 Mr. Kudlow no longer cites pension and health benefits just the apparent disparity in labor costs of $75/hr for UAW and $49/hr as the average for Honda, Toyota, and Nissan. However, as a report by CBS news noted:
“The Associated Press reported that, for example, the average United Auto Workers member makes $29.78 per hour at GM, while Toyota pays its workers (most of whom are non-union) about $30 per hour. However, when total benefits (including pensions and health care for workers, retirees and their spouses) is factored in, GM’s total hourly labor costs is about $69, while Toyota’s is about $48.” Toyota has less retirees than GM. Toyota also provides less health benefits to its workers.
“The Japanese automaker has fewer retirees in the U.S., and its health care benefits and pensions are less generous than those negotiated between Detroit and the UAW. Another key point is that health costs and pensions for autoworkers in Japan – worth billions – are subsidized by the Japanese government. Not so in the U.S.
UAW representatives were wary of renegotiating its contracts again, after having already settled for lower wages in its contract talks with GM earlier this year. [New hires at GM are paid $14-$16 an hour; Ford and Chrysler also pay new hires less; this has stirred the companies to offer buyout packages to their older workers.
Furthermore CBS news noted:
“The Detroit Free Press reported last week that it had obtained an internal Toyota report which said the company should align its hourly wages with the prevailing manufacturing pay in the state rather than those of competitors in the auto sector, with the goal of cutting an expected $900 million increase in worker compensation by 2011 by one-third. And other manufacturing jobs, on average, pay less. In Kentucky, for example, Toyota workers in Georgetown earn about $30 per hour, while the median wage in the state for manufacturing jobs, according to the Department of Labor, is $12.64”.
The internal memo hinting at still lower wages for American Employees of Japanese carmakers would according to the Corker proposal force the union to lower their wages and benefits to align with foreign competitors. The possibility then exists that all autoworkers wages could then be adjusted down towards $12-14/hr.
The efforts of Sen. Corker may be motivated by more that just lowering costs. Tennessee has spent considerable money to win agreements from Nissan Motors to build factories in Tennessee. Good Jobs First, has reported, “Foreign Auto Plants Have Received $3.6 Billion in Subsidies, Mostly From Southern States.” Perhaps there is more of an incentive to help foreign automakers for such Senators as Robert Corker. I have heard from other conservatives that foreign carmakers could step up and hire more American employees if one or more big three companies were liquidated. Sure thing though I wonder how people are going to afford those automobiles on $30,000 or less!
Larry Kudlow has the answer… Rich people will make the purchases necessary to spur the economy. Larry Kudlow writes on the National Review Online that we need to help the rich people so that they can spur the economy.
“And then of course Biden went on about how Obama is going to help the middle class, and how it’s the middle class that’s going to get us out of this jam. While I listened carefully, I never heard him say anything about rich people, or successful earners and investors. No mention of businesses. Irving Kristol taught us 3 decades ago that the top earners are the “economic activists”. They are the ones with the highest propensity to consume and invest. They’re the ones who purchase the yachts, which are subsequently constructed by blue-collar workers. And they’re the ones who run the small businesses and provide the capital for new entrepreneurial startups that are the lifeblood of this economy.”
I thought the Republican line was that those earning slightly more than $250,000 (compared to those that are super rich) were the small business owners… the Joe the Plumbers that were the key to our economic engine.
Turns out that it is actually the rich “the top earners” who are people who need more money. This is an amazing statement given that the tax cuts of the past eight years have effectively provided rich people with an average of 30,000 dollars for each of the past four years. If you read the book “Richistan” you will know why that is not enough. Why that barely covers the cost of a private masseuse or the decorations for one season in one of the homes they own. Let’s see then if we give rich people more money they will kindly invest in more purchases such as yachts and mansions that we will labor to build for them. Then we can keep our employment with lower wages and the inherent need to borrow to make it to the next payday. Sounds like a plan to me, light me up another few hundred dollar bills, what is this man smoking.
By the way, let us not forget the corporate bonuses that are being handed out with the TARP money, our tax dollars. Without the TARP money, these firms would have been liquidated or bought out by another firm. In that case, would employees still get such large bonuses? Naturally, with all these bonuses they would need a tax break.
“If we had an economy without rich people, we wouldn’t have much of an economy. That is why lower tax rates to reward the economic activists—that is, the most prominent capitalists—would be ever so helpful. Or slashing business tax rates that would create investment inflows to promote high wage earning new jobs. And, it would give consumers a break since they’re the ones that bear the brunt cost of high corporate taxes.”
So now, we have the rest of story. American worker’s wages need to lowered to $12-14/hr. Consumers need not worry about saving for big box items like cars, they can purchase on credit. Meanwhile the rich need more yachts, so displaced workers will find employment catering to the rich. Voila, with one wave of a magic wand, rich people have rescued us all. We should be so grateful, we would happily give up our healthcare benefits, Medicare, Medicaid and other social services that will need to be cut to provide for more tax cuts for the rich.