INSTITUTIONS CAN CONTROL THEIR CONTRIBUTION, NOT THE BENEFIT (via Daniel Merriman):

A Right Turn Back to Making Cars (George F. Will, October 20, 2005, Washington Post)

General Motors took an interesting turn on Monday. It is going back into the automobile business.

Granted, GM has always been in that industry, but it has also become the nation's largest private purchaser of health care. This supposedly secondary role has become primary.

GM has been forced to allow product development, pricing and other decisions to be driven by the need to keep sufficient revenue flowing in so it can flow out in fulfillment of GM's function as a welfare state. GM provides $5.2 billion in health care annually -- more than Harley-Davidson's revenue -- to 1.1 million workers, retirees and dependents. Retirees outnumber current U.S. employees 2.5 to 1. The $4 billion that goes annually to retirees does not go into developing products people want to buy. [...]

Robert "Steve" Miller, Delphi's chief executive, minces no words, telling the Wall Street Journal that defined-benefit programs are imprudent anachronisms: "The notion of having all your retirement eggs in one basket -- your employer -- is a concentration of risk that is simply inadvisable for anyone in today's fast-moving economy." He calculates that a competitive American industrial compensation cost is about $20 an hour. And to get to a total compensation cost of $20, including health care, retirement and workers' compensation, "which is high in the states we are in like New York, Ohio and Michigan," you have to have a basic hourly wage of $10. Pay at Delphi's plants in China is roughly $3 an hour.

Miller bluntly says that the social contract written after 1945 is being -- must be -- repealed because, given globalization, unskilled manual labor cannot be paid $65 an hour, with the cost passed on to consumers. "When you buy a Hyundai you get a satellite radio as your option, but if you buy a Chevrolet you get social welfare as an option. Long term, the customer is going to desert you if you try to price for your social-welfare costs."

Interesting to read this in conjunction with today's story about the Bush Brothers and then think about the current mantra on the Right that the president is a liberal, not a conservative.

Posted by Orrin Judd at October 20, 2005 9:15 AM