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January 2009, Volume 11, Number 1
Edited by Jim Hightower and Phillip Frazer
Hawking the myth of the $73/hour auto-worker
Senators bail out their banker buddies but stiff workers and their unions
THE 8,000-MEMBER GREATER GRACE TEMPLE in Detroit is the home church of many autoworkers, and its Sunday service on December 7 spoke directly to their troubles. The tone was set by the choir's opening selection, "I'm looking for a Miracle." The Pentecostal pastor kept the spirit moving with a sermon he titled "A Hybrid Hope," after which the congregation joined in a full-throated, hallelujah version of the gospel classic, "We're Gonna Make It."
For the men and women who actually do the work in automobile manufacturing (America's quintessential industry), the only hope left for dealing with a catastrophic economic meltdown seems to be prayer. Their corporate leaders have failed them, and Congress has stiffed them. Only last month's begrudging agreement by the White House to consider a $14 billion bridge loan for the Big Three automakers has given them any optimism as their industry limps into 2009. But the ongoing bailout battle is no longer about economics. It's about class in America.
Republican lawmakers, backed by a raucous chorus of right-wing pundits and corporate lobbyists, have turned Motor City's economic woes into an excuse for launching a mendacious and pernicious assault on America's hard-working, highly skilled, unionized working families--and on the middle-class ideals that they embody.
Okay, admittedly Detroit's bailout request to Congress was botched from the start by the industry's own boneheaded bosses. Rick Wagoner of GM, Alan Mulally of Ford, and Bob Nardelli of Chrysler goobered badly by winging off to Washington for the bailout hearings ensconced in their separate-but-equal corporate jets. What, were no cars available to them?
Pampered CEOs jetting in for taxpayer handouts is what corporate image consultants call "bad optics"--which is to say, it looks really, really bad. As Rep. Gary Ackerman asked during the hearing, "Couldn't you all have downgraded to first-class or jet-pooled, or something, to get here?"
Then the optics got worse. Having arrived, the bumbling honchos proceeded to act as though showing up was all they had to do to get bailout funds. They were unprepared to tell Congress how they came up with the $25-billion number they were requesting. They had no plan, no explanation of how they'd spend the money. Congress got its back up, giving a gaggle of tongue-clucking, sanctimonious Republican senators the political opening they needed to deny any funds for automakers.
The double standard
What the auto execs didn't grasp is they are not Wall Street bankers, our country's ruling financial royalty. They are from Detroit and run a working-class industry. As the Detroiters soon learned, royalty is treated differently, even deferentially, by Washington. After all, hadn't the purple-robed princes of Citigroup, AIG, JPMorgan Chase, Bank of America, and other bailees from The Street also flitted in and out of Washington aboard their jet-powered corporate carriages? Yes, they had--but not a peep of protest was uttered by those holding the public purse strings.
Also, while Congress squawked about the blue-collar crowd's relatively paltry request, it had totally caved in to the banking elite, who did not request money but demanded it. Lawmakers meekly rushed out $700 billion for them, a taxpayer gimmie nearly 30 times larger than the one Detroit was seeking. What plan did the bankers present? What explanation did they give of how they'd spend our money?
Congress gives Citi all it wants
A DECADE AGO, CITIGROUP led a full-court lobbying press on Washington, ultimately winning what big bankers, insurance giants, and high-rolling investment wizards wanted: government deregulation. [read more...]
None. They simply dispatched their designated consigliere, Treasury Secretary Hank Paulson (formerly the reigning prince of Goldman Sachs), to hand Congress a three-page ultimatum. It contained not a single specific or promise of results. It was, in effect, a hold-up note.
But that $700 billion was just for openers. It has not been widely reported, but the total Wall Street bailout--counting government loans, stock purchases, debt guarantees, and backdoor handouts by the Treasury and the Federal Reserve--is nearly $8 trillion. That's eight followed by 12 zeroes!
What have we gotten for this gargantuan giveaway? Zip. The rationale for indiscriminately pouring public funds into big banks, investment houses, insurance giants, hedge funds, and the like was that our money would "unclog" the financial markets, allowing credit to flow again to businesses and consumers-as though America is having a plumbing problem and our national treasury is a bottomless vat of Liquid Plumr.
