Friday, November 21, 2008

Before the Bailout

There should be no Detroit bailout without an accompanying plan to transform GM and Ford into companies that are sustainable in the American business climate.  The manufacturing and assembly process is good, the quality is reasonable, the branding is there -- the main problem is salaries at the top and bottom of the scale.

Start with the top.  GM CEO Rick Wagoner made over $14 million in 2007 including benefits, stocks, and other goodies.  The top 5 executives at GM averaged $7.79 million.  At Ford, the top 5 did better, averaging $8.24 million, with top dog Alan Mulally bringing in over $21 million.  Chrysler is privately held by Cerberus, and salaries are not disclosed.  

If these companies want a bailout -- that is, want your money and my money and our children's money -- they need to subscribe to a completely different salary plan.  We have a federal structure for highly-compensated executives:  the President of the United States earns $400,000 per year and the Vice-President earns $221,100.  Senators and Representatives start at $169,300 and top out at $188,100 for leadership positions, except for the speaker of the House who earns $217,400.  The Chief Justice of the Supreme Court gets the same $217,400, and the associate justices make $208,100.  We also have a 15-grade scale for all other federal employees, depending on location in the US.  In Washington, DC, the most junior employee (Grade 1, Step 1) makes $20,607 and the most senior (Grade 15, Step 10) makes $149,000.  The pay rates are almost identical in Detroit.  Finally, the Senior Executive Service ranges from 139,600 to 191,300.

It seems to me that any company that wants to accept federal rescue money must start -- as an absolute prerequisite -- by accepting the federal pay scale for their non-union workers.  Details abound, but the basic idea is that the top person makes no more than $400,000 and everyone else works down from there.  Deferred compensation, including equity options like stocks, should also be limited to a federal equivalent.  This must be understood before any possibility of a bailout can be considered.

The same is true at the other end of the spectrum.  As it stands now, UAW workers earn an hourly wage of around $74 including benefits, while Toyota and Honda workers earn around $48 per hour.  Building cars that may or may not be as good as the competitors' with 50% higher labor rates is clearly not a sustainable business plan, and cannot be subsidized through a bailout that tries to get GM and Ford back to business as usual.  There is no more business as usual.  

A prerequisite to a federal bailout is that the GM and Ford workers accept a salary and benefit plan representative of the other US automakers.  What that means for the union is between the workers and their representatives.  What's clear is that a gold-plated deal with a company that goes into bankruptcy or even ceases to exist isn't worth the floor mats.

So in some ways it's good that there was no emergency bailout plan for Detroit before Congress adjourned.  Before considering any such plan, Congress needs to send the message: don't expect the taxpayers to clean up your mess.

Tuesday, November 11, 2008

Race in the race

I live in Washington DC, and my quotidian observation has typically been that race matters, and matters a lot. So many photos and cartoons and reactions from around the world to the Obama election and yesterday's White House walk through seem to dote on the unthinkable: a black man in the White House. What that says is that race might matter, but a lot less than I thought.

First, education matters. Barack Obama attended Occidental and Columbia as an undergraduate and Harvard Law School. That education oozes out of him in every declaration. His eloquence may be a natural part of his genetic makeup, but the content contained in every proposal and every version of the stump speech is clearly the product of a well-trained mind. His poise and cool-as-a-cucumber demeanor likewise suggest the benefits of a challenging education.

So education trumps race.

Second, family matters. The Obama girls stole the show at the Democratic National Convention, and Michelle Obama is an incredible example of a spouse simultaneously supportive and yet successful in her own right. Barack Obama's unusual upbringing (Hawaii-Indonesia-Hawaii-Los Angeles-New York-Chicago) and complicated family relations are marked repeatedly by the willingness of family members to come together to help raise a young man. Obama himself demonstrated similar loyalties when he took days off in the middle of a tight election to visit his ailing grandmother in Hawaii, a move validated when she died on the eve of his election.

Family values trumps race as well.

And so, a perfect role model regardless of race: work hard in school and be true to your family.

