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Liz Shuler

By Liz Shuler
AFL-CIO Secretary-Treasurer

 As newly elected secretary-treasurer of the AFL-CIO, I traveled the country this fall, talking with workers and hearing their concerns. The economic crisis is causing a lot of pain. So many people have no jobs, no health care–and many are losing their homes. And as I looked into the faces of young workers, the reality hit home that these young people are part of the first generation in recent history likely to be worse off than their parents.

This is a tragedy.

The AFL-CIO and our community affiliate, Working America, recently surveyed young workers–and I’m not talking about 17- and 18-year-olds. I’m talking about 18- to 34-year-olds. In the past 10 years, young workers have suffered disproportionately from the downturn in the economy:

• One in three young workers is worried about being able to find a job–let alone a full-time job with benefits.
• Only 31 percent make enough money to cover their bills and put some aside–that is 22 percentage points worse than it was 10 years ago.
• Nearly half worry about having more debt than they can handle.
• One in three still lives at home with parents.

Young workers are living the effects of a 30-year campaign to create a low-wage workforce. It has succeeded.

For decades, the far right led an anti-government, anti-investment, feed-the-rich-and-starve-the-poor drive that gave us an era of deregulation, privatization and job exporting.

At the same time, corporations and government attacked unions and workers’ freedom to form unions and bargain for decent wages and benefits. When unions are strong, paychecks grow and workers have benefits like health care and pensions.

When unions are under attack, paychecks shrink. Pensions vanish. Health care becomes the emergency room.

What’s left is not working for young people–or for any of us. It will take a broadly shared sense of wartime urgency to replace today’s low-wage economy with a high-wage, high-skills economy. The first step must be immediate action to address the nation’s jobs crisis, with five essential steps:

1. Extend the lifeline for jobless workers.
2. Rebuild America’s schools, roads and energy systems and invest in green technology and green jobs.
3. Increase aid to state and local governments to maintain vital services.
4. Fund jobs in our communities.
5. Put TARP funds to work for Main Street with job-creating loans to small businesses.

We took these initiatives to the White House Summit on Jobs on Dec. 3 and are pushing Congress to take action now. The first reports from the Jobs Summit are encouraging, and we look forward to working with the Obama administration and Congress to carry on this momentum.

It’s time to rebuild an economy that works–an economy based on prosperity, an economy we can be proud to pass on to our children and their children. And we need young people to lead the way. That survey I mentioned earlier shows they are ready.

· Young workers have a whole new level of civic engagement, with the surge of new voters in the 2008 election.
· They are well-informed and following government and policy news.
· They believe in collective action and understand the power of having a union.
· They have hope for the future and the vision of a savvy, diverse movement to bring about progressive change.

We’re planning a major summit for young workers after the first of the year to bring all our ideas and voices together. When crises hit, it’s young people who drive change.
Martin Luther King Jr. was 26 when he led the Montgomery bus boycott. At 25, César Chávez was registering Mexican Americans to vote. Walter Reuther headed strikes demanding GM recognize its workers’ rights starting when he was 30. Elizabeth Cady Stanton was 33 when she drafted the declaration of women’s rights.

Young people are being hard in this jobs crisis. But I believe they provide much of the fuel we need to get out of it.

Roger Bybee

By Roger Bybee
Milwaukee Freelance Writer

As rescue attempts go, the Obama administration and its Auto Task Force are pursuing a peculiar course: They seem intent on keeping General Motors and Chrysler afloat as corporate entities by tossing more U.S. workers overboard.

Even as unemployment rates soar in longtime GM-centered communities hit by shutdowns, such as Janesville, Wis. (14.7 percent), and Flint, Mich. (15.3 percent), Obama and his task force pressed GM and Chrysler for more cuts. GM plans to shut down at least 14 factories and discard some 21,000 workers. Chrysler is closing eight U.S. plants, though it claims that somehow its merger with Fiat will result in a new increase of 5,000 jobs. In a telling observation that carried unsettling echoes of Bill Clinton’s push for NAFTA, the New York Times called the job cuts and other worker sacrifices “steps that most analysts thought could never be pushed through by a Democratic president allied with organized labor.”

The most recent version of GM’s recovery plan-closely tailored to the demands of the task force-calls for a stunning 98 percent increase in autos produced in Mexico, China, South Korea and Japan for the U.S. market. In May, the United Auto Workers (UAW) and United Steelworkers launched a 36-city campaign to prevent GM “from importing small cars from China, a move that would have increased GM’s profits while very likely reducing the number of domestic automobile jobs,” the New York Times reported June 2. This last-minute drive was successful, but it’s still unclear exactly what modifications GM will make.

For its part, Chrysler announced May 1 (the day after it filed Chapter 11 bankruptcy) the closing of its Kenosha, Wis., engine plant and the transfer of many of the plant’s 850 jobs to Mexico. As recently as the day before, top Obama administration and Chrysler officials had assured Wisconsin legislators that the Kenosha plant would be preserved. Faced with a firestorm of protest for using federal dollars to transfer jobs to Mexico, Chrysler now says that Fiat will consider keeping the plant open.

On top of all that, job losses will balloon with the closing of more than 1,100 GM and 789 Chrysler dealerships, eliminating tens of thousands more jobs.

Although Obama hasn’t ordered auto industry cuts himself, “the revamping of the nation’s largest car company is being guided by the administration’s auto-industry task force, and it follows the president’s calls for a leaner, healthier industry,” DowJones.com reported on May 12. The Obama administration’s downsizing of the auto industry, established as a precondition for approximately $30.5 billion extended thus far in loans to GM and Chrysler (with another $20 billion in the pipeline), sharply contrasts with the lightly-conditioned, larger bailout of Wall Street. Nomi Prins, author of It Takes a Pillage, a forthcoming book on the Wall Street meltdown and its roots in Washington, estimated that Wall Street has received $12.5 trillion-nearly 400 times more-in loans, loan guarantees and taxpayer subsidies for the sale of risky loans.

Contradictory policies

Only three of the Auto Task Force’s members were notably pro-labor, despite protests from labor and auto-state lawmakers. “The Auto Task Force members are basically red-pencil types who looked at saving the auto industry on the cheap without much consideration to social costs, let alone generating green alternative jobs for auto,” says economist and author William K. Tabb. “They have the narrowest business criteria for auto, unlike the banks that got capital and loan guarantees worth trillions. So their focus was to save the auto companies but not the auto workers.” Essentially, Obama and the task force wanted a quick and cheap solution to the Big Three’s ailing finances rather than providing an endless flow of resources, as the government did to the “too-big-to-fail” financial sector.

Bizarrely, the Auto Task Force’s policy direction dramatically undercuts Obama’s $787 billion economic stimulus program. “The problem with GM’s new Washington-mandated restructuring plan is that it steps on the gas in the wrong direction,” UC Berkeley professor Harley Shaiken told NPR’s “Marketplace.” “The stimulus package spends $800 billion to create jobs, while billions in loans to GM are conditioned on eliminating them.”

