Category Archives: economy

Republicans Hate Workers

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It really is all about union busting for righties. Yesterday the UAW refused to agree to steep wage cuts for auto workers, so Senate Republicans killed the Big Three bailout package.

Congressional Republicans have been in open revolt against Bush over the auto bailout. Senate Minority Leader Mitch McConnell of Kentucky joined other GOP lawmakers Thursday in announcing his opposition to the White House-backed bill, which passed the House on Wednesday. He and other Republicans insisted that the carmakers restructure their debt and bring wages and benefits in line with those paid by Toyota, Honda and Nissan in the United States.

Here’s the catch — wages, although not benefits, for Toyota workers in Kentucky are somewhat higher than wages paid to Michigan auto workers.

Hourly wages for UAW workers at GM factories are about equal to those paid by Toyota Motor Corp. at its older U.S. factories, according to the companies. GM says the average UAW laborer makes $29.78 per hour, while Toyota says it pays about $30 per hour.

The Big Three have bigger benefit costs, but not all because GM workers get “gold-plated” health care. It’s because the old U.S. automakers have huge numbers of retirees drawing pensions and benefits, while Toyota of Kentucky does not.

GM says its total hourly labor costs are now $69, including wages, pensions and health care for active workers, plus the pension and health care costs of more than 432,000 retirees and spouses. Toyota says its total costs are around $48. The Japanese automaker has far fewer retirees and its pension and health care benefits are not as rich as those paid to UAW workers.

The point is that wages are not the problem. Yet the Republican senators who stopped the bailout package wanted to cut wages.

One of the compromises being floated around yesterday was for American automaker workers to accept the same wages and benefits that non-union employees get in the South, effectively making unions irrelevant.

But let’s not kid ourselves that Toyota would willingly pay $30 an hour if GM were not paying about the same. Even if Kentucky workers are not unionized, they benefit from the fact that unions exist.

Righties hate unions so much that Little Lulu and others are talking about the UAW bailout, not the automakers’ bailout.

Remember when John McCain got all misty-eyed talking about wonderful American workers and how they were the backbone of our economy? The truth is that McCain and other Republicans in Washington love workers as much as they love dog poop on their shoes. Workers are cost. Workers want to get paid a living wage, and they want health care, and it cuts into profits. Your average Republican looks at a worker and sees money taken out of his quarterly stock dividend.

Although Japanese and other foreign cars are more marketable than what the Big Three have produced in recent years, the fact is that without massive government subsidies Toyota and other foreign manufacturers wouldn’t be building plants here. Further, if nothing is done about our health care “system,” eventually the foreign manufacturers like Toyota in Kentucky will be in the same boat the Big Three are in now.

See also Steve Benen.

Auto Bailouts and Auto Bailouts

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A bit from last night’s Countdown that I hope nobody missed —

OLBERMANN: The filibuster threat here is partially Senator Shelby’s of Alabama and I’m missing something in this equation. Alabama has given more in tax subsidies per job for non-union jobs at foreign automakers plants in Alabama than Detroit is asking to save union jobs for American auto manufacturers. I’m missing something here.

[CHRIS] HAYES: Well, you’re not missing anything. I mean, this is the worst kept secret in Washington when you talk about the auto bailout. Every time you see Carl Levin and see Janet Granholm or any Michigan politician, there’s an implicit understanding and there’s a treatment from the press that they are representing distinct and, sometimes, narrow geographical interests of the people they represent.

The same, though, is true of a lot of the politicians from the southeast, particularly Alabama. The largest industry in Alabama is the car industry. And, you know, we’re talking about, you know, throwing taxpayer dollars at the Big Three. Well, they’ve been throwing taxpayer dollars at Toyota for years in Alabama, and no one raises a stink about that.

OLBERMANN: And to what degree also is in this an opportunity that the Republicans see for kneecapping a big union?

HAYES: Yes. I mean, at the level of power politics, I think that’s a huge part of it, and you see it in terms of you read the conservative press. People are obsessed with the erroneous number that is somehow $70 an hour in labor. We know that’s not true. David Leonhardt had a very good piece from “The Times” on that today.

I believe this is the David Leonhardt piece referred to. You can watch the entire segment here:

Read Any Good Books Lately?

