The skinny on the auto bailout

Last night Republican senators killed the latest version of a bailout plan for Chrysler and General Motors. I’m not qualified, and I wonder if anyone is qualified, to state that the bailout itself is a good idea. Economists seem to come down on both sides of the question, as economists are so prone to do when the rubber meets the road. Paul Krugman has argued that it is lamentably necessary to save the auto makers, and he is right so often that I’m inclined to grant him the argument.

But there’s a pertinent detail that I am qualified to criticize, if only because I have made observations about the matter for several years and the senators’ arguments confirm my position. Republicans demanded sharp wage reductions for union workers and the union’s refusal to comply is now cast as the deal killer.

What the Big Three have done over the past decade or more is to move their profitable small car operations out of the country and continued to build the gas guzzlers here. Anyone with four functioning neurons and the ability to read has known for many years that American dependence on imported oil, coupled with the coming crash in oil supplies, coupled with climate change and attached to this country’s balance of payments problem (one neuron each for those keeping score) would diminish demand for large cars. The automakers intentionally kept their big car production here in order to kill organized labor when the market for those cars collapsed.

That’s what’s happening now in the bailout negotiations. The companies have positioned themselves financially so that if they aren’t bailed out, the workers lose their jobs. If they are bailed out, the quid-pro-quo being demanded by the GOP is to slash wages. Sadly, the electorate didn’t provide a veto-proof majority in the Senate, so even after January the Republicans will still be in a position to put a bullet in the brain of the unions.

Hopefully the coming Depression will be deep enough and hard enough to revive the power of organized labor. It is time for the giants to fall.

~ by bothwellsblog on December 12, 2008.