The New Republic

Some regression to your liberal roots?

- roidubouloi

September 26, 2007 at 8:38pm

Think about the obscene flush incomes of GM's top executives, or Ford's, or Chrysler's. Perhaps if they were willing to design affordable, appealing cars, give the workers more of a stake in the company, support universal government-supported health care, and be paid concomitant to their success as managers, GM, Ford and Chrysler would all be 100% better off than they are today.

- jrk3150

September 26, 2007 at 8:57pm

I heard Jim Cramer--Mad Money--say that GM created this whole fiasco as a union busting measure. Cramer the capitalist thinks that busting the union is the only way to save GM, and uses Caterpillar as his example. Sure sounds right (but horribly wrong) to me!

- rishy

September 26, 2007 at 9:02pm

"Is America still a middle class society?" The data clearly shows America to still be a middle class society---and also a growing one. The GM workers have only themselves to blame for their misfortune. Please note that non-union auto workers are doing fine. Foolishly, the GM hourly employees listened to the class war nonsense of Walter Reuther and other socialists who they elected to run their union. The resulting union contracts have just about destroyed the company.

- thomsondavid

September 26, 2007 at 9:07pm

right on post. Welcome back to the liberal fold, if only momentarily...this is the Peretz of yore...

- MrCookie1

September 26, 2007 at 9:10pm

Does Marty Peretz truly wish to help the middle class? Well, why isn't he rebuking the anti-science global warming fanatics? Why does he allow the cowardly Al Gore to avoid the hard questions? Let's get real. This nonsense is a scam operation to enrich the left-wing Democratic party "elites." Everybody else in the country will pay a horrible price.

- thomsondavid

September 26, 2007 at 9:23pm

lordy, it is possible that I have missed your unique unbridled Asperger's like cannonades of nonsense? uh...no

- MrCookie1

September 26, 2007 at 10:27pm

Leave the Aspies out of this one. Many are extremely intelligent and don't continually knock their heads against walls.

- MOLLYSIMON

September 26, 2007 at 10:40pm

please post a link thomsondavid, thanks. My own limited researches do not support the idea of a growing middle class or the idea of non-union auto-workers 'doing fine' (assuming that you mean better than their union counterparts, in this case), but I welcome actual data refuting this.

- thufir

September 26, 2007 at 11:00pm

"...but I welcome actual data refuting this." Oh my God, you are right. Bill Gates is worth around 50 billion dollars. I am worth far less than half of that---and likely so are you. There is obviously no middle class in America. Perhaps John Rawls can help me get my 25 billion?

- thomsondavid

September 27, 2007 at 1:33am

Surely you must jest--GM executives have no culpability for running their company into the ground? When a ship sinks, you don't blame the sailors!

- cd024

September 27, 2007 at 5:21am

I agree with thufir. Show some numbers or STFU, Uncle Thomson.

- cleavet

September 27, 2007 at 10:00am

Growing up in Detroit, one knew that the best gig going was to drive a hi-lo truck or get some other cushy spot at the Rouge Plant or any of the other Big 3's facilities. In 1979 you could earn $10k for a summer's worth of unskilled labor; today it's normal to expect to earn $80k or more for FT work, without seniority, in an unskilled or semi-skilled position in SE Michigan for the Big 2.5, oops, that's Big 3 again. Now, a reduction in wages from a starting point of $80k may seem cruel to someone whose life has been spent in Manhattan or Cambridge, but trust me, in Detroit, you can live VERY well on two $50k+ incomes. A modest proposal, Mr P: spend a weekend in Oakland County, MI north of Detroit, check out beautiful Cranbrook Academy and its Saarinen architecture, and then drive north and west to the blue-collar environs. You'll see that each house in these blue-collar bastions has a) about twice as much square footage as one would find in any comparable blue-collar suburban neighborhood, anywhere, in this country; b) a boat (de rigueur in Water Wonderland; blue-collar types have fishing boats whereas upper middle-class Michiganders prefer elegant Boston Whalers) c) at least 3 cars, of which 2 will probably be brand new d) in many cases a U-Michigan sticker, indicating the worker's kid is availing himself of an education equal to any Ivy League education, at a fraction of the cost The hard truth here is that the UAW's restrictive work rules and sky-high wage and benefit structure are themselves a part of the problem. No way on earth that any automaker could possibly compete given a 43% per-man-hour cost disadvantage.

