Bad for the Country - New York Times
The New York Times

November 25, 2005
Op-Ed Columnist

Bad for the Country
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.

Moreover, G.M.'s health care costs are so high in part because of the
inefficiency of America's fragmented health care system. We spend far more
per person
on medical care than countries with national health insurance, while getting
worse results.

About the trade deficit: These days the United States imports far more than
it exports. Last year the trade deficit exceeded $600 billion. The flip side
of the trade deficit is a reorientation of our economy away from industries
that export or compete with imports, especially manufacturing, to industries
that are insulated from foreign competition, such as housing. Since 2000,
we've lost about three million jobs in manufacturing, while membership in
the
National Association of Realtors has risen 50 percent.

The trade deficit isn't sustainable. We can run huge deficits for the time
being, because foreigners - in particular, foreign governments - are willing
to lend us huge sums. But one of these days the easy credit will come to an
end, and the United States will have to start paying its way in the world
economy.

To do that, we'll have to reorient our economy back toward producing things
we can export or use to replace imports. And that will mean pulling a lot of
workers back into manufacturing. So the rapid downsizing of manufacturing
since 2000 - of which G.M.'s job cuts are a symptom - amounts to dismantling
a sector we'll just have to rebuild a few years from now.

I don't want to attribute all of G.M.'s problems to our distorted economy.
One of the plants G.M. plans to close is in Canada, which has national
health
insurance and ran a trade surplus last year. But the distortions in our
economy clearly make G.M.'s problems worse.

Dealing with our trade deficit is a tricky issue I'll have to address
another time. But G.M.'s woes are yet another reminder of the urgent need to
fix our
health care system. It's long past time to move to a national system that
would reduce cost, diminish the burden on employers who try to do the right
thing
and relieve working American families from the fear of lost coverage. Fixing
health care would be good for General Motors, and good for the country.

Thomas L. Friedman is on vacation.

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. Copyright 2005

Posted by Miriam V.