# Employer-based Health Care



Open thread on the auto bailout (updated)

I opposed the massive Wall Street bailout rushed through Congress this fall, but if the government can provide hundreds of billions of dollars to financial firms with no oversight, it’s only fair that $13.4 billion of the Troubled Asset Relief Program be used to prevent General Motors and Chrysler from collapsing:

“These are not ordinary circumstances,” Bush said at the White House today. “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”

The cost of letting automakers fail would lead to a 1 percent reduction in the growth of the U.S. economy and mean about 1.1 million workers would lose their jobs, including those in the auto supply business and among dealers, the White House said in a fact sheet.

‘Necessary Step’

President-elect Barack Obama endorsed the plan, calling it in a statement a “necessary step” to avoid a major blow to the economy.

“I do want to emphasize to the Big Three automakers and their executives that the American people’s patience is running out,” Obama said later at a news conference. “They’re going to have to make some hard choices.”

The United Auto Workers are “disappointed” that Bush added “unfair conditions singling out workers,” the union’s president, Ronald Gettelfinger, said in a statement.

“We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed,” Gettelfinger said.

This diary by TomP has a lot more detail and reaction to the bailout deal.

It would be grossly unfair for only the workers to be asked to sacrifice to make these companies profitable. Some Republicans, notably Senator Bob Corker of Tennessee are explicitly trying to drive wages in union shops down to the level paid to non-union employees of Japanese automakers in the southern states.

But it’s no coincidence that the standard of living in states with more union workers is higher than the standard of living in the deep south.

I don’t know enough about the details to know whether this bailout can save GM and Chrysler, but failing to act was not an option with so many jobs on the line.

By the way, all three U.S. automakers have made a lot of mistakes over the years, but kudos to management of Ford Motors for locking in a large credit line while credit was easy to obtain. In case you were wondering, that’s why Ford is not currently on the brink of collapse, begging for a government bailout. Nevertheless, I’m sure Ford will have to do a lot of restructuring to adapt to this tough economy, just like GM and Chrysler. I can’t imagine 2009 will be much better for new car sales than 2008 was.

Chrysler has already idled all of its plants for a month. Ford is extending the holiday break at most of its plants until January 12, and GM plans massive production cuts next year.

Those actions may be necessary to save the automakers, but they will have disastrous ripple effects in all the communities where the idled factories are located.

Some of these problems could have been avoided if Congress had fixed our broken health-care system years ago. This report is more than two years old:

The competitive disadvantage of U.S. automakers resulting from the absence of a national strategy on health care financing is becoming increasingly clear. GM faces legacy costs (health care plus pensions for retired workers) of $1,500 per car. Together, the Big Three automakers support roughly 800,000 retirees, compared to less than 1,000 for foreign-owned competitors in the United States.

Clearly the failure to address America’s health care finance problems has become a major competitive disadvantage for our economy as a whole and has placed U.S. workers in a diminished bargaining position for wages and job security in relation to the rest of the industrialized world. Targeting retiree health costs offers an opportunity to provide strong incentives for industry action on fuel savings investment and reduces the competitive disadvantage.

Share any relevant thoughts in the comments.

UPDATE: Why I am not surprised to learn that banks like Goldman Sachs and Morgan Stanley are giving out large bonuses to some executives after receiving billions in bailout money from the federal government?

Note also that George Bush attached all kinds of conditions to the loans for automakers, while major financial institutions just got free money with no oversight.

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