In addition to the factory job and dealership cuts, GM will unload its Pontiac, Saturn and Hummer brands. By contrast, the Italian government provided $1.7 billion in aid to Fiat as long as Italian plants stay open, noted Robert L. Borosage of the progressive coalition Campaign for America’s Future. Also, France loaned $8.5 billion to its big three automakers, in exchange for pledges to keep jobs in France.

Labor advocates fight back

After months of the UAW trying to avoid a fight with Obama, in early May it began openly challenging the use of taxpayer loan money to finance the outsourcing of jobs. “We believe (GM) should have an obligation to build in this country the vehicles it will be selling in the U.S. market, thereby maintaining the maximum number of jobs in the United States,” UAW legislative director Alan Reuther wrote to the Senate.

Former Clinton Secretary of Labor Robert Reich blasted the notion of paying billions of taxpayer dollars to keep companies afloat while they cut tens of thousands of jobs and wages. “We’re transferring money from taxpayers to Big Three shareholders for no apparent reason other than the Big Three are headquartered in America,” he said. “Why should taxpayers foot any of this bill unless the Big Three agree to keep their workers employed while they try to turn themselves around?”

The full answer to that question remains unanswered at this moment, as the two corporations’ plans for future outsourcing are unavailable. But significantly, the Auto Task Force didn’t explicitly require that federal assistance be directed to renewing production in the United States. Furthermore, following conventional management wisdom, “the Obama administration structured the GM and Chrysler plans to lessen the union’s voice in management,” the New York Times stated.

But so far, the mainstream media hasn’t much noticed or criticized the contradictions between Obama’s plans to simultaneously stimulate job growth and shrink GM and Chrysler. With all the attention on unwarranted Wall Street bonuses, major media lump Wall Street brokers’ compensation and CEO pay with autoworkers wages as part of the same culture of “excess.” Reports that autoworkers were paid as much as $73 an hour quickly spread through the media.

Actually, the typical wage is $26 to $28 an hour, plus an additional $10 or so in benefits, according to the Center for Automotive Research. UAW’s agreement to accept a new starting wage of $14.20 an hour with vastly reduced benefits received little attention. Neither did the fact that UAW-represented plants ranked “very favorably” on quality and productivity compared to Japanese “transplants” in the United States, according to independent industry assessments.

Shielded by a lack of accurate and coherent media analysis, the Auto Task Force used a narrow and conventional single-firm turnaraound framework to create a strategy for GM and Chrysler. “A hedge fund wants to make money fast for its client-in this case, the taxpayer-without regard to social cost,” Shaiken says. “Unlike most clients, however, the taxpayer picks up the social cost. Longer unemployment lines and more foreclosures are devastating for the victims, not cheap for the rest of us.”

But the Auto Task Force seemed largely oblivious to the human costs of eliminating thousands of U.S. auto jobs. Obama and his task force withheld billions of dollars in new loans requested by GM until after the company came up with a more aggressive program of job cuts, plant closing and outsourcing. The Auto Task Force rapidly divorced the reinvigoration of GM and Chrysler from a longer-term shift to a fuel-efficient economy and production not just of high-mileage cars, but also of mass-transit equipment for buses and high-speed rail.

Ironically, GM’s ruthless downsizing of its U.S. workforce and outsourcing of jobs over the last 25 years diminished its leverage with the Obama team. GM has discarded 85 percent of its domestic production since 1990-and that was before it hit the current recession and the resultant nosedive in sales. It was no longer “too big to fail.”

So Obama and the Auto Task Force felt free to promote a recovery strategy for the two ailing auto firms that stands in appalling contrast to the generosity shown Wall Street. GM and Chrysler headquarters will remain intact, but thousands of U.S. workers will be vaporized, retiree health benefits could be put on the chopping block (especially at Chrysler) and numerous industrial communities will suffer permanent damage. And the Obama team has forfeited the opportunity to recast the current crisis into a fuel-efficient re-industrialization of America-right when the country needs the stimulus of  high-wage green jobs the most.

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• First published in In These Times. To subscribe, click here.

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Roger Bybee is a Milwaukee-based freelance writer and progressive publicity consultant whose work has appeared in numerous national publications and websites.

By Leo W. Gerard
International President

The economic structure of Jim Henson’s cartoon realm called Fraggle Rock reflects our own. In one HBO episode, the industrious, hard-hatted Doozers prepare to leave the rock, which would have quickly left the Fraggles starving. Somehow, politicians and powerbrokers in this country don’t see the simple parallel. If the U.S. continues to send its manufacturing overseas — with the latest proposal General Motors plants — the result will be hungry U.S. families.

I saw this up close and personal as I toured the U.S. last week on the 11-state, 32-city “Keep it Made in America” bus tour. I talked to unemployed manufacturing workers who are desperate. Through no fault of their own, they’ve lost their jobs, their homes, their health care. These are the people who are the strength of America, who in better times volunteered in New York City after 9-11 and in New Orleans after Katrina. Now, they’re forced to get groceries at their union hall’s food bank. They’re humiliated.

This economic crisis was inflicted on them by recklessness on Wall Street and in Washington. Over the past 40 years, politicians have eroded regulations that could have helped prevent the sub-prime mortgage bubble and bust. And Wall Street banks and investors took full advantages of that rule-free environment to behave capriciously in the market, causing stocks to tank, driving unemployment up to the current 8.9 percent, and contributing to the loss of 5.2 million manufacturing jobs since 2000.

Let me introduce you to four Steelworkers, four hard-hats struck down by the decisions so disastrous to the economy made in Washington and on Wall Street. They are Diana Arends, an aluminum can maker; Matt Dossett, a rubber worker; Andy Nirschl, a papermaker, and Kevin Vest, a copper miner.

Diana Arends’ employer, Ball Corp., shuttered its Kansas City aluminum beer can manufacturing plant March 27. Ball blamed the economy when it announced the closure that cost 150 Steelworkers their jobs. Beer sales are down. As the economy contracted, Americans had fewer coins in their pockets for every little pleasure, including throwing a few back.

Diana Arends

The plant closure was both an economic and emotional shock to Arends. She’s divorced, and supports a daughter and granddaughter. Before the plant mothballing, she routinely worked 12-hour days, with the overtime paying her mortgage and bills. Now she’s only getting unemployment.

Her house in Lees Summit, Mo., on which she has paid for 10 years, already is going to foreclosure. She doesn’t have any credit cards, but she does owe on a used car she bought a couple of years ago.

When she heard the plant was to shut, she immediately dropped her internet and cable TV services, ended trash collection and stopped eating out. She buys food in bulk at a wholesale store. But it’s just not enough.

