this is in the Trib today…
When President-elect Barack Obama said he wanted to “spread the wealth around,” conservatives warned that this sounded like socialism. No one expected Democrats in Congress to take this to mean redistributing wealth to the rich.
That, after all, is what an automaker bailout would mean.
General Motors, Ford and Chrysler are hemorrhaging cash and asking Congress to bail them out – with your money. Congress has already given them a $25 billion low-interest loan, and congressional Democrats want to give them $25 billion more.
Many factors have combined to bring the Big Three down, including poor management, too many brands, poor product design and too many costly dealerships. But the main reason they’re on the verge of bankruptcy can be summed up in three letters: UAW.
UAW workers are among the world’s most affluent. They take home an eye-popping $75 an hour in wages and benefits – triple what the average private-sector worker earns. They get seven weeks’ paid vacation and holidays.
UAW workers retire after 30 years on a generous pension. If they don’t qualify for Social Security benefits because they’re in their 50s, they get special bonus payments until they do.
Not to mention gold-plated health coverage. For $10 a month and a $250 deductible, UAW workers and retirees get comprehensive medical, hospital, surgical and prescription drug coverage. Most retirees in Medicare, by contrast, must pay thousands of dollars annually in premiums, deductibles and copays.
Worse, under the union contracts the automakers do not lay off workers when plants close. Instead they transfer them to the JOBS bank. There they get nearly full pay to not work. Detroit automakers actually pay thousands of workers six-figure salaries to sit around and play Trivial Pursuit.
Nice work, if you can get it.
It’s not so nice, however, if you have to pay for it when buying a car. Those gold-plated health benefits add $1,200 to the cost of each GM vehicle. Paying workers to play bingo in the JOBS bank adds an additional $200. Americans won’t pay for that if they have a choice. Competition now gives them one.
Detroit’s problem isn’t foreign companies using cheap labor – many so-called foreign cars are built in the United States by American workers. The typical hourly worker at Honda earns $43 an hour. That’s a good living, but $30 an hour less than GM pays. Union contracts have driven the Big Three to the brink of ruin.
Management also made its share of mistakes. Focusing on gas-guzzling SUVs was foolish in hindsight. But even that was brought on by the UAW. At $75 an hour the Big Three couldn’t compete in the small and midsize car market. So they concentrated on making the trucks and SUVs on which they could still make a profit. Until oil hit $140 a barrel.
And now it is time to pay the piper. The automakers would face restructuring in bankruptcy court. This would mean a fresh start for GM, which would order union contracts rewritten to reflect competitive realities. Pay would come down to market levels, the JOBS bank would disappear and UAW retirees would pay more for their health benefits.
The UAW, understandably, doesn’t want this to happen. It wants Congress and the president to give the automakers a lot of your money. A bailout would only delay the inevitable, but it would keep UAW wages and benefits sky-high for a little bit longer.
The UAW endorsed many Democrats in the incoming Congress and spent thousands of hours campaigning for them. The labor movement poured more than a half billion dollars of members’ dues into expanding the Democrat majority. Now they are calling in their chits.
Change we can believe in? Not quite. But at least taxpayers know what Democrats in Congress mean by spreading the wealth around.
James Sherk is the Bradley Fellow in Labor Policy at The Heritage Foundation.