It's Time To Impound GM

OBAMA NEEDS TO BEGIN MAKING THE UNPOPULAR, TOUGH DECISIONS
If you view a laid-off employee as the top of their very own food chain, as the Los Angeles Times posits today, then their activities, or lack thereof, would ripple down to the butcher, the baker and the candlestick maker.

In a story today, the Times used the example of a Southern California man whose software deal fell through, which then forced him to lay off his employees. In other sections of the article lay-offs meant consumers put off haircuts and skimped here and there to stretch their budgets.

Of course, there's an unquestioned rationale to this phenomenon, but isn't this the case General Motors and the United Auto Workers are trying to pass as reason for the government to keep it afloat? The GM question is indicative of many of the financial dilemmas facing the Obama administration. How can a company and, by extension, an industry so steeped in the American culture like the automotive business be allowed to flounder? Yet, when does continually propping up GM as a practical long-term policy become a lost cause?

CBS News today wondered what bankruptcy would likely mean to workers. The decision would likely trickle down to the closing of part makers and the shuddering of car dealerships around the country. That means, thousands of factory workers, mechanics and car salesmen added to the unemployment rolls. On the other hand is it wise to give another $15 billion or so to GM just to keep the lights on when it is likely another $20-$30 billion may be needed a few months from now.

President Obama ran on a platform preparing Americans to tighten their belts and begin making the tough decisions. He has yet to make those decisions. Although, maybe we should give him some time since according to a well-researched article in the New York Review of Books that chronicles his first month in office, Obama has spent an inordinate amount of time simply turning back many of President Bush's horrendous policies. Yet, on the economy, the Treasury Department has done little to force the banks and the entire financial system to concede one point similar to the circumstances around GM.

Instead of holding these auto-related industries in place while they lie precariously on the edge to oblivion, how about pulling the plug on them while there is time for the government to restructure the work force in an orderly manner. The New York Times ran a chilling front page article last Friday that reinforced this notion that the workforce is in many cases, obsolete. A chief economist at Wachovia Bank said, "These jobs aren’t coming back.” Isn't that what the foreman in the Bruce Springsteen song "My Hometown" said?

"Foreman says these jobs are going boys and they ain't coming back to your hometown," sang The Boss. Ironically, those lyrics were written during the equally disastrous 1981-82 recession.

There would be repercussion other than in employment. Sure, innovation would suffer. Plans for the vaunted Chevy Volt would gather dust, but who would be able to afford a $35,000 green car without a job or reliable financing available. We can take the hit now and hope for the recovery to not just get us back on our collective feet, but in far better position to dominate the marketplace for the next 30 years.

San Francisco Mayor Gavin Newsom said last week, the voters showed that the last 30 years of conservatism was a failure, yet the decisions this president is making on behalf of liberalism will define the next 30 years either positively or negatively for another generation of American political thought. Now is not the time for short-term thinking.

Is GM About To Lead The Nationalization of Medicine?

OBAMA ADMINISTRATION TELLS GM TO RESTRUCTURE
American economic monoliths tend to steer the wheels of commerce by their sheer size and influence. A state like California can enact sweeping environmental laws that leads other states to do the same, and when a company like McDonald's acquiesces to posting nutritional information, others follow. As General Motors and the United Auto Workers iron out a deal involving its vaunted health care challenges, will its decision change how others do business and the debate due to commence in Washington?

As a part of GM's vast restructuring plan, the automaker is negotiating with the UAW to change the terms of the 2007 agreement that created a $35 billion trust fund for employee health care. To justify additional government bailout dollars, GM must show Washington details for future plans. The New York Times noted, GM "has to address how a company that lost more than $20 billion last year can afford $5 billion a year in medical bills."

Matt Miller, whose book The Tyranny of Dead Ideas identifies the role of companies paying for employee health care benefits as one of those mortally-wounded ideas. Instead, he believes the government should carry the burden like every other nation in the industrialized world. In his book, Miller writes:

The second force — The Rush for the Exits — is corporate America's desire to stop providing health care and pensions to its employees. To be sure, these costs are soaring in ways that seem unsustainable, especially when competing firms in other nations bear fewer of them. Still, American business leaders act today as if their search for an "exit strategy" on benefits is the end of the conversation. What happens to the millions of workers who are left unprotected if companies simply walk away?

Miller told NPR last month that the government would need to raise taxes to foot the bill, but with Baby Boomers retiring, taxes will increase anyway. "We need to tax ourselves more smartly ... [by] cutting taxes on things like payrolls, which hurt lower-income workers and kill jobs, and raising taxes on dirty energy, which we want to cut back on because of our environmental goals," said Miller.
The Obama administration may be signaling a willingness to allow GM to tinker with health care, according to statements made by his adviser David Axelrod and the naming of Ron Bloom as a key adviser to the Treasury Department. Bloom, according to the Wall Street Journal, is known for forcing parties to make significant concessions.

If GM is able to restructure its health-care responsibilities under the eyes of the White House, health-care reform critics and proponents alike will be wondering whether it could be the harbinger of the wholesale transfer of health care from private industry to the public sphere in the future.