Vox Nova

27 Responses to “Pro-Wall Street, Anti-Main Street Caucus”

1. Maximos Says:
   December 12, 2008 at 10:38 am

   Few things are as repugnant as the spectacle of Republican Senators from states that have given away the farm, so to speak, in order to induce foreign manufacturers to site facilities in those states effectively representing the interests of those corporations as over against the interests of broad swathes of the working class, other states, and, insofar as manufacturing is critical to economic vitality in a country as large and diverse as the US, the nation as a whole (chronic trade imbalances, and thus, American indebtedness, cannot be rectified except by the production of tradeable goods).

   While large percentages of the American middle and working classes have been bamboozled by GOP propaganda for years, this ought to be perceived for what it is: A giant middle finger, a tremendous “F— YOU” screamed in the faces of middle America, particularly in the MidWest.

   The GOP is sooooo over, preferring ideology and a stale anti-labour brand of politics to efforts to stabilize a cratering economy. The devil take them.

2. radicalcatholicmom Says:
   December 12, 2008 at 10:48 am

   Even my conservative friend from Texas supports helping the Midwest. But then she is a Catholic so maybe that explains it.

3. blackadderiv Says:
   December 12, 2008 at 10:55 am

   Against the Midwest?

4. non aligned Says:
   December 12, 2008 at 11:13 am

   At least be aware of the rationales given by thy enemies:

   A…. that the financial firms affect credit to all businesses across the board (a car business does not)….so that it is important to help the financial firms only because they are the 1st floor upon which rests the whole above edifice of the various individual businesses like cars, computers, televisions etc.

   B…. the labor agreements in the midwest car companies require low paid workers like waitresses in Kentucky and bank tellers in New Mexico to effectively pay a worker tax for car workers who have benefits far exceeding the low paid workers of this country. Imagine a waitress who has no medical nor dental nor pension paying over a thousand extra per car throughout her lifetime so that workers in the midwest can have all the benefits that she will never see. The market is weeding out that reality and a bailout would prevent the market from listening to the votes of millions of low paid workers who are voting for the corolla or civic. The US does not have benefits across the board for all workers and leaves it to the market which is trying to tell the UAW no….but a bailout would silence that voice.

   I may not be back to answer questions…no longer have the internet…..had to give the money to GM.

5. Magdalena Says:
   December 12, 2008 at 11:16 am

   As someone living in the Cleveland area I can tell you the reason the OH reps are voting the way they are is in response to constituent concerns. There is a LOT of bailout fatigue here. Talking to my neighbors the constant line is, “where does this end?” and “we already bailed out the banks to the tune of $700 billion and how the hell did it help? I’m losing my house. Where is my bailout? I guess I don’t have millions of dollars to spend lobbying Congress the way GM does.” Although the Cleveland area stands to lose a lot in an auto bankruptcy (including my neighboring town of Twinsburg) there is also the palpable sense that anyone dumb enough to go work for a steel or manufacturing company in America in the 21st century deserves whatever they get. Many, many industries in this area are bleeding jobs and people don’t think auto suppliers should be the only ones to get a helping hand.

   If President Bush steps in and opens up the treasury funds to GM, which at latest report it appears he will, I wonder how much credit he’ll get?

6. steve Says:
   December 12, 2008 at 11:18 am

   Interesting read on the events, not sure that I reached the same conclusion. The real question, why didn’t the overwhelming (albeit not filibuster proof) majority call the vote and see if the minority really blocked it? Is Harry Reid really that unsure of himself? There are at least 3 if not more Republicans who would have fled the filibuster route. My read is that the Democrats didn’t want to go it alone since they realize the plan is not that solid.

7. Bill H Says:
   December 12, 2008 at 11:19 am

   Oh humbug. So, presumably if you voted against the financial bailout but for the auto bailout, then logically it’s because you hate effeminate blue-state New Yorkers, right? How many people on this list have voted to subsidise ethanol, which is ripping off the rest of the world in order to benefit Midwestern famers?

   Apparently Sen. Shelby wants New York to sink into the ocean, since he opposed the financial bailout as well.