She’s thinking about taking the remnants of her stock market-ravaged 401K and using it to support herself, her daughter and granddaughter because she has been unable to find another job. No one has called her back for a second interview, although she also has 28 years experience manufacturing grain bins for CTB, Inc. Let’s face it, she points out, who’s going to hire a 59-year-old?

She recollects, a few years ago, “I got to feeling set. I had a 401K and just a few more years to retire.” But now she’s jobless, and soon she may be homeless. “I did nothing to deserve that,” protests Arends, who went the extra mile, serving as president of USW Local 13, a position she loves, but one she’ll be forced to relinquish May 14 because she no longer is employed as a Steelworker.

Diana Arends is concerned about running up federal debt to pay for the bank bailouts and stimulus package, so she doesn’t understand anyone proposing to use one dollar of that money overseas. The stimulus is American tax dollars designated to create American jobs – not Chinese jobs or Korean jobs or Mexican jobs. So when General Motors submitted a bail out plan in which it would get American tax dollars, then use them to build fewer cars here and more cars overseas that would be sent back here to be sold, Arends just couldn’t believe it. “These are middle class jobs lost, the people who go to the grocery store and support food banks and the Little League,” she noted.

And they’re not just GM assembly line jobs. The more jobs GM sends overseas, the more support and supply jobs go overseas too. And that threatens the economic lives of millions more Americans — workers like Matt Dossett.

Matt Dossett

He’s a rubber worker from Fancy Farm, Ky., furloughed with 50 other Steelworkers from the Goodyear Tire plant in Union City on Feb. 28. Dossett, 27, who tried to get a job at the plant since he graduated from high school, had worked there just a year before the lay off. He knew it was a good job because his father and uncles had all worked there. “They had their whole careers there,” he said, “They worked 40 years and retired there. They had good lives from working there. It is one of the best paying jobs in this area.”

He worked on a balance crew in the curing department – cooking tread onto the tires, a place where it could get well over 100 degrees in the summer. Still, he longs for that call back, “I really enjoyed it down there. I enjoyed the people I worked with and the job I was doing,” he said.

But that’s all jeopardized by the sagging economy, unfair trade practices by China in supporting its tire makers which export to the U.S. and GM’s plan to move production offshore – including to China.

When he was working, Dossett paid off his car loans and saved money just in case he got furloughed. But making the mortgage payments is starting to get tough. His wife works, so that’s helping them pay the bills. And they’ve cut out all frills. They don’t visit her family in Chicago anymore. They don’t go out to eat. They don’t visit Nashville for weekends. Dossett has a credit card, but no debt because he only uses it in emergencies. “I worked hard for everything I’ve got,” he explained, “I’m trying not to lose it all now.”

He sees a clear connection between GM building cars here and his job.  Because billions of American tax dollars have already gone into bailing out GM, they shouldn’t be talking about moving jobs overseas, he says. “We gave them money to build here, to create jobs here. Let the Chinese pay if they want a plant in China,” he said.

Like Dossett, Andy Nirschl worked for an industry damaged by unfair trade. He was a process operator, controlling pulp, for the NewPage Corp. Kimberly mill in Wisconsin. It made the kind of glossy paper used in magazines and new car catalogues. The mill had operated in the town of 5,000 since 1889 and was the largest employer. Kimberly was NewPage’s largest producer, but the Ohio corporation closed it after a defeat in a trade case with China under the Bush administration.

Andy Nirschl

That was Sept. 30, 2008. Nirschl, president of USW Local 2-9, knows all the gory details: 475 Steelworkers lost their jobs, and 125 salaried guys got thrown out of theirs. When NewPage refused to sell or re-open the plant, the town considered renaming its high school teams. They are called the papermakers.

Nirschl’s wife, who had worked at home, had to switch jobs so the family could get health insurance. He’d married late in life, so he had a good start paying off his mortgage. He isn’t behind yet but knows lots of fellow Steelworkers who are. He has only one credit card and no debt on it or on his cars, so he’s in better shape than many of his friends. Still, his family has cut out vacations and eating at restaurants.

Nirschl got a new job earlier this month, a good union job with the state helping the unemployed find work. It doesn’t pay as much as the mill did but has good benefits. The pay comes from the $700 billion stimulus package, and he’s hoping the position is renewed in the state’s next budget year in June.

He says he hopes Congress gets on board to save the American auto industry. He says his friends understand that to have a strong, solid economy, America must manufacture. It’s not clear to them why politicians are willing to back struggling banks with billions but balk at supporting industry.

Like Nirschl, Kevin Vest talks about a cycle of industrial life. It’s obvious to him. The haul truck driver furloughed with 600 fellow Steelworkers Feb. 13 from Freeport McMoRan’s Chino mine in New Mexico, where they extracted copper and molybdenum, a steel hardener, offers this story:

He read in a newspaper about a $100 million wind farm to be built near his daughter’s house in Arizona. The 30 wind turbines are to be manufactured by a company from India and the huge towers are to be constructed in Mexico. Vest wants to know why GE can’t make those turbines. If the American company did the work, they’d probably buy the copper wire for the turbines from an American company. And that company might buy the ore to make the wire from his mine – or some other downed U.S. copper mine, putting some Steelworker back to work. If there’s one cent of tax breaks or stimulus money in this wind farm, then it’s doubly outrageous to employ Indian and Mexican workers.

For the same reason, Vest always buys American cars. There’s copper wire in engines and molybdenum (molly) in other steel car parts. Buying that car keeps him employed, but also fellow Americans who make the glass and axles and all the other parts.

And he’s got news for people who deride the quality of American cars. He’s owned a series of them and driven them more than 150,000 miles with no problems. Now he has a 1997 Chevy Silverado with 160,000 miles on it that he’s planning to drive 1,400 miles to Iowa to visit relatives. His father has owned nothing but American cars, and when his brother bought a Nissan, told him to park it down the street. “When I got out of the service,” Vest said, “my dad tried a Toyota Celica GT. . . He looked at me and said he felt bad to have even test driven it. He bought a Ford Ranger pick up.”

At 54, Vest is without health insurance and behind on his credit card payments. He owes $2,000, and the collector is hounding him. He is hoping to get a job at a mine in Arizona, close to where his daughter lives. But that may not be possible until copper prices rise.

Workers like Vest, Nirschl, Dossett, Arends and me are taking the message to Washington D.C. this week for a teach-in to explain how crucial manufacturing is to the economy of this country and how essential manufacturing is to construction of automobiles in this country, not just the final product, but also all those products leading up to the final car — from glass for windshields to glossy paper for brochures. We are going to try to explain that 7.2 million paychecks are dependent on U.S. autos, including health care, education, service and other jobs, so that the politicians and policy makers understand clearly that the very idea that General Motors would ask for taxpayer dollars to ship more car manufacturing overseas – and then import the cars – is an insult and an affront to American workers – as well as an economic threat to the country. We are not going to allow American manufacturing to starve for support. But that support cannot go to pay for manufacturing overseas, or ever more American families will end up stretched like Arends, Dossett, Nirschl and Vest.

