Kissing the Rust Belt goodbye

If you want to know why the Republican Party is rapidly becoming the party of the Deep South only, you only have to observe the votes this week by Senate Republicans to block a bailout of our domestic auto industry. Thirty-five Republican senators blocked the bill, which actually won in a 52-35 vote. However, Republicans chose to invoke the cloture rule, which meant that 60 votes were needed to actually pass the bill. Therefore, it died leaving President Bush in the ironic position of deciding that maybe he needs to find $15 billion of the $700 billion bailout of Wall Street to keep millions of automotive and automotive related jobs from vanishing in this country.

Senate Republicans effectively gave the finger to Americans autoworkers this week, while also scorning them by telling them that they were paid too much. (This takes a lot of chutzpah when a senator’s salary is $169,300 a year, and a senator’s pension benefits for even a short stint in the Senate would make autoworkers swoon.) Yes, a bankrupt GM, Ford and Chrysler would probably destroy the evil United Auto Workers. It would also destroy the livelihood of millions of Americans, not just the autoworkers themselves, but a vast network of suppliers, dealers and merchants that eke out a living based on Detroit. But hey, that evil UAW would sure learn a lesson!

Yes, color the Midwest blue. If it is not entirely that way today, it will be in the next election. Moreover, if the key to winning the White House is to win Ohio, I may be in my grave before the next Republican ascends to the White House. (That would be fine with me, providing I live to a very ripe old age.) It used to be that you were showing your patriotism by buying American cars. Maybe you paid a bit more and maybe your car was not as reliable comparable with a foreign model. Nevertheless, it was “Made in America”, and that helped put food on your table, your neighbors’ tables and kept your community vibrant. Now in the bizarre world inhabited by a majority of Republican senators, you are showing true love of country by killing off our domestic automobile industry!

You see this is love. When your father beat your bums black and blue with his leather belt, he was doing it because he loved you. It was tough love. Never mind this sort of tough love that many of us endured growing up would now be considered child abuse. But it is okay to do it with auto industry workers and the vast numbers of workers who earn their living off our auto industry because, well, they are all adults! After all, it is not child abuse if they are not children.

Now the truth is that those of us who did have their bums beat black and blue by our dads (or in some cases, our moms, or both) do generally love them, in spite of their past proclivity toward inflicting violence on minors. You cannot divorce mom and dad. However, you can throw your senator out of office when their term expires. If they just don’t get it, that they are there to serve the interests of the American people, you simply vote for someone who does.

It is unsurprising that those Republican senators that voted for the bailout seemed to represent swing states. Few Republicans from swing states voted for the bailout, but there were some, including Allard from Colorado, Burr from North Carolina, Coleman from Minnesota, Ensign from Nevada and Gregg from New Hampshire. One thing these senators do have in common is that there is little or no auto assembly in their states. I have some advice for these senators: do not expect much in the way of contributions from the National Automobile Dealers Association for your reelection campaign.

There is no question that Detroit has been a follower rather than a leader in the auto business. Its management has been abysmal. However, the United Auto Workers has been accommodating about cuts in wages and benefits, somewhat begrudgingly of course, just not enough to keep up with the competition. What is true is that American automakers cannot be as agile as the foreign competition. For in most other countries the government provides universal health care for all, liberating manufacturers from these costs, or at least allowing them to be controlled. In our country, they are generally borne by employers. However, American cars no longer really deserve a bad quality rap. As Consumer Reports has documented, American cars are now often as reliable as their foreign competition. Part of the problem is the perception, which is often no longer true, that buying American means you will get a less reliable car.

You would think that if American autoworkers were so well paid that they would be living opulent lives. That is clearly not the case. The average assembly line worker for GM makes $28 an hour in wages. This is about $58,000 a year, which is certainly nothing to sneeze at, but not outrageous for a skilled assemblyman. All this assumes of course that they have steady employment. The auto industry has many ups and down, so it is unwise to count on full employment. It is true that autoworkers receive benefits too, but so do many of us who are employed. The cost of benefits is nowhere near the inflated $70 an hour figure bandied about. The Big Three’s pension costs are so high because they also have the legacy of pension costs for existing retired workers and their spouses. Foreign car companies do not have this baggage.