8. Maximos Says:
   December 12, 2008 at 11:28 am

   Imagine a waitress who has no medical nor dental nor pension paying over a thousand extra per car throughout her lifetime so that workers in the midwest can have all the benefits that she will never see.

   And this is structurally different from the higher levels of taxation prevalent in other industrial nations such as Japan and Germany, levels of taxation that fund more generous health and pension programmes that keep these costs off of the books of the manufacturers – exactly how?

9. S.B. Says:
   December 12, 2008 at 11:34 am

   [I wasn't interested in it then, and I'm still not interested in it.]

10. non aligned Says:
    December 12, 2008 at 11:44 am

    Maximos…..they are structurally different in that in the US, the worker tax is haphazard but avoidable:

    Haphazard depending where labor wills to organize and where it does not will to organize with vigor…..waitresses down the tubes…..large concentrated factories related to high priced items as priority.

    And avoidable in that one may buy a non detroit car.
    __________________________________________________________________

    We at one time had three Taurus’ in our drive in an act of patriotism. We were in the gas station’s mechanic shop so often that we had our own key to the bathroom. The owner told me plainly that the Ford Taurus was 50% of his income from the repair shop and he told me he had a Camry and had a decimal of the trouble one had with the Taurus in those years of the 1990’s.

11. Maximos Says:
    December 12, 2008 at 11:54 am

    Maximos…..they are structurally different in that in the US, the worker tax is haphazard but avoidable

    No, they are identical insofar as the higher costs to consumers in those foreign nations resulting from the tax and social welfare policies are just as real as the higher costs to consumers here in America. Unions have little to nothing to do with this reality; nations like Germany, Japan, and France have a different way of socializing collective obligations, one which effectively reduces the labour costs to the manufacturers, and usually makes their products more competitive.

12. blackadderiv Says:
    December 12, 2008 at 12:08 pm

    And this is structurally different from the higher levels of taxation prevalent in other industrial nations such as Japan and Germany, levels of taxation that fund more generous health and pension programmes that keep these costs off of the books of the manufacturers – exactly how?

    I’m pretty sure that Japanese auto makers provide health insurance for their workers, and U.S. workers in Japanese owned plants wouldn’t have access to a Japanese national health service in any event.

    Also, the overall tax burden for Japan is slightly less than for the U.S. So, there’s that.

13. Lilllabettt@aol.com Says:
    December 12, 2008 at 1:01 pm

    What I don’t understand is why the auto makers don’t file for bankruptcy protection. Bankruptcy is no fun for private individuals or for corporations, but it exists for this very purpose; helping people start over without losing everything.

    During the Asian financial crisis, Kia went bankrupt. Eventually they were purchased by Hyundai. Ford also has stake in them, I believe, unless they sold it off. They still make cars and are popular in Europe.

14. M.Z. Forrest Says:
    December 12, 2008 at 1:06 pm

    Bankruptcy laws are different between countries. Most analysts don’t believe the autos could secure DIP financing. That would move bankruptcy from Chapter 11 to Chapter 7, liquidation. More to the point though, analysts are confident that a single bankrupcy would push a number of the suppliers into Chapter 7. This would result in additional costs for all auto makers, resulting in a cascade.

15. Maximos Says:
    December 12, 2008 at 1:21 pm

    I’m pretty sure that Japanese auto makers provide health insurance for their workers

    If they do, which I’m more than willing to stipulate for the sake of argument, they do so within the context of an entirely different system of industrial and economic relations, and a broader system of political economy which could be described as neo-mercantilistic. Corporations operating in a sheltered economy based on exports might find it easier to provide health and retirement benefits.

    and U.S. workers in Japanese owned plants wouldn’t have access to a Japanese national health service in any event.

    *Sarcasm on* Obviously, I meant to assert that Honda employees in Marysville were beneficiaries of the Japanese health care system, as this is the natural reading of my words. *Sarcasm off* No, the relevance of this point, on which I should have been clearer, is that the transplants have benefited by locating in relatively impoverished states that offered them hundreds of millions in de facto subsidies, ie. tax abatements, which makes the comparison to an established domestic industry, once dominant and protected in much the same way as Japanese and European manufacturers are protected, with huge legacies, a case of apples and oranges.