Leo W. Gerard

By Leo W. Gerard
International President

The proposition General Motors has presented to the United Auto Workers and American taxpayers in its latest restructuring plan is simple: You must pay for your own execution.

GM, which already took $15.4 billion in bailout money, wants another $11.6 billion and is offering in return this deal: It will close 16 of its American manufacturing plants, terminate 21,000 of its factory workers and double the cars it builds in low-wage Mexico, China and South Korea and ships back to the U.S. to sell.

There it is: GM is demanding that Americans pay to send their own jobs overseas.

In the world where corporate executives live, the one in which boards of directors grant CEOs multi-million dollar bonuses even after companies tank, maybe that’s not a perverse proposition.

But in the world where real Americans live, we’ve had enough of this crap. Decades of foolish tax and other federal policies that encouraged American manufacturing firms to throw Americans out of work and expatriate were bad enough. To expect American taxpayers to bankroll GM’s plans to layoff American workers and move their jobs overseas goes too far.

We’re taking a stand. It’s gotta stop here. The United Steelworkers (USW), the Alliance for American Manufacturing (AAM) and the Mayors and Municipalities Automotive Coalition (MMAC) are conducting an 11-state, 32-city protest bus tour. At each stop so far, hundreds of people have cheered our message: “Keep it Made in America.” And they’ve signed our petition calling for support of a simple idea: Buy it here; build it here.      We will present the petitions at a teach-in conference in Washington, D.C. on May 19 when we will explain to elected officials why GM’s plan fails America and why they must require GM to submit a new plan supporting American jobs.

As much as for the UAW, this is a life and death struggle for the USW, American manufacturing, and for millions of Americans in good-paying jobs. Without manufacturing, America is in danger of attempting to subsist on an economy based on nothing more than amorphous derivatives, credit default swaps and Ponzi schemes. The Steelworkers represent hundreds of thousands of workers whose jobs depend on the auto industry, from steelworkers who make the steel, to the rubber workers who make the tires, to the glass workers who make the windshields, to the paper workers who make the glossy pamphlets.

Altogether, more than 7 million paychecks depend on the U.S. auto industry, including healthcare, education, service, retail and other jobs. This bus tour is about preserving those jobs, all of those jobs.

In just the past eight months of this recession, caused in huge part by recklessness on Wall Street, this country has lost 1.2 million manufacturing jobs, according to the U.S. Department of Labor. GM cannot take tax dollars to slash more. Former U.S. Labor Secretary Robert B. Reich agrees. Here’s what he told the Washington Post, “. . . it raises fundamental questions about the purpose of bailing out these big companies. If GM is going to do more of its production overseas, then why exactly are we saving GM?”

It’s not as if it’s impossible for a U.S. auto company to manufacture here. Ford Motor Co., which is not taking any bailout money, is investing $500 million in retooling its Michigan Truck plant outside Detroit so that it can make small cars that it will sell worldwide, including its next-generation, battery-electric Focus. And Chrysler, which is getting bailout money, has made a deal with Fiat under which the Italian car company will manufacture a small car in one of Chrysler’s U.S. assembly facilities, which, along with other long-term commitments, will eventually create 4,000 U.S. jobs.

On the first day of the bus tour, I was joined by the Rev. Jesse Jackson, actor Danny Glover, the angriest mayor in the U.S., Virg Bernero of Lansing, and U.S. Sen. Debbie Stabenow, among others.

The Rev. Jackson drew cheers as he remarked that somehow we’ve given billions to the “banksters,” yet somehow we’re still hemorrhaging hundreds of thousands of jobs and homes each month. He called for a moratorium on foreclosures and plant closings, and I’m with him.

Bernero is tired of Wall Street describing his father, a retired auto worker, as a legacy cost. His father is a human being, a senior citizen, who worked hard every day of his life and returned home exhausted from an honest day’s work. Now, however, Wall Street thinks it’s fine to reduce him to a sub-human term and cheat him out of the retirement benefits he earned.

Bernero’s father made things, real things that could be touched, held in the hand – not derivatives, not figments of the imagination that turned out to have less than no value at all.

Now Wall Street and GM must be made to understand that Main Street isn’t going to take it anymore. We’re not going to continue allowing corporate America to outsource the American dream. Bernero said it right: “This is America’s fight.”

Join us. Sign the petition. We have no intention of buying our own noose. We intend to win this fight.

David Sirota

By David Sirota
Author of “The Uprising: An Unauthorized Tour of the Populists Revolt”

United Steelworkers President Leo Gerard likes to say that Washington policymakers “treat the people who take a shower after work much differently than they treat the people who shower before they go to work.” In the 21st century Gilded Age, the blue-collar shower-after-work crowd is given the tough, while the white-collar shower-before-work gang gets the love, and never before this week was that doctrine made so clear.

Following news that government-owned American International Group (AIG) devoted $165 million of its $170 billion taxpayer bailout to employee bonuses, the White House insisted nothing could be done to halt the robbery. On ABC’s Sunday chat show, Obama adviser Larry Summers couched his passive-aggressive defense of AIG’s thieves in the saccharine argot of jurisprudence. “We are a country of law – there are contracts (and) the government cannot just abrogate contracts,” he said.

The rhetoric echoed John Adams’ two-century-old fairy tale about an impartial “government of laws, and not of men.” Only now, the reassuring platitudes can’t hide the uncomfortable truth.

Last month, the same government that says it “cannot just abrogate” executives’ bonus contracts used its leverage to cancel unions’ wage contracts. As the Wall Street Journal reported, federal loans to GM and Chrysler were made contingent on those manufacturers shredding their existing labor pacts and “extract(ing) financial concessions from workers.” In other words, our government asks us to believe that it possesses total authority to adjust contracts at car companies it lends to, and yet has zero power to modify contracts at financial firms it owns. This, even though the latter set of covenants might be easily abolished.

According to New York Attorney General Andrew Cuomo, these allegedly inviolate AIG agreements promised bonus money the company didn’t have and were crafted by executives who knew the firm was collapsing, meaning there is a decent chance these pacts could be invalidated under “fraudulent conveyance” statutes. They also might be canceled via force majeure clauses allowing one party to rescind a pact in the event of extraordinary circumstances – like, perhaps, the collapse of the world economy. (Note: Business Week reports that corporations are already citing the recession as reason to invoke such clauses and nix their business-to-business contracts.)

But, then, those legal cases require a government that treats AIG’s shower-before-work employees with the same firmness that it treats the auto industry’s shower-after-work employees, not the government we have – the one that believes “the supreme sanctity of employment contracts applies only to some types of employees but not others,” as Salon.com’s Glenn Greenwald says.