Monday, November 10, 2008

If I were Obama, part 2: the Bush bill

It seems to me that there is way too much attention focused on the details of President-elect Barack Obama's transition planning. If I were Obama, I would develop some cover stories, put those out for attention and discussion, and let the transition happen more subtly. One narrative could well be: how much has it cost you, the average American taxpayer, to have George W. Bush in office for the past eight years.

Let's start with the obvious one: the $700 billion bailout. What is $700 billion, anyway? It's far too large a number to really mean anything to me. So let's dig in, shall we?

In 2007, there were approximately 138 million taxpayers in the United States. So $1 billion is about $7 for every US taxpayer. Some pay more, some less -- there are probably 138 million individual situations -- but it's a place to start. So the cost of the bailout is 700 times $7 per taxpayer: $4900.

Wow. So, almost $5 thousand per taxpayer. That's a lot of money to get Wall Streeters back on an even keel.

The other obvious biggie is Iraq. No one really knows how much the Iraq war will cost; current estimates are $600 billion spent so far and final costs between $1 and $2 trillion. Some estimate the cost as high as $4 billion. Well, let's say $1.5 trillion; divided again by our 138 million taxpayers -- careful of all those zeros -- is around $10,800.

That's around $16,000 per taxpayer for Baghdad and Wall Street. For reference, Joe the Plumber made $35,000 to $46,000 in 2007 if he was working full-time. Perhaps Fox News could have him on to get his thoughts, since I imagine he's got plenty of time.

The way debt works, including our national debt, is like putting $16,000 on your credit card. If you don't pay off the principle -- or worse, make no payment at all -- the debt just gets bigger.

So if I were Obama (or perhaps Obama's PR machine), I would ask the following question:

When President Clinton left office almost eight years ago, he left a surplus budget. President Bush has incurred approximately $16,000 in debt which he has not figured out how to repay. What are your thoughts on how best to address this problem?

If I were Obama, part 1: Iraq

Barack Obama was unique among the 2008 presidential candidates because of his immediate and vocal opposition to the Iraq war. That his original stand was both principled and prescient does him no good now, over five years and 4000 casualties into the war. However, hearkening to the first Bush administration -- George H.W. Bush, or Bush-41 -- may serve Obama well at this point.

Recent history gives us this comparison: why was Bush-41 able to prosecute and conclude a US engagement in Iraq successfully? And why was Bush-43, with the strong wind of public outrage of 9/11 at his back, so clearly and completely unable to secure public support or military success in the same place?

  • Bush-41 articulated his reasons for going into Iraq: Saddam Hussein had invaded a small and defenseless country. Anyone who has spent time on a playground understands that bullies are held accountable by older siblings. Bush-43, by contrast, provided several possible reasons, but did so unconvincingly and without a coherent narrative. Among the Bush-43 rationales:

    1. Weapons of mass destruction. Few intelligence decisions have been so poorly made as the idea that Iraq was teeming with WMD. The Bush-43 staff stretched every possible point to somehow support the idea that Iraq and Saddam Hussein posed a WMD threat. By all accounts, the Bush-43 staff deliberately distorted the intelligence, arm-twisted administration officials who still had international credibility (such as Colin Powell), and whipped up what froth they could in terms of public opinion.

    2. Al-Qaeda. It is well-established now that al-Qaeda had no significant presence in Iraq before the US invaded. Al-Qaeda was entrenched in neighboring Afghanistan, which the Bush-43 administration has deprioritized behind Iraq. It is similarly known that Saddam Hussein had no involvement with the 9/11 attacks. For Bush-43 to instigate and allow that perception to continue suggests that whatever the actual reasons are, they may well not stand up to public scrutiny.

    3. Saddam as bogeyman. The demonization of Saddam Hussein was easily the most effective of the Bush-43 narratives, grounded as it was in fact. However, Hussein's capture, trial, and execution appear to have had no impact whatsoever on the facts on the ground in Iraq.