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What people are talking about:

This is coming from the Left, mind you. We don’t need the Vast Right-Wing Conspiracy when we’ve got each other. Well, go ahead and bellyache, peeps. Just do it without me. Call me naive (and I know you will), but I’m still waiting for the guy to, you know, become President and start doing President stuff before I throw my hands up and re-pack the bags for Canada.

Hasn’t it hit zero yet? I’m afraid to look.

  • The phrase on the tip of everyone’s tongue is “liquidity trap.”

Betcha can’t say it five times real fast.

Anything else going on? How’s the weather where you are?

Reacting Versus Responding

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A wise person pointed out to me once that there’s a difference between reacting and responding. As it says here, reacting is a reflex, like a knee-jerk. Reacting is nearly always triggered by emotions — attraction or aversion — and is about making oneself feel better. Responding, on the other hand, is a thought-out and dispassionate action that is primarily about solving a problem.

By now it’s clear that the Bushies are a tribe of reactors, not responders. Their well-established pattern is not to acknowledge a problem until it bites their own ass somehow, and then they react, sometimes over-react, with “solutions” that (pick as many as apply) miss the mark, make the problem worse, and waste tons of money without really helping anybody but which somehow ends up in the pockets of corporations that happen to be big GOP donors.

We saw this happen with 9/11. Before 9/11, intelligence experts did everything but bash Condi Rice in the head with a 2 x 4 trying to get the Bush Administration to pay attention to a screaming terrorist threat. After, the Bushies reacted. The whole nation wanted to bash the President in the head with a 2 x 4 during Katrina week; the belated reactions to that disaster were wasteful and ineffectual, not to mention political.

I’m thinking also of the Christmas tsunami that devastated parts of Asia. Bush very nearly ignored it until Bill Clinton made headlines by talking about it. Then, pissed, Bush crawled out of Crawford and made a respectable pledge of money. But, apparently to snub the United Nations, the Bushies bypassed the established relief agencies that already were helping the survivors and instead created a temporary, on-the-fly coalition to receive U.S. taxpayer dollars appropriated for tsunami response. I’ve never seen any follow-up on that, and I’m willing to bet only a small part of those dollars made it to Asia.

The pattern continues. The Bush Administration insisted the financial markets’ problems were under control, until it was obvious even to them that problems were not under control. And then their hair caught on fire. This is from an editorial in today’s New York Times:

This page has consistently held that the government must intervene in markets when failure to do so would cause even greater economic harm. The impending collapse of Citi or an unrelenting credit freeze demand intervention. But good crisis management also requires that the calamity of the moment not be allowed to overwhelm good governing. Unfortunately, that is not the case now.

Even, as the rescue tab rises, taxpayers are not being adequately informed or protected. There is as yet no effort to deal effectively with the underlying causes of the problem, especially mass mortgage defaults that feed bank losses. And officials seem to think urgency to act absolves them from considering the longer-term implications of the actions they take.

It was obvious during the campaign that John McCain is pure reaction; the sort of guy who rushes about putting out fires without ever stopping to consider how the fires are getting started. My hope is that the cool and intellectual Barack Obama is more of a responder than a reactor.

However, my understanding is that the real solutions to the crisis will require a big outlay of money also. My fear is that once we’ve gone through a cycle of reaction, there will be no support for response.

Take George Will. Please. He made an ass of himself on ABC’s “This Week” awhile back,

Having learned nothing, Will is still spreading revisionist history, as are other righties. Paul Krugman continues to respond with actual facts —

The main line of empirical argument seems to be that FDR didn’t succeed in ending the Great Depression. Since that’s also what my side of the debate says — fiscal expansion was too cautious, and disastrously abandoned in 1937 — I don’t see what this is supposed to prove.

In other words, Krugman says, yes, the New Deal didn’t revive the economy effectively, but that was because FDR was too conservative and cautious in his approach. But when the real government spending program of World War II got underway, the economy bounced back just fine.

See also The Keynesian Moment.





More Stupid Than Corrupt

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No doubt Thomas Friedman’s own financial losses are partly behind his recent focus on the financial crisis, but however it happened, the man has seen the light. His entire column today is worth reading, but I’m going to zero in on just one point he made — that a lot of the people running the financial industry had no clue what they were doing.

