08 December 2008

What's Good for GM Could Be Good for America

Rick Wagoner, this could be your moment.

When you appear before Congress later this week, you will no doubt have left behind the Gulfstream jet that attracted so much unwanted attention the last time you testified as chairman and chief executive officer of our nation's largest car company, General Motors.

You know that corporate jets are among the least of Detroit's problems. You know too that among the greater threats to your industry are the overly generous health-care promises made by various managements and union leaders to their workers and retirees. Most of all, you know that these promises will not be kept, for the simple reason that there isn't enough money to fund them.

Given this reality, Detroit needs two things today. First, it needs a restructuring that would allow auto workers to own their own health care -- and take it with them if they leave. Second, it needs someone like you to stand up and say so.

It would take guts. After all, senators and congressmen view hearings like those they will hold this week as opportunities to hop on the populist train and take a few corporate scalps on camera. That, of course, will do nothing to address the costly and unfair system of health-care coverage that makes American companies less competitive and leaves American workers more vulnerable. If you would only use your platform to point out how Congress could change this by making our tax laws more equitable and our nation's health plans more portable, you'd be worth a whole fleet of Gulfstream planes.

Now, health care is not the only reason Detroit is in trouble. But you have rightly noted that it's a big contributor. GM, for example, provides health benefits for a million people today -- only a fraction of them actual workers. Three years ago, you told GM shareholders that these health-care expenses added $1,500 to the cost of every GM vehicle. Which explains the old joke that GM is no longer a car company that provides health benefits, but a health-care company that happens to make cars.

In the past, efforts at reform foundered because workers with employer-provided care had an interest in preserving advantages that gave them more generous health coverage. But today's economy may be testing that proposition. In 2005 and 2007, these same workers watched as you reached deals with the United Auto Workers union (UAW) to cut back on GM's health-care obligations.

In other words, whatever the old health-care plans might say on paper, you know the reality is a future where the Big Three's workers will be renegotiating givebacks with a gun pointed at their heads (the threat of their company going bankrupt). Retirees will have even fewer options as they find themselves paying more than originally promised.

Mr. Wagoner, you could point to a better way forward, one that helps both companies and workers. Thanks to reforms pushed by this president, Americans can now own health savings accounts they can use to build savings and cover day-to-day expenses. Used in combination with a catastrophic health plan, they would also be protected from financial ruin.

For companies, such an arrangement would help shift the responsibility for health care from employers to employees. And because these plans give health-care consumers more control over spending decisions, they also help restore some price-discipline to the market.

For employees, benefits that might not have been as obvious when times were fat are now easier to see. A worker who owned and controlled his own plan would not be trapped at a job simply because of its health benefits. A worker who owned and controlled his own plan would not be at the mercy of business managers and union leaders who agree to cut health benefits as part of a corporate rescue. And a worker who was unfortunate enough to be laid off wouldn't have to worry about his family losing their health coverage along with his job.

For too long, much of Big Business and Big Labor seem to have shared the assumption that the "solution" to the health-care mess is to dump their problems on the American taxpayer. This in fact has long been the message of Lee Iaccoca, the business leader who was so successful in lining up Chrysler for an earlier bailout. So it will be interesting to review the fine print of any bailout to see how much American workers who have no health-care coverage at all will be taxed to fulfill the generous promises made to the UAW.

Mr. Wagoner, if you were the voice that prodded Congress to eliminate the perverse incentives eating away at the benefits of both GM workers and their company, you'd be a hero. At a time so many are singing the death of capitalism, Americans could stand to hear from a corporate chief singing a different tune.

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