Today's and Yesterday's Political News

There's so much going on in the world United States, that it's been difficult to keep the blog up to date recently. We've got sensational corruption, tanking economy, and Presidential transition news up the ying-yang. So much so, that my ying-yang is starting to hurt. And when I need them most, my fellow blog-mates are in the middle of finals or partying it down in Vegas with economic policy wonks (Really? Vegas? Because nothing says prudent and progressive economic policy environment like a town built on gambling and prostitution). But alas, I will carry on through these trying times. So herein lies the past two days worth of notable news items because I didn't get around to doing yesterday's round-up. Part one of many:

1) Auto Bailout

Here's the quick rundown on the auto bailout. Yesterday the plan appeared to be that Congress would vote on a package that would keep the Big Three viable until March by giving them a $14 billion dollar loan. At that point, the new Congress and Obama administration could work a better long-term solution out. The house voted on this package this morning and the result was more or less along party lines, with the Dems voting for it and the GOP voting against it. So on to the Senate it went, but earlier today Mitch McConnell, GOP minority leader, said the Senate Repubs wouldn't vote for it, even though Bush wants them to. Instead, they are pushing their alternate plan, devised by Sen. Bob Corker, that would require the UAW to make concessions way beyond what the UAW had already agreed to:

The automakers would also be required to cut wages and benefits to match the average hourly wage and benefits of Nissan, Toyota and Honda employees based in the United States, and the companies would have to impose equivalent work rules.

Corker and McConnell either don't know what the hell they're talking about or they just want to use this as an excuse to break up one of the last big unions. Let's look at the numbers: the wage difference is something like 10 dollars an hour ($55/hr for Big Three, $45/hr for Japanese) . However, the Big Three pays an additional 15 dollars an hour effectively per worker to pay for it's retirees. The Big Three have been making cars since 1903, 1908, and 1925 (Ford, GM, and Chrysler respectively). Toyota opened it's first American manufacturing plant in 1988. The Big Three pays significantly more in benefits merely because they have more retirees to pay:

These retirees make up arguably Detroit’s best case for a bailout. The Big Three and the U.A.W. had the bad luck of helping to create the middle class in a country where individual companies — as opposed to all of society — must shoulder much of the burden of paying for retirement.

So here’s a little experiment. Imagine that a Congressional bailout effectively pays for $10 an hour of the retiree benefits. That’s roughly the gap between the Big Three’s retiree costs and those of the Japanese-owned plants in this country. Imagine, also, that the U.A.W. agrees to reduce pay and benefits for current workers to $45 an hour — the same as at Honda and Toyota.

Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800.

That’s because labor costs, for all the attention they have been receiving, make up only about 10 percent of the cost of making a vehicle. An extra $800 per vehicle would certainly help Detroit, but the Big Three already often sell their cars for about $2,500 less than equivalent cars from Japanese companies, analysts at the International Motor Vehicle Program say. Even so, many Americans no longer want to own the cars being made by General Motors, Ford and Chrysler.

(ed note: I implore you to read this entire article, it's enlightening.)

In addition to that, the credit problems have reduced the sales of ALL automobiles, Japanese included. It's really a perfect shitstorm of factors that has put the Big Three in this position (by far the most inexcusable factor being the management's dumbass myopic business strategies)

That's why McConnell and Corker are deluded in thinking the only reason the American auto industry is in this predicament because of the unionized labor. In reality, they're not deluded, they're just looking out for their own corporations. McConnell represents Kentucky, home of the first Toyota plant in America. And Corker represents Tennessee, home of the first Nissan plant in America. Any chance they can get to kill off the UAW helps their states' auto industry. It's no surprise then that this has hit a snag in the Senate, because the Republican power base, however eroded in the past two electoral drubbings, is centered in the South. That too, is where the foreign auto compaines, eyeing cheap non-unionized labor, have nearly all of their plants.

FYI: Robert Reich has got his own alternate plan.