Citigroup was involved in, and made money from, almost every link in that chain. And the bank’s executives, including, sad to see, the former Treasury Secretary Robert Rubin, were clueless about the reckless financial instruments they were creating, or were so ensnared by the cronyism between the bank’s risk managers and risk takers (and so bought off by their bonuses) that they had no interest in stopping it. …

… Also check out Michael Lewis’s superb essay, “The End of Wall Street’s Boom,” on Portfolio.com. Lewis, who first chronicled Wall Street’s excesses in “Liar’s Poker,” profiles some of the decent people on Wall Street who tried to expose the credit binge — including Meredith Whitney, a little known banking analyst who declared, over a year ago, that “Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust,” wrote Lewis.

“This woman wasn’t saying that Wall Street bankers were corrupt,” he added. “She was saying they were stupid. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of borrowed money, and imagine what they’d fetch in a fire sale… For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.”

A little further down, another hint:

Lewis continued: Eisman knew that subprime lenders could be disreputable. “What he underestimated was the total unabashed complicity of the upper class of American capitalism… ‘We always asked the same question,’ says Eisman. ‘Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.’ He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S.& P. couldn’t say; its model for home prices had no ability to accept a negative number. ‘They were just assuming home prices would keep going up,’ Eisman says.”

‘They were just assuming home prices would keep going up,’ Eisman says.” If you live long enough, you really do begin to relive the same old stuff, over and over. I remember conversations I had during the Reagan housing boom in the 1980s, in which people gushed that their homes would be worth a kazillion dollars in a few years, and I’d say, no, home prices will fall again eventually. And I’d get shocked reactions, and the gushers would say that can’t possibly happen. And within a few months, their homes were worth less than the mortgages they were carrying on them.

What in the world makes people think their home prices won’t fluctuate down as well as up? They always do. We go through at least one house price surge and drop every decade, sometimes two.

But the other part, about the stupid CEOs, deserves more comment. In the 1980s and 1990s we went through a phase in which big corporate executives were worshiped. My own experience with the godlike CEOs was that they were usually more aggressive and intimidating than they were smart or competent. They remain at the top even when their performance isn’t that great because people want to believe Daddy is in charge of things.

Which brings me to what Hilzoy wrote today.

But the people who either ran Citi into the ground or were asleep at the wheel need to go. That should be the condition of a bailout: if you turn out to need public assistance, you lose your job. No golden parachutes either.

As I’ve said before: we absolutely need to make sure that the people who run these banks do not conclude from our unwillingness to let them take down the entire financial system that it’s OK to run these risks. The best way I can think of to do that is to make sure that they, personally, pay.

I don’t think I’m saying this out of vengeance. At least, I’m trying not to. I just do not want a system in which private individuals get the rewards of excessive risk-taking and taxpayers pay the price when it all goes wrong; and I do not know how else to avoid one.

I said something similar last week. The Bush Administration’s no-strings bailouts are an outrage. Compare/contrast that to money appropriated by Congress to rebuild New Orleans and the Louisiana coast after Katrina, which had so many strings attached much of it was still sitting unused more than a year later. I’ll bet some of it is still not being used.

Now what? Righties don’t want to pay for the bailouts. Well, nobody wants to pay for the bailouts. Friedman again:

That’s how we got here — a near total breakdown of responsibility at every link in our financial chain, and now we either bail out the people who brought us here or risk a total systemic crash. These are the wages of our sins.

Righties don’t see the interconnectedness of things. We may not want to “reward” the auto industry, but we’ll all feel the shock waves if they fall. And with credit so tight, bankruptcy would probably not allow them to retool, as it were, and grow back.

On the whole, the Right still is in denial about what their cockamamie economic theories hath wrought. Grover Norquist claims the economy is failing because Democrats took control of Congress in 2006. The only solutions being offered by the Right are the same solutions they always offer — tax cuts, especially capital gains tax cuts (although whose got capital gains these days?), and of course blaming labor.

Stupid, stupid, stupid.

