Current State of Economics in the United States and why we suck...

So I'll try to make this post interesting and relevant while getting to what I think is the root of the problem. It may take awhile, but hopefully you'll enjoy the journey.



A little background before I begin though. I was in my Accounting class this morning, and we didn't have much on the agenda because it was the last class before the final exam. So my instructor went off topic and asked what we thought of the Auto Industry bridge loan. I was floored by the number of responses from students that disagreed with the government's plan. I was sure that university had perpuated and compounded liberalism in its students, but to my surprise the student's wanted GM, Ford, and Chrysler to be held accountable for their previous actions and decisions. (Equally funny, these are the same students that are whining that the instructor's exams are too difficult even though they are take home. Go figure.)

I, on the other hand, perhaps the left one, disagreed with their point of view. I felt that the viewpoint they were taking was perhaps a little too narrow. I agree that people and corporations alike need to take responsibility for the choices that are made, but we can't just kick someone when they're down. In this case if you kick GM, Ford, and Chrysler while they are in the fetal position, you might as well stuff your Nike in your arse as well.

The result of letting these three companies collapse wouldn't be confined to Michigan, Ohio, and Indiana. I've heard that it's an estimated loss of one million jobs in this country. That's like everyone in Sacramento losing their jobs. I wonder what would happen to the economy if one million people stopped spending money. Better yet, I wonder what share of their unemployment benefits I would be responsible for.

But wait, there's more!!! If you purchase a Government Bailout package today we'll throw in a competitive marketplace as well. Right now there are a limited number of automobile manufacturers selling vehicles in our country. The list includes (in no particular order): GM, Toyota, Ford, Chrysler, Honda, BMW, Volkswagen, Daimler, Nissan, Mitsubishi, Hyundai, Suzuki, and I'm sure one or two more. There are some familiar names missing from the list like Volvo and Mazda, but look who owns them. So what happens when the Big Three go under, well Honda and Toyota lose significant competition in the marketplace, and thus lose their incentive to build those cute Priuses that everybody likes so much. Perhaps they lose the incentive to offer the warranties that they offer because the consumer won't have GM to offer an alternative vehicle warranty package.

I know that you're thinking, "Mr. Blogger, you've got this all wrong. If Toyota and Honda stop creating a good product other companies will come along." Oh will they? What kind of capital is required to start an automotive company. I know that I don't have the finanical resources to design and implement a safe and stylish car, to create an automated assembly line, to crash test many vehicles for safety testing, or to establish a network of dealerships willing to sell my unproven product. So what is the motivation for Toyota and Honda or Volkswagen to keep up the good work and to keep prices down?

So now that I've thoroughly depressed you, you probably want to point a finger at someone or some group of someones. I'll let you know that the Auto Workers Union is a popular choice. They have leveraged their way into creating contracts that starve the corporations because of extensive pension and healthcare packages. In fact many of the costs of automobile production are caused by employee factors. This may be part of the problem, but not all of it.

OK so then let's blame the executives and managers at these mega-corporations. If you were to pay me something like thirty gazillion dollars to lead a company I think I would use common sense. I wouldn't produce huge, expensive SUV's during rising gas prices and shrinking economies. Alright, maybe that wasn't very obvious. I would have had the foresight not to cave into stupid pricing and financing schemes that were sure to doom other companies (please refer to circa 2004 when the crack-fiend alcoholic begging for money on the 16th St offramp could have qualified for a 0% loan on a new F150 and still could have gotten employee pricing). I mean there was no reason to believe that people would default on their loans that weren't creating any profit. And I were CEO, I know I would only create cars that people want and not the car to the right.

So yes, the Auto Executives and the Unions deserve their fair share of criticism for contributing to this situation. However, we should also take a look at our current education system. Why are we OK with a 12th grade education (if that at many high schools) being a qualifying consideration for a career? The real shame of this whole economic meltdown is that we are put in this situation, because the auto workers don't really have skills that translate outside of manual labor. And we think this is fine for our kids? "Hello son, I just want to reassure you that you will have zero job security because foreign countries have better education systems than the U.S. for quality careers and the manufacturing job you're planning on getting with your high school diploma will be shipped to a third world country in two years."

Here's my three fold suggestion for improving our economy, world status, and quality of life in this country: education reform. Step 1, get a box, wait wrong blog. Step 1, change primary education. High school doesn't need to be the same for everybody. We should create schools that teach students different specializations that can translate into career fields. These fields could be computers, construction/engineering, business, arts, etc... There would still be requirements such as English skills, History, and Science, but to differing degrees based upon the field of study. Part B of this suggestion is to tie a reward to schooling. Are you ready for this? You can't get a driver's license until you finish your high school (or equivalency). That's right, you actually have to earn this priviledge. How many students would actually place effort into schooling for this? Teachers could actually apply realistic standards because students actually want to participate.

Step 2 is to make centers of higher education more accessible to our citizens. Taxpayers should get some benefit from paying for state universities, and it shouldn't be to fund foreign nationals. If someone from South Korea or Canada or France wants to learn at our institutions they can do so on their dime, and at a premium, because they are taking a seat from a taxpayer. Meanwhile, we should lower tuition rates for universities or increase tax credits to encourage citizens to get their college degrees. I don't know about you, but I would rather pay $8,000 in tuition costs than $20,000 in unemployment. Plus that citizen that finishes school is ready to be a better contributor to the country. Its a win-win for everybody.

Step 3 is to create a two-option conscription program for our country. The choice for any 18 year old would be to serve 1 year in the military reserves/coast guard/national guard or serve 1 year in civil service. The service requirements would be 1 weekend per month for 12 months starting the month after graduation. There is something about service to one's country which hopefully instills pride in the country.

Ultimately we have to get people to want to be better educated and searching for skilled/professional jobs rather than menial jobs. The service industry can only do so much for our Gross Domestic Product before that rug is pulled out from underneath our feet. In the mean time we need to help these car companies, their employees, and the well-being of our economy.