We should look on the $15 billion bailout as an interim measure to help put in place a structure that will make our car companies competitive again. At some point, this will likely mean shifting costs for pensions off the car companies and onto the taxpayer. Then American car companies can compete on something like an equal footing.

Meanwhile, by their votes, Senate Republicans have simply gained the contempt of many in auto producing states. Once you hold someone in contempt, it is nigh impossible to be held in esteem again. This is why Republican opposition to the automotive bailout was so needlessly counterproductive. Even the White House gets it. President Bush understands that his legacy rests on very shaky premises. To leave the White House with the American automobile industry collapsing around him will seal his fate in history.

Based on Senate Republicans’ foolish votes, people like me hoping to see even larger Democratic majorities have new reason for optimism. Any Joe the Plumbers out there living under the illusion that Republicans actually care about people like them are now thoroughly disillusioned. Instead, Senate Republicans are reminding them of their dear old dad and his leather belt, and senators are telling them to lower their trousers and assume a right angle. Why is Dad punishing them? Apparently, they had the audacity to expect a living wage.

Maybe they should run for the Senate instead.

2 thoughts on “Kissing the Rust Belt goodbye

  1. What happens often is how we judge others with our personal values, I’m a senate republican, my insurance and salary are serving me well….Christmas season has me feeling warm, life is good.
    Yes, we lost the White House, but i still have my job, making the rounds with lobbyists at their Christmas parties has made me feel secure with the incoming campaign contributions.
    Those silly people will soon forget about that crazed vote regarding the auto companies, all of them are busy buying cheap Christmas gifts at Wal-mart,or upgrading their new cell phone, or looking for a new Bluetooth device.
    Sometimes i wonder what life would have in store for me if i did not choose a public life, thankfully senators don’t get laid-off, how would i explain that at the country club.
    Hopefully the landscapers have finished with the Christmas display around the house,i really was not happy last year with those lights on the gate.
    Well i better stop at the gas station and top-off, the peasents should be somewhat happy about the gas prices.

  2. Unfortunately for us, the issue is larger than GM because suppliers employ 3x more workers, but they are interlinked. In normal times Chapter 11 might let GM stay in production, and keep paying suppliers. Fat chance with our financial system in a mess, and with industry sales down 35% — even for the Japanese nameplates.

    Because for many types of components there are only a few firms supplying all in the industry, and because of lean production (the system has only a day’s inventory for many parts), if one supplier fails suddenly (and many would), and can’t find money immediately to keep paying workers and their suppliers, then that slams the brakes on the whole manufacturing system — including Toyota and Honda. It would take a long time to unravel the mesh and get production restarted.

    Not that dealerships are doing well, either — and they employ more than all of manufacturing, and are likewise interlinked.

    Whether an industrial restructuring package can be put together is problematic; there are too many pieces, and until sales stabilize, planning is impossible. But $14 billion is a cheap option on keeping us out of depression. The incoming Administration and the new Congress could then try to handle a complex, messy problem rather than be asked to slap together a package that focuses primarily on one firm (GM) in a complex, interlinked industry that is in crisis not just in the US but in Europe as well.

    It’s quite understandable that the Senate should be unhappy with what’s been done with TARP. But the reaction shouldn’t be to TARP and feather the auto industry and run them out of town for the sins of Wall Steet. Not that the industry doesn’t have sins aplenty. In any case, there would be considerable irony if in the end a bridge loan comes out of TARP….

    Michael Smitka
    Professor of Economics
    Washington and Lee University

    Oh, and good riddance to the Republicans. Let’s pray that their successors do (much) better.

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