- teplukhin2you

September 27, 2007 at 12:23pm

Oops, I've got it wrong. It's a 52% cost per vehicle albatross for GM vs Toyota. Here are the numbers: Production Time per Vehicle Source: 2005 Harbour Report GM: 34.3 hours, 2.5% improvement since 2003 Toyota: 27.9 hours, 5.5% improvement since 2003 Average Hourly Salary for Non-Skilled, Assembly Line Worker (Source: Center for Automotive Research) GM: $31.35/hour Toyota: $27/hour Result: cost per worker per vehicle = $73 for GM vs $48 for Toyota. How does Gm make up for this 52% cost differential? By cutting back on new product development (good-bye, rear wheel drive) and most disastrously, by using sh*tty, cheap plastic parts instead of high-quality steel or aluminum, which causes quality and performance to royally suck vs Toyota, which hurts sales and market share and reduces free cash flow, which crimps new product development and forces usage of cheap plastic parts, which....

- teplukhin2you

September 27, 2007 at 12:34pm

GM is making a lot of their money in China. You should see their new Headquarters in Shanghai. Sweet. For some bizarre reason Chinese love Buicks. As of now all the cars made there is for domestic consumption, but in another decade they will make cars for export. In 20 years all of the factory jobs in Detroit will be gone. They can't compete with $2 an hour, or a generous $3. I can buy a nice new car in China for a fraction of the price in the states. My brother in law has a new mini-van and he makes less than $500 a month. And to be honest, I don't care about the GM workers in Detroit. I don't want to pay a premium so some blue collar worker can have a boat and a nice house. I want the cheapest and most reliable car.

- blackton

September 27, 2007 at 12:47pm

and all the tobacco companies. Their financial models and Wall Street's valuation of them assume that their US operations are next to worthless and that all the growth will come from China India Russia Brazil etc

- teplukhin2you

September 27, 2007 at 1:07pm

For some bizarre reason Chinese love Buicks. They're good cars. The quality today is VASTLY better than it was a mere ten years ago, and I'd guess they're a lot easier to maintain and repair than any non-US counterpart.

- teplukhin2you

September 27, 2007 at 1:09pm

about Big Three management shortsightedness. And, to the extent that union agreements have prevented the automakers from reducing the labor hours required per vehicle, much to criticize there as well. However, while Blackton may want the cheapest deal he can get on a car, as most people do, on an aggregate basis forcing US workers to compete in a world labor market is forcing the equilibration of wage income. The result will not be that workers in Indonesia get to enjoy the standard of living of a Detroit autoworker in the 1950s or 60s. Just the reverse. It has even finally occurred to Thomas Friedman, for a long time a completely uncritical advocate of globalization, that the US is not going to be able to keep some kind of monopoly on high value-added employment while merely shipping relatively less productive jobs abroad. It is the responsibility of the United States to see that its citizens enjoy the opportunity to earn a good living to the extent that government can do so. It is past time to start figuring out how. Otherwise, we will in fifty years be a society with a small class of plutocrats and a giant underclass and not much in between. I have no doubt that this is the aspiration of George Bush and the advocates of high-end tax cuts. But is this the purpose of America? GM should be a huge wake-up call.

- roidubouloi

September 27, 2007 at 1:21pm

Agree to some extent with roi, above. There's simply no way on earth that the Big 3 can maintain all of the following: 1) design build and bring to market cutting-edge, high quality products that can compete effectively with Honda and Toyota, while 2) preserving a wage structure and restrictive work rules that put them at a 50%+ per vehicle cost disadvantage 3) fulfilling crushing pension and HC obligations inherited from the disastrous bargain struck over half a century ago, when the worker-retiree ratio was the inverse of what it is today. Can't square that circle, no way no how. So obviously what needs to give is some combination of wage cuts, benefits relief and changes to work rules. All of which screams out for the federal government to take over the Big 3's haelth care obligations, in exchange for which the Big 3 could sign up to much higher fuel efficiency standards, perhaps matched by some kind of pool of federal money to support basic research, etc etc etc