Mind you, this double standard works the other way, too. Congressional Republicans have long supported the laws letting bankruptcy courts annul mortgage contracts for vacation homes. Those statutes help the shower-before-work clique at least retain their beachside villas, no matter how many of their speculative Ponzi schemes go bad. But for those who shower after work, it’s Adams-esque bromides against “absolving borrowers of their personal responsibility,” as the GOP announced it will oppose legislation permitting bankruptcy judges to revise mortgage contracts for primary residences.

Certainly, for all the connotations of fairness inherent in American politics’ “country of law” catchphrases, most of us know that the selective application of legal principles is as old as the Republic. However, lots of us are only now discovering that inequality is so pronounced that the time of day we bathe determines the enforcement and reliability (or lack thereof) of even the most basic contracts. We are just realizing that for all the parroting of America’s second president, we are ruled by a government of men, and not of laws.

David Sirota is a fellow at the Campaign for America’s Future. Find his blog at OpenLeft.com or e-mail him at dsdavidsirota.com.<–>

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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Leo W. Gerard

By Leo W. Gerard
International President

President Bush took to the TV Friday to announce that he wouldn’t walk past the financial crash of America’s Big Three automakers and do nothing to save their lives.

Refusing resuscitation, Bush said, would be irresponsible during the worst economic crisis since the Great Depression.

A week earlier, 31 GOP Senators, mostly from Southern states, voted to avert their eyes and allow American auto companies to die. They opposed $14 billion in federal loans for GM and Chrysler, revealing that their loyalty lies not with America, not even with their own states, but with South Korea and Germany and Japan.

They are Toyota Republicans.

Toyota has non-union manufacturing plants in Alabama, Kentucky, Mississippi and Texas – states whose senators led the GOP quest to slay the Big Three American auto manufacturers – Richard Shelby, R-Ala.; Mitch McConnell, R-Ky, and John Cornyn, R-Tx. Here’s the Republican from Mississippi, Sen. Thad Cochran, explaining why he’d vote against the loans, “Things have changed. It’s not just the Big Three anymore,” he said, pointing out that Nissan and Toyota employ more Mississippians than General Motors, Ford and Chrysler. But, he said, the foreign companies would not share “in the benefits of that automobile bailout program.”

No. But Mississippi did give Nissan and Toyota more than $650 million to entice them to locate in the state. GM, Ford and Chrysler didn’t share in those benefits, Sen. Cochran.

The Toyota Republicans are all for helping the rich with tax breaks and shelters, and they’re all for aiding foreign auto manufacturers with billions worth of tax forgiveness and government-paid infrastructure improvements.

But their disdain for the working class couldn’t be clearer as they organized defeat of loans to the Big Three under this command: “Republicans should stand firm and take their first shot against organized labor.”

They haven’t gotten the message sent out by the electorate in November. Voters rejected politicians prolonging the same old policy of protecting themselves and the rich. The nation’s voters want selfless leaders who will perform in the best interests of the entire country. They want change.

Clearly the allegiance of the 31 Republicans who opposed the loan to save GM and Chrysler is not with the United States of America, which would lose 900,000 jobs if just GM closed, and more than 2.1 million if the Big Three did. Those job losses would occur during the worst economic downturn since the Great Depression. In November, the 11th consecutive month of job losses, another 533,000 people were thrown out of work, swelling the pool of unemployed to 10.3 million. The Toyota Republicans were willing to increase that.

They voted against the interests of their own states as well. Consider what would happen in a few of those Southern States whose senators led the charge against preserving the Big Three. If just GM collapsed, Kentucky would lose 20,000 jobs; Alabama, 21,000; Georgia, 23,000, and Tennessee, 29,400, according to calculations by the Economic Policy Institute.

Sen. Cochran just didn’t think it was right for the U.S. government to aid its auto industry. But apparently he’s fine with foreign governments providing subsidies to the transplant automakers in his state. And, apparently, he’s okay with spending state and federal money to help foreign automakers locate manufacturing plants in the U.S.

Korean and Japanese automakers – including Nissan and Toyota with plants in Cochran’s Mississippi – benefit from manipulation of currencies by their governments, a factor that, according to EPI estimates, reduces their costs by between 10 and 20 percent. In addition, nationalized health care in countries such as Japan and Germany serves as a subsidy.

Also, the Toyota Republican opposed federal money for American companies but supported state and federal money for foreign auto makers estimated at $3.6 billion.
Shelby, for example, got $3 million in federal funds to improve roads near the Hyundai plant in Alabama after the state gave $250 million to the Korean automaker.

Shelby opposed loaning one federal cent to the U.S. automakers, though, telling “Face the Nation” that they should die: “Companies fail every day and others take their place. . . There’s not a bank in this country that would loan a dollar to these companies.”

But for foreign auto companies, his home state of Alabama couldn’t provide enough taxpayer cash – more than three quarters of a billion. In addition to the quarter billion it gave the Korean automaker, it handed another quarter billion to German Daimler for a Mercedes-Benz plant, nearly a quarter billion to Japanese Honda and $29 million to Japanese Toyota.

Similarly, Jim DeMint, another senator who led the Toyota Repubicans’ rebellion against the loans to GM and Chrysler, told the “National Review” recently, “Government should not be in the auto industry.” Yet, his state, South Carolina, got into the auto industry with nearly a quarter billion — $230 million – in gifts to a German auto company – BMW.

The same is true in Kentucky, home of Sen. Mitch McConnell, who said of loans for the Big Three, “Government help is not the only option. It’s not even the best option.” But government help was fine when Kentucky was providing grants for Toyota, which got $371 million from taxpayers since 1986.

It’s clear that the real problem was not a philosophical one. All of these lawmakers were willing to flick free market capitalism out the car window like a cigarette butt if their states could use taxpayer dollars to buy a foreign auto plant. No, what really gags them about the Big Three is that they pay good, middle class wages and benefits as a result of contracts with the United Autoworkers.

Repeatedly, the Toyota Republicans insisted that UAW members bear the brunt of the cost of the bailout. The senators insisted that UAW wages be lowered to match those of non-union auto workers at foreign-owned manufacturers. Toyota Republican Sen. Bob Corker of Tennessee, wrote an amendment to the bailout bill that would have required UAW members to accept pay cuts by a specific date in 2009. When Republicans defeated the bailout, DeMint blamed that on the union, saying, “It sounds like the UAW blew up the deal.”

The Toyota Republicans then conferred the American auto industry to bankruptcy. They said they favored bankruptcy because it would enable the Big Three to break pledges made in labor contracts and promises for health care and pensions made to retirees. The Toyota Republicans want the wages of American workers pulled down. To them, UAW members making an average of $28 an hour, accounting for less than 10 percent of the cost of a car, are earning just too much money.

