Wednesday, November 19, 2008

Class Warfare Is A Poor Solution

Yesterday I listened, while I painted, to the Senate hearings on the auto industry “bailout.” First, calling it a bailout is the wrong word. It is a loan. Why does the federal government have to loan the three American auto makers money in the first place? Well, this is where the debate begins.

The auto makers claim that the financial crisis has made it more difficult for people to borrow money to buy cars. They also claim that the banks, where they usually go for a loan, are not willing to lend them any money. Banks, as we all know, now are tightening their borrowing requirements after they left them too loose for too long. So, now car buyers find it more difficult to qualify for a loan. The fact that the economy is in the toilet does not make the situation any better for the auto makers.

The auto makers and the president of the auto workers’ union now claim that they have improved their cars and trucks and that without the financial crisis, which has taken funds out of the equation, that the auto makers would not need a loan from the federal government to get them through this difficult period. However, there are those that don’t believe that line of reasoning.

Here is my take on the whole thing. First, I would make the loan as I do believe they are making a better product and that the reason they are in trouble is because of the financial crisis which they really were not a part of. Remember it was mortgage loans and in particular sub prime mortgages that has brought the whole world into the economic recession we all now face. Wait. You mean the whole world is having an economic crisis and it was brought about by the few people that signed up for a sub prime mortgage? How can that be? Relax, I do not believe for one second that the sub prime mortgages caused this world wide financial crisis. But, it plays well in the old game of class warfare. What is class warfare?

Class warfare is when you blame the problems on the class least able to defend themselves. The people that took out sub prime mortgages and the union auto workers make great targets for those that wage class warfare under the title of economic debate. Management will come out of this much better than the union worker if the three American auto makers are forced into bankruptcy. Does anyone not agree with that statement? Everything gets thrown on the high priced American worker. What about the less than level playing field when it comes to American car makers exporting their cars and trucks? Oh, that is another story to be discussed later? No, let us talk about that right now. The trade deals stink. Let us have a few union guys in on the trade talks the next time we sit down to negotiate a new trade agreement on cars and trucks.

First, the bankruptcy is the last thing we need right now with so many other things happening to our domestic economy. The macroeconomics professor can lecture all he wants about our cost to their costs to build cars and trucks, but the bottom line is do no harm to the patient. Letting the three American auto makers fail at this point is bad for several economic reasons, but also for our national security. I can wrap myself in the flag too. The flag is not just a symbol of the conservatives, it is everyone’s flag and liberal economists can wrap themselves in it too.

I hope that each member of Congress will put themselves in the place of the auto worker when they make their decision on the loan. Remember, since the first oil embargo in 1973, many politicians have had the chance to put together a national energy policy and they took little or no action. The president for the last 7 years has shown no leadership on this issue as well. Now is not the time to stick it to the union worker. These are the same union workers who fights our wars. This is just another war, but without the bullets. Let us not make it a bloody one if we have a choice.

Stay tuned.


moneythoughts said...

Well, it looks like Congressman Barney Frank is the only one asking the right question, in my opinion. Why is it easier for the federal government to bailout AIG and a bunch of "white-collar" workers than it is for the government to loan the three American auto makers $25 billion? Maybe Congressman Frank should read my blog today. The answer is as old as time, class warfare! F. Scott said it a long time ago, but it still applies today, "the rich they are different." If you work with your hands to mend a heart or operate on a brain, you are viewed with more respect than if you use your hands to build a car or a skyscraper. Not to approve the loan to the three American auto makers is wrong, wrong wrong!!!

Butch said...

They already have egg on their faces. It was mentioned yesterday during their questioning and again today. They admittedly gave money to the Treasurey Dept. with out strings attached and got burnt by both parties receiving the cash. It isn't that they don't want to bail/loan out the auto industry, it is they don't know how. The rhetoric is real close to the campaining of the candidates. Same questions (answers) to the CEO's (voters) from member of the panel (candidates).

Our government let the AIG's and Lehman Bros. get away with robbery. The auto industry is NOT to blame. They are the victims of a drive-by incident that they had no part in. It is neither the place or time to talk about re-organizing this industry. It's not that simple except for simple mindedness. It's been two years and Delphi is still in bankruptcy and reorganization.

winslow said...

Congress needs to form an emergency negotiating committee consisting of a union rep, a rep from each auto company, and 2 reps from Congress. The committee has 30 days to come up with an emergency plan to survive....including cutting management salaries and bonuses drastically and to renegotiate union contracts in order to survive. If Congress then finds this acceptable, discussion can begin on a possible loan package.

Butch said...

Winslow, I agree somewhat, however, GM and their unions do have some new contracts coming out to where they will be at or possibly below the competitors wage scales (benefits included). It won't happen until 2010 I believe. The salaries of all corporations need to be visited but then what about football players or owners. How about Tony George and the Indy track. Fine line on capitalism and free interprise. You do present a very good point and a very large discussion topic.