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Mike Hall

By Mike Hall
AFL-CIO Senior Writer

Some lies are just tiny fibs, reshading the truth just a little bit, something all of us—except for the purest of heart—have done.  Then there is the whopper, the bald-faced lie that completely blots out the truth. Just like what Sen. Bob Corker (R-Tenn.) said the other day.

Thanks to the 2009 federal loan agreement to help General Motors and Chrysler stay afloat, both companies have dug themselves out of deep financial holes and are restoring jobs.

Last week at a ceremony at GM’s Spring Hill, Tenn., plant to celebrate the rehiring of 483 workers to build a line of fuel-efficient EcoTec engines, Corker, who ranted and railed against the government help to save the auto industry, took credit for the government help to save the auto industry. Here is what he said. Really.

At the end of the day we all have to feel good about what we did, I contributed to strengthening the auto industry in this country.

Politicians do have a vastly different truth formula than the rest of us use, but even so, Corker’s claim to saving the auto industry is as far from the truth as Saskatchewan is from Rio de Janeiro in miles (6,285) and culture (use your imagination). (more…)

Seth Freed Wessler

By Seth Freed Wessler
Researcher at the Applied Research Center

When General Motors filed for bankruptcy on Monday, it left behind a long trail of grievers– twenty-one thousand of them. The loss of these good, union jobs and the many more that will be shed when related businesses close are devastating families and communities. For Black workers, who are highly concentrated in the auto industry, these have long been some of the few reliable jobs that pay living wages, supplying families of color the with the possibility of entering the middle class.

As we now know, high levels of unionization equate with smaller income gaps between people of color and whites. But in the economy we’ve inherited from the last three decades of deregulation and declining union density, people of color are increasingly relegated to low-wage, precarious work that pays too little to support a family. Unless Congress acts now to ensure that work actually pays, these workers will have few options and we’ll only deepen the racial income and wealth divides.

A few months ago, I traveled to Michigan to interview dozens of people for “Race and Recession,” a new report released by the Applied Research Center. I met Leo Shipman, a 24-year-old Black man, who had recently lost his job in an auto parts factory in Detroit. “My biggest worry is my son,” he said about his 3-year-old. “You don’t know how you’re going to feed them. He doesn’t know the bills are running up, but I do.” When I met Shipman, he was on the edge of being evicted from his apartment.

With only a high school education–Shipman’s been trying to enroll in a technical college–securing a living-wage job proves elusive if not impossible. Because he had been underemployed, Shipman had no unemployment check coming in. It’s growing more likely that his only option will be to work a job that makes feeding his son a daily struggle.

As one of the last strongholds of union jobs shrinks, and people like Shipman are cast out, it’s time to confront some tough truths about work in our country. Black workers like Shipman have been hit especially hard by layoffs and closures because their concentration in the auto industry is higher than their overall share of the state’s labor market. In fact, across the labor market, workers of color are overrepresented in occupations with high unemployment rates. These include jobs in the service sector, as well as construction and transportation occupations. The loss of these auto industry jobs strikes a massive blow to the ability of workers, especially Black workers, to earn middle-class incomes, to save enough to pass on to their children and to achieve some financial stability. Indeed, the UAW was one of the first unions to organize Black workers and the implosion of GM further dismantles one of the mainstays of the Black middle class.

The collateral damage of job loss are taking their toll. Sandra Hines, a 55 year old Detroit native who I wrote about last week, lost the home her family owned for 40 years after her sister was laid off from GM and was forced refinance. The family was sold a predatory loan with an adjustable rate and was evicted after payments skyrocketed. As more people lose their jobs, more families will find themselves unable to pay their mortgages and more wealth will be drained. It is now clear that the perils of this situation go beyond these communities. Indeed, as we find in “Race and Recession,” the racially discriminatory predatory lending and foreclosure crisis was a central factor in pushing the economy into this recession.

As a country, we’re reckoning with the fall-out from decades of putting profit above people. As precious union jobs disappear, the time has come to ensure that those who are unemployed–disproportionately people of color–are able to enter employment that actually pays. Congress should immediately pass the Employee Free Choice Act (EFCA) so that workers can demand fair pay without intimidation. Since UAW now has a major ownership stake in the company, the workers who remain there will be taken care of, but the 21,000 workers who are getting pushed out will be less likely to find jobs with sufficient salaries and benefits, especially as the federal minimum wage increase to $7.25 next month still does not approximate a living wage.