The Toyota Republicans did not, however, make that claim about the white collar workers on Wall Street who got this country into the financial fiasco that led to the dire circumstances for automakers. And not just for American ones. Domestic car sales declined by 40 percent last month, but Asian producers’ sales dropped too – by 35 percent.

The average salary of white collar, Wall Street employees — workers in “securities, commodity contracts and investments” — is four times that of those laboring in the rest of the economy. Remember, these are the guys who are so smart that they took down Bear Stearns, Fannie Mae, Freddie Mac, Washington Mutual, AIG and Lehman Brothers – in less than a year – and ultimately required $700 billion from taxpayers to bail them out.

The top executives of Wall Street banks receive billions of dollars in year-end bonuses. The New York Times detailed those at Merrill Lynch in a story Dec. 17 entitled “On Wall Street, Bonuses, Not Profits Were Real.” In 2006, the firm gave its top executives between $5 billion and $6 billion in bonuses, which means, for example, a trader earning $180,000 a year got a $5 million bonus.

Merrill’s $7.6 billion earnings that year turned out to be bogus. The company’s losses now have exceeded all of the profits it earned over the previous 20 years. To prevent collapse, it sold itself to Bank of America in September. But then, Bank of America took $15 billion of that $700 billion in bailout money. Despite the gift of taxpayer dollars, the CEO of Bank of American has not publicly announced that he will decline a bonus, and Bank of America plans to tell Merrill Lynch workers the amounts of their bonuses beginning Friday, the New York Times reported Thursday.

When those Toyota Republicans voted in favor of providing $700 billion for Wall Street — including both of Tennessee’s senators, Bob Corker and Lamar Alexander; Kentucky’s Mitch McConnell; Georgia’s Saxby Chambliss and Johnny Isakson; South Carolina’s Lindsey Graham, and Texas’ Kay Bailey Hutchinson and John Cornyn – none asked for high-paid white collar workers to take pay cuts or give up their million dollar bonuses. There was a feeble attempt to limit the pay of chief executives, but that applied only to firms that received federal money under one particular method, and the treasury decided not to hand out the $700 billion that way.

And no lawmaker asked white collar workers or executives who got billions in bonuses based on false profits to return them.

But those Toyota Republicans want middle class, blue collar workers who don’t get year end bonuses, who don’t celebrate with five-figure dinners, to take wage cuts. They want autoworker pensioners to lose the monthly benefits they earned with a lifetime of labor.

And at no time did those Toyota Republicans suggest that they should cut their own salary or top-notch, government-paid health benefits or pensions. Like the reckless speculators on Wall Street, Congress bears responsibility for the crisis condition of the American economy because it deregulated financial markets.

In 2002, during a downturn in Japan, the House of Councillors reduced the pay of Diet lawmakers by 10 percent, and ended the transportation allowance, portrait-painting and  pension given senior lawmakers.

If the Toyota Republicans believe the Japanese way of pay is so great for autoworkers, they should first impose it on themselves.

Leo W. Gerard

By Leo W. Gerard
International President

In 1941, car manufacturer Willys-Overland demonstrated the strength and sturdiness of its new Army scout vehicle – the Jeep — to Congress by driving it up the U.S. Capitol steps.

Invented and manufactured in the USA, the Jeep would become an icon of American ingenuity, durability and mechanical ability. Soldiers loved the lithe little vehicle for its uncanny capacity to go anywhere. The New York Museum of Modern Art would exhibit it in 2002 and describe it as a masterpiece of functional design. Now it’s 68 and constructed by United Auto Workers for Chrysler in Toledo, Ohio.

Disregarding Jeep’s help in securing this country against fascists, conservatives like former Republican Massachusetts Gov. Mitt Romney are calling for its execution. Romney and his conservative compatriots want Congress to deny Chrysler, GM and Ford federal loans so that the Big Three go bankrupt. Using false wage information, these conservatives have persuaded the public that auto workers are overpaid. That has resulted in polls showing 61 percent of Americans oppose aid to the Big Three. And now Senate Majority Leader Harry Reed is saying he fears he can’t muster the votes necessary for a loan.

Congress cannot let the Jeep die in bankruptcy. Congress must not fail the U.S. auto industry. Doing so would be abandoning the core of the American economy – manufacturing. America is not built on Wall Street’s credit default swaps and collateralized debt obligations.  Its wealth and culture are built on and built by middle class workers who construct actual products like steel beams, tires and Jeeps, who operate and repair machines that pull oil and coal out of the ground, who log trees and man the mills that convert them into paper.

Just after the end of World War II, when the Jeep first became a civilian vehicle, 35 percent of workers belonged to labor unions. That’s significant because union members earn 30 percent higher wages than non-union workers and are 59 percent more likely to have health insurance. Those better wages and benefits helped create the great middle class in America. Workers earned enough money to buy refrigerators and homes and cars and, later, college educations for their children. The money they earned and spent churned through the economy and kept it humming.

But over the next half century, union membership declined. So it is only about 12 percent now. Business and industry groups intent on the extinction of unions can claim credit for a good part of that. These are the same organizations that are today misleading the public about auto worker wages, claiming they make $70 an hour when it’s really $28. They’re the same ones advocating auto company bankruptcy because it would allow the Big Three to renege on their contractual promises to workers and to retirees. They criticize auto workers for making a decent living, $28 an hour plus health benefits and a pension. And they denigrate the companies for being decent corporate citizens and fulfilling their health care and pension promises to retirees.

Over the past half century, multinational corporations have shipped a significant number of those good-paying union jobs overseas. With the help of wrong-headed federal policy that encouraged it, the U.S. lost an average of 12,000 manufacturing jobs per month since 1980. Since May this year, the average has been nearly 60,000. Multinational corporations sought cheap labor and lax environmental regulations in places like China and Indonesia, in what has become an international wage race to the bottom. Americans supposedly benefit from the import of cheap goods. But unemployed workers can’t afford to buy them.

Along with the decline in jobs and union membership came a reduction in the rate of personal savings and an increase in household debt. The financial situation of the typical American family became increasingly precarious even as, over the past 25 years, the very richest one tenth of one percent accrued more and more wealth. These were the kind of guys involved in short-selling – a practice through which a person owns nothing but makes money by betting that a stock will lose value – and by selling sub-prime mortgage-backed securities. These were the kind of know-it-all Wall Street risk takers who gave themselves $30 billion in bonuses last Christmas.

You know what happened next. Three months after those bonuses the initial investment bank fell. Bear Stearns got the first big federal bailout in March. Then other financial institutions and a gigantic insurance company involved in the subprime speculation toppled: AIG, Washington Mutual, Fannie Mae, Freddie Mac, and Lehman Brothers. Congress quickly offered up $700 billion to save financial institutions, and giant Citigroup took $25 billion of that in October and another $20 billion in November trying to stave off bankruptcy.

