for a hamburger today. Isn’t that what Wimpy used to say in the old Popeye comic strip?
Here’s Daniel Gross writing in Slate:
On Saturday, Delphi, the giant auto-parts company, filed for bankruptcy, kicking off what is sure to be one of the great cram-downs in American history. In a series of interviews with the New York Times, the Wall Street Journal, and the Financial Times, Delphi CEO Steve Miller offered unionized workers a choice: They can accept pay cuts of about two-thirds or face the termination of their pension plan, which is underfunded by several billion dollars.
Dean Baker on MaxSpeak observes:
Since the punditry will no doubt applaud Mr. Miller’s courage, let’s get some facts on the table. Delphi did make generous commitments to earlier retirees. Of course it also paid substantial sums to shareholders in the form of dividends and also paid rich salaries to its top executives. In principle, Delphi’s current workers could go to war against either Delphi shareholders or its higher paid managers to keep their current paychecks. They could require them to repay some of the dividends or fat salaries earned over the last two decades. But, Mr. Miller and his colleagues have set up institutional structures that leave the incomes of these groups beyond the reach of Delphi’s workers.
Brad DeLong adds:
At the corporate-structure level, the big problem is that retirees (like workers, stockholders, and bondholders) have claims on corporate cash flows. Workers’ claims at a company like Delphi are secured by the fact that if they don’t show up, nothing gets made and there are no cash flows: Delphi’s jobs are very highly-skilled indeed, and replacing any significant chunk of the workforce with people off the street is not a realistic option. Stockholders’ claims are secured by the fact that they vote for the executives of the company–and can throw out the executives if they don’t like what the executives do. Bondholders’ claims are secured by their ability to throw the company into bankruptcy if they are not satisfied and by bankruptcy judges’ mandate to protect their interests.
To which Megan McArdle adds:
That’s one way of looking at it. Another way of looking at it is that unlike stockholders, management, and current employees, retirees have claims on the company that are unrelated to current income. They are guaranteed a certain amount of pension and pretty much unlimited health care regardless of the company’s earnings.
C’mon, Megan. These retirees are the workers with whom management contracted 10, 20, or 30 years ago to pay on these terms when they retired. Management was not forced to do it. They chose these terms over whatever other alternatives were available. Just say it: management screwed up and should be held accountable.
They ate the hamburger and now it’s Tuesday. Pay up or cough up the burger.
Unfortunately, Uncle Sugar in the form of the PBGC will wind up picking up the tab. Which means you and me and everybody else who actually pays taxes. Assuming you pay taxes, that is.