Congress, Unions and the Big Three Bailout

The government's handling of the crisis in the automobile industry highlights the nature of the power structure in the United States. Congress reprimanded the executives from the Big Three for arriving in corporate jets and for not having detailed, concrete plans for what would be done with government money to transform the industry. The auto industry was asking for $25 billion in loans. The banking and investment houses, on the other hand, were asking for $700 billion in no strings attached grants. The initial three page ultimatum presented by Henry Paulson was initially rejected by Congress, but a method of granting the money was quickly worked out. Where the money went, and what was done with it is, of course, a secret. What isn't broadly reported is that, if all the bailouts, government loans, debt guarantees, stock purchases and other handouts from the Federal Reserve and Treasury are added up, they come to a total of around $8 trillion dollars. None of it is subject to oversight, and it has done little or nothing to aid the failing economy.

The automobile industry's request was greeted with hostility. Tight credit (even with the bailouts) and economic recession have cause automobile sales to plummet across the board. In November 2008 GMs sales were down 41% from November 2007, Toyota was down by 34%, Ford by 30%, Chrysler by 47%, Nissan was down 42% and Honda sales were off by 32%. In Congress, the problem was laid firmly at the feet of organized labor. Senator John Kyl of Arizona claimed UAW wages averaged $73 an hour. The number is calculated based on total of health care costs, pension costs of retirees, training costs and payroll taxes. In more conventional terms, the base wage of a veteran UAW worker is $29 an hour, compared to the $26 an hour for non-union auto workers at Toyota's plant in Kentucky. Indeed, the UAW granted a concession to Ford in their last contract that would put Ford wages on a par with what the Japanese car manufacturers are paying at US plants by 2010. Furthermore, carmakers operating in Japan, Korea and Europe don't bear the skyrocketing costs of healthcare that Detroit shoulders. Their healthcare is provided by the government and their taxpayers. No one in Congress has suggested that a national healthcare system here might help the auto industry and other business across the nation. Finally, total labor costs account for 10% of the price of the average made in Detroit car.

It's not really surprising that Wall St. gets billions in aid with no oversight, while Detroit gets assistance only if it can further batter it's workers and unions. The CEO of GM earns $7,000 and hour; Ford's CEO gets $10,000 an hour. The sight of Senators berating union workers over their pay turns ludicrous when one realizes that Senators earn about 3 times as much as the average auto worker, has free health care, great pension benefits and all sorts of Senatorial perks. It''s not that unions are unpopular. Sixty eight percent of the public say that unions are necessary to protect working families, and 60 million unorganized workers claim they would join a union if they could.