- teplukhin2you

September 27, 2007 at 1:44pm

that is all fine and good, maybe push the date back a couple of years but the automotive industry in the US is a titanic. Rearrange the deck chairs all you want, it is still going down. Roi, I grew up in Bethlehem, Pa. home of Bethlehem Steel. There is a huge complex in the south side that has not been making steel for years, they are turning part of it into a museum, and are even talking about having slots there as well. Bethlehem Steel used to be one of the largest steelmakers in the world. It had a long life span (1857

- blackton

September 27, 2007 at 2:39pm

Agreed that there will be significant job losses in the US auto industry. I'm saying that the game isn't lost. Autos are not a commodity, like flat-rolled steel; in fact the auto industry has much more in common with the entertainment biz than it does with metal-bashing industries. Most of the profit in the car comes from the lifestyle appurtenances sold as options (GPS and Alpine or Bose sound systems, etc). Americans can and do succeed in such an industry, and the jobs needed to design and build and market those systems are good, high-paying ones. In short, we should not let the auto industry go totally offshore the way we let (commodity, low-end) steel go offshore. Especially since the japanese are INCREASING the number of US-based jobs in their operations. This is a problem that can be solved, and a little more than half of the solution is to sever this insane linkage of employment to health insurance.

- teplukhin2you

September 27, 2007 at 3:27pm

Yes.

- phargle

September 27, 2007 at 3:29pm

A big reason why we will get UHC is not because the 40 + odd million uninsured want it. It is because business wants the albatross out from around its neck. The Big 3 are just the best and latest example. Every business that has to compete in the global marketplace is affected. As we have been saying, cut the link between employment and health insurance. Funny - NONE of the Dems' plans do that. Why do you think that is? And I'm mostly serious.

- butchie b

September 27, 2007 at 4:33pm

But then I'm not a politico. In any case I've always thought a quick peel of the bandage preferable to a slow and painful one. For the life of me I don't see what is gained by making an employment contract the primary point of negotiation and HC provision. Why can't we simply give each American the same plan, or set of options, that Congress has? Alternatively, give everyone a basic plan that covers hospitalizations and catastrophic illness at 100% and raises the deductible for minor outpatient stuff? It just isn't rocket science. Every civilized nation on this planet has worked out a reasonable, single-payer system. What's wrong with us?

- teplukhin2you

September 27, 2007 at 4:43pm

1) Our government is unwilling to do anything that would restrain the profits of insurance and drug companies. 2) Even though the total cost of our health care system would be lower and a majority would find that their income after taxes and health care costs was higher, the single-payer system would make much of the per capita cost appear as a "tax" rather than aa insurance premium or a reduction to wages -- and anything that even looks like a tax increase, even if it is a net decrease in individual total cost, has been made into the third rail of American politics by our friends the Republicans. 3) It is very difficult to make the whole thing sound simple, which is also a necessity in American politics these days. Myself, I favor a take or pay system in which everyone gets a tax credit if they sign up for private insurance meeting approved minimum standards and is defaulted into a government pool otherwise. That let's private insurance companies try to compete which ultimately they cannot do because they add little value -- most of their money is made by scamming patients out of legitimate care and providers out of legitimate fees. What is more important, however, is to recognize that the problem with medical care is a type of market failure -- people need catastrophic coverage but if they are covered they have no incentive to shop, and even if they did have the incentive to shop, the practical reality is that they don't have the information with which to do it and, as a practical matter, can't. The key to a successful system is to control reimbursement rates according to a standard cost system -- take it completely out of the hands of insurers -- and allow providers to charge more if they can collect it -- a pseudo-market. Statistical methods can be used to control excess care given to increase revenues inappropriately. You make available an automated system for approving care options based on preliminary tests/diagnosis, you give providers a budget for variations that they can turn to on a discretionary basis, and you provide a mechanism for approval of care options that are outside of the norm -- but not controlled by anyone, such as insurers today, with a financial incentive to withhold care. Done that way, you can preserve the framework of private care and private insurance while eliminating the perverse incentives to insurance companies.

- roidubouloi

September 27, 2007 at 9:20pm

I don't believe that the Bethlehem Steel analogy to globalization is a good one as the scale of the process is vastly larger. If you put US workers in a pool with the rest of the world, wages will equilibrate and, given the relative sizes of the domestic and foreign pools, the equilibrium wage will be a lot closer to theirs than ours.