Ultimately, as we recover from this recession, we need to make sure that the jobs we create and the economy we build help those who have been most hurt by the recession, which have disproportionately been families of color. Ensuring that good, sustainable jobs go to communities of color across the country is an essential part of building an inclusive and working economy.

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Check out arc.org/recession to learn about how racial inequity rigged the economy and how to change the rules.

Leo W. Gerard: The likes of Alabama Sen. Richard C. Shelby and other “Toyota Republicans,” as I call them, contend that GM and its partners in the Big Three American auto makers are antiquated and irrelevant and should be euthanized. You’ve written a book, “Why GM  Matters” that refutes Shelby’s premise by establishing that GM has remade itself as a company and is crucial to the American economy. I believe you. Why do so few others?

William J. Holstein: One major problem is that so many attitudes were formed five, 10, 20 years ago-long before GM began its transformation in earnest. These people, out of ignorance of the facts, are recycling old myths like these: GM can’t design cars that Americans want to drive. GM can’t innovate. GM hasn’t been willing to reduce its cost structure to compete internationally. And so on.
Then there are other people who are consciously trying to destroy or further cripple GM by recycling those arguments. One is U.S. Sen. Richard Shelby, who has four transplant factories in his home state of Alabama. It turns out that the Southern Republicans are working on behalf of their home states, and their home states have given hundreds of millions of dollars in incentives to Toyota, Nissan, Honda, Hyundai, BMW, Mercedes and others.
There is another lobby, which I call the “Bankruptcy Lobby,” that is trying to push GM into Chapter 11 because these bankruptcy lawyers and their law school allies would profit handsomely from it.

Gerard: So, to quote the book, here’s what you actually say:
“Free marketers had felt obliged to go along with the $700 billion {bailout} for Wall Street because Treasury Secretary Henry Paulson (the CEO of Goldman Sachs at the very moment that it had become embroiled in Wall Street’s love affair with mega-leverage) had convinced them the entire financial system would shut down if they did not.
“But when it came to the auto industry and the UAW, they wanted to slam the brakes on. Part of it also was sheer spite: Republicans were reeling after one of their most devastating electoral losses in history. The auto industry, and particularly, the United Auto Workers, had helped get the Democratic vote out and deliver the crucial swing states of Michigan and Ohio to Barack Obama.”
Are you actually saying that Republicans were willing to vote against the good of the country out of spite?

Holstein: Sad to say, but true. They are not acting in the national interest. They are playing for their home states. They have the right to do that. But everyone should be able to understand what they’re doing, and why. I blame the media for picking up comments from Shelby and others (“GM is a dinosaur”) and printing them, without subjecting them to critical scrutiny.

Gerard: Then you go on to say that the presence of “transplant” factories, or manufacturers like Honda and Toyota from foreign countries located in states like Shelby’s Alabama made a difference for some of these senators. And you cite Shelby as an example, noting that Honda, Hyundai, Mercedes and Toyota all located plants in Alabama with the help of state funds, but then he refused to provide federal funds for an American company. So are you saying that these senators were willing to vote for something that was bad for the U.S. – the bankruptcy of the Big Three – because it might provide more business for their home states?

Holstein: As I’ve said, I think that’s exactly what they’re trying to do.

Gerard: Oddly, considering the treatment of the UAW in the press, you manage not to lay blame for GM’s situation on the union. In fact, you say that by last spring, “The Harbour Report,” which you call the bible of car-making statistics, said Toyota factories needed 30 hours to assemble a vehicle while GM required 32. So what does that mean in productivity and difference in labor cost per vehicle?

Holstein: GM and the UAW have made dramatic progress in improving the way the company’s cars are manufactured. They’ve done that by absorbing the Toyota lean production method. And by altering their own relationship, by transferring health care costs to the union’s VEBA and by implementing a two-tier wage system. It is estimated that GM will have stripped out $5,000 from the cost of each vehicle by 2010. The relationship between GM and the UAW is by no means perfect, but they have made big progress in helping the company begin to approach the cost structure that Toyota has at its Georgetown, Kentucky plant. This is truly an historic response to Toyota.

Gerard: You cite a fascinating statistic in your third chapter. You say that although the transplants like Honda and Toyota located factories in the U.S. and American manufacturers make some cars overseas and import some parts, GM’s chief economist estimates that Toyota’s U.S. content is 50 percent while GM’s is 75 percent. What does that mean in the long run to Americans, in terms of jobs and the economy, for each GM car made?

