General Motors and Social Security – Two Sides of the Same Coin
There’s a group of folks out there who are busy pinning the blame for GM’s four-decade long implosion on unions. Those folks tend to also bleat the loudest about the crisis with Social Security. People like this miss the point with both situations… and the point is about the same.
First, Social Security. Writers like Bruce Webb and Coberly here at Angry Bear, plus numerous others, have pointed out many times – there is no problem with Social Security. Social Security has accumulated a fortune in IOUs from the rest of the Federal Government, which has happily borrowed that money and promised to pay it back. If there’s a problem, its with the rest of the government’s ability to pay those IOUs back once Social Security stops running a surplus. The problem is only being exacerbated now, when the government is taking on additional new debt to cover and handing it to the likes of Goldman, Welfare, Queen & Sachs and Citi so they could continue to pay the talent that created the financial crisis. Similarly, since WW2, the problem has generally been made worse under Republican Presidents and been alleviated under Democratic Presidents – debt held by the public as a percentage of GDP has decreased under every Democratic President beginning with Truman, and has increased under every Republican President beginning with Ford. Clearly, bailing out bankers is seen by some as a better option than honoring long-extant promises to the nation’s retirees. Tax cuts, gutting regulations, and generally producing slow growth are also more worthwhile goals.
What does all off that have to do with GM and unions, you ask? Well, like the Federal Government, GM had a choice as to how to finance its operations. When it (and the rest of the US auto industry) were producing world beating vehicles back before the world was cursed with knowledge of the Bee Gees, it was doing so in part by asking its employees, especially its unions, to forgo some payment at the time in exchange for some payment later. Put another way, by offering pensions and other benefits, GM got its union employees to accept lower salaries in the 40s and 50s and 60s. It built the world-beating cars of the time by borrowing the future, much like St. Ronald the Reagan and GW Bush “paid” for their “tax cuts.” Would GM of the 1950s had been GM of the 1950s if it had paid its employees the future value of their retirement benefits at the time? I am pretty sure the answer is “heck no.” Would it have gotten the same work out of its employees without those promises? Again, I’m pretty sure the answer is “heck no.” Complaining about GM’s obligations to its retirees is essentially saying: “if only GM reneged on its deals, it would have lower costs.” No doubt the statement is true, but there’s something seriously wrong with anyone who sees that as the way a company should choose to do business.
Of course, its only certain deals that some folks want to see reneged. Nobody would ever suggest that GM should refuse to pay for parts and equipment it has already used, or that the Federal Government should refuse to pay for equipment we transfer to Pakistani intelligence so they could train the new generation of Taliban who are fighting against our troops in Afghanistan. But weaseling out of obligations to folks who worked on assembly lines for decades seems to actually be a good thing. And any suggestion otherwise is class warfare or envy or even socialism.