United States Heading towards a Depression?

Sorry, don't have time to respond to your lengthy previous post point for point right now (but I will later). I just got a chuckle out of you trying to present comparisons of hourly wage as of hourly wage is the only thing that goes into a compensation package. Perhaps you missed the part where Unions kept their "caddilac" health plans tax exempt in the Obamacare package? I'm guessing you were also absent for the entire debate over how Union pensions are quite literally bankrupting the State of California? I don't have the stats which accurately compare compensation packages between Ford, GM, and Toyota in front of me right now, and neither do you. At least I didn't try and pass off a sham comparison like the one above. Common sense dictates that selling gas guzzlers in an increasingly fuel efficient environment was only part of GM's economic problems.

 

I don't have the figures, they are buried in my notebooks somewhere. It was the 1990's, while they would be out of date, my contacts told me the culture hadn't changed. But it's not just the hourly rate, it was that many many more union workers were involved in building a car at GM than they were at Ford or Chrysler. For example, unions wouldn't let GM put robotics where it belonged and so they had union workers doing things by hand that Ford had completely automated. And GM had to buy expensive parts from certain union shops without putting out a competitive bid.

Earl, it's like the terrific real estate example you gave a few months ago. To completely understand an industry, the entire process must be looked at.

 

Corwin: Tx for the insights. Gr8 stuff.

O_Nation: I kept editing and adding figures. I assume they are reasonably accurate. They come from a consistent source, though different years. The domestic big 3 figures represent 2006; the Japanese costs represent 2005. I assume the latest info on Ford costs includes health care benefits, regardless of what adjective you put next to it.

It looks to me like GM's downfall was more a function of lousy management than labor. Nothing is black and white. But from qualitative descriptions, including Corwin's many excellent insights it looks like GM management simply s*cked. Corwin's commentary on how GM was forced to put in more labor hours due to lack of robotics....and buy overpriced crappy inventory from former GM companies (delco) indicts both labor and management in increasing costs and building crappy cars.

When you take a look at the entire package of problems (many many many) and ascribe everything to unions, you are simply playing the overly simplistic political game. It totally obscures the picture. It leads to bad decisions and terrible policy. Its a sick dangerous game.

Similarly if you don't ascribe a portion of California's fiscal mess to Prop 13 you are simply missing the point and obscuring the truth. I did a calculation assuming an average house bought in the Northern Cal town where my brother lives...looking at average prices from 1986 and now. Ran prop 13 numbers against it. Took the average value from 1986 and now. My bro and sister in law bought the house in early 1980's. If their house is average for that town (I don't know what it is or how much they paid)...they would now be saving in excess of five figures in RE taxes for every year (five figures = $10,000 to 99,000). Multiply that kind of impact by millions of homes and commercial properties.

Prop 13 seriously changed the landscape of state revenues going forward from 1978. Here is how my bro and sister in law respond.

Prop 13 saved them (...thousands, 10's of thousands, or more) Prop 13 ended up screwing their local school system.

All things have pro's and cons.

Don't blame it all on unions. Spare us your simplicities.

 

You can't completely blame the unions for GM. After all, they got the best deal they could for their members because "GM management simply s*cked". But they do share some blame.

At some point, the unions knew that GM was going down the tubes. The beginning of the end was in in the mid '90's when in an attempt to cntrol costs GM spun off Delco, which renamed itself to Delphi Automotive Systems (Delco had been badly bleeding money every year). Ross Perot had already left GM's board in disgust when they refused to, among other things, renegotiate with the unions.

But one thing is for certain - the unions knew, as far back as 15 years ago, that they were killing GM and the unions did not care.

 

The politicians knew they are fu*king the country and they did not care,
The fund managers knew that they are fu*king the people out of their pensions and they did not care,
The bankers knew that they are fu*king the banking system and they did not care,
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As long as they were making a buck and that is the story and tragedy of USA.

 

By Gworld:

by Corwin:

I have a different view. In the capitalist US economy, the thing about capitalism is that it is a competitive market. Labor is an element of competiive market. Labor fights for its piece. Management fights for its piece. Less effectively, shareholders fight for their piece (its a little muddled; they could want stock price increases/ they could want higher dividends; they probably want both) and frankly shareholders mostly have a crappy say in what is going on.

The business is competing in the competitive market. GM competes against domestic and foreign auto manufacturers. The manufacturers make an amazing variety of auto's and small/medium trucks.

Outside of that are all the other influences of the world. The most significant recent outside influence was that the recession killed new auto purchases.

All new auto purchases in the US from all manufacturers fell from about 16 million/year to 10 million/year.

