If Only...

"Winds of Change in Unionland" by Holman Jenkins

How's the view from Solidarity House? Just asking.

Solidarity House is the headquarters of the United Auto Workers in Detroit, whose windows gaze figuratively across the labor hinterland of the upper Midwest. At least it used to be a labor hinterland, though its politicians this week are taking an axe to public-sector unions. In Indiana and Michigan, proposals even target private-sector unions with bills to turn those states into "right to work" states, like Tennessee or South Carolina.

It all serves to underline the improbability of the agenda rolled out in January by the UAW's new boss, Bob King. Mr. King's grand plan is to organize Toyota and other transplant factories in Southern states where unions already aren't popular, where the laws already are unfriendly, and where previous campaigns have yielded nothing but defeat.

That Mr. King is not dumb is illustrated by his success in a previous job. He led the UAW's successful drive a decade ago to organize the auto parts suppliers. He won by playing the only card the UAW has to play, its politically-protected labor monopoly over the Big Three. He leaned on the Big Three to lean on their suppliers to accept the union on a card-check basis—without a secret ballot vote. In return, the UAW agreed to stand aside while the Big Three shut down some of their own plants and laid off workers.

That was the deal, and the episode offers three important insights. The union had little else to offer supplier companies or their workers, who folded simply under threat of losing their Detroit contracts.

Secondly, the supplier campaign was a distraction from the fact that the Big Three's own workers were giving ground on jobs and job security.

The third lesson, bluntly, is that Mr. King is blowing smoke about Toyota. The UAW has no card to play. The union's labor monopoly gives it no leverage over the transplant factories, and the union's appeal to their nonunion workers, realistically, is less than zilch right now.

The UAW finale has begun. It's the beginning of the end for the union, except as administrator of its membership's retiree health-care benefits (which increasingly looks like a bone thrown the union by the Big Three to give labor honchos a reason for living).

Let us put away our Woody Guthrie records. Detroit's "turnaround" has come not because everyone got a warm feeling and pulled together as a team. Accurately stating matters, the New York Times recently noted that the homegrown industry's "cost structure has been reduced substantially, first through worker buyouts and plant closings and then by eliminating debt during its bankruptcy."

This has the virtue of getting the chronology right. The big labor concessions all came before a government-sponsored bankruptcy that reorganized GM and Chrysler in 2009. In each case, the union gave ground because it knew the one way to outrun its all-important political support in Washington would be to drive the Big Three into Chapter 11.

Bankruptcy came to GM and Chrysler anyway in the financial crisis, followed by a taxpayer bailout. Mr. King knows, in the current political atmosphere, he can't go back to playing his monopoly card to extract anticompetitive terms from the Big Three.

He says the union has changed and wants a new nonadversarial relationship with management. But what exactly has the UAW got to offer? Evidence is lacking that organized labor actually adds value, creating gains workers and stockholders can share. If it did, Toyota et al. would be clamoring to have the UAW in their factories. They're not.

Mr. King's dilemma is evident in his lukewarm response to the Big Three's opening gambit in this year's quadrennial contract talks, an offer of enlarged profit-sharing. Here's the problem: Incentive pay is earned pay; workers see profits as something businesses create, not something union bosses create. And the foreign transplants will only be too happy to compete on the basis of performance-related pay. If the industry is headed toward compensation based on success, what are workers getting for their UAW dues? Good question.

Mr. King must have figured out the handwaving about Toyota no longer is going to fly. Expect him soon to change the subject to management compensation, especially the stock option and bonus payouts white-collar workers are enjoying as a result of the turnaround. Look for the Obama administration to pitch in with rhetoric about workers being denied their "fair share."
All the while Mr. King will be praying, praying—beseeching the heavens for some change in the political atmospherics to allow the union to go back to playing its monopoly card. Don't bet on it anytime soon.

Government Programs

"The government's mortgage assistance program has helped just one in four of the 2.7M homeowners who applied to the program. The bulk of the applicants either failed to qualify for HAMP or were disqualified after initially being accepted into the program. As a result, just $1B has been spent on HAMP, a far cry from the government's initial estimate that $75B would be needed for the program."

So do we see this as being successful?

I was reading another article which pointed out that whenever the government tries to remove the consequences of the risk people/corporations (yes, there is risk when you purchase a home) take they create a more disastrous bubble within the economy, than the normal cycle bubbles we will always see.

While I believe the economy will be able to withstand the bubble that has probably been created from all of the recent government activity, we are going to see this pop later on, and it isn't always in a predictable sector that the bubble manifests.