Oftentimes I have an idea, let it sit, and then I see someone has written it up better than my first draft would have been
Such is the case with the Washington Post's Robert Samuelson, who compared Barack Obama's economic vision with the failed strategies that led to General Motors' collapse
Broadly speaking, the U.S. welfare system divides into two parts -- the private, run by firms; and the public, provided by government. Both are besieged: private companies by competitive pressures; government by rising debt and taxes. GM exemplified the large corporation as private welfare state. In contracts with the United Auto Workers, GM promised high wages, lifetime employment, generous pensions and comprehensive health insurance. All this is ancient history: New workers get skimpier benefits. .......
Pressures on private and public welfare won't abate. The economic conditions that encouraged corporate welfare have long since vanished. In 1955, GM, Ford and Chrysler accounted for 95 percent of U.S. light vehicle sales, reports economist Thomas Klier of the Chicago Federal Reserve. With market dominance and technological leadership, the Big Three assumed they could pass along to customers the costs of job guarantees, high wages and fringe benefits........
In theory, expanding public welfare could offset eroding private welfare. President Obama's health-care proposal reflects that logic. The trouble is that the public sector also faces enormous cost pressures, driven by an aging population and rising health costs. The Congressional Budget Office projects the federal debt will double as a share of the economy (gross domestic product) to 82 percent of GDP by 2019.
Any sober examination of figures like these suggests that the system has promised more than it can realistically deliver. We are borrowing not to finance investment in the future but to pay for today's welfare -- present consumption. Sooner or later, the huge debt will weaken the economy. Nor would paying for all promised benefits with higher taxes be desirable. Big increases in either debt or taxes risk depressing economic growth, making it harder yet to pay promised benefits.
The bottom line is that if the Fortune 500 couldn't provide free health care to all their workers and dependents, it's hard to see how governments are going to do it--that is--without tradeoffs which politicians aren't going to disclose up front.
I also find it interesting that the most vocal Congresional proponents of "public option" health care are those politicians who came of age at the tail end of the Great Society---Ted Kennedy, Chris Dodd, Henry Waxman, et al.---all of whom would like to pretend that big government never really failed--it just got bad press. And we all know Barack Obama "missed the 1980's"
Roger Smith may seem to be a light year away from our suave , metrosexual President. But maybe not. When Smith took the reins at GM, the firm was challenged, but huge. Smith thought by sheer force of revenue he could buy GM's way out of trouble. He spent profligate sums on his vision--buying Hughes Electronics, buying Ross Perot's EDS, building huge new assembly plants like Poletown and Buick City even when GM had plenty of old plants, starting the new Saturn brand to compete with Toyota.
Ironically, when American business was in the process of reinventing itself by becoming nimble, flexible and customer-oriented, Smith remade GM into even more of a command and control organization than he inherited--removing divisional autonomy.
And a time when GM should have been trying to right-size itself with future demand, establish a realistic labor-management relationship and build its own organic resources, Smith brought his version of "Hope and Change"
Michael Moore depicted how it worked out. By 1992 GM was shutting plants and taking charges against earnings. And with free cash flow later spent to gain temporary labor peace instead of new products, the cycle once started never really ended.
How exactly is Barack Obama's economic vision different than Roger Smith's. He is trying to buy off the old labor establishment and spend his way past the problems we face--instead of forcing the painful but necessary reforms we will need to be competitive in a cutthroat global economy. And he is trying to impose centralized management upon a dynamic economy.
Let me make one other point. If we adopt "cap and trade" much of the heavy industry left in the Midwest will give up the ghost and move to Asia. Then the workers will be retrained for health care. But "health care reform" is supposed to cut costs. In practice, that means closing hospitals and firing employees. Out of the frying pan, into the fire. Jobless recovery, anyone...or "Player Piano"
I fear that when "Buzz Lightyear economics" plays out we will have more vacant cities in the Rust Belt bereft of any hope. Perhaps a more conservative and thinner filmmaker will have at our President about it. He'll have as much luck getting an interview, I'm sure.