Holstein: I don’t think it’s too dramatic to say that we are in the process of defining what kind of economy we want to have as Americans. Do we want to have an economy where we have many higher-paying jobs in finance, design, engineering, management, marketing (and in GM’s case, those jobs all depend on the folks working on the line) or do we want to send our kids to work in foreign-owned factories where a majority of the higher-value added functions are performed in Japan or Korea or Germany? You have heard it said, no doubt, that it doesn’t make a difference whether it’s a GM job in Michigan or Ohio or a Hyundai job in Alabama. The impact is the same for the American economy, so they say. But that statement is based on a very superficial understanding of auto manufacturing. In fact, it’s plain stupid.

Gerard: What I found striking about your book is that it took a hard look at Toyota as well. Here is a company that the Republicans glorified all through those hearings. Some said let the Big Three fail and Toyota can pick up the slack. And yet, Toyota’s sales fell off dramatically last year, and it posted a loss too. Wasn’t it simply affected by the same market forces that GM was? And if so, why does it retain an aura of perfection?

Holstein: Yes, Toyota has almost had a Teflon coating. The media and political leaders who are so critical of GM seem to turn a blind eye to what Toyota is doing. They glorified its Prius hybrids, which were undeniably a good thing, but ignored the fact that Toyota’s much more important push was into full-sized pickup trucks, which hasn’t worked. Toyota’s design also has fallen behind GM’s. Their cars aren’t as sexy or as fun to drive. They’re like appliances on wheels. Toyota’s reputation for quality is even suffering, as they launch recalls in the United States and Japan. Consumer’s Reports no longer issues an automatic recommendation for every Toyota car. So yes, things are changing at Toyota. I think we’re seeing them go through a period of consolidation or doubt. No company can avoid making mistakes forever.

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William J. Holstein is an author, writer and magazine editor. Before “Why GM Matters: Inside the Race to Transform an American Icon,” (Walker and Co.), he wrote two other books, “Manage the Media” and “The Japanese Power Game.” He has written for “United Press International,” “Business Week,” “The New York Times” and “Fortune” magazine and served as an editor for a decade for “Business Week,” managing the magazine’s Asian coverage.  He covered the American economy and the auto industry for “U.S. News.”

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In a related matter, U.S. Rep. Tim Ryan, D-Niles, spoke with passion in Congress on March 10 about how crucial it is to sustain the U.S. auto industry. Watch him here:
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Robert Kutner

By Robert Kutner
Co-Founder and Co-Editor of The American Prospect

Barack Obama may soon find that he is committing a big sin against one of the major premises of the reigning ideology. As part of his plan to restructure the auto industry, rebuild infrastructure, and create new green industries and jobs, he will be committing industrial policy. And this will create a head-on collision with one of the cherished dogmas of market fundamentalism — “free trade.”

This clash is long overdue. For several decades, American elites of both parties have been preaching the same gospel of free trade. Supposedly, if we just leave markets alone, different countries will produce and export what they naturally do best, and import products at which their partners excel. In the tidy and oversimplified textbook world, there is no room for questions about pollution, labor standards, product safety, financial engineering, or industrial policy.

But the real world doesn’t work like the Econ. 101 fable. In much of the rest of the world, governments help their industries develop.

However, in the hierarchy of America’s diplomatic priorities, countries like China that subsidize industries (and violate human rights) get a free pass. Other nations like Japan, that basically closed their borders to most imports for several decades while they became industrial powerhouses, got a seal of approval, too. Supposedly, what we lose in jobs and industries, we make up in cheap imports.

While other nations care about what they produce, the United States disdains having industrial policies, in order to set a good example. Indeed, we have been the principal architect of the World Trade Organization, which discourages government involvement in economic development as an illicit thumb on the free-trade scale.

Now, with the crash of 2008, it is clear that the US economy was built on a financial mirage. Our reliance on asset bubbles – inflated stock and real estate prices – disguised the fact that we were not paying our way. Much of our prosperity was simply borrowed.

Having let so many industries and jobs just go offshore, we don’t make enough to pay for our imports. Instead, we have been relying on loans from foreign central banks to finance our trade imbalance.

Looking at this economic calamity, President-elect Obama has proposed several sensible policies. He wants the U.S. auto industry to reinvent itself, with government aid and government standards. He wants to incubate other domestic industries around the goal of clean energy. And he wants to spend serious money on all of this, to help avoid a depression. The only historical counterpart is the vast industrial mobilization of World War II, which finally cured the Great Depression.

But these ideas about government involvement in the economy violate the sacred dogma of free trade. If the Obama administration is serious about reviving American manufacturing industry, it is only a matter of time before a foreign government hauls the U.S. before the World Trade Organization and charges us with the crime of industrial policy.