Every auto manufacturer got killed in that drop. GM, with poor finances, high costs, lousy management, a package of union costs (its own plus elements Corwin pointed out, wherein GM sucked up legacy union costs from Delco) all doomed GM.

None of them saw overall US new auto sales dropping from 16 to 10 million. That crushed all auto manufacturers.

In a capitalist environment, everyone fights for their piece. Theoretically the market makes decisions and picks winners and losers. When one party is losing, they tend to adjust strategies and actions to try and get back on a winning path. It could be politicians, bankers, unions, fund managers, management etc. That is all theory though. In reality those changes are very difficult to make and clouded by internal machinations.

My problem on all this is that one political side keeps overemphasizing attack political language and cherry picking problems that point out where its targeted enemies went wrong. The side that does it the most is the Right Wing Republican side.

The Dems also do it. They simply don't get close to attack language as the GOP uses it. Frankly its not as united a party as the GOP typically is.

Frankly, the GM issue is one relatively small component of the overall impact of the recession. It has a high profile. It got bailout funds. Prospects for full payback are not good. Full payback may not happen. It may take a very long time.

I was for the bailout on a more qualitative basis. The US needs to strategically have a couple of auto companies that can compete on a world wide basis and be a manufacturer of an absolutely critical major item in the world economy. Secondly it saved certain jobs. Its not just GM jobs. The bailout saved jobs in so many businesses that provide somewhere in the entire auto chain. In total its huge. The auto business in total is a huge employer in the US.

Did the unions kill GM? that is a stupid question. It jumps into a political attack realm. It takes everyone out of reality. It makes everyone move off target from all the things that impacted the company.

Did the unions contribute to the demise of GM? yup. how much. That is for debate. It could be 2%. It could be 5%. It could be 20%. Nobody knows for sure.

Was it managements fault? Yup. I'd suggest, based on all the evidence, including Corwins specific reporting it probably holds the most guilt.

As to politicians, bankers, fund managers, you name it, as suggested by GWorld. They may have had a little to pay, especially Michigan based pols that might have created and pushed legislation that extended GM's operations as a crappy company.

the blame gets passed around though, at least IMHO.

 

We are looking at the same information and coming up with two different conclusions. If we can agree that keeping labor in lieu of robotics is a bad idea, and that it was the idea of the labor unions, we can blame Management for being weak and giving in to political pressure from union bosses. I hear they play hardball. It still leaves the lions share of the blame for that particular item in the court of the Unions. I'm not trying to say the management didn't suck, but unions literally drove that company into the ground. This is all ancillary information to the point I was making, so I'll ask it in a single bulleted question:

• Was it right for the Unions to go to the front of the line thanks to the Obama administration, outside the legal bankruptcy process, or should they have gotten in line with the rest of GM's debtors?

For those who don't know, prop 13 caps property taxes at 1% of the assesed value. It also prevents property from being re-assessed, except in the case of a sale, or a remodel. It allows for a 2% annual increase to account for inflation.

To give you an example of how it works, my dad bought his piece of ocean view property in Southern California in 1969 for something around $5,000. He put a house on it for another $5-10,000. My mom, a housewife with no career whatsoever, got the house in the divorce in the 1990s. Even if they had stayed together, I doubt my dad ever made more than $35,000 in a single year of his working life. Right now, in this market, the house would sell in less than 30 days for around $600,000. Without Prop 13, the taxes on the property would be in excess of $12,000, far exceeding my mothers social security check.

So let me ask you something. Why do you want to f*ck my mom out of her house? Don't you think having bought and paid for it, and lived in it most of her life is enough? Perhaps you think Coastal California is only for rich people? Do you really think Gray Davis and the Unions who negotiated $1.5 million dollar pensions on a $60,000 investment need my Moms house more than she does?

I'm always glad to hear the Democrats are looking out for the poor.

 

How much did she contribute to the Democratic Party?

Nothing? Well then... she gets nothing.

If she had contributed to the Party like the labor unions contribute, you can be sure the Democrats would have carved out a nice special deal for her like they did for GM's labor unions.

 

First on prop 13. O_nation: The argument you make on your mother's status is the argument that was made when Prop 13 was first passed in 1978. Since that time it has changed the character of state taxes and revenues inalterably in so many drastic ways. Most of the nation does not limit local real estate taxes in the way California does. The net result has been to starve local communities, put large demands on the state, and inalterably change the way the state raises tax funds of any sort.

The other thing it did was change the way the government could govern moving forward. It established the 2/3 majority for taxing. thereinafter a minority controls the ability of California to effectively handle issues going forward. That in its own right has contributed to the financial problems California currently faces.

