Government Meddling Is Bad, Except When We Do It: The Balance Sheet: Online Only: The New Yorker: The narrative Senate Republicans are going to try to spin, about the death of the automakers’ bailout, is that it was the fault of the U.A.W. After refusing to support the bill that Congressional Democrats and the Republican White House came up with, some Senate Republicans suggested that they might be willing to support a bill that rolled back U.A.W. wages to the levels earned by U.S. workers at Japanese- and German-owned plants. The union, which had already made concessions on work rules, said it would be willing to renegotiate wages in 2011, when its current contract expires, but not to roll back wages immediately. This was a deal-breaker for the Senate Republicans.
There are a couple of things to notice about this story. First, it has almost nothing to do with the core problems faced by G.M., Chrysler, and Ford. The wage gap between U.A.W. workers and workers at other car companies is no longer that big, and labor costs at this point account for only ten per cent of the cost of producing a vehicle. So rolling back wages was not going to suddenly make G.M. and Ford significantly healthier than they are today, and not getting those rollbacks did not materially change the economic value of the bridge loan. In other words, if you could support the loan with the givebacks, you should have been willing to support the loan without them.
More important, having the government dictate the wages of employees—which is literally what the G.O.P. was insisting on doing—is precisely the kind of government meddling in the marketplace that Republicans normally abhor. There is no reason to think that G.O.P. senators have a greater insight into labor dynamics, the appropriate wage for Ford workers,and how labor-management relations affect productivity than the Big Three’s executives do. Yet the senators were insisting that their judgment on these matters should trump all other considerations. I recognize the logic of saying that if we’re going to offer the automakers a loan, we should have conditions attached. But those conditions should be similar to the ones any lender would attach. They shouldn’t be an attempt to have the government dictate wage levels. What’s next? Price controls?
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