To quote our beloved leader George W. Bush in a different context, bring it on. The current version of the W.T.O., designed by and for US multinational corporations to make it easier to outsource jobs and production, has not served the national interest. It is indeed time to use industrial policy to rebuild long neglected domestic industries; and if something has to give, let it be the W.T.O.

As a mark of the total intellectual muddle in how policymakers have thought about these issues, the fact is that we have several implicit industrial policies. For instance, American commercial leadership in aerospace is no naturally occurring phenomenon. It reflects trillions of dollars of subsidy from the Pentagon and from NASA. Likewise, U.S. dominance in pharmaceuticals is the result of government subsidy of basic research, favorable patent treatment, and the fact that the American consumer of prescription drugs is made to overpay, giving the industry exorbitant profits to plow back into research. Throwing $700 billion at America’s wounded banks is also an industrial policy

So if we can have implicit industrial policies for these industries, why not explicit policies to rebuild our auto industry, our steel industry, our machine tool industry, and the industries of the next century such as green energy and high-speed rail? And why not devise some clear standards for which industries deserve help, and why, and what they owe America in return?

The new administration is already a bit schizophrenic on the subject. On the one hand, President-elect Obama has been saying bold things about building the industries of the future. On the other hand, he just appointed as America’s top trade official Dallas Mayor Ron Kirk, a man with no serious diplomatic experience and one whose main claim to fame on the trade issue is that he has been a big booster of NAFTA, a badly flawed deal that Obama has pledged to reopen.

Kirk’s appointment was meant to signal that Obama will not challenge the current orthodoxy on trade policy. It was cheered by the U.S. business establishment. What is truly bizarre is that Obama’s reported first choice for the job was California Congressman Xavier Becerra, a critic of NAFTA and other recent trade deals. Kirk will also vehemently disagree on trade and industry with Obama’s new labor secretary-designate, Rep. Hilda Solis, another NAFTA critic.

Maybe, like Lincoln, Obama has the genius to fuse this “team of rivals” into an effective administration; perhaps he will listen to the divergent advice and forge the best course. When the historian Doris Kearns Goodwin coined that phrase to describe Lincoln’s manner of governing, she was referring to the fact that Lincoln literally brought into his cabinet men who had been Lincoln’s rivals for the Republican presidential nomination in 1860. These were people of real stature and of fierce differences, representing a party that was badly fractured on the key issues of how to save the union and whether to free the slaves.

Obama has prided himself building bridges and transcending ideology. We are now beginning to see what that means in practice–a cabinet that represents people of thoroughly contradictory views, with some members who are public figures of real consequence and others who are surprisingly weak. This pattern puts all the more pressure on Obama himself to create coherence out of the stew.

Despite these gestures of broad inclusion, there is no escaping the fact that Obama must quickly make some difficult decisions about which path to follow. And one path precludes another. He can’t have both his industrial policies and his free trade.

Robert Kuttner’s new bestselling book is “Obama’s Challenge: America’s Economic Policy and the Power of a Transformative Presidency.”

Robert Kuttner’s new bestselling book is “Obama’s Challenge: America’s Economic Policy and the Power of a Transformative Presidency.”

Column first published on The Huffington Post

Robert Borosage

Robert L. Borosage

 

Co-Director Campaign for America’s Future

Does President-Elect Obama represent the change we need? His mainstream appointments — largely veterans of the Clinton administration — have sparked a clamor from worried supporters. But in one of the critical challenges facing the country — how to get the country out of what will be the worst downturn since the Great Depression — Obama is calling for dramatic and long overdue change. While President Bush continues to oppose any major plan for Main Street, Obama has been calling for a substantial recovery program, focused on public investments rather than tax cuts.

His chief economic advisor, Clinton’s former Treasury Secretary Larry Summers, suggests a “speedy, substantial and sustained” fiscal stimulus, at levels of $350 billion a year or more. A key question is whether the stimulus will be strategic — investing in areas vital to our future, rather than in simple one-off expenditures for temporary effect.

On this Obama seems clear. The centerpiece of his plan is a down payment towards moving to energy independence and dealing with global warming. He’ll generate green jobs by investing in retrofitting buildings for energy efficiency, in modernizing the electric grid, in pushing renewable energy, mass transit, and retooling the auto industry.

He could also sensibly use the crisis to make college more affordable again. The cost of college has doubled under President Bush. Grant programs haven’t kept pace. States have been limiting their support. Students have had to take on more and more debt to pay the bill.