While your mother's issues are one side of the coin, I'll describe the taxing and local schooling situation my brother and sister-in-law and their son faced.

They purchased a house in the early 1980's. The home is in a San Francisco suburb. The small town is one of those towns characterized as having the most expensive homes in America.

I don't know exactly what they paid back then. I do know it was a lot to me. I lived in the DC region then. The estimates I heard or got a feel for were more expensive than the house I had and were more expensive than those with which I was familiar. Housing prices in that Cal. town were running higher than in my area. The DC area is one of the more expensive parts of the country. That was true in the early 1980's and currently.

I did a calculation on what my bro and sis-in-law could be paying in taxes. I took average home prices from a current Real Estate web site. It gave average home values in that town in 1986 and currently. Its an approximation. If their house was average (for that town the actual house is probably below average) they would have had nicely over $1 million in price appreciation. If you tax rates on the home based on current values against what they are paying due to prop 13....they have been saving Five figures ($10,000-99,000) in annual real estate taxes for quite some time. Take the entirety of California and how prop 13 has starved the state for real estate tax revenues and it creates a terrible financial problem.

Its one of the other sides of the coin. Here is the other side. This smallish wealthy town has had a dearth of good quality public schools. Elementary to middle school was pretty good. The choices for high school were limited and pretty much sucked. Wealthy town surrounded by some other wealthy towns and non wealthy towns. They simply can't afford enough good public high schools for the area. Prop 13 screwed up public school education.

Every one of these things has its pro's and cons. Prop 13 has been around for over 30 years. It dramatically changed the way California gets tax money from the public versus every other state. It has had a crazy impact on real estate and extended ownership. It definitely impacted the free flow of the market creating unnatural tenancies and occupancy. It starved local communities for money that normally goes to local schools. OTOH it enables people like your mom to stay in homes they normally would have moved out of.

GM management sucked. Your colleague in Right Wing perspective, Corwin, gave us deep details. They sucked in terms of everything, including dealing with their unions. OTOH The 2006 data on labor costs suggests that their union costs were close with those of Ford and Chrysler. The difference is so nominal and is clearly not why Ford didn't have to take a bailout to survive while the only way GM survived was through a bailout. The bailout was a form of rapid bankruptcy. The rapidity allowed many operations to continue to operate. They wouldn't have continued in a long drawn out bailout. Probably saved a lot of jobs for both GM and for suppliers. As GM approached bankruptcy, suppliers and other auto manufacturers feared that bankruptcy would screw and demolish the supplier chain. VEry serious implications.

The rapid bankruptcy impact enabled the union to take equity in the business. It appears the union will take a financial haircut as its wage levels should approximate the recently announced Ford union deal. That would amount to a reduction of about $20/hour in wages and benefits. Pretty hefty hit.

The only way the union will benefit will be if GM stock makes a comeback. Its very long term. Lots of risk. There are no guarantees it will pay off.

If this bankruptcy moved forward with every creditor fighting for every inch of ground every step of the way the other more normal form of bankruptcy might have taken forever and killed the supplier chain.

Its a deal. It may or may not work.

The union argument is bogus. Today about 12.4% of the US labor force is unionized. In 1945 it was about 36%.

Right Wingers scream more about something that is and has been shrinking for decades. The more union membership declines the louder Republicans scream about it as an incredible evil. If and when US union membership shrinks to about 5% of the US work force the Right Wing Republicans will start equating it to Hitler, Ghengis Khan, the Devil, and the killer death star, only worse than all of them put together.

 

@Earlpearl: You completely dodged the issue. I found this statement especially funny:

Normally moved out of? Don't you mean, would have had to move out of because taxes would have forced them out? Why would anyone want to move out of the ocean view house you built with your own hands, on an empty lot you picked out?

You are quite right by the way. Without prop 13, they would have had to have sold for inability to pay the taxes and move to some dump in a bad neighborhood inland before I reached high school. I also appreciate the story about your brother in San Francisco and the plight of their poor high school because all the million dollar homes around the school couldn't fund a school with the taxes on hand. Excuse the french but what a load of bullshit.

By the late 1970s, prices in my neighborhood had already reached low 200s. That meager 1% property tax money from all those "wealthy" people who moved in around me set my high school up with a computer lab in 1984, all Apple 2e, followed by IBM xts the next year. That meager 1% property tax put my high school into a small group of high schools in the state offering Advanced Placement programs for early college credit. All in all, for high schools I suspect it was in the top 85% in the nation, if not better.