Auto Bailout

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There appears to be general agreement across the political spectrum that the Big Three automakers are going bankrupt because their CEOs have made many really, really bad choices over the years. Joseph Romm has an article at Salon about this. Here is just a bit:

When I was at the Department of Energy in the 1990s, we partnered with G.M., Ford and Chrysler to speed the technological development of hybrid gasoline-electric cars, given that increased fuel efficiency and advanced hybrids vehicles were (and remain) clearly the best hope for cutting vehicle greenhouse gas emissions and ending our oil addiction. This partnership was an informal deal between the Clinton administration and the car companies. We did not pursue fuel economy standards and the car companies promised to develop a triple-efficiency car (80 miles per gallon) by 2004.

In one of the major blunders in automotive history, G.M. and Ford and Chyrsler walked away from hybrids as soon as they could when the Bush administration came in — and after taxpayers had spent over $1 billion on the program. Ironically, the main result of our government-industry partnership (which had excluded foreign automakers) was to motivate the Japanese car companies to develop and introduce their own hybrids.

Detroit also spent millions of dollars lobbying against increased fuel economy standards — “suicidally lobbying against its own inescapable future,” as Romm puts it. Of course, the Big Three were encouraged to fight fuel economy standards by the Right, which for years has crusaded against CAFE standards as an example of socialism

What I want to know is, if the Free Market is so all-fired miraculous, how did such a pack of meatheads rise to the top of the auto industry?

(Actually, I know the answer to that, and I think anyone who has ever spent much time in big corporations does, also. Most corporations don’t reward competence as much as they reward aggression. Every corporate big shot I have ever met has been an alpha-on-steroids type who cannot live with himself unless he’s led three frontal assaults, so to speak, before breakfast. Those of us who don’t have testosterone running out of our ears don’t have a chance to climb very high on the corporate ladder, no matter how good and how smart we are.

I figure this phenomenon is some vestigial social behavior left over from our early cave dwelling ancestors. We’re wired to defer to the big guy who presents himself as the biggest badass in the tribe. See also Matt Yglesias, “Confidence Men.”)

Where was I? Oh, yes … a lot of right-wingers now are blaming unions for the auto industry’s problems. If those greedy workers didn’t insist on being paid a living wage and decent health benefits, the saying goes, everything would be hunky dory. I don’t think unions are above criticism, but frankly, without them we’d have a sickly and underpaid workforce. And if paychecks are so squeezed no one has disposable income, who’s going to buy stuff?

The damnfool CEOs can’t add two and two together to make four half the time. They are idiot savants, of a sort. They know how to game the system for their own benefit, but the world outside of their narrow self-interests is a blur to them. They can’t see past the next quarterly earnings reports.

If the CEOs weren’t such meatheads, for the past twenty years they would have been at the forefront of getting national health care, to get health insurance costs off their backs. Why haven’t they done that? Because they are meatheads.

That said — I understand that allowing the Big Three automakers to fail would set off a chain reaction of job losses that could lead to as many as three million people losing their jobs.

So what are we going to do?

Josh Marshall argues that letting the auto industry fail is nuts. See also Fester, Publius, and even a couple of guys at Bloomberg. For a lot of reasons explained in the articles linked, if the big automakers went bankrupt they probably could not just reorganize and come back, leaner and meaner. And the loss of the auto industry would have a catastrophic ripple effect on our already wounded economy.

On the other side of the fence are conservatives and “free market” economists who would rather let the Big Three go under than allow any government interference with the Free Market. These are the same people who for years have fought CAFE standards and national health care. In other words, they helped create the problem. Enough said.

There are lots of opinions out there about what should be done. I personally would insist that anyone who has served on the boards of directors or as a CEO for more than a year should be told to go away. No golden parachutes, no bonuses. They can keep the stuff they’ve got, which I’m sure is plenty to tide them over. If they think they have more to offer the auto industry they can damn well get in line and apply for whatever’s available. At the very least, they should have no authority whatsoever on how the money the government gives them is used.

Will workers have to take pay cuts and lose benefits? I keep hearing that it must be so. I’d like to see some provision made for pensions and health insurance, at least. Maybe this is where we start building a real national health care policy.

