More Both Sides Did It Nonsense

With Republicans saying they would have let the auto industry fail and take hundreds of thousands of jobs with it, Bloomberg's editorial page this morning wants Republicans to admit the plan to bail out the auto industry was absolutely the right thing to do...but the editors can't help but put nearly all of the blame for conditions that necessitated the bailout squarely on the shoulders of those evil, evil auto unions.

Under the circumstances, the combination of bailout and bankruptcy was right. Bankruptcy without public money would have meant destruction rather than restructuring. If conditions in financial markets had been normal, new private creditors might have forced radical, desperately needed changes on GM and Chrysler as part of ordinary bankruptcy proceedings. In 2008 and 2009, this was not possible; private lenders were too distressed even to think about supporting auto companies on the necessary scale.

Either the government had to put money on the table or the companies would be liquidated -- not easy to contemplate in Chrysler’s case and all but inviting disaster in GM’s. Job losses on that scale would have hammered an economy already on its knees. Bush took this view, and so did Obama weeks after being sworn in. The crucial thing was forcing real change on Detroit -- and Obama’s team did so.

The concessions demanded of shareholders, management, creditors and the UAW were severe. Obama has chosen not to mention the role the union played in bringing the industry so low in the first place, and likes to portray the terms extracted from it as a kind of noble sacrifice.

Nobly or otherwise, the union gave up a lot of ground. Although the UAW got shares in both companies, this was in exchange for payments owed to workers’ health-care benefit funds. The union wanted cash, not shares, for those obligations. The bankruptcies shut down inefficient plants, forced out tens of thousands of workers and cut wages for new hires. Some treasured union work rules, including overtime payments after working less than 40 hours a week and the “jobs banks” that paid idled workers for doing nothing, are a thing of the past. 

So the bailout was a good thing, but nearly all the concessions made were made by the unions.  As a result, one of the major paths forward into the middle class through manufacturing jobs was dismantled in a state that badly needed it.  It wasn't the unions who made GM's bad management and design decisions for 20 years, selling nothing but expensive trucks and SUVs at the expense of giving the smaller car market away to Japan and Korea.  It wasn't the unions who refused to jump onto the electric car bandwagon until it was nearly too late.

If anyone actually thought auto unions had too much power in America compared to corporations today, they're the reason why wages have been stagnant, if not falling now for decades.