A-Train asked me today how I see the plan helping people (while avoiding answering my own question to him on how he would try to fix the problems facing our nation today).
I see the plan creating jobs by putting people to work building and updating necessary infrastructure and investing in our energy future, instead of costing jobs by doing nothing. I see the plan helping to maintain my property value by keeping people who are on the edge in their homes, instead of lowering my property value when my neighbors are foreclosed upon.
Keep in mind that the mortgage plan is for those who have ONE mortgage, and whose loan-to-property values are in the 90-105% range; not for those who have a $500K mortgage on a $250K house.
A flawed plan is better than no plan … but it appears that this plan will have safeguards built in. As the President indicated in his speech tonight:
[This is] a housing plan that will help responsible families facing the threat of foreclosure lower their monthly payments and re-finance their mortgages. It’s a plan that won’t help speculators or that neighbor down the street who bought a house he could never hope to afford, but it will help millions of Americans who are struggling with declining home values — Americans who will now be able to take advantage of the lower interest rates that this plan has already helped bring about. In fact, the average family who re-finances today can save nearly $2,000 per year on their mortgage.
While President Obama is not cutting non-war spending for 2010; he does plan to cut war spending in Iraq; offsetting increased spending in one area with cuts in another, and ultimate plans to halve the deficit by the end of his first (and hopefully not only) term in office.
Some people also seem to blame a lot of the economy’s problems on union labor, specifically, the United Auto Workers.
Union labor is not in and of itself a bad thing; in fact, the UAW has made many concessions over the past 20 years. In fact, it is not union labor that is killing the auto industry, but the thousands of useless middle managers.
- At General Motors, the average hourly wage for a union employee is $28/hour.
- Toyota Georgetown (Kentucky) pays $27 to $30/hour for non-union labor.
- Adding in GM benefits, the current employees cost about $51/hour.
- At Toyota, they cost about $55/hour including benefits.
And yet, Toyota isn’t struggling to quite the same extent as GM despite paying its workers more. You can’t blame the UAW for that.
On the other hand, GM’s CEO makes 14 times as much as his Toyota counterpart … perhaps a big chunk of GM’s problems are at the top of the salary chain rather than at the bottom of the wage chain.
GM also has 32,000 salaried employees (but only 62,000 hourly employees). How many companies have a 1:2 management/labor ratio? Certainly not financial services, and you can’t blame the UAW for the excessive numbers of salaried management employees.
GM is also paying pensions to their 365,000 retired employees (about half of which were salaried management workers) as opposed to their 62,000 active hourly workers). Of course, since GM’s market share has dropped from 60% 20 years ago to less than 25% today, you can see why they have more former employees than current employees. This is also a huge drain on their resources; caused not by the unions, but GM’s loss of revenue and market share due to competition and poor management. If GM focussed on developing new, innovative cars that people want, they might not be in this situation … and you can’t blame that on the UAW either.
In fact, in 2007, the UAW negotiated a historic deal that will allow the Big Three to contribute a one-time cost and subsequently allow the union to run the health care benefits program of retired autoworkers. That will allow the Big 3 companies to wipe out their health care obligations to retirees, relieving them of that drain on their resources.
In addition, the UAW made concessions agreeing to a two-tiered pay system such that new (second-tier) hires will start at about $14 an hour. When the ratio of new, second-tier workers reaches about 20 percent of the overall work force, the difference between labor costs at the Big Three and the transplant auto companies like Toyota will nearly disappear.