- roidubouloi

September 27, 2007 at 9:22pm

It's all those nasty Republicans' fault - um, who's in charge of the Congress, again? That's a reasonable plan, roi. I'd go easy on the drug companies, because we do want incentives for new drugs. But I'd go after direct marketing to consumers as a trade-off for no price controls on drugs.

- butchie b

September 28, 2007 at 10:47am

It's not as if the last time around on health care they actually had any interest in finding a solution that would work. Their sole interest was in killing it and then tarring the Dems with it. Hopefully the Dems have learned the lesson that they should never expect the Republicans ever to put national interest ahead of partisan success and will be wiser next time. It would be foolhardy in the extreme for the Dems to undertake any massive restructuring of health care with a Republican in the White House. An exercise in futility with lots of potential political risks and exactly zero prospect of political gain or achievement. They have to wait until 2009 when a Democratic president takes office with a strengthened Democratic majority in Congress -- courtesy of "stay the course," a tragedy for America but a gift to Democratic political prospects. The drug companies hugely exaggerate the amount of money they put into research. It is small in comparison to their marketing budgets. Most of the drugs they produce are based on publicly funded research. Their research efforts are more often devoted to finding ways to create and defend patents, particularly on existing drugs, than anything else.

- roidubouloi

September 28, 2007 at 11:22am

I like your posts about Health care, I do disagree with you about research effort costs. I am not sure what figures you are looking at, perhaps cost of research on a drug as opposed to its marketing. That might be skewed towards marketing, but you are ignoring the huge costs that go into research of drugs that never make it to market. Essentially, finding a safe and effective drug is a hugely difficult task. Any mistake anywhere along the line will kill the whole prospect. Believe me, these research scientists don't come cheap either whereas marketing people are a dime a dozen. My point is, just don't mess with big pharm. I would rather they ride a little of the gravy train, then risk closing the whole train down. as to "the equilibrium wage will be a lot closer to theirs than ours." Well, you know that is simply not true because it can't be. No American can work for $2 an hour, while Chinese workers can. You know there is a whole host of other factors in play, productivity, Cost of Living, etc. that render simple statements like that irrelevant. Besides, even if it were true I don't know what anyone can do about it besides engaging in trade wars or tariffs, which are far worse than the cure.

- blackton

September 28, 2007 at 3:07pm

Democrats killed Hillarycare. yes, the GOP helped, but there were DEM majorities in Congress, and a bill never got out of the House. As Moynihan used to say, you get your own opinions, but you don't get your own facts. Your hatred of all things GOP notwithstanding.

- butchie b

September 28, 2007 at 4:38pm

When a firm can pay someone in Indonesia 10% of what you pay someone here to work on the same machine and produce the same output, the work migrates to Indonesia unless the wage here and the wage there equilibrate. The difference in productivity that you cite is largely a product of the difference in capital per worker that increasingly can be duplicated elsewhere. There is absolutely no reason to be sanguine about the impact of globalization on American wage-earners. We have before us the prospect of an educated class that can sell its labor for a high value on the world market and then effectively employ low-wage workers elsewhere to produce the commodities that that class wants to buy, by-passing American labor and forcing the real income of the majority of Americans down. I know you love that Moynihan quote, but the facts are that the GOP did its damndest to kill any prospect of a bill -- does your memory serve to recall those baloney ads about how you weren't going to be able to see your own doctor any more? -- and it worked. The Dems were completely unprepared for that kind of campaign. It has taken them a long time to learn the lesson. I hope they have. All in all, my memory is just fine. I recall who was working for a universal health care plan and who was working against it. You seem to have forgotten, or more likely are engaged in your favorite pastime of finding some justification or other for letting Republicans off the hook both for what they actually do and for what they don't do. Same old, same old.

- roidubouloi

September 29, 2007 at 12:34am

if we had the will, is require our current trade account to remain in balance. We don't HAVE TO import more than we export. We choose to because we are still operating on the basis of truisms about free trade that don't adequately describe a globalizing world -- the "comparative advantage" paradigm is going out the window because the only comparative advantage that is going to matter will be low wages.

- roidubouloi

September 29, 2007 at 12:37am