Dumping on Detroit
We never thought we'd say this, but Dick Cheney is right. Recently he mordantly warned Senate Republicans that if they failed to pass a bailout for the auto industry, "it's Herbert Hoover time." His colleagues, apparently, can't wait. Led by Bob Corker, Mitch McConnell and Richard Shelby, they filibustered a $14 billion loan package that the majority of Congress (including forty-two members of the GOP), the Bush administration, President-elect Obama, GM, Chrysler, Ford and the UAW all supported. The immediate goal of this Gang of Three was to force wage and benefit cuts on unionized autoworkers who had already swallowed steep concessions in recent years and had offered to compromise again to keep Detroit alive. But no matter. Asserting that UAW members are "paid way above industry wages," Corker & Co. insisted that Detroit's compensation packages become "competitive" with those of foreign manufacturers on a government-mandated timeline.
This sudden fixation on competitiveness is a sham. Contrary to widely circulated claims that UAW members make an average of $73 per hour, union wages are, in fact, already in line with nonunion salaries at foreign-owned US plants. In 2007 the average UAW member made about $28 per hour, while the average American Honda or Toyota worker made $20 to $26 per hour; a new UAW hire earns as little as $14 per hour. It's UAW wages and benefits that built the American middle class, and cutting what's left of them risks plunging the country deeper into recession.
Where was the devotion to fiscal rectitude when Congress passed a $700 billion bailout for the financial sector? In October Democrats tried to implement limits on executive compensation in TARP, but as the Washington Post has reported, the Bush administration pushed through a last-minute loophole that restricted the enforcement mechanism to firms that sold troubled assets at government auction. Thanks to Treasury Secretary Paulson's modification of TARP, not a penny of the $335 billion committed so far has been sold at auction and not a single firm has been forced to curb executive pay. Indeed, quite the opposite: AIG--which has so far received $152 billion--has announced that it is giving "retention bonuses" to 168 executives, some of whom will receive as much as $4 million.
Unlike union wages, skyrocketing executive compensation packages are directly linked to the financial crisis, as they encouraged CEOs to downplay potential losses and risk before cashing in on inflated stock options and floating away on golden parachutes. In 2006 the average CEO earned 364 times what the average worker made (up from forty-two times more in 1980)--the largest such gap in the world. While the average CEO of a large US corporation makes about $12 million a year in salary, bonuses and stock options, his Japanese equivalent carts home a lean $1.3 million. If Congress is serious about making failed industries globally "competitive," let's start with a 90 percent pay cut for corporate executives.
Don't hold your breath waiting for one. For all the talk from Senate Republicans (and some Democrats) about fiscal responsibility, the reluctance to rescue autoworkers isn't based on economic principles of even the conservative sort. It's political and class warfare, pure and simple. "Crisis is when good things happen," Corker said during the bailout negotiations, "when you make people do things." What Senate Republicans wanted, however, was not to retool the ailing auto industry but rather, as one of their internal memos put it, to "take their first shot against organized labor, instead of taking their first blow from it."