My parents were so poor, I spent my entire primary education till 11th grade eating school lunches with the aide of government assistance. While all the people who bought up property in our little beach community had money, we kept rabbits and chickens in the back yard to keep the cost of food down. I got to go shopping for clothing once a year, two weeks before school started.

Cut the crap about the "two edged sword" and the "two sides of the issue". Are you, or are you not, in favor of taking the limits off of property taxes, knowing full well it would force people like my mom out of the home shes lived in her whole life? I guess I can add, "I give a shit about the poor" to the list of reasons not to vote Democrat. If Democrats had their way, every part of the country will look like the inner cities, with the rich looking over the serfs.

So I'll take it you are in favor of the back door bonus agreements Gray Davis struck with the unions, granting them completely unrealistic and impossible to support pensions plans.

So I'll take it you are in favor of holding the people in Gitmo without trial? After all, keeping them there prevents a whole lot of other issues with "serious implications". Hell with Gitmo, at least the argument can be made these people are POWs and not entitled to trial. Your excuse for bypassing our justice system and having a politician make the financial decisions on the break up GM was expediency? Our court systems are moving pretty slow these days. Some trials take a year to get going. Perhaps we should just have politicians make the decisions based on the need for expediency. Have you lost your mind?

Let me hand them a tissue. Per your previous post, that would mean the compensation for some uneducated union asshole putting screws into an automobile will drop from an average of $150,000/year(~75$/hr) to $110k/year(~55$/hr). Its too much to think about. Look at it this way. When GM eventually goes bust, at least they will be qualified for a job with the TSA. Either way, I pay their salaries.

Oh yeh, thats right. They gave up 40k a year in compensation for almost 50% of the company. Jesus, who wouldn't take such a cheap stock deal.

Hitler, Ghengis Kahn? I personally would go with Chavez or Castro. You are out of step with your party. Democrats in California, a very liberal state, are campaigning against union labor. There is more than one reason California is in financial crisis, but Unions are at the top of the list. Many California Democrats are starting to realize that.

 

The whole misconception that the government can make the nation richer by taking money away from one group of people and giving it to another group of people is farcical.

If you want to make the nation richer, motivate people to create wealth by letting them keep it. Stealing money people have earned through honest labor isn't a great method to motivate people to keep working.

The fact that the politicians are stealing the money in order to funnel it to their campaign contributors is not a defense; it is an additional crime.

I'll finish with a quote from Frederic Bastiat:

 

Ever notice the angrier a Right Winger writes the more likely the writing is a pure pack of lies?

O_Nation: The union share of the GM deal is 17.5%. Its not close to 50%. Where did you get that figure (lie)? Did you simply make it up? Do you simply not know the facts and decided to lie? Did you get a directive from the central office of Right Wing liars to use that rediculous percentage figure.

Actual labor rates by GM union workers are not even remotely close to $75/hour or $55/hour.

Existing union workers earn a wage rate of about $28/hour for the norm. New union hires at GM are getting $14/hour http://blog.autoshopper.com/articles/579/UAW-New-Hires-Make-20-Less-Than-Average-American/

Anyone who had read about the union wage rates would know that the stated wage rates of around $70/hour include wages, health and other benefits, and a legacy retirement benefit. You chose to misrepresent that. Its typically called lying.

BTW: You were going on and on about the GOP being the party of "family values". If that is the case, Practice it. help your mother. Don't waste our time talking about looking at foreign real estate for your investment pleasure. help your mom.

My family does. I do.

Quit lying. Quit preaching. Do something nice for someone, especially your mother.

Alternatively since you lied so much about the union thing, maybe you were lying about your mother.

Finally where in God's green earth did some allegations about Grey Davis and wild eyed comments about Gitmo come from?

Oh yeah....the angrier the Right Wingers seem to be....the more they lie.

If I were you I'd take up acting.

 

I had heard it was over 40%, though I never researched the final number. I'm not going to dicker over the number. You say 17.5%, fine. 17.5% or 45%. Do you think Obama has the right to bypass the legal system and put the Unions at the front of the line? Answer the question.

LoL. You can't have it both ways dude. If their compensation package can be chopped by 20$/hr, you cant claim they are working for !4$/hr. Most people with two brain cells to rub together realize nobody pays GM 6$/hr to work for them. I believe the very very bottom of the union pay scale in California 14 years ago was 19$/hr(purely unskilled labor).