Congress used taxpayer dollars – working people’s money – to save those year-end-bonus awardees on Wall Street. Then it stiffed the working stiff. So far, there’s been talk, but no actual help for millions facing foreclosure. And while unemployment is rising, Congress is dithering over the Big Three’s request for a loan that could save millions of auto worker and support industry jobs.

Unemployment increased to 6.7 percent in November, after 533,000 people got thrown out of work in just those 30 days. Over the past 12 months, 2.7 million people lost their jobs. And finally, what every one of them already knew was officially declared earlier this week – the country has been in a recession for a year.

This nation clearly can’t survive on what is produced by Wall Street – reckless speculation. That took America down.

This country should not be spending all of its financial resources salvaging those who destroyed the economy. America needs to invest in what works – its people. Congress must provide mortgage relief. But, most urgently, it’s crucial that we re-invigorate our manufacturing base. America must be able to actually produce products. Swapping paper is not enough to sustain a strong and stable middle class that will save money and buy cars and homes.

The Jeep helped us win World War II. What has Wall Street actually done for you? Saving the Jeep – and Chrysler, GM and Ford – would be a symbol that America understands manufacturing is key to a strong economy and financially brawny workers.

Jeep owners should let Congress know they’re prepared to drive up the Capitol steps to support loans for the Big Three and investment in American manufacturing.

Leo W. Gerard

By Leo W. Gerard

International President

Congress drove the Big Three CEOs out of Washington, D.C. last week, ordering them not to return with their tin cups until they could guarantee their companies would be viable after a $25 billion bailout.

Just days later, Citigroup, a bank that had already received a $25 billion bailout in October, held its hands out for more. Within 48 hours, federal officials approved giving the bank another $20 billion and providing backing for $306 billion in its risky loans and securities. Even though Citigroup was failing just weeks after getting its first government bailout, Congress didn’t subject its CEO to the public lecturing and demands for business plans that it did the Big Three.

The message here could not be more clear: Washington will bailout out those who shower before work but not those who shower afterwards.

Washington, D.C. is a white collar town. President Bush and members of Congress understand their suited counterparts on Wall Street. In fact, several prominent figures in the banking industry – including Citigroup’s Robert Rubin, a former Secretary of the Treasury, and UBS Investment Bank’s Phil Gramm, a former Texas Senator, – worked in Washington first, aiding and abetting the current crisis by de-regulating the financial markets and everything else they could.

Detroit, by contrast, is a blue collar town. It’s a place where workers at the Big Three earn thousands of dollars — the average production employee making $67,480 last year — not hundreds of thousands, and certainly not Wall Street’s millions. The Citigroup CEO credited with overseeing the bank’s ill-fated investments, Charles O. Prince III, was forced out a year ago as the bank’s massive sub-prime losses began mounting but the board of directors still gave him a $12.5 million bonus, $68 million in salary and accumulated stockholdings, a $1.7 million pension, an office, and a car and driver for up to five years. Heading the board executive committee at that time was Rubin, who would briefly serve as chairman and receive $17 million in compensation as the bank declined further into financial ruin.

Detroit is a place where workers are unionized; Wall Street is not. And right-wing Republicans and conservative pundits have made it clear they want the union workers to suffer. They want federal aid denied to the Big Three so that the firms go bankrupt. Then the companies can renege on pensions they guaranteed to retirees and can break salary and benefit promises to workers in current contracts.

Senate Minority Whip Jon Kyl writes on his web site that Chapter 11 bankruptcy would be best for the Big Three because it would enable them to break their pledges to retirees receiving health care and other benefits earned over decades of service, what he calls “legacy debts”: “Like many other industries, including the airlines, the goal under Chapter 11 is to gain temporary protection, reorganize in a way to reduce legacy debts, and emerge as a more viable and competitive company.”

Conservative columnist George Will, similarly, wrote: “Do nothing that will delay bankrupt companies from filing for bankruptcy protection, so that improvident labor contracts can be unraveled. . .” Will’s fellow Washington Post Columnist Martin Feldstein blamed all of Detroit’s problems on the unions, writing that the basic reason the Big Three can’t compete: “is labor costs imposed by union contracts.” He said if Congress gives the Big Three a loan, it must require “that the unions accept reductions in wages and benefits to levels that allow the firms to compete with imports and with non-union U.S. auto firms. The trustees of retiree benefits should be required to accept reductions in those benefits.”

They want the unions broken. They want retirees’ benefits slashed and union workers’ wages and benefits cut, which, of course, will enable the foreign auto makers – whose U.S. plants are non-union – to reduce their wages. It’ll be an all-American race to the bottom, rather than the preferable opposite, where workers and retirees are treated with dignity and respect for their hard labor.

None of those conservatives, however, is calling for Citigroup’s Charles O. Prince III, who took down Citigroup at a cost of untold billions to taxpayers, to return his $1.7 million pension, office and car and driver.

Unlike Citigroup and the other Wall Street banks, which have their very own inside-the-beltway apologists in the form of Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson to argue their case before Congress, the Big Three CEOs had to appear before Congress to plead for themselves.

There, legitimately, lawmakers grilled them about flying to the hearings in expensive private jets and about their multi-million dollar compensation packages. Still, none of the lawmakers has asked Citigroup’s CEO, Vikram S. Pandit, to take $1 for next year’s compensation, as they did the auto executives. Nor have they asked any of the CEOs from the nine banks that shared $125 billion in bailout money in October to sell their private jets, as they did the auto executives.

Conservatives also argued that the Big Three should be left to die because in a free market, that’s what happens to poorly operated companies offering inferior products.

Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, said, for example, “I do not support the use of U.S. taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers.”

Shelby made this accusation while part of the Congress that ran up the largest federal deficits known to man and allowed Paulson to broker a deal to sell troubled Wachovia bank to troubled Citigroup – a bank that so far got two bailouts, the first of which arriving within weeks of the failed Wachovia marriage.

Shelby, of course, has a lot to lose if Michigan does well. His home state of Alabama gave tax breaks to foreign car companies Mercedes-Benz, Honda and Hyundai to locate factories there – hardly a free market approach.

So, like many conservatives, he twists reality to suit his circumstances. He’s right that American car companies made mistakes. In October, GM’s sales were off 45 percent from the year before, Chrysler 35 percent and Ford 30. But he’s wrong about that being a result of mismanagement alone, well, unless he thinks his precious foreign car companies made the same mistakes. Toyota was down 23 percent, Honda 25 and Nissan 33 for the same month.

And if aid denial is based on bad products, Wall Street definitely should be the first refused. Its firms built and sold what are now being called “toxic securities,” products so defective that they took down banks, the U.S. economy and international financial stability – creating the deepest economic crisis since the Great Depression. Now that’s mismanagement for you!

When the representatives of blue collars went to Congress hat in hand, lawmakers insisted that to get loans automakers would have to present viable business plans. Congress didn’t impose similar conditions, however, when Bernanke and Paulson went to Congress seeking grants for reckless white collar firms.

