Charles Shiflett Column May 8, 2005

The New Economic Reality

My uncle Bob was typical of many World War II veterans. He fought his way across Europe… then
returned home to start a family and help rebuild a nation. He began a great career at the General
Motors plant in Doraville and soon moved into a supervisory position.

Like thousands of other automobile workers across our growing nation, uncle Bob had a good thing.
Very few of these young former GI's had attended college, yet autoworker wages were above average,
benefits were good, and they enjoyed excellent retirement packages. Many of these workers spent
their entire careers with General Motors, Ford, or Chrysler.

The U.S. had just vanquished its foes in Europe and Asia, and was coming into its own in what some
refer to as The American Century. The standard of living for workers here was significantly higher than
in most of the world. If America had so chosen, it could have dominated the world in a way almost
unimaginable.

Now those of you who have lived in northwest Georgia for a while will probably recall this area as being
a hotbed for supporters of the John Birch Society back in the 1960's, 70's and 80's. Former
Congressman Larry McDonald of Cobb County was a hero to the Birchers and those who supported
Birch philosophy.

Staunchly anti-communist and nationalistic, the Birch movement railed against the Trilateral
Commission and the Council On Foreign Relations… accusing these organizations of undermining
America.

According to numerous Birch publications, these two groups were working to implement a worldwide
economic plan that would artificially slow prosperity in the U.S. while increasing it for the rest of the
world so as to bring global balance. Regardless of whether you believe the Birchers were on target or
not in their assessment of the Trilateralists and CFR members, much of what they warned against has
or is coming to pass.

China, India, and numerous other second and third tier nations are quickly gaining economic ground
on the U.S. One of the primary contributing factors to our increasing price for gasoline is the
emergence of these nations as large consumers of oil.

A growing number of Americans are concerned at the rapidly escalating movement of industrial, high
tech, and service jobs from the U.S. to foreign shores. In today's technology driven world, it can be
argued that it makes business sense to move jobs to where the cost of labor is lowest.

Low labor cost is also a factor in how foreign auto makers like Toyota, Honda, Nissan, and BMW can
open plants in the U.S. and beat domestic car manufacturers on price and quality in their own
backyard. It all goes back to those young GI's who left the battlefields of Europe and Asia.

Eager to attract and keep quality employees during the booming U.S. economy of the 1950's, U.S
auto companies made unsustainable promises to the labor unions that represented most autoworkers.
As the U.S. grew, it was expected that an ever-growing pool of autoworkers would prop up this
generous system of benefits unions had demanded for their retirees.

Just the opposite has happened. We've all watched as U.S. domestic auto manufacturers have
consolidated and downsized their factories over the past thirty-plus years in a desperate attempt to
remain competitive against foreign firms.

A business analyst on television this past weekend stated that over $1,500 of the selling price of each
and every vehicle General Motors manufactures goes to pay for health insurance for current workers
and retirees. The amount collected per vehicle is only slightly less for Ford.

He went on to predict that within five years both companies would file bankruptcy and be purchased by
foreign corporations. It seems doubtful that GM or Ford will be able to compete with the albatross of
retiree benefits hanging around their necks.

If only the management of GM and Ford in the 1950's, 60's, and 70's had the foresight and courage to
buck the labor unions and change their retirement benefits plans so that employees had some type of
individual health savings plan to pay for health coverage at retirement. Instead, current employees and
stockholders are now saddled with that burden.

If automakers had also implemented individual IRA/401-K style retirement plans instead of guaranteed
pensions, both GM and Ford would be in position today to compete against foreign automakers and be
successful… and retires wouldn't be in fear of losing their benefits.

The United States government is much like GM and Ford in that it is competing against rising
economies in China, India, and other nations. Unfortunately, the U.S. with its antiquated Social
Security system and tax code is losing the battle. If our current crop of political leaders don't heed the
call for reform soon, we as a nation may not be far behind GM and Ford.