  • Bush-41 carefully marshalled public opinion -- around the world as well as at home -- before launching any military offensives. He built on previous groundwork in the UN Security Council and General Assembly, built strong support for the US position throughout Europe, and assembled Arab countries throughout the region to provide a unified approach.
In this context, Barack Obama's options are not what they were during his initial opposition to the Iraq war. Yet it seems to me that Obama can make demonstrable progress that furthers US interests and security by addressing those shortcomings in the Bush-43 approach.

First, open the door to a multilateral approach to the Iraq war, both among the great powers and throughout the region. The regional approach means developing and acknowledging stakeholders in the Middle East. All national players must feel that they have input into a regional consensus. Not every country will get its way, but if all countries in the area can commit to an ongoing dialogue -- and the price for terminating that dialogue is set by the other actors, not unilaterally by the US -- then those nations can begin to believe that the Iraq war will have a sustainable ending. And as regional nations come to own the process, then they own the outcome. An investment of Obama's substantial political capital may pay significant dividends in the years ahead.

Second, re-engage the UN Security Council and our European allies on the subject of Iraq. Normally, I don't place too much faith in the ability of the UN to make meaningful progress on areas of intense conflict, particularly during an active war, but in this instance several powerful countries have security and economic interests in the Mideast that could lead to some relatively quick alignment. France and Russia have enormous investments in Iraq -- most of which have ceased to operate over the past five years but still have considerable value -- and Western Europe is even more dependent on foreign oil and other natural energy resources than the US. The difficult part of this approach is that we need to go into those discussions with transparency, openness to the leadership of other countries, and with some humility. But these are the hallmarks of classic diplomacy, and one of the great travesties of the Bush-43 administration is the degree to which diplomacy was rendered ineffective through clumsy and arrogant heavy-handedness. Again, Obama has substantial goodwill in capitals throughout Europe and elsewhere; he should use it immediately to draw world leaders to the table for multilateral discussions on Iraq. Who knows, they might even come up with something.

An odd coincidence that the administration of the most eloquent speaker in a generation of American politics may need to do a lot of ... listening.

Wednesday, November 5, 2008

Why McCain lost the election

McCain lost the election because he is unable to formulate solutions in a complex environment. This came out time and time again during the campaign, and is the motivating factor behind the issues that people claimed as their reasons for voting Obama: economy and the war in Iraq.

McCain is extremely good at taking a principled stand on issues where there is a clear right and wrong position. His heroism in Vietnam is the clearest indication of this. Another good example is the work on campaign finance reform that bears his name, and has led to those disclosures at the end of political ads ("I'm so-and-so and I approved this message.").

However, McCain simply ceases to function effectively when the decision environment becomes complex. Take, for example, the economy and the Iraq war.

On the economy, McCain "suspended" his campaign, traveled to Washington where by most accounts he slowed and distracted the process, and yielded a plan that his own party shot down. He clearly has little grip of the issues that contributed to our current fiasco and even fewer concrete ideas about how to get us out of this mess. It probably doesn't help that the current downturn has virtually no meaningful implications for his personal financial status.

On the Iraq war, McCain needs to turn a complex situation into a bite-sized nugget in order to formulate a solution. The situation in Iraq is a combination of ethnic strife and religious intolerance superimposed on an area that has never regained a post-colonial identity. (Notice all the straight lines on maps of the Middle East; these were drawn in European capitals.) The United States will never successfully impose a solution on Iraq; hopefully we can mediate and facillitate a peaceful arrangement that maximizes communication and participation. Unfortunately, the only way McCain can express his position on this complex situation is through the language of victory, World War Two-style. His language ("we will never stop fighting until we achieve victory!") recalls the era of confetti parades and sailors kissing girls in the streets. But McCain is not able to articulate a solution beyond the fight-victory imagery that actually identifies or addresses any of the actual problems in Iraq.

When we hear that Obama was the right candidate for the times, this is what it means for McCain: his inability to grasp complexity and formulate appropriate solutions meant that he ceded all intellectual momentum to Obama. This explains, at least in part, why McCain's campaign during the last weeks of the election was only about Obama -- what Obama said, what Obama stood for, and ultimately why Obama won.