Now in the crisis, all will get much worse. Tuition and costs are increasing, as states cut even more costs. Teachers are getting laid off; construction projects stalled; class sizes will increase. As private lenders abandon the student loan area, loans are still available — but the costs and debt burdens are likely to rise.

For this country to prosper as a high wage society in a global economy, we will need greater education for students, particularly in the skill oriented community colleges that are being hit hardest in the downturn. Obama would be wise to raise Pell grants — the grants that go to neediest students back to the level they once were, when the maximum grant covered about 75% of college costs. That would cost $35 billion a year. The money would be spent immediately — and it would keep kids in college and off the unemployment rolls.

Critics argue that the spending program should be temporary — one-time tax rebates, or one-off investments that involve no long term commitments, and can be ended when the economy starts to grow. If we make a downpayment on strategic investments now, they warn, we’ll have to find a way to pay for them when the economy recovers.

Exactly. The fact is that we’ve been starving vital public investments for decades. Just as conservatives pushed for massive tax cuts as a back door way to force cuts in government spending, Obama should be making vital investments as part of the deficit-funded stimulus as a backdoor way to strengthen the argument for paying for these investments in the long run.

A big time recovery plan for Main Street focused on the investments we need is one key element of the change we need. And one that President Obama surely supports.

Robert Borosage

By Robert L. Borosage

Co-Director

Campaign for America’s Future

Free fall. The US has lost private sector jobs for 10 straight months. One quarter of all businesses in the US plan to cut payroll over the next year. Retail sales fell in October by the largest monthly drop on record. Auto sales have collapsed, driving the auto companies towards the precipice. Unemployment is up to 6.1%, with most analysts predicting it will soar past 8% over the next year. (That translates into unemployment among young minority men at rates of 50% or more). States are now facing $100 billion in deficits in operating budgets for the next fiscal year. Twelve million homes are “under water,” worth less than their mortgages. The US has joined Germany and Japan in what is becoming a global recession.

The era of big government is over is over. In the crisis, we are, as Richard Nixon once said, “all Keynesians now.” Former Clinton Treasury Secretaries Robert Rubin and Lawrence Summers, until recently notable deficit hawks, now call for substantial fiscal stimulus — deficit funded federal spending — to get the economy going.

Summers whose alliterative guidelines for this year’s earlier $150 billion stimulus — “timely, temporary and targeted” — helped to fix its mistaken focus on tax rebates, has changed his consonants. Now he says the stimulus should be “speedy, substantial and sustained,” noting that some estimates on Wall Street have gone as high as “$500 to $700 billion.” Rubin agreed, saying “we need a very substantial stimulus,” while mumbling about needing to reduce the budget deficit over the longer run.

A major recovery program — featuring substantial public investment — will be inevitably the first initiative of the Obama administration. It should feature more spending than tax cuts — investing in renewable energy and conservation, in rebuilding everything from schools to bridges to a smart electric gird, in helping cities and states avoid crippling cuts of services, in keeping college affordable, providing health care to children, and aiding those most in need.

Our public investment needs can easily use the money. A stunning report by Eric Lotke at the Campaign for America’s Future details the staggering investment deficits that have accumulated over the last thirty years. For decades, we’ve chosen to cut taxes on the wealthy while starving vital public investments. The result is an America that is literally falling apart, while much of the private wealth was squandered in the speculative frenzy that now has leveled our economy. Rather than adding to that folly, we should be focusing on strategic public investments that will put people to work in the short term while contributing to a more competitive economy, a better educated citizenry and a cleaner environment.

The time to get started has already passed, as the downturn is accelerating. Tomorrow, as Senate Majority leader Harry Reid suggests, Congress should pass a $100 billion down payment on recovery, while instructing the Treasury Secretary to use some of the $700 billion rescue fund to help keep the auto industry from going belly up, with devastating effects throughout the Midwest.

But, as this is written, it looks like that won’t happen. Republicans didn’t get the message from the election, and apparently don’t read the financial section of the papers. The Republican minority in the Senate seems intent on adding one last obstruction to its ignominious record. Secretary Paulson has indicated that while he’s happy to throw $250 billion at Wall Street banks with no conditions, he isn’t ready to save the Midwest with a $25 bridge loan for the automakers under strict conditions.

In the face of the threatened Republican filibuster, this Congress is likely to adjourn for the final time without acting on the deepening economic downturn. When the new administration and the new Congress convene next January, the crisis here — and across the globe — will surely be far worse. Make no small plans, President Obama, you are about to inherit the full catastrophe.