- The Foundry: Conservative Policy News from The Heritage Foundation - http://blog.heritage.org -

All Megan, All the Time

Posted By Conn Carroll On November 17, 2008 @ 10:59 am In Economics | Comments Disabled

The Atlantic’s Megan McArdle [1] has been tackling the proposed auto bailout like a champ. Here are just some of her contributions from the past week:

On why Congress can’t fix Detroit:

Indeed, a bailout will mute the one thing that sometimes does turn around dysfunctional management: the shock value of failure. Failure is nature’s way of saying “don’t do that anymore!” We’re whiting that out and replacing it with “Keep going!”
The only thing that the Federal government could even theoretically oversee fairly competently is downsizing: choose which plants to shutter, which workers to lay off. But avoiding mass layoffs and plant closings is precisely the reason that Congress wants to give Detroit a bailout. And even if Congress had the political will to cut deep, in practice it would fall apart. The decisions about plant closures and layoffs would become a political football akin to base closings in the nineties, with Congress working hard to ensure that any such decisions were made on the basis of whose senators and representatives had more power, rather than which plants are least efficient. The Big Three have a fantastic burn rate; at current rates, a $10 billion infusion into GM would be gone in a few months unless the economy magically turns around. Raise your hand if you think auto demand is going to improve to 17 million cars a year in the next two or three years.

On the UAW: [2]

I do think that the UAW is perhaps the grossest example of something toxic about what a lot of American unions have turned into. …What bothers me is twofold. First, after the unions have put companies into an untenable position, they come to the rest of us looking for a handout to continue the unsustainable levels of pay and benefits. Almost everyone I know makes less than an autoworker, and has a whole lot less job security. Why should they pay autoworkers for the privilege of making cars no one wants?

I also really loathe and despise the way the unions use work rules and featherbedding to make their companies and industries less productive than they otherwise would be. … The union goal is to keep the number of people at least even, and if possible increase it, regardless of the level of production. Hence the fight between the west coast port operators and their unions, who wanted to keep exactly as many jobs loading ships as they’d ever had, even when there were vastly more productive ways to do things. I don’t think any thinking liberal should support this.

On already existing over regulation U.S. auto industry: [3]

[F]our of the top ten cars in Europe last year were small cars made by an American company (Opel is GM’s European marque). People who criticize Detroit for insisting on making only gas guzzlers have to ask themselves: why weren’t these cars made here?

On health care costs not causing Detroit’s problems: [4]

I’m getting a lot of comments claiming that the real problem is the lack of universal health care in the US. How can GM and Ford possibly compete with German and Japanese companies whose employee healthcare is paid for by the government?
Well, you’re right, they can’t. That’s because there are no German or Japanese auto companies whose employee healthcare is paid for by the government. Both countries have a government-regulated system of employer-provided healthcare.
Moreover, this ignores the fact that insofar as health care is the fundamental problem here, the problem is with retiree health care, not health care for current workers. In other words, with people who are already mostly covered by America’s universal healthcare system, Medicare.

Why have the Big Three provided extremely expensive health benefits for retirees for decades, when there was a really very generous government program available? Because that’s what the union wanted, and it had enough muscle to get it. Unless you actually do as Canada has done, and make private health plans illegal, there is nothing in a system of universal health care that prevents employees from asking for more generous benefits than the government provides.

On who the bailout hurts: [5]

Bailing out the auto industry offers no net gain to society. It is a straight transfer of resources from one sector to another: we tax money, or borrow it from a finite pool of capital available to the nation, and spend it on auto workers. The people who pay the taxes, or the people who would have borrowed that investment capital, now have less to spend. Whatever they would have bought goes unbought; whoever would have made it goes unemployed. To coin a phrase, what is made on the swings is lost on the roundabouts We have the illusion of a gain only because that other group of people is invisible. Even if we don’t bail out GM, they will not be visible–we will never know who didn’t lose a job or a business because we declined to spend one squillion dollars saving the Chevy Cobalt.

But let’s say it was all management’s fault. What’s the argument for bailing them out then? Does someone have tens of thousands of auto engineers, marketers, and senior management buried under a rock somewhere, waiting to replace the incompetent managers? Because it seems to me that we’re just pouring money into the same deep hole that will periodically reward our efforts by coughing up the Pontiac G6.

And speaking of money holes, check out this in depth panel discussion:


In The Know: Should The Government Stop Dumping Money Into A Giant Hole? [6]


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2008/11/17/all-megan-all-the-time/

URLs in this post:

[1] Megan McArdle: http://meganmcardle.theatlantic.com/

[2] On the UAW:: http://meganmcardle.theatlantic.com/archives/2008/11/right_to_work.php

[3] On already existing over regulation U.S. auto industry:: http://meganmcardle.theatlantic.com/archives/2008/11/why_cant_american_firms_make_s.php

[4] On health care costs not causing Detroit’s problems:: http://meganmcardle.theatlantic.com/archives/2008/11/if_we_only_had_socialized_medi.php

[5] On who the bailout hurts:: http://meganmcardle.theatlantic.com/archives/2008/11/labors_love_lost.php

[6] In The Know: Should The Government Stop Dumping Money Into A Giant Hole?: http://www.theonion.com/content/video/in_the_know_should_the_government?utm_source=embedded_video

Copyright © 2011 The Heritage Foundation. All rights reserved.