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The High Price of Detroit's Welfare Mentality

By Thomas Bray

"Who'd have thought, 25 years ago, this could happen?"

That was the reaction of Mike Belsito, a member of United Auto Workers Local 652 in Lansing, to last week's agreement to offer buyouts of between $35,000 and $140,000 to factory workers at General Motors and its spinoff, Delphi. You can sympathize with his sense of shock. But actually it was pretty clear 25 years ago what was going to happen.

In 1979, after all, Chrysler had already been forced to run to Washington for an emergency bailout. By the early 1980s Ford was reported on the brink of bankruptcy. And the long ugly slide in GM's market share, from nearly half of U.S. car and truck sales to less than 25 percent today, was well under way. The ranks of the United Auto Workers, once the aristocracy of the labor movement, had begun its decline from a high of 1.6 million workers to 600,000 or less today.

But news travels slowly inside the intellectual, social and economic bubble known as the welfare state -- of which the UAW was a leading architect in both the public and private sectors. Even now many UAW members consider a job in the auto industry a sort of property right. And the belief is still strong that what is good for the union is good for the country.

Premium pay, after all, helps prime the national pump, doesn't it? Never mind the fact that this quaint Keynesian notion was long ago discredited. A given level of compensation is only sustainable if it's earned through productivity and sales. Protectionism helped sustain the illusion that the corporate welfare state could work, but the market soon worked around it. Toyota and Honda and the others simply set up plants inside the United States itself in places like Alabama, Tennessee and South Carolina where unions would have trouble persuading workers to pay fees to get what they were already getting, a good day's pay for a good day's work.

And American management, fearful that a strike would cost them the market share (and bonuses) that they have lost anyway, repeatedly caved in to union demands for, as Samuel Gompers put it, "more."

The same welfare state mentality was leading to an even bigger calamity in the public sector. Detroit, remember, was going to be the "Model City" of Lyndon Johnson's Great Society, the shining example of what the "fairness" of the welfare state can produce. Billions of dollars later, Detroit instead has become the model of everything that can go wrong when you hook people on the idea of something for nothing - a once-middle class city of nearly 2 million that is now a poverty-stricken city of less than 900,000.

And still the beat goes on: Detroit's public school teachers are engaging in massive "sick-outs" to protest minor cuts in pay and benefits, completely ignoring the fact that Detroit schools are losing students to the suburbs at the rate of 10,000 a year - a decline in "market share" that makes even GM look good.

The GM and Delphi buyouts are themselves examples of welfare state mentality. They seem compassionate, but mainly if you are a worker already close to retirement. The staggering cost of the buyouts, aimed at reducing GM's hourly U.S. workforce of 126,000 by about 30,000, will take a big chunk out of the budget for development of future products. And still intact is the creaky New Deal labor structure that makes a virtue of inefficiency on the factory floor.

The real question is: who would have thought 25 years ago that Detroit could have ignored reality for so long?

Tom Bray writes columns for The Detroit News and Email:

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