Resurrect Capitalism!

The city of Vallejo, CA made the news last year for going bankrupt.  The city coffers swelled during the 2000’s real estate boom.  As that bubble popped real estate tax revenue dried up and the town went bankrupt due to its unsustainable obligations.  One of the major costs that broke the city was the cost of employing public sector union members.

Now, after much haggling and legal wrangling with the bankrupt municipality the unthinkable has happened: public employee union members actually accepted a cut in entitlements.  Public employee unions typically fight tooth and claw against getting small increases in benefits & pay (never mind outright decreases) so this is actually significant.  OK, so the town had to go bankrupt to renegotiate its union contracts but at least it happened.  This is why bankruptcy was created.  It allows an entity to renegotiate unsustainable agreements.

Some concessions CAMP members made in their supplemental contract include dismissal of all bankruptcy-related damage claims against the city, limited unpaid furlough in the next two fiscal years, a reduction in medical benefits coverage — starting in 2010 — and further reduced retiree medical benefits for new hires. Also, new employees will be unable to cash out accrued sick leave or gain longevity pay.

Notice what didn’t happen: the union members are not down and out.  Unions don’t want to accept even the smallest cuts and will wage fear-mongering propaganda campaigns about the horrors that await the budget ax.  But ultimately the union members accepted mild entitlement concessions so that their city could regain solvency.  Sounds like a win-win deal to me.

The Detroit automakers should do the same thing as the city of Vallejo.  Go bankrupt and renegotiate your labor agreements.  Wring some concessions out of them and regain the ability to profitably manufacture cars.  Instead the bailout of the Detroit three has prevented (at least temporarily) the marketplace feedback from influencing labor agreements.  We taxpayers are footing the bill for unsustainable UAW union labor practices.

On that note, here is a sad story: the main manufacturing plant in my Central New York hometown, Magna International / New process Gear, is closing down.  The factory has been financially wobbling for some time and the closing was precipitated by UAW members voting against accepting wage and benefit concessions.  Some of my friends from high school and family members work for that plant.  They didn’t want pay cuts but now they are going to get a 100% cut in pay. Through the years the UAW fought tooth and claw against every single effort to control labor costs and this “no” vote was simply the straw that broke the camel’s back.

I don’t want to think about what this closing will do to the area:

When the afternoon shift let out, there wasn’t a worker in sight at the normally crowded McShane’s. “All the factory jobs we’ve already lost - General Motors, Marcellus Casket Company, Carrier, Crouse Hinds, Syracuse China, and now Magna, what’s left?” asked [McShane's manager] Doran.

Nothing is left.  My home region used to be a manufacturing powerhouse.  Now it is a vegetable on life support, with various handouts from the state as the dominant industries.  Some of the job losses are due to outsourcing but many of those jobs have just moved to more business-friendly climates down south.  The tax and regulatory environment simply make New York state an uncompetitive place to do business.  Upstate New York needs capitalism badly.

Say hello to your future, New York: