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Friday, December 12, 2008

The news today is that Senate Republicans have voted against the auto industry bailout because the UAW refused to agree to have auto workers' wages cut to those of nonunion workers. I gather that the logic in this demand must be either that auto workers wages are too high, or auto workers are responsible for the woes of the auto industry.

I think there's something to this this logic and we should follow it through to its logical ends.

Cut wages that are too high

So in looking around at wages that are too high and must be cut until they are equal to the wages of nonunion workers, I think we should start at the very top. That would, of course, mean starting with a few billionaires and then moving swiftly to the Millionaires Club, otherwise known as the US Senate.

If we were then to demand that they donate their income in excess of the wages of nonunion workers to shore up the economy, I think we will have gone a long way toward solving our problems.

This plan has the added benefit of helping these millionaires understand what it is like to live on those sorts of wages. Of course, what with their taxpayer paid healthcare plans and accumulated wealth, they will be far better off than people who have been surviving on those wages for their whole lives. This move may also help them see the wisdom of raising the minimum wage.

Cut the wages of those responsible for the economic woes of the auto industry

Well, well. Once again this strategy brings us back to the Senate but focused on the Senate Republicans and also means we can bring in the House Republicans plus a few fellow travelers.

The auto industry would not be in its current condition if these powerful people had used their power to regulate instead of deregulate the economy - letting their buddy foxes into the henhouse - and if they had raised CAFE standards, thus forcing our auto industry to make cars that would let it compete around the world.

Now there are lots of others who fall into those two categories and name names. But I'll leave it to your imagination to consider who else should be included in the pay slashing party.

The logic of how these "representatives" are handling the crisis

Let me add that one other claim made by these "representatives" is that bailouts don't work. I'm curious which ones they are relying on. It is true that Chrysler is now in trouble, but the Chrysler bailout kept that company alive for decades and even got the money returned to the US treasury.

The bailout of New York City seems to have worked out OK.

So what is the data they are relying on? Or is just more truthiness and faith-based economics?

Comments

2 comments

[1]
Another candidate for wage cutting. Software modelers and those who rely on them.

<a href="http://www.sciam.com/articl...">After the Crash: How Software Models Doomed the Markets - Overreliance on financial software crafted by physics and math PhDs helped to precipitate the Wall Street collapse</a>

<blockquote>The software models in question estimate the level of financial risk of a portfolio for a set period at a certain confidence level. As Benoit Mandelbrot, the fractal pioneer who is a longtime critic of mainstream financial theory, wrote in Scientific American in 1999, established modeling techniques presume falsely that radically large market shifts are unlikely and that all price changes are statistically independent; today’s fluctuations have nothing to do with tomorrow’s—and one bank’s portfolio is unrelated to the next’s. Here is where reality and rocket science diverge. Try Googling “financial meltdown,” “contagion” and “2008,” a search that reveals just how wrongheaded these assumptions were.</blockquote>

Posted by shirah at Friday, December 12, 2008 07:52:36

[2]
Related to the above comment, this economist/physicist explains why the whole field of economics is pretty much intellectual rubbish:

"Economics needs a scientific revolution" at
http://arxiv.org/abs/0810.5306

Referring to beliefs in markets by economists, the author writes, "An economist once told me, to my bewilderment: These concepts are so strong
that they supersede any empirical observation."

The author is head of research of Capital Fund Management and a physics professor at Ecole Polytechnique in France.

Posted by BobB at Friday, December 12, 2008 17:57:27

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