16. Morning's Minion Says:
    December 12, 2008 at 3:05 pm

    See this, from John Judis:
    ———————————————————————–

    OK, let me get this straight. Tennessee Republican Senator Bob Corker, backed up by Alabama Senator Richard Shelby and South Carolina Senator Jim DeMint, made it a condition of the auto companies receiving help that the United Auto Workers agree to a reduction of wages and benefits to the level of those paid by the Japanese companies that have plants in those senators’ states. Desperate for the deal, the UAW and the Democrats agreed to a phased-in reduction, but the Republicans insisted on an immediate cut. The deal broke down, and Republicans–aided by a few Red State Democrats (e.g. Baucus, Lincoln, Tester)–used a filibuster to kill the bill, which would have passed on a majority vote.

    Here’s what bothers me. Japanese companies, which for years have benefited from one-way deal by which they could sell cars in the U.S. while U.S. companies were stymied in selling cars and trucks in Japan, set up non-union plants in low-wage, low-education, right-to-work states where they can pay less wages and benefits to their workers. Of course, in Japan, these same companies recognize and work with unions, but not here, where they have a chance to undercut American firms that work with unions. Corker and these other great patriots want to allow these Japanese companies to dictate the wages and benefits that American companies pay their workers. It’s despicable. Imagine, for a moment, American companies being allow to operate in this manner in Japan or South Korea. It would not happen.

    Of course, this is not just about automobile companies. If you look at the history of the Great Depression, what tipped that event from a global recession to depression was precisely a series of dumb, craven–or in Keynes’ word, “feather-brained”–moves by politicians blinded by ideology or by narrow self-interest. An interest rate hike here, a balanced budget there, a spending reduction or two, and we went from ten to twenty percent unemployment. Don’t imagine for a moment that the failure to bailout the auto companies isn’t one of those feather-brained moves.

    Put it this way. What we have learned from the economics of the Great Depression is that in order to end the spiral of unemployment, government has to throw money at companies and consumers. It should be trying to raise wages, not lower them. The Wall Street bailout was a fiasco, but it was probably better than nothing. And the auto bailout was considerably better thought-out. Now there is a good prospect that two of the Big Three will fail, jeopardizing, perhaps, as many as a million jobs. That’s exactly the kind of thing that Americans should not be doing. But don’t tell that to those great patriots Corker, DeMint, or Shelby. They know better.

17. jonathanjones02 Says:
    December 12, 2008 at 3:32 pm

    American automakers are overleveraged. They can’t handle a decrease in sales due to monthly payments on liabilities.

    How exactly does a bailout help this? Bankruptcy would. Under bankruptcy, liabilities and all contracts are open to reorganization by the court.

    This is the better option.

18. DarwinCatholic Says:
    December 12, 2008 at 3:37 pm

    While I see what Judis is getting at in the post which MM quotes, it doesn’t sound to me like a case of the Japanese car makers trying to dictate the wages at American-ownered (to the extent that’s a meaningful term given how multi-national all the car makers are) car companies.

    First off, no one would be dictating wages and other business practices at the Big Three if they were able to pay the bills — the problem is that for a number of reasons they can’t. And given that the US tax payer is being asked to subsidize them on the theory that they’ll recover and pay back the money, I imagine the thinking was: “Why should tax payers be asked to subsidize people who make more than they do. Clearly the inflated wages are part of the problem.”

    Frankly, that strikes me as smacking of the same kind of populist politics of envy that one normally hears out of anti-business advocates at the opposite side of the spectrum, but populism is a equal opportunity failing. My thought would be that bailing out the auto industry should be done or not done of the basis of the likelihood of the bail out helping the industry to right itself and the potential dangers involved in not bailing it out.

    So I’d tend to think these senators took the low road in choosing to argue over wages.

    That said, if Michigan was serious about change, becoming a right to work state like the southern states which have attracted so many Nissan, Toyota and Honda plants would be a good place to start.

19. blackadderiv Says:
    December 12, 2008 at 4:03 pm

    What we have learned from the economics of the Great Depression is that in order to end the spiral of unemployment, government has to throw money at companies and consumers. It should be trying to raise wages, not lower them.

    If this is what people have learned from the economics of the Great Depression, then I would submit they have learned the wrong lesson.