Tuesday, November 4, 2008

Yes, Virginia, you can go for Obama

Easily the most dramatic race of the evening was in Virginia. Early returns showed Barack behind. Slowly he made progress as the percent reporting crept upward, until suddenly Barack went up. Here are some numbers throughout the evening (in thousands of votes)

OBAMA MCCAIN Pct Rptg. Obama margin
1283 1382 43% -99
1330 1415 46% -85
1482 1422 54% 60
1585 1552 66% 33
1660 1616 70% 44
1806 1823 86% -17
1963 1967 96% -4
2054 2026 95% 28
2098 2084 98% 14
2102 2089 99% 13

So, Barack was down about 100,000 votes just after 7pm, then up-and-down, but in the end, he was up. Great news for the new South.

Monday, October 27, 2008

A couple of old posts from Rick D's Obamablog

I suspect the site will be down soon, or in any case will not stay up indefinitely, so I've snagged a couple of old posts from there.

The moment I became a fan
Friday, February 29, 2008 4:55 PM

So, like many people, I'd increasingly come to appreciate what Obama was saying -- all the good things about hope and change, all the sensible policy statements, etc. Of course, in our hypercynical world, I actually expect to be lied to, or at least swindled. But increasingly I was starting to think that, even if he couldn't live up to them, I wanted our next president to have pretty much exactly the ideals that Barack is talking about.

But my watershed moment came in South Carolina. You remember South Carolina: the state that delivered the Bill Clinton candidacy, the state the campaigns came to rolling off of Hillary Clinton's win in New Hampshire, and ... the state where Hillary fired the Bill Clinton missile. Bill Clinton had spent most of the campaign smiling and exuding confidence, leading with that lantern jaw and increasingly ruddy cheeks and that squinty smile. (Sometimes watching Bill Clinton is like reaching for that fourth beer: you're pretty sure your judgement is getting clouded, but it just feels great.)

Anyway, in those days leading up to South Carolina, Hillary Clinton directed Bill Clinton in a broad attack on Obama. In a forum where Bill could just talk -- no questions, no accountability, no focus on the issues -- Bill flamed Barack, calling his candidacy a "fairy tale" and other negative talk. I felt anger toward both Clintons, along with the familiar revulsion of watching someone whom I though was a pretty good person getting dragged through the mud.

We know what happened, of course: South Caroline went HUGE for Obama, catapulted him into the current string of victories (10? 11?), and he was off to the races.

But the best part of the story is: when asked about the vilification from the Clinton campaign, Obama just said, "Senator Clinton and I were friends before this campaign began, and we'll be friends after it ends." Grace, charity, and a nose for the high road: THAT'S what I want in my next president.

Something I've been carrying around
Wednesday, February 27, 2008 3:50 PM

Originally, I thought the Democratic party would nominate John Edwards. Not necessarily because I 'm an Edwards fan -- although I like him, and he's grown on me, and I think he may still have a part to play in the 2008 drama. No, I just figured Hillary is unelectable, and this country just wasn't going to vote for a black guy with a name like "Barack." Or "Obama." Particularly in this nutty system in which the Iowa caucus disproportionately determines who will run for president. Everyone knows that pork-munching, gun-toting, law-and-order types in Iowa would never go for the skinny dark guy with the foreign name.

Resoundingly wrong. I've never been more proud of this country than when Iowa went for Obama.

And Iowa made me look in the mirror and confront my own bigotries. Why would I think that this state or this country would not elect a person of color? Why did I think my country was so shallow that only good-looking white men could get elected (Romney and Edwards are both gone)? The real victory for me was realizing that I no longer thought of Obama in terms of race or any other demographic, but instead had started to perceive in Obama the best that America can be.

Increasingly I do not think that the Obama candidacy is "historic" because he's mixed race, but because the level of optimism and hope for a better life is so well-modelled that I cannot help but hope and aspire to be a better person.