Sheer dumb luck

I’ve written before that one of the defining characteristics of liberals is that they take the role of luck in our lives seriously. Even with hard work, some people experience bad luck or bad timing. With an equivalent amount of hard work, some people just catch some breaks.

Check out this post in which three prominent liberal bloggers describe the role of luck in their lives.

Book to read

John Podesta is a co-chairman of Barack Obama’s transition team and the president and chief executive officer of the Center for American Progress, one of liberalism’s most effective organizations.

He also has written a great book outlining liberalism/progressivism itself – The Power of Progress. I’m about half way through it. I’ve read a lot of these books, and this is one of the more concise and clear-headed explanations out there.

The Southern Strategy

And I don’t mean the famous political strategy of Kevin Phillips.

No, I’m talking about overseas automakers.

One reason Detroit’s automakers have had such trouble with their bailout is they have an opposing constituency among southern politicians. It’s something the Wall Street Journal wrote about today.

Overseas automakers have mostly invested in southern states, largely because of their historical opposition to labor unions.

As I’ve mentioned before, I covered the auto industry for several years, but I never ran across an explanation for why the South hates unions so much. A quick Google search today didn’t help. I’ll let you know if I come across something, or if I get the time to look into it myself.

Also today, the ethics of an automotive bailout.

The Great – Blue – Lakes


Just a quick note about the election, now that Missouri’s vote has come in, and we have the entire electoral map in place…

I’m a much bigger fan of maps that show the true purpleness of the country (scroll down to the bottom). But at the electoral college level, it’s still great to see what I consider my home – the Great Lakes region – entirely blue.

Image from the New York Times.

Getting at the true cost of a gallon of gas

Yesterday, I said:

By the way, I’d also like to see us fold all of the money we spend on the military protecting our Middle East “interests” – that is, oil supplies – into the gas tax. That’s pure rational accounting, baby. But that’s a different post.

Well, this post still isn’t about what the gas tax should really look like, but today from NPR we have an example of what I’m talking about:

Pirates got the world’s attention a few days ago when they seized a Saudi oil tanker three times the size of an aircaft carrier. But that’s just one of at least 10 ships attacked near the Horn of Africa in the past two weeks.

Vice Adm. Bill Gortney, commander of the U.S. Navy’s 5th Fleet, says even one of the most powerful conglomerations of ships in the world isn’t enough to combat the pirates.

“We can’t be everywhere,” Gortney says.

Gortney’s 5th Fleet has dozens of warships that support the wars in Iraq and Afghanistan. He also commands the Combined Maritime Forces, a kind of international navy. But the Somali pirates operate in an area covering more than a million square miles of ocean.

More on the auto industry

Following up on my previous post regarding the possibility of a Detroit bailout, here are a few interesting links I’ve run across.

First, on the UAW. In my post I mentioned that yes, indeed, Detroit’s labor costs are higher. Here’s another way to look at it from Felix Salmon:

You might expect it from right-leaning commentators like Will Wilkinson. You wouldn’t expect it from someone like Mark Perry, who lives in Flint, Michigan. And you certainly wouldn’t expect to see it in the New York Times, from the likes of Andrew Ross Sorkin. But all of them are perpetuating the meme that the average GM worker costs more than $70 an hour, once you include health and pension costs.

It’s not true.

The average GM assembly-line worker makes about $28 per hour in wages, and I can assure you that GM is not paying $42 an hour in health insurance and pension plan contributions. Rather, the $70 per hour figure (or $73 an hour, or whatever) is a ridiculous number obtained by adding up GM’s total labor, health, and pension costs, and then dividing by the total number of hours worked. In other words, it includes all the healthcare and retirement costs of retired workers.

Now that GM’s healthcare obligations are being moved to a UAW-run trust, even that fictitious number is going to fall sharply. But anybody who uses it as a rhetorical device suggesting that US car companies are run inefficiently is being disingenuous. As of 2007, the UAW represented 180,681 members at Chrysler, Ford and General Motors; it also represented 419,621 retired members and 120,723 surviving spouses. If you take the costs associated with 721,025 individuals and then divide those costs by the hours worked by 180,681 individuals, you’re going to end up with a very large hourly rate. But it won’t mean anything, unless you’re trying to be deceptive.

James Surowiecki also adds:

It’s true, of course, that G.M. does have to pay retiree costs, and mentioning those costs in any discussion of the financial burdens G.M. is under makes sense. But that’s not what people are doing, rhetorically, when they use the seventy-dollars-an-hour number. What they’re doing is trying to make it sound as if G.M.’s current assembly-line workers are earning outrageous compensation for their labor, in order to demonize the U.A.W. U.A.W. workers are well-paid by industrial-worker standards. But they are not getting rich building Buicks, and making it sound as if they are is pure propaganda.

