CT Blue

“A lie gets halfway around the world before the truth has a chance to get its pants on.”

Winston Churchill

Right now the left wing of the blogosphere is trying to put the pants on a bit of truth about union workers at GM, so I thought I’d do my share.

This particular lie started its journey in the pages of the New York Times, a week ago today. Dean Baker explains:

The New York Times told readers that GM’s autoworkers are paid $70 an hour (including health care and pension). This is not true. The base pay is about $28 an hour. If health care cost per worker average $12,000 per year, that adds in another $6 an hour. If the pension payment takes up 25 percent of base pay (an extremely high pension), that gets you another $7 an hour, bringing the total to $41 an hour. That’s decent pay, but still a long way from $70 an hour.

How does the NYT get from $41 to $70? Well the trick is to add in GM’s legacy costs, the pension and health care costs for retired workers. These legacy costs are a serious expense for GM, but this is not money being paid to current workers. The person on the line in 2008 is not benefiting from these legacy costs.

This particular lie is doubly outrageous, because the fact is that those legacy costs have largely been contracted away. If GM manages to hold on for a few years, the actual average pay for GM workers will be less than non-union workers. From Jonathan Cohn, at the New Republic (via digby):

In 2007, the Big Three signed a breakthrough contract with the United Auto Workers (UAW) designed, once and for all, to eliminate the compensation gap between domestic and foreign automakers in the U.S.

The agreement sought to do so, first, by creating a private trust for financing future retiree benefits–effectively removing that burden from the companies’ books. The auto companies agreed to deposit start-up money in the fund; after that, however, it would be up to the unions to manage the money. And it was widely understood that, given the realities of investment returns and health care economics, over time retiree health benefits would likely become less generous.
…
One can debate the propriety and wisdom of these steps; two-tiered wage structures, in particular, raise various ethical concerns. But one thing is certain: It was a radical change that promised to make Detroit far more competitive. If carried out as planned, by 2010–the final year of this existing contract–total compensation for the average UAW worker would actually be less than total compensation for the average non-unionized worker at a transplant factory. The only problem is that it will be several years before these gains show up on the bottom line–years the industry probably won’t have if it doesn’t get financial assistance from the government.

It is a staple argument of our opinion leaders that Detroit’s woes can be laid at the feet of the unions. Until union members return to a proper level of destitution, Detroit deserves no bailout. The same rules don’t apply to the bankers, of course. As Barney Frank observed, “There is apparently a cultural condition that’s more ready to accept aid to a white-collar industry than the blue-collar industry, and that has to be confronted.” Detroit must show us a plan to mend its ways or we can not give them their $25 billion. That amount is thrown at the banks like chump change, and they are not required to reform their practices at all. Nothing the Bush Administration has done (or that Obama has yet proposed) will stop these same banks from doing the same thing once conditions are right.

Since this lie started its journey it has gone quite a distance. A by now partial list of the media outlets and politicians who have helped it on its way can be found here.

Meanwhile, the truth is getting dressed. The folks at Media Matters are doing their best to help it along (I’ve linked to several of their articles above). I’m doing my bit to get the word out about this. The times are too serious. We can’t let the right wing hijack this situation and force us to make economic policy in the Obama administration like we did foreign policy under Bush. This time we need to be a bit more reality based. Our futures really do depend upon it.

UPDATE: A Study in contrasts. While the people who know are busily blaming unions for GM’s mess, and consigning the US auto industry to the dustbin of history, they are totally silent about the shortcomings of the Citibank get out of jail free card. Media Matters reports that:

On their November 24 broadcasts, all three network evening news programs included reports on the bailout of Citigroup that included interviews with supporters of the deal. The report on NBC’s Nightly News, for example, featured clips from interviews with Citigroup CEO Gary Crittenden and with “[o]ne of Citi’s biggest investors,” Saudi Prince Al-Waleed bin Talal. However, only the CBS Evening News‘ report included any criticism of the bailout, and that criticism came from Egan-Jones Rating Co. founding principal Sean Egan, who said that the bailout was not large enough. None of the reports featured criticism of the bailout on the grounds that it is a poor deal for taxpayers, even though several economists have strongly criticized the bailout on those grounds.