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2008 U.S. Presidential Elections—Why the U.S. auto industry
crisis is a precursor to what the next President will face on
a national level.
2007 March 22
© 2007, Libertiny Financial LLC
The United Autoworkers Union (UAW) was developed to help provide a good quality of life for America’s middleclass by providing fair wages, accessibility to health insurance, and a retirement pension amongst other critical items. UAW members became part of the middleclass which continues to be the backbone of America consumerism today.
In a closed society, the UAW would continue to thrive. However, the UAW and our middleclass continues to face the onslaught of globalization where wages and benefits slide down to meet the lowest common denominator--Those societies that offset these costs through either nationally funded programs or an inherently lower cost of living/wage structure. Key countries in this camp include China, Japan, and Mexico.
In the 1950’s and 1960’s the saying went: What’s good for General Motors (GM) is good for America—and vice versa. Although the meaning behind this statement was different 50 years ago, the overall viewpoint is a precursor to what the next U.S. President will face:
How do you sustain the living standards of Americans when other countries, now heavily involved in the world’s economy, have very different living standards?
Back in 1930’s and amended in the 1950’s and 1960’s the “Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds” were the financial foundation to what is commonly known as Social Security & Medicare. In UAW parlance, it’s a national health insurance and a pension plan. And like the automotive industry, it has created a tremendous financial burden for present and future generations of workers who support those who have retired. Why?
Both the U.S. and UAW benefit plans are based on the underlying assumption that subsequent generations of workers will earn more than previous generations and will be employed in higher quantities. This requirement allows for the support of the present generations who are now using the plan during retirement.
As we’ve witnessed in the automotive industry over the last 20 years: In a global economy, this “pyramid” model is unsustainable since both assumptions are no longer true in the U.S.
What we need is a President who understands the issues and works with non-partisan experts to develop a realistic solution.
As with any financial issue that includes annual Cost Of Living Adjustments (COLA), “compounded interest” problems require that action be taken earlier rather then later in the process. A painful financial fix today avoids a complete future meltdown of the system tomorrow.
All of us who have individual or family budgets to adhere to, that would be everyone, recognize that there are three fixes possible:
1) Increase your salary (increase taxes from the U.S. perspective)
2) Cut costs
3) Combine both of the above
Recommendation:
The U.S. can not afford to increase taxes as we fight to maintain our global competitiveness. So cost cutting is the requirement for fixing Social Security and Medicare. And not the easy solution of cutting back the amount paid to people, but the difficult solution of streamlining administrative costs.
The original Presidential task force designed Social Security in less than 2 years. With the right non-partisan experts, finding and implementing a solution can be accomplished in one Presidential term.
Our next President needs to assign a small, bi-partisan team of experts to fix Social Security and Medicare once and for all.
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