I think they both makes good points, and I agree – if the commentator is trying only to bash the UAW. But let’s face it, what commentators like to label “legacy costs” – those benefits for retirees and surviving spouses – are a real financial problem for the U.S. automakers and the UAW. (And for the U.S. taxpayer if the pensions end up at the PBGC – the FDIC of pension plans.) You can’t just leave them out of the discussion completely. If anything, let’s work those legacy costs back into a larger conversation on health care and retirement insecurity in this country and what we can do about it.

On the subject of environmental regulation, I tend to agree with the views in this post by Greg Mankiw:

Allan Sloan joins the Pigou Club:

Having permanently high gas prices would let the market, rather than incomprehensible, loophole-ridden Corporate Average Fuel Economy regulations, make the decisions on what kind of vehicles Americans get to drive. As part of my plan, I’d scrap these CAFÉ standards, abandon the current attempts to force automakers to spend tens of billions of dollars to meet higher fuel-economy standards. Instead, the market, guided by a high gas tax, would rule.

And so do many CEOs:

Members of the Journal’s CEO Council tasked with discussing priorities for the U.S. economy and finance offered several fairly uncontroversial suggestions to the incoming administration: implement a fiscal stimulus plan without worsening the long-term deficit, appoint a panel to address financial regulation, create an economic vision.

Tucked away in the proposal, in the category of long-term tax policy, was this political grenade: “consider raising taxes on gasoline.”

Yes, THAT Greg Mankiw. Even conservatives can bring something to the table. If you remember, Barack Obama also supported keeping a gas tax in place, although his argument seemed to be that it was necessary to sustain our roads and that it wouldn’t help consumers very much.

The problem, of course, with raising the gas tax is how regressive it is. The people who are least able to pay it would suffer the most. But we could look for other ways to help people, like tax refunds, that would make them whole. So, we’d get the market incentives necessary to finally get more environmentally friendly cars on the road, while making sure the less-well-off didn’t fall behind.

By the way, I’d also like to see us fold all of the money we spend on the military protecting our Middle East “interests” – that is, oil supplies – into the gas tax. That’s pure rational accounting, baby. But that’s a different post.

A central value of liberal economics

One reason I didn’t post for a long while was I was trying to follow all of the economic news and punditry as the economy melted down and cries of socialism came from the campaign. I felt it was a perfect time to hear people talking fervently about liberal versus conservative economics.

I still have much of that chatter to process, but I think I reached one conclusion. There’s a way to determine just how liberal or conservative a person is when it comes to economics: how indifferent are they to human suffering?

A hard-core conservative would be completely indifferent. This is the kind of mindset that suggests we should have let the entire economy collapse in order to weed out the weak actors (both corporations and people) and quickly right the ship. There might be a certain economic logic to this. Yes, the economy would quickly hit bottom, and presumably it would then begin to come back.

Of course, in the meantime, there would be extraordinary human suffering for everyone except the most wealthy among us.

And that’s where liberal values come in.

We must do what we can to limit the human suffering brought on by economic slowdowns. We can debate the most effective way to go about this. I would also say that people who made poor decisions should not be made whole. For example, if you need a mortgage bailout, there should be some long-term implications for you.

But the conservative economic position of laissez faire strikes me as immoral. Economic slowdowns cause both the prudent and the foolish to suffer. No able-bodied person or household who is willing to work at providing for themselves should be left without access to a decent level of food, clothing, shelter, or medical care in the face of an economic downturn – or at any time, for that matter.

Detroit

Ah, Detroit’s automakers.

I almost called this post “The Big Three,” but I stopped calling them that years ago. I covered the U.S. auto industry for several years while I worked at the public radio station in Ann Arbor, Mich. Initially, I felt I had to come up with a different moniker because Chrysler became a German company when it was bought by Daimler. That deal famously came apart, but I still see no need to call anything about the U.S. auto industry “big” anymore.

I love the state of Michigan and always root for Detroit. I was born just outside of the city, and as I said, I lived near there for several years as an adult. My kids were born in southeast Michigan. I have many friends who work in or depend on the U.S. auto industry. A collapse of Detroit automakers would be devastating for many people I know and my home state.

But I cannot support a bailout.

Or, at least, a bailout that would leave everything as it has been.

It’s sad to watch General Motors, Ford, Chrysler, and the United Auto Workers go begging to Congress for help, but it’s even more baffling to me to think that an industry would be so incapable of pulling itself out of a roughly three-decade decline. For some reason, the Detroit automakers and the UAW have proven that they can’t make decisions that will put them on a long-term road to health and competitiveness.

Many people I know – and many national commentators – blame the UAW. It’s those cursed autoworkers, with their crazy demands for high wages and high-quality health care. Don’t they just see the reality? Obviously, I’m being facetious here. Still, the reality is really real, so to speak. There is a huge labor cost difference between Detroit’s companies and the rest of the auto industry. Clearly that’s unsustainable in the competitive environment that’s grown up in the U.S. in the last three decades.