No, you chose to represent that when you put a $73.26 as the average per hour cost of an UAW employee. You can fudge with the numbers when you start talking(lying) about the numbers for the federal budget, but when you talk about what a worker receives for his/her labor, that is a concept most people get. Most Americans who don't work for a Union(or the federal government) put money into something called an IRA or a 401k. If they are not self employed and have a nice employer, that employer may match the employees contributions to his 401k, sometimes reaching as much as 5% of their salary. That is what most Americans are used to. You start rambling on about the "legacy costs of a pension", you a) ignore the fact those employees have been funding that out of their salary during their career, and b) those types of pensions are what are breaking the state of California at this very moment. At the end of the day, it all boils down to what you get paid for an hour worked.

I am. Right now. You see, my mom doesn't really need my help financially right now, but she's always had it when she needed it. She owns her home and she lives on her Social Security. Her biggest problem at the moment is that there are a bunch of people like you out there who want to steal her home from her by means of taxes. You tell us sad stories about a $20/hr cut these poor union workers are going to have to suck up, and expect us to shed a tear as you recommend new(actually old) ways of generating more revenues to keep these dead beats sucking off the government tit. Its like the story of Robin Hood, except we'd have to modify the plot to be "Steal from the poor and give to the rich".

I'm helping her in other ways too, of course. I'm now politically active for the first time in my life, and working hard to bring that Union number in California to zero. Absolute zero. Less than zero. I'm working hard to make sure any politician who even suggests touching prop 13 never sees office or re-election . If you think Unions are so great, why don't you send me a list of the businesses you hold in this country so I can pay them a visit and see if we can't get them all unionized. Somehow, I doubt you would hire union labor.

Now now, you can't troll me. If there is something I know, its when I'm being trolled . Besides, there is something in the telling of a true story that always reeks of truth when you read it. You've read the story. Do you really think I'm lying?

More importantly, where are your answers to the questions about Gitmo? Are you or are you not for bypassing due process? Shall I just chalk you up for "I'm for bypassing due process when it suits my political agenda"? If so, you are definitely part of the culture we need to get out of Washington.

And if I were you, I'd stay out of politics. The shiny veneer of the type of "Change" you are recommending wore off a long time ago. I believe the upcoming election cycle will find it about as popular making Islam the state religion.

 

Please correct me if I'm misreading this, but... the Democrats are ahead in the midterms by 0.6%.

Source: http://www.realclearpolitics.com/epolls/other/generic_congressional_vote-901.html

 

There are a few ways to look at it. First, generic congressional polling is about public sentiment. We'd have to look at the individual races to get anything meaningful. Second, we are at least one geological age away from election day, as Rove would put it. A lot can and will change, in either direction. Third, the poll you are looking at is a poll of polls. Rasmussen is the only one in the group polling likely voters. Its nice that the general public is more forgiving of Democrats but if they don't vote, who cares? Rasmussen has it at R+8, down from R+10 a week ago. Lastly, the real sentiment out there does not appear to be pro-Republican as much as it is anti-Democrat and anti-incumbent. Its going to be an interesting election cycle, but I suspect when the rubber hits the road, the Dems are going to pay pretty heavy in Nov.

From a purely Machiavellian/Alinksy view of politics, Republican bloggers should be out there right now posing as Democrats and calling Tea Party people racists. The Dems do it all on their own, but it was really causing their numbers to slip so they've toned it down.

 

I think that incumbent Republicans were at risk because Republicans are unhappy with how the party under Bush gave up it's soul to try to be more Democrat than the Democrats.

The Democrats on the other hand... what have they to be unhappy about? The have the White House, the Senate, the House of Representatives, and half the Supreme Court. The only thing they could really hope for is one of the Justices stepping in front of a city bus. The glorious revolution is here baby! Put the bourgeois middle class up against the wall!

 

For the topic of this tread - the likelihood for depression becomes evermore remote with each passing day. Whether the electorate ever realizes the extent of the economic meltdown or the proximity to a new Great Depression that was averted the actions initiated first by Bush and followed through by the Obama Administration may not translate into positive votes as it should but notwithstanding the meltdowns probable conclusion the depression has been averted.

.......

This number has changed daily and from one party back to the other, to date - how it ends up by Nov. is a real sport worth watching.
.

 

Will, fix your post and that cite, I did NOT write that, Obamanation did! Fix your post, please!

 

Housing starts plummet after expiration of free government money to home buyers. Obama responds to catastrophic failure of the MMS to enforce offshore well inspections by renaming the organization to Bureau of Ocean Energy Management and Regulation

[video=youtube;zDAmPIq29ro]http://www.youtube.com/watch?v=zDAmPIq29ro[/video]

 

Weird... I have no idea how I managed to screw that up. Sorry!

But, it's unfixable. DP won't let me edit that post.