But, guess what? It didn't work. Credit is still not flowing. As a result, an economic crisis has swiftly spread across the country, including a rash of business bankruptcies, construction shutdowns, massive job losses--and, yes, a credit crunch that is crushing auto sales, auto dealers and suppliers, auto makers, auto workers...and Detroit.
The reason that the Wall Street bailout has not worked is quite elementary: Congress and the White House attached no requirement whatsoever that the recipients of our money use it to make loans! It seems that Washington didn't feel that it should "interfere" in the decisions of the financial deities.
Country rubes attending their first carnival sideshow are not this gullible.
With no conditions put on the phenomenal taxpayer windfall they received, the wizards of Wall Street have chosen to spend it selfishly, rather than for any public purpose. They've already used billions to buy out some of their competitors, a perverted use of bailout funds that will reduce our banking choices and raise the bank fees we're charged. Other billions have gone to the banks' big investors, to executive pay, to pad the bottom line, or simply into bank vaults to be hoarded--while America remains starved for capital.
Even more amazing, the very same Congress that harrumphed about trusting Detroit automakers with taxpayer money was not even told where most of the $8 trillion Wall Street bailout went. Which banks got government backing, and how much did each get? That's a secret, Congress was told by the Bushites. What are they doing with the money? We can't tell you, say those who doled out the cash.
Moving from amazing to reckless audacity, Secretary Paulson has even taken the law into his own hands. Last September, he unilaterally, secretly, and illegally nullified a federal law because it was in the way of his unauthorized plan to help big banks take over smaller ones. Hank's autocratic decree allows banks to use offshore tax dodges that Congress banned 23 years ago. This executive maneuver provides an under-the-table tax subsidy for predatory banks wanting public financing to absorb their rivals--a subsidy that will cost our national treasury upwards of $140 billion even as it reduces bank competition.
This is a flagrant usurpation of Congress's constitutional power and a kleptocratic transfer of public wealth by executive fiat. Yet it was met with barely a meow from lawmakers.
Roar of the kitties
Oh, but what tigers some of the congressional kittens became when Detroit showed up!
Right-wing senators from the South and West were suddenly baring claws and hissing furiously that to get aid these supplicants had to restructure their businesses in accordance with government dictates. These congressional onetime free-market holy rollers made a demand that was specific and blunt: Whack your unions.
Sen. Bob Corker, a multimillionaire real-estate baron from Tennessee, led the charge, demanding that all three automakers close plants, cut jobs, and slash pay of union workers. "Before we even contemplate making a loan to these companies," popped Corker, "we need to put in place specific and rigorous measures."
Sen. Jim DeMint of South Carolina piled on, asserting authoritatively that Detroit manufacturers "are struggling because of a bad business structure with high unionized labor costs," adding that taxpayers "should not be forced to pay for them." Then came Sen. John Kyl of Arizona: "They have a bad business model. They have contracts negotiated with the United Auto Workers that impose huge costs." How huge? "It's $73 [an hour]," hissed Kyl.
Wow, that's a paycheck of about $146,000 a year. I want that job!
Union faces down banker greed
IRONICALLY, AT THE VERY TIME that boneheaded senators in Washington were working furiously to impose their anti-union extremism on our country, most Americans were captivated by some 250 feisty union members in Chicago, joyously cheering them on. [read more...]
Problem is, the $73 figure is a hoax. The right-wing contrived it by lumping in all of the health-care and pension costs of retirees, plus tossing in training costs and the payroll taxes that the companies owe.
No Detroit autoworker is skipping away with anywhere near $73 an hour. In fact, the base wage of a veteran UAW member in a Big Three auto company is about $29 per hour, compared to $26 per hour for a non-union worker in Toyota's Kentucky factory.
Also, the learned senators who're now moonlighting as labor negotiators failed to do any rudimentary homework before assailing the UAW. Last year, the union agreed to concessions in their new contract with Ford that, by 2010, will lower the company's total labor costs to a level on par with what Japanese corporations are paying non-union American autoworkers. In addition, a new contract with GM is expected to give that U.S. company a labor-cost advantage over Toyota.
