As goes GM so goes 30,000 people to the unemployment line
Word is spreading as I write this that GM is bringing its production in line with its sales which means closing 6 plants and laying off 30,000 jobs. And of course the first thing every news man will start quoting is "As goes GM so goes America" and wonder where "America" is at this moment. An America that could have prevented a lot of this from happening by creating universal healthcare. GM has to add $1500 to every car it sells just to cover it's health coverage legacy costs. It's understandable when we talk about business that you'd better keep up with the times and always be part of today's economy. Toyota will now be the #1 car company because it handles legacy costs much better. And to a large extent this is true, GM is getting what it deserves for being an uncontrolled behemoth. But there's also something to be said for 30,000 people who will now have to be reobsorbed into our economy which is having enough trouble finding places for the nations refugees of Katrina. So the saying still holds because we know what America is when we look at what happened to GM and what the effects of outsourcing are, what the effects of not dealing with our oil problems sooner are, what the effects of not taking an active roll in hybrid technologies in our car companies are, and what our effect of letting businesses deal with the insanely spiraling up prices of medical coverage are. And sin of all sins, "If we give tax breaks to big business, they'll use it to create more jobs." Yeah we can see how well the largest tax breaks in history for the rich and big business are doing. They're not stopping outsourcing, they're not increasing minimum wages, they're not even saving jobs let alone creating new ones. Businesses hire new people when they make more money having someone new rather than if they can get it done with fewer people regardless of what they pay in taxes, end of story. Tax breaks can be used to increase investment in one's company but more than not they just increase CEO's salaries which are also at record highs this year. GM is to blame for sure with its bad planning for a lot of this, but the structure of America is also to blame. Now I am a big fan of the saying "it is to hurt before it is to heal" (Never Ending Story), but there's so much more we could have done and there's much more that we have to do. It will hurt for us to heal as well, but if we don't face up to how we're restructuring America into a nation run on daddy's credit card, 30,000 jobs lost is going to seem like a drop in the bucket.
posted by Jaime Schwarz @ 6:01 AM
2 comments
2 Comments:
Dude,
First of all, 30,000 jobs lost is a huge number, and all those plants closing will certainly hurt a bunch of local economies -- clearly a tragedy. However, I think GM's problems are not so much a fault of the system as they are a fault of GM's poor management. How does GM make it's profits? By selling huge, gas-guzzling SUVs mostly. Clearly they don't understand that dependence on foreign oil and decreased fuel-efficiency are not the way to go. Also, health care costs have been going up steadily for years, and clearly they did not plan for the future very well.
That being said, I don't think that tax breaks to businesses caused GM to get into trouble, rather, I think the fact that they are in so much trouble in spite of all the tax breaks further validates the hypothesis that the company is poorly run. In addition, as we have seen a net increase of job creation over the past several years, I don't think that one company cutting a large number of jobs means that the strategy doesn't work in general for the whole economy, it simply means that despite less money given to the government, you still have to run your business well.
And I must firmly disagree with you on one point: universal health care, though it sounds great, is not necessarily the answer. Which would an assembly line worker choose, the company's health plan, for which he pays none or only part of the premiums for decent (maybe not great) care, or a huge tax increase that is bound to accompany socialized medicine, compounded with no assurance that his medical problems will be solved quickly? (I doubt that if I was Canadian, I would even have had my knee surgery yet)
I definitely agree with you that our dependence on oil and therefore lack of incentive to develop or even research other energy sources has left us behind the Japanese once again (and will come back to haunt us, definitely), but should we seriously trust the government to solve all our problems? The same government that completely botched the Katrina relief effort? I agree that it may take unfortunately more incidents like that and the GM thing to wake us up and prod us to figure out a solution, but let's leave the finding of a solution to keen American ingenuity, not the American Government!
Dr. Nick makes excellent points of which I agree with on some areas. I put most of the blame square on GM for sure. What I was saying was: had what I suggested been implemented, this blow would not have been as bad. Gas guzzling SUV's was their idea and it worked for a bit, but that's the way the cookie crumbles in business for sure. And yes, they failed despite their tax breaks, I'm not saying if they had more taxes it would have helped them. BUT, universal healthcare would have been like a tax break to GM and every other company that offers healthcare. And if they're getting that kind of tax break, that's more money for workers pay to afford the higher taxes. Plus with universal healthcare the government can get even better discounts from drugs than huge companies or even groups of huge companies can buy in bulk. On top of that the administrative costs of medicare is 2% vs private HMO's 20% which is money that automatically gets sent back into the system. The Congressmen in DC seem to like their government plans just fine. The way the new prescription drug plan works it just pours more money into inefficient companies where competition isn't working like we thought it would. If it's overall less money, I don't care that moe money is going to taxes cause even less if going to medical expenses.
And of course also, no one incident can prove any rule. GM's fall doesn't define the faults of our insurance system, it just helps shed some light.
And to your last point about trusting the government: ingenuity and government don't have to be mutually exlcusive. Unfortunatly we have an administration right now that hates government so much they set it up to fail. FEMA would have been able to handle this 5 years ago but the gutting of that and many other govt programs have left them so feeble and understaffed and with people in charge with so much ineptitude that it's not surprising what's happened. In healthy times, the driving force of this or any country should come from the private sector, the people, that's where inovation comes from of course. But the government is our backbone, they are our safety net, they must help us when we cannot help ourselves, and that is all I want government to do. They are not meant to run our lives, they should stay out of our lives, but when they can help because no one else can or would, that's when Uncle Sam, Mr. Kinderhook, comes to the plate.
And on a side note, who won the Giants-Eagles game last night? I didn't see it.
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