Monday, November 17, 2008

The Horns of a Dilemma

The bailout du jour discussion centers on the automakers- not an easy call. Does the government let these companies founder and possibly go bankrupt with all of the ramifications doing so entails? It is sad, but these are perhaps the largest remnants of our industrial base, since we let the Japanese sink our electronics and the Chinese siphon off our textiles. The loss of American carmakers, in addition to the widespread devastation in unemployment and ancillary businesses, is a potential national security concern.

Still, it is very difficult to help an industry that will not help itself. The automakers earned a reprieve with the advent of the increased popularity of SUV's and trucks. They should have realized, even at the height of the craze, that the trend could not last. The handwriting was on the wall, yet they seem to have been caught unprepared.

Then there is the Union question. Can you explain to me what other industry pays an average wage of $72 dollars an hour? Include what they call the "legacy" costs. The nifty pensions. The health benefits for pensioners. Did you know that these last constitute $1500 dollars of the price of every GM car? Did you know that you can't quite lay off a worker? You have to pay him not to work. So how does the Union respond? Over the weekend, they made clear there'll be no concessions coming from them.

Of course, they are expecting to get paid back for their political support. Unfortunately that means asking, say, retail workers who make about a tenth of the salary, retirees who have to make do with Medicare, people the state of whose 401K's have put retirement off indefinitely to subsidize with their taxes what is an untenable system in the present reality.

After the debacle of the mortgage bailout, which became a bank bailout, which is morphing into an auto bailout with cities and states like New York, San Francisco, California next in line with hands and hats extended in order to fund services that many other solvent places can not offer, it is not surprising that there is little confidence in oversight and little enthusiasm to bail out a seemingly endless queue of supplicants.

It's a good thing President Elect Obama is the "One." He's going to need some Solomonic wisdom to split this baby.

*Hood Ornament in picture is available at A truly excellent book about Detroit and SUV's is High and Mighty: The Dangerous Rise of the SUV by Keith Bradsher.

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