Stop the Bailout, Create More Jobs

Jim Lindgren looks at the other side of things: If we're subsidizing people to work in noncompetitive industries, aren't we also keeping them from working in competitive ones?

He also notes the hidden hand of the government, once again making things worse:

As with so many problems, it is unlikely that GM would have made such foolish deals if the government had not forced it to bargain with striking workers, rather than simply replace them. As with mortgages in the banking industry, the federal government pressured businesses to make deals that were economically bad for the businesses involved.

If an industry is contracting and there is an oversupply of productive capacity, then the worst thing we could do is prop up that industry by taking jobs away from the healthier portions of the economy (including better run automakers). If government planners really were a lot smarter and better planners than business people (they aren’t), then the government’s strategy should be to try to drive bad businesses out of business quicker, not try to destroy the healthy companies by propping up the dying companies.

The argument that the auto unions and the auto executives have already made sufficient givebacks is not credible. And as the Congressmen pointed out, the Detroit executives could have flown to Washington on commercial flights (in first class), instead of in private planes. If a business is failing, union auto wages should be priced well BELOW what nonunion auto workers make, not well ABOVE what nonunion workers make. So until the unions have given back everything above the market value of their labor, they haven’t given back nearly enough. I don’t know enough about what goes into the $72 compensation rate, but perhaps the parties should consider having all current employees, both management and union workers, take a 50% pay cut.

Top executives should take a bigger cut than that. For one thing, they've failed. For another thing, leaders lead.

posted by Ace at 03:34 PM

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