I'd started working on a little post about Navy procurement, a topic I rant about frequently in person, but I really can't say anything better than a host of milbloggers like Galhran. Suffice to say it would be nice if someone could tell the US taxpayer exactly who we think we are fighting, and how the Navy plans to adapt to a world in which the line between police work and military action is very blurry. Juan Garcia, Obama's reported pick for SecNav, is not that man. Bob Work, the director of the SSGN program, or anyone who served on a surface vessel off Africa or the Middle East and thus has some idea of what it's like to deal with low intensity conflict would be a far better choice.
Instead, the news this week offers up two great examples of how not to run a country. First of all, we have the Lumbering 2 (Ford looks to be in good shape over all) screaming for enough money to stave off bankruptcy until the most optimistic projections suggest the economy might start to improve. Fat chance of that, says Honda's president, and without a clear restructuring program, there's no reason to throw money down a hole. However, Chrysler and GM apparently did present an acceptable restructuring plan to Congress, at least by Congressional standards, but it failed because the unions would not accept a pay cut fast enough. As I've said before, the only way the GOP is going to claw its way back to relevance is if it can offer a credible benefit to workers who have not, and likely will not, directly benefited from "trickle down" economics.
Pointing out to voters that the Democrat-designed bailout leaves GM and Chrysler's overpaid management in charge of the ships they ran aground scores positive political points. The fact that an Obama administration would begin with government money being used to lay off workers by buying out contracts would sell really well in the Rust Belt, something like "we want to make it easier to employ people, they gave millionaires billions of tax dollars to lay people off!" So, allowing for a moment that Republicans in the Senate are not uniformly fools, why did they not take to opportunity to say this? More importantly, why does GM need to guarantee cost parity with Toyota? If we apply that logic, then why not demand average wages in Berkley, CA be the same as South Bend, IN? Or that call centers in Oklahoma City, OK pay the same as Bangalore, India? An effective opposition is good for governance, but a "straw man" opposition like this is bad for everyone.
The white elephant in the room, implicit in a somewhat more cogent statement from Senator McConnell, the minority leader, is that health care in this country is too large a burden to place on employers. The UAW is right to resist taking payment for their retirees in GM stock, because that paper is almost completely worthless today, and no one I've seen is willing to bet their health and pension on the company remaining solvent in the long run. GM and Chrysler need to enter bankruptcy to let them shed their unproductive dealerships and brands, hand a portion of their retiree benefits over to the federal government, and renegotiate its various labor contracts to get the cost structure and flexibility it needs to survive as a leaner, stronger company. With guaranteed health care, those workers will suffer much less than they are set to now.
The WSJ's suggestion that the Pelosi-Reid team wanted this bailout to make sure they could specify what kind of cars GM built is hogwash, or at least mostly. They want certain environmental standards met, but then so does everyone who doesn't wear a "Drill, Baby, Drill" shirt or count on oil stocks to buoy a portfolio. Oil is currently priced below the cost of exploration required to maintain current output, and some kind of carbon tax is on the way, so we're looking at a long term demand for efficient and flex-fuel vehicles. However, the very necessary and painful restructuring of the Lumbering 2+Ford will probably cost around 1.5million jobs and make it much harder to keep Indiana and Michigan blue.
The implications of all of this for pie making are actually quite simple. A very large amount of fruit is grown in Michigan, and so things that reduce the pollution load and cost of living there are generally pro-pie. An auto industry that has to restructure in the face of a thriftier nation will put a lot of people out of work, but they will be needed to fix decaying infrastructure and for projects like insulating cities. Some, hopefully many, will turn to farming and biofuels projects, which are labor intensive if they are to have low impact on the environment. This is not a "high growth" strategy, but PMCIN=1 prosperity doesn't require constant spending growth, just a stable society that adapts as necessary.
A way to guarantee that starting a small business won't cost your family its health insurance is a big step in that direction. It will also help make American manufacturing competitive because a cost that is now on our labor will be spread over the whole economy, as is the case in all other developed countries.
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