Saturday, December 13, 2008

Senate Republicans want a Depression

I continue to be amazed at the idiocy of Senate Republicans. How eager they are to stand on principle and bloviate in front of reporters and television on why they couldn't in consciousness vote for the Auto Bailout.

First we need to recognize that we are NOT talking about a bailout. What we are talking about is a LOAN of significant amount to the Auto Industry, not just free money. This has already been done in 1980 when the US Government provided a loan to Chrysler, which enabled Lee Ioccoca to turn Chrysler around with the introduction of the K Car and the mini-van. With the revival of Chrysler, and the investments made, they were able to repay the loan back to the US Government with interest.

Secondly, while there are many problems within the Auto Industry brought about by poor decision making, lack of vision and strategy, and poor brand management, we need to recognize that part of the sudden downfall of the Big 3 has been due to the poor economic environment and market forces that created a perfect storm in an industry unable to react quickly.

The idea that the Auto Industry can react to market forces with lightening speed is ridiculous. We are talking about a heavy manufacturing industry that produces durable goods, you can not change production lines and factories with a switch of a lever. Moreover, what's even more idiotic is the idea that the auto industry can operate as a bankrupt company with restructuring as many opponents to the bailout loan are suggesting. Unlike the Airline Industry, the auto industry produces a durable good that most consumers keep for on average 7 to 10 years. An Airline ticket is a cheap service that is quickly consumed on a single use. Studies have been conducted, and it is clear that consumers will NOT take the risk to purchase a vehicle from a company that has been bankrupt.

While it's recognized that many changes need to come about in terms of the strategy, brand management, and operations within the Auto Industry, it's also clear that in order to bring these changes about, the Big 3 need capital to restructure.

What the Senate Republicans did by failing to provide the Big 3 with this loan is light a match that could implode the American Economy, resulting in the next Depression, because of their irrational dislike of Unions.

The idea that it is Unions that are at the heart of the problems of the auto industry and failure for resolution on the bailout loan is completely ludicrous. The only ones to blame are the peopel who voted against it - pure and simple. The UAW had made significant concessions; understanding that their whole future and industry was at stake. Furthermore, this constant lie being reported by the media and Congress on the idea of the $70/hour wage that American Union Autoworkers make is so blatantly false and irresponsible.

The Union Auto Workers do NOT make that much per hour, otherwise we would certainly be seeing a much better economy! Union Auto makers make on average $28/hour. The $70/hour that continues to be falsely bandied about is a COST to the company NOT THE WAGE! What the Auto Industry has done is totaled the entire COST wages + benefits for all current workers, IN ADDITION to ALL retired workers, and divided by ONLY current workers. As a result, not only are we reporting a false number to the American Public, but the American public and the Media are too stupid to understand the difference between wage and cost. Wage being the take home pay, and the cost being a more expansive number to a company. If this is the new standard for reporting income, should we change the federal income tax code to reflect this new definition?

Furthermore, when will we stop demonizing unions? It is because of unions that we have safer work places, child labor laws, and equitable pay. Do unions also have their problems? Sure, but let's not forget the good that they also bring. I would argue just as fiercely that the myth that "unions are the reason for the downfall of business" is just as ridiculous a generalization as the myth that "big business is just out to screw the worker".

Let's be clear, if the auto industry fails, we are talking an impact of potentially up to 3 million jobs and a reduction of $150.7 BILLION dollars in Personal Income within one year. This is a significant impact to the economy. This will have a huge multiplier effect on consumption and demand for goods and services. Think of the impact of the loss in income on other durable goods such as homes, appliances, clothing, and electronics. Outside of direct personal income, the failure of the Auto Industry would also impact their suppliers and vendors, who would in turn see a contracting of their business.

You can expect a knock on effect not only on the retail and service industry, but the US Government! Expect the government deficit to grow even bigger due to more payouts on unemployment and health care costs for the uninsured, along with lower tax revenues. The cost to the US government and the economy will be MUCH bigger than the $34 Billion dollars for the Auto bailout loans that were originally suggested.

We simply can not let an entire industry to disappear overnight without a plan to modernize and transition to a new industry.

There is MORE at stake than just an auto worker and auto industry. Anyone who thinks that we should just let the market forces work and let them fail, are totally shortsighted in understanding the complete impact and devastation it would have on the American Economy as a whole.

If the Auto Industry dies and the US economy spirals out of control, let's be clear, while there will be plenty to go around for blame on the mismanagement of the auto industry, the final implosion can solely be laid at the feet of the moronic and irresponsible Senate Republicans who voted against this measure, simply to assuage their ideology.
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