[Mb-civic] Krugman

[Mike Blaxill]

http://www.truthout.org/docs_2005/112505Z.shtml

Bad for the Country 
    By Paul Krugman 
    The New York Times

    Friday 25 November 2005

    "What was good for our country," a former
president of General Motors once declared, "was
good for General Motors, and vice versa." GM,
which has been losing billions, has announced
that it will eliminate 30,000 jobs. Is what's bad
for General Motors bad for America?

    In this case, yes.

    Most commentary about GM's troubles is
resigned: pundits may regret the decline of a
once-dominant company, but they don't think
anything can or should be done about it. And
commentary from some conservatives has an
unmistakable tone of satisfaction, a sense that
uppity workers who joined a union and made
demands are getting what they deserve.

    We shouldn't be so complacent. I won't defend
the many bad decisions of GM's management, or
every demand made by the United Automobile
Workers. But job losses at General Motors are
part of the broader weakness of US manufacturing,
especially the part of US manufacturing that
offers workers decent wages and benefits. And
some of that weakness reflects two big
distortions in our economy: a dysfunctional
health care system and an unsustainable trade
deficit.

    According to A. T. Kearney, last year General
Motors spent $1,500 per vehicle on health care.
By contrast, Toyota spent only $201 per vehicle
in North America, and $97 in Japan. If the United
States had national health insurance, GM would be
in much better shape than it is.

    Wouldn't taxpayer-financed health insurance
amount to a subsidy to the auto industry? Not
really. Because most Americans believe that their
fellow citizens are entitled to health care, and
because our political system acts, however
imperfectly, on that belief, tying health
insurance to employment distorts the economy: it
systematically discourages the creation of good
jobs, the type of jobs that come with good
benefits. And somebody ends up paying for health
care anyway.

    In fact, many of the health care expenses GM
will save by slashing employment will simply be
pushed off onto taxpayers. Some former GM
families will end up receiving Medicaid. Others
will receive uncompensated care - for example, at
emergency rooms - which ends up being paid for
either by taxpayers or by those with insurance.

    Moreover, GM's health care costs are so high
in part because of the inefficiency of America's
fragmented health care system. We spend far more
per person on medical care than countries with
national health insurance, while getting worse
results.

    About the trade deficit: These days the
United States imports far more than it exports.
Last year the trade deficit exceeded $600
billion. The flip side of the trade deficit is a
reorientation of our economy away from industries
that export or compete with imports, especially
manufacturing, to industries that are insulated
from foreign competition, such as housing. Since
2000, we've lost about three million jobs in
manufacturing, while membership in the National
Association of Realtors has risen 50 percent.

    The trade deficit isn't sustainable. We can
run huge deficits for the time being, because
foreigners - in particular, foreign governments -
are willing to lend us huge sums. But one of
these days the easy credit will come to an end,
and the United States will have to start paying
its way in the world economy.

    To do that, we'll have to reorient our
economy back toward producing things we can
export or use to replace imports. And that will
mean pulling a lot of workers back into
manufacturing. So the rapid downsizing of
manufacturing since 2000 - of which GM's job cuts
are a symptom - amounts to dismantling a sector
we'll just have to rebuild a few years from now.

    I don't want to attribute all of GM's
problems to our distorted economy. One of the
plants GM plans to close is in Canada, which has
national health insurance and ran a trade surplus
last year. But the distortions in our economy
clearly make GM's problems worse.

    Dealing with our trade deficit is a tricky
issue I'll have to address another time. But GM's
woes are yet another reminder of the urgent need
to fix our health care system. It's long past
time to move to a national system that would
reduce cost, diminish the burden on employers who
try to do the right thing and relieve working
American families from the fear of lost coverage.
Fixing health care would be good for General
Motors, and good for the country.