By Paul Krugman
“What was good for our country,” a former president of General Motors once declared, “was good for General Motors, and vice versa.” G.M., 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 G.M.’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 G.M.’s management, or every demand made by the United Automobile Workers. But job losses at General Motors are part of the broader weakness of U.S. manufacturing, especially the part of U.S. 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, G.M. 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 G.M. will save by slashing employment will simply be pushed off onto taxpayers. Some former G.M. 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.
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