In fact, it's not wages that burden the auto companies--it's the skyrocketing cost of health care in America. Japanese, Korean, European, and other carmakers don't pay this cost because their countries have national health care for all, financed by taxpayers. Curiously, none of the senators who now profess to be outraged by American labor costs have stepped forward to support universal health care in our country, which would drastically improve the global competitiveness of all of our industries.
There's one more number that union-busting senators don't mention: 10%. That's the share of a made-in-Detroit car's price tag that goes to cover all labor costs, including health care, pensions, etc. That's it. Ten percent. In short, labor is nowhere near the financial burden it's portrayed as being. To the contrary, unionized workers bring award-winning productivity to the industry. They are assets, not liabilities. Meanwhile, 90% of what we consumers pay for cars goes to bankers, bondholders, investors, executives, suppliers, dealers, and a myriad of others who are part and parcel of every vehicle we drive. The senators could force UAW members to work for free, but that would not begin to solve the industry's financial problems.
Again, the current squeeze on all automakers--domestic and foreign --is the result of the same tightfisted lenders who've already pocketed trillions of our taxpayer dollars. Since these bankers won't lend to the companies or to consumers, cars are either sitting on dealers' lots or not being made. GM's sales for November 2008 were down 41% from the previous year, Toyota was off 34%, Ford 30%, Chrysler 47%, Honda 32%, Nissan 42%...right on down the list.
The people responsible for the uniquely bad situation of Detroit automakers are not the workers on the factory floor, but the suits up in the executive suites. UAW members are not the ones who decided to make Motor City's business model dependent on a never-ending supply of cheap oil; the rank and file were not the ones myopically fighting better fuel-efficiency standards; and GM workers did not make the decision a decade ago to recall and kill the EV-1, the forward-looking electric car that the company had pioneered. The folks making these strategic business decisions are CEOs who pay themselves from $7,000-an-hour (GM's Wagoner) to $10,000-an-hour (Ford's Mulally).
Speaking of pay, am I the only one who thinks it's ridiculous to hear senators chastise working families over earnings? Come on-Corker, DeMint, Kyl, and the others who're throwing hissy fits about UAW wage levels are drawing nearly three times as much from us taxpayers in base pay, plus getting platinum-level health care, golden pensions, and all sorts of senatorial perks. And, unlike autoworkers, senators don't have to have any real skill, do any heavy lifting, or produce any products.
Yes, these union workers make a good living--but what exactly is wrong with that? Indeed, they're a tremendous American success story. UAW members define our country's middle-class ideal. They can afford to buy homes (and cars), send kids to college, take vacations--and pay taxes, including those that cover salaries and benefits for U.S. senators.
Sustaining, expanding, and extending such a vibrant, productive middle class ought to be the top goal of economic policy makers. Yet, too many Washington officials keep pushing in the opposite direction, constantly pursuing a cheap-labor America that enriches the few at the expense of our nation's true economic strength. They are doing the bidding of a corporate elite whose only industrial idea of the past 30 years has been to kick labor in the shorts.
We saw this tired old ploy tried again last month when Detroit's honchos finally presented their restructuring plans to Congress. To no one's surprise, all of the restructuring would be down on the assembly line. GM, for example, bluntly promised that in exchange for $18 billion in taxpayer money, it would gladly boot another 25,000 workers out the door. A tax-paid mass firing--what a deal!
These executives--and the congress critters who enable them-should be given Henry Ford bobbleheads to remind them of the power of a democratic economy. The auto pioneer famously outraged his competitors by paying Ford workers $5 a day, more than double the industry standard at the time. As he explained in 1926, "An underpaid man is a customer reduced in purchasing power. He cannot buy. Business depression is caused by weakened purchasing power. Purchasing power is weakened by uncertainty or insufficiency of income. The cure of business depression is through purchasing power, and the source of purchasing power is wages."
That remains true today. Middle-class wages are the lifeblood of the American automobile industry... and of the American economy.