    I mean honestly, MM, are you going to sit there with a straight face and say that the problem with the government’s response to the Great Depression was that it didn’t do enough to raise wages?

20. S.B. Says:
    December 12, 2008 at 4:10 pm

    Right, the New Dealers should have taken even more fascist measures to throw Jewish grocers in jail for being too cheap.

21. Morning's Minion Says:
    December 12, 2008 at 4:27 pm

    Blackadder,

    I can’t tell from your question what exactly you are objecting to, but it is certainly the case that in conditions of a Keynesian depression (shortage of aggregate demand and liquidity hoarding) then raising wages is certainly an appropriate response. I’ll defer to Paul Krugman here:

    ——————————————

    “But I think it’s worth pointing out why Ms. Shlaes thinks the New Deal was destructive of employment: namely, that it raised wages. Funny she should mention that — because the effect of wage changes on employment was the subject of a whole chapter in Keynes’s General Theory.

    And what Keynes had to say then is as valid as ever: under depression-type conditions, with short-term interest rates near zero, there’s no reason to think that lower wages for all workers — as opposed to lower wages for a particular group of workers — would lead to higher employment.

    Suppose that wages across the US economy had been, say, 20 percent lower than they actually were. You might be tempted to say that this would make hiring workers more attractive. But to a first approximation, prices would also have been 20 percent lower — so the real wage would not have been reduced. So how would lower wages lead to higher demand for labor?

    Well, the real money supply would have been larger — but the normal channel through which this might increase demand, lower interest rates, was blocked by the zero lower bound. Yes, there would have been a slight Pigou effect: real private sector wealth would have been higher, because cash under the mattress (or wherever) was worth more. But on the other hand, real debt burdens would also have been higher, probably exerting a contractionary effect. Overall, there’s no good reason to think that lower wages would have helped raise employment.

    And once you realize that, the whole argument that FDR prolonged the Depression by sustaining wages evaporates.”

22. blackadderiv Says:
    December 12, 2008 at 4:52 pm

    with short-term interest rates near zero, there’s no reason to think that lower wages for all workers — as opposed to lower wages for a particular group of workers — would lead to higher employment.

    That’s kind of an important qualification, isn’t it? I mean, it’s not like Senator Shelby or anyone else is talking about trying to cut the wages of all workers by some uniform amount. His proposal had to do with “lower wages for a particular group of workers,” a case that Krugman specifically doesn’t consider and which makes his argument of somewhat limited relevance (for what it’s worth, Krugman seems to be opposed to the auto bailout).

    Suppose that wages across the US economy had been, say, 20 percent lower than they actually were. You might be tempted to say that this would make hiring workers more attractive. But to a first approximation, prices would also have been 20 percent lower — so the real wage would not have been reduced.

    Suppose, though, that prices have already fallen, say, because the money supply has been contracted by about a third. If wages didn’t also fall (because, as Keynes himself argues, workers are unwilling to accept a reduction in nominal wages even if real wages aren’t reduced), then what would happen?

23. CJ Says:
    December 12, 2008 at 5:11 pm

    I’m wondering where the bishops stand on this Wall Street vs Main Street debate vis a vis just wages, govt standing by as 2 or 3 million souls are on the brink of losing jobs and health insurance? Have any spoken out?

24. Tony Says:
    December 13, 2008 at 6:22 am

    Bankruptcy laws are different between countries. Most analysts don’t believe the autos could secure DIP financing. That would move bankruptcy from Chapter 11 to Chapter 7, liquidation.

    Then auto makers who ran more profitable operations would snap up the assets at the fire sale, and put many of the laid off workers back to work at a more “industry standard” wage and benefit package. The CEOs and union bosses who screwed this up would be out of work.

    Seems like a win-win situation.

    For the record, I was against the Wall St. bailout too.

25. non aligned Says:
    December 13, 2008 at 10:20 am

    [And I'm feeling censorous.]

26. non aligned Says:
    December 13, 2008 at 10:28 am

    That’s “censorious”.

27. Pauli Says:
    December 14, 2008 at 11:30 pm

    I’ll never but another American car again if this “bailout” goes through. Anyway, a Toyota is more “American” than a Ford — some genius figured it out, 85% components versus 65%.

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