If It Were a Perfect World.......

The recent bankruptcies of Chrysler and General Motors should send shock waves through our economy and be a wake-up call for us to get our financial house in order. For those that have been living on Pluto for the past couple of years one of the main reasons that these giants have gone broke is due to the onerous burden of retiree pension and health care benefits. Over the years these two companies have made concessions to the U.A.W. on these benefits past the point of fiscal responsibility and to the point of absurdity. The end result was a never ending cash drain to the point that they could not be competitive in the marketplace because they started out with these costs before a nut was turned. Even the benevolent taxpayer could not stop the bleeding with large infusions of cash.

So after the dust settles what will we have? Two companies, a shadow of their former selves, being owned and managed by the U.A.W. and the government. Their Utopian plan would be to return these automakers to profitability and competitiveness. The union hopes that the concessions they made are recovered in the short-term and that the American taxpayer be repaid the billions they put in. If they truly believe that will happen then I know they have been smoking crack!

The history General Motors is instructive. In its heyday GM employed over 600,000 workers. Over the past two decades that workforce has dwindled to less than 100,000. The problem is that many if not most of the 500,000 workers that have left took with them pension and health care benefits that GM continued to pay. Their production and sales continued to dwindle but their retiree benefits continued to grow. Does this remind you of another situation we are facing? (Hint: Social Security and Medicare) Estimates project that both entitlements will be broke within 20 years. The primary reason is that fewer workers are paying for more and more recipients and as the baby boomers retire that drain is really going to go fast. This doesn't even consider the national health insurance program that the President and Congress are hell-bent on implementing.

So if we made a list of things that would be nice to have at the top would be the items above: free health care and guaranteed pensions. We would all retire when we wanted and live out our golden years comfortably. Sounds pretty good to me!

There is only one problem with this. The funds to pay for this have to come from one of two places; taxes or borrowing. What we have been doing of late is borrowing money like we have an unlimited line of credit and digging ourselves and the next generations a deep hole. Everyone wants lower taxes so raising them is political suicide. The downside to borrowing is that the lenders want to be repaid, along with interest. So if we keep borrowing like we are now the cost of the money we borrow will go up, up, up and so will inflation. Our money will lose value and we will not be able to maintain the lifestyle in retirement we had hoped for.

So what do we do to change the course we are on? First, Social Security must be revamped back to its original intent. It was never intended to be the only form of retirement or serving the many non-retired individuals that drain the system today. Same goes for Medicare and Medicaid. Both of these programs serve millions of people that should be paying for their own health care, taking dollars away from the recipients originally designated. Finally, this national health insurance could be the ruination of our economy. The funding is not available for it and should be fought vigorously.

I really don't expect any of the above to happen. This is because we have become demanding children that do not care what the reality is we just want what we want. And the politicians are more than happy to placate us. So when the baby boomers are gone our children and grandchildren will have to deal with the mess because we didn't have the will to face it. Hopefully they will.