The auto makers must be forced to face reality and prepare to be competitive in the post-internal combustion engine world. Grants, loans, whatever, lots of strings, performance benchmarks, no excuses.

Jokes Writing Themselves

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It’s dark humor, but it’s still humor — first, the headlines:

Now, here’s the punch line:

Like, something bad might happen if we do?

Update: Here’s another punch line:

You don’t even need the set-up for that one.

Ask What You Can Do for Your Country

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What can I do for my country? you ask. You can email this chart to everyone you know.

Accompanying text:

Since 1929, Republicans and Democrats have each controlled the presidency for nearly 40 years. So which party has been better for American pocketbooks and capitalism as a whole? Well, here’s an experiment: imagine that during these years you had to invest exclusively under either Democratic or Republican administrations. How would you have fared?

As of Friday, a $10,000 investment in the S.& P. stock market index* would have grown to $11,733 if invested under Republican presidents only, although that would be $51,211 if we exclude Herbert Hoover’s presidency during the Great Depression. Invested under Democratic presidents only, $10,000 would have grown to $300,671 at a compound rate of 8.9 percent over nearly 40 years.

You can also email this article titled “The Simple Arithmetic of Employment: Job Growth Is Always Higher When a Democrat Is In The White House.”

[Update: The email function for the above article seems to be busted. You can email this post instead; see “Email This” link at the end of the post.]

So why is it so many people believe Republicans are better for the economy? Because Republicans say they are. Over and over and over. With great conviction. I’m sure they believe it. But they are nuts.

For that reason, I think Harold Meyerson is jumping the gun a bit in his column “The God That Failed.”

Today, conservative intellectuals might want to consider writing a tome on the failure of their own beloved deity, unregulated capitalism. The fall of the financial system has been so fast and far-reaching that there’s been no time to fully consider its implications for the reigning economic theology of the past 30 years. But with the most right-wing administration in modern American history scurrying to nationalize the banks, the question cannot be elided indefinitely.

What exactly do economic conservatives believe now that their god is dead? What’s become of the glories of privatized Social Security? Of the merits of 401(k)s vs. defined-benefit pensions?

Meyerson assumes the ideologues pay attention to the real world. Although I think the True Believers will have a harder time pushing their unregulated capitalism privatization is best trickle down supply side swill in the near future, they will not lose faith in it. They’ll blame George Bush for this little glitch of a global financial crisis somehow, but say their theories are still correct, and Bush simply didn’t adhere to them faithfully enough.

Meanwhile, nearly 70 percent of Americans now want stricter regulation of the financial sector. From the Los Angeles Times:

“I always thought the least amount of government in people’s lives, the better,” said Bagley, 29, a poll respondent who was contacted in a follow-up interview. “But now you see what happens when you take it to the extreme.”

Exactly. The problem with wingnuts is that they can think only in extremes. Judging by their rhetoric, they think there are only two kinds of government — totalitarian communism or laissez-faire libertarianism. And they apply something like a one-drop rule to judge which is which — even one drop of un-laissez-faire libertarian policy renders a nation into a Stalinist gulag. For this reason, they cannot be worked with. Either vanquish them, or surrender.

So they cannot be educated. But, apparently nearly 70 percent of the American people can be educated, which is no bad thing. Now is the time for progressives like us to do everything we can to educate our fellow citizens about economic reality. It’s what we can do for our country.

See also:

“The death of the Washington consensus? Paul Krugman’s Nobel prize for economics signals the intellectual tide is turning against unrestricted free trade” by Kevin Gallagher.

“Misplaced Blame,” New York Times editorial

“Let’s Spend Money” by Dean Baker

“Dan Quayle was Metternich by comparison.”

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Sarah Palin endorses Hamas.

More tidbits:

The McCain campaign has banned Mo Dowd from the plane. I think in the spirit of bipartisanship, the Obama campaign should ban her also.

Paul Krugman on why McCain must not become president: “The modern economy, it turns out, is a dangerous place — and it’s not the kind of danger you can deal with by talking tough and denouncing evildoers.”

Shorter Stanley Kurtz: Community organizers caused the mortgage crisis.

Even shorter Stanley Kurtz: Blame black people.

Breaking: The House rejected the bailout plan.