But what about that competitiveness anyway? It’s been nice to see more national commentators actually acknowledge that Detroit’s car companies have been poor at delivering vehicles people actually want to buy. That’s management, folks. The UAW doesn’t walk into management’s office and demand that they produce boring clunkers that don’t measure up well to the overseas competition. And it was management’s decision to focus almost exclusively on trucks for a decade or more, which left the companies completely exposed to the sales-crushing force of high gas prices.

And lest we forget, every labor deal has two sides. Labor made its demands. So did management. And everyone signed at the bottom. And they did so for decades.

So what am I suggesting? That the Detroit automakers should be allowed to simply collapse – with all of the collateral damage to people and the larger economy?

No. That wouldn’t be very liberal of me, would it?

But does liberal in this case meaning propping up an industry that has been unable to help itself for so long? I don’t think so.

Liberalism demands that we do what we can to help ourselves – that we bear some personal responsibility for our own fate. But liberalism also acknowledges that sometimes we aren’t in control of what happens to us, and that we shouldn’t suffer extraordinarily because of that.

Liberalism also favors real people as opposed to creations like corporations.

So how does all of that apply here?

I don’t see any reason to save GM, Ford, Chrysler or the UAW themselves. These institutions are simply combinations of people that clearly are dysfunctional. They need some form of bankruptcy so that they can reorganize and/or merge into an auto industry that can actually compete.

That bankruptcy could take many forms, though. Traditional, Chapter 11, bankruptcy might be too dangerous at this point. The auto companies make a good point that few people would be willing to buy a long-term product like a car from a company that’s bankrupt. Plus, with the financial crisis, the loans usually used to get through a process like that (DIP financing) are simply not available.

Government could step in here. A “bailout” could simply be a special form of bankruptcy that gave them the funding necessary to restructure, while still imposing the need to restructure. We’ve seen something like this in the financial services industry.

But why do it at all? Because of the larger economy and the people.

On the larger economy, it’s true – as the industry and its supporters often point out – that a lot of jobs do depend on this industry. A complete meltdown would never be welcome, but certainly this would be the worst possible time to do it, with recession upon us. Detroit’s automakers benefit from having hung on long enough to go down when all of us together can’t afford to let them simply go down.

But here is what I think is my most liberal point in this post – we need to do what we can to prevent unnecessary suffering among the individuals and their families caught up in the meltdown of the automakers.

Put another way – save the people, not the corporations.

How do we go about that? For the most part, I’m going to punt on answering this question for now. I haven’t had as much time to consider this up to this point. Obviously there are some short-term tools that are available – extended unemployment insurance, helping to fund payments for continuing health insurance coverage, extending trade adjustment assistance to people who need to retrain to find new work. Obviously, this doesn’t fill all the gaps, but it’s a start.

Personally, I think if we spent as much energy trying to figure out how to help the people who are caught up in this as we did crafting a way of saving the companies, we’d come up with more and better ideas.

Also, over the long term, the big issues are stagnating wages and rising health care costs. People might not feel so bad about leaving the Detroit automakers if they knew they could make decent wages and have good health care coverage at other companies. Say what you will about the UAW, but they’ve taken care of their people in a way that the larger economy has not.

Yikes. A huge post. I could say other things, too. I don’t like these ideas to make the automakers produce certain environmentally friendly cars. I won’t go into that much right now. One thing on that, Toyota has taken the lead in environmentally friendly technology, and it did so by serving customers, not by forcing it upon them. (In the interest of full disclosure, my brother-in-law works for Toyota.)

Thoughts on the election of Barack Obama

I know it’s been a couple of weeks since the election, and I’m not sure there’s much I could add to what has been said about it already. So, just a few thoughts.

This is the first presidential election in which I felt that my guy won. Obviously Barack Obama is an impressive speaker, but I’ve never been particularly interested in political speech itself. But as the campaign went on, I found myself actually wanting to hear what he had to say. What he said – and how he said it – synced up with my views most of the time. I’ve never had that before.

Obviously, it was an historic election. It makes me proud of my country in many ways. I think it puts us on a path to bringing our behavior back in line with our greatest American ideals, renewing our faith in ourselves and rejecting fear, and restoring our reputation.

With all of that said, though, I think we also need to – as liberals – remain vigilant. We the People can’t let up now. Barack Obama and his allies in Congress will need our support and our honest evaluations of how they’re doing.

Also, I tend to agree with some of what’s been said and written already that liberals must be careful not to read too much into this election. This election was still very much about rejecting the Republicans. I think it was even less about rejecting conservatism. The Republicans proved themselves to be cynical, corrupt, and incompetent during their time in power. Conservatism ran out of ideas to help the nation at this particular moment.

But none of that means that liberalism has triumphed. I believe we’re at a strange moment when the conventional wisdom – the common sense – remains as the conservative movement has defined it for the past thirty years. But that very common sense broke down when it came to facing problems in the real world, and many so-called conservatives themselves abandoned that common sense when things got bad. What stepped in to the breach? Liberalism, of course. But I don’t believe the American public understands it that way. That work – of defining, articulating, and defending liberalism – of explaining its value – remains to be done.