In fact, they gave $125 billion to nine big Wall Street banks in October, contending the direct infusion of money would melt frozen credit. It didn’t. The firms apparently didn’t lend the money, and the deal didn’t require them to. There’s a viable business plan for you!

Paulson and Bernanke gave insurance giant AIG $85 billion. And when that didn’t work, they forked over more until it all added up to $150 billion. Now, it’s not clear that will be enough to resolve AIG’s problems. Sen. Jon Kyl, the Republican from Arizona who voted for the Wall Street bailout, didn’t demand a viable business plan for AIG or Citigroup, yet said this about the auto industry request: “There’s no reason to throw money at a problem that’s not going to get solved.”

This year, as Wall Street’s recklessness destroyed the American economy, a million Americans lost their jobs. It’s no wonder no one is buying cars. It’s not just that they can’t get credit. It’s also that they don’t have money to spend or they’re afraid to spend the money they have.

Some of those furloughed had been on Wall Street. Citigroup announced recently it would cut 52,000 jobs by early next year. But of the million jobs lost so far, 100,000, or one in ten, have been auto workers or employees of auto suppliers. Unemployment in Michigan is 9.3 percent – while in the rest of the nation it is 6.5.

Just like Paulson who couldn’t see that Citigroup was too weak to buy Wachovia, the conservatives intent on denying the Big Three loans are shortsighted. They don’t see that 2.3 million jobs in and dependent on the auto industry could be lost. They don’t see the effect of slashing the wages and benefits of people who get their hands dirty for a living.

It would mean even more mortgage foreclosures and even more credit card debt unpaid to those struggling banks. It would mean the Big Three defaulting on the $100 billion they owe to those weak banks and bondholders, some of which is secured, some not.

It’s the big circle of economic life. If Congress spits on the autoworkers and the millions whose jobs depend on the Big Three, the lawmakers may find themselves using more and more taxpayer dollars to scrub new blood off Wall Street.

Dean Baker

By Dean Baker
Co-Director, Center for Economic and Policy Research

Henry Paulson’s main claim to fame is getting just about everything wrong in his tenure as Treasury secretary. However, he now stands to gain lasting notoriety as the person who destroyed the domestic U.S. auto industry, and the economies of the Michigan, Ohio, and Indiana along with them.

The story is that the big three automakers are struggling with record sales declines. This collapse in car sales in turn is the fallout from the collapse of the Greenspan-Bernanke housing bubble. While the domestic automakers have been hit hardest, all manufacturers have seen sharp drops in sales. Toyota’s sales were down 23.0 percent compared with its year ago levels. Honda’s sales were down 25.2 percent, and Nissan’s sales fell 33.0 percent.

These huge plunges in year over year sales by the world’s top car manufacturers can’t be blamed on the industry. Responsibility for this plunge lies with Mr. Paulson and other economic policy makers, and their Wall Street friends.

The basic arithmetic is simple. General Motors saw its sales fall by 45 percent compared to its year ago levels. That means its revenue has been cut nearly in half. While it has made some reductions in employment and can ease back its production, there is no way it can reduce its expenses by the same amount. Many of its expenses, like interest costs, property taxes, and health insurance for retirees are largely fixed independent of short-term fluctuations in output.

As a result General Motors is now losing close to $2 billion a month. At this rate, it will burn through its capital in around 2 months and be forced into bankruptcy. Chrysler and Ford are in somewhat better shape, but the basic story is the same. Furthermore, the fallout from a GM bankruptcy could sink Chrysler and Ford as well, as common suppliers shut down and credit for the industry vanishes and customers flee to manufacturers with longer life expectancies.

There have been analysts, presumably including Henry Paulson, who think that bankruptcy is a reasonable solution for the auto industry. This is yet another of Mr. Paulson’s famous mistakes. (Remember, this guy missed the housing bubble completely, thought its impact would be small when it burst, didn’t see a problem with letting Lehman Brothers fail, and thought the TARP [RIP] was a good idea.)

Bankruptcy would allow GM, Ford and Chrysler to more quickly cut back their bloated dealer networks and adjust their car lines with current market demand, as its proponents claim. Bankruptcy would also void union contracts, which will thrill the millionaire bankers by forcing workers earning $57,000 a year to take pay cuts. And, all those lazy retirees will see the health care benefits that they worked for taken away.

That’s the good part. Realistically, bankruptcy is likely to kill all three manufacturers, taking down much of the region’s economy with them.

First, some folks may recall the credit crunch. Lenders are extremely reluctant to take risks. In the absence of government guarantees, it is unlikely that any banks will step forward to provide GM and the others the money they need to keep operating in bankruptcy. In other words, bankruptcy is very likely to mean a complete shutdown of the Big Three.

Let’s say that the anti-bailout crowd suddenly gets a soft spot and decides to guarantee loans to the firms operating under bankruptcy protection. There is still the problem of selling cars. Customers will be very reluctant to buy cars produced by a manufacturer in bankruptcy, since they won’t know if a dealer and supplier network will exist in 3 or 4 years so that they can get their car serviced and buy replacement parts.

While people don’t mind flying an airline in bankruptcy, buying a car is to some extent an investment in the company. Many fewer customers will be willing to invest in a bankrupt car company.

But let’s assume that the investment financing is arranged and that customers are still willing to come through the doors. The bankruptcy itself is still likely to be devastating to the economies of Michigan, Ohio, and Indiana, the three states where Big Three employment is concentrated.

Bankruptcy protects the firm from its creditors. The creditors of these firms are thousands of suppliers who are heavily concentrated in the same states. In most cases, the Big Three manufacturers were their major customers. These suppliers have already been squeezed by falling demand and lower product prices. If they cannot collect the money owed them by the Big Three, there will be a whole chain of secondary bankruptcies.

The impact in these states is potentially huge. According to the Center for Automotive Research, auto related employment accounts for almost 7 percent of total employment in Michigan, 6 percent in Indiana, and 5 percent in Ohio. Losing 7 percent of total employment in Michigan would be equivalent to losing more than 9 million jobs nationwide.

That is Mr. Paulson’s latest plan for the auto industry and these three states. This will be quite a legacy.

There is one last point that should really gall just about everyone. Mr. Paulson has argued that he does not have the legal authority to use the money appropriated for TARP for bailing out the auto industry.

This claim is outrageous for two reasons. As many of us who opposed the TARP argued, it gave Paulson a virtual blank check, and that is pretty much how he has interpreted it, using the money to bail out a wide range of non-bank institutions.

The other reason why this is so galling is that this is an administration that has taken pride in claiming virtually unlimited powers in a wide range of areas, including the conduct of war and holding of prisoners without charges or trial. It would be incredible if they allow Detroit to sink because they claim that they don’t have the legal authority to save it.