Baseball Crank
Covering the Front and Back Pages of the Newspaper
December 11, 2008
BLOG: Wrong Week To Quit Sniffing Glue Open Thread

This is an exceptionally crummy week to not have time to blog, but work pays the bills (and, as it happens, I'm working on some very interesting stuff - just quite a lot of it at the same time), plus my home PC is still out of service. For those of you who come here regularly, here's your open thread for now on

CC Sabathia
JJ Putz
Rod Blagojevich
Senate Candidate #5
Auto company bailouts

Or, you know, whatever else.

Posted by Baseball Crank at 12:53 PM | Blog 2006-13 | Comments (29) | TrackBack (0)
Comments

MacBook Pro, Crank. Macbook Pro.

Posted by: Dave at December 11, 2008 1:12 PM

Yanks may have overpaid for CC, esp. in light of his obesity, which may ultimately weaken his back and knees, JJ Putz was a great acquisition by the Mutts,
Blago didn't do anything wrong except blab and drop the f bomb (his wife dropped it on the Cubs) Jesse Jackson is just another shakedown artist, ala Dad, and the Auto Company Bailouts are Congress's gifts back to the unions. People making $18 an hour bailing out people making $73 an hour.

Posted by: peter (not peteruk) at December 11, 2008 4:23 PM

An SEC examiner once used the "wrong week to quit sniffing glue" line on me. Never a good sign.

Posted by: Dr. Manhattan at December 11, 2008 4:37 PM

1) CC. Fat man makes good. Where's El Sid when you need him? CC is 2-4 lifetime against the Sox and his work in the 2007 ALCS is stuff of legend in Sox Nation. He's an upgrade slightly over the Mussina of 2007. Not too worried about him and, as stated before his contract at the end could look as bloated as he does.

2) Glad Omar, as he himself stated, is not worried about the health of pitcher's he acquires. That is clear. Putz had one good year in Seattle. He was a HR machine prior to that and was dinged up and mostly terrible last year. What pitcher are you taking a bet y'all are getting?

3) Jackass. Proabably not a lot different than a whole lot of other politicians. Just more stupidly public about it. Maybe he can room with RI's Buddy.

4) See #3 except a little slicker, but not much.

5) If you think auto workers make $73/hr you are a fool (that's $150,000/year). This totally fake number is a joke. This whole bailout would be laughable if it wasn't going to be so stupidly and cavalierly handled by people unqualified to make financial decisions handing over billions of dollars to people who squander it. Unreal.

Posted by: jim at December 11, 2008 4:43 PM

Jim, no the autoworkers do not make $73/hr take home. That figure was quoted as the total including benfits...what it costs the company to employee them.

The problem in the auto industry is that prior to the price of fuel skyrocketing the auto industry WAS "making the cars that Americans wanted to buy." If Congress takes over control of was the car companies are making you can be sure that the "cars Americans want to buy" will be gone.

The free market system says that we as consumers should be able to buy the type of vehicle we want. Not what is dictated by the government. I have no problem with hybrid technology. If you want one, go buy it. That being said, if you want an Yukon and can afford to buy if a purchase the gas you should be able to get that too.

Posted by: maddirishman at December 11, 2008 9:07 PM

The business model as Detroit knows it clearly has not worked in a long time. That was known, as was this forthcoming implosions. Ford knew it better, and seems more prepared for it than the others.

I'm not crazy about the Senate Republicans blaming this debacle on the UAW not taking huge wage cuts. After all, nobody said the people at AIG were making too much when they got way more than these industrial behemoths were begging for. But the ramifications of AIG going under were larger than GM and Chrysler going under.

If we want a thriving auto industry in this country, and we want to get there ahead of foreign companies, than they shouldn't be building cars that people want to buy now. They should have prepared for the kind of personal transportation systems that suddenly, people will think, "How could we ever travel any other way?" Which is what Apple did for music for example.

And Irish, you are right that if you can afford a Yukon, and all the gas that goes into it, it's a private right. I do think that it's in our national interest though, to develop better ways of moving about without transferring so much money to the providers of hydrocarbon energy that lie beyond our borders.

Posted by: Daryl Rosenblatt at December 12, 2008 9:36 AM

Re: J.J., his dominance was very real -- Guardado taught him a killer splitter, and with a very good fastball and good command, he could just julienne batters. Whether he's fully healthy and has the stuff and command back is of course the open question, and the reason Seattle was willing to deal him now (in case of a negative answer).

For the short term, it's a good deal for the Mets -- Putz should be an upgrade, and possibly a large one, over Heilman, and Green is an upgrade on Smith. (We loved Green in Seattle.) Reed's no Chavez, but he's useful.

For the long term, though, Carp and Vargas look like useful pieces, and Cleto could be the kind of guy you really regret giving up; plus Carrera could be another Endy Chavez, a nice little fourth OF. The short-term upgrade is real, but the long-term price could be high. Still, the Mets can pay it.

I like this deal for all three teams, actually, since Valbuena should be a solid ML 2B for the Indians (he's the player I actually regret the M's giving up), and Gutierrez fills a major present need for Seattle.

Posted by: The Ancient Mariner at December 12, 2008 11:31 AM

The whole $73/hr thing is bumpkus. Do you really believe the average line worker has a $150K salary and benefits package? What this number does is take ALL workers present and past (covered by pensions, etc.) and divide it by present workers only which ends up drastically inflating the apparent package current workers get. No other industry in the world does math this way. It is misleading, distorting and hugely anti-worker. As Daryl points out this is the only place where the pay of the workers has been criticized. Crazy.

The model is screwed up and I don't see how big companies, car manufacturers or otherwise, can pay lifelong pay and benefits packages to a population who lives such a long time post-retirement. If you believe this trumped up $73/hr package is too much perhaps some of it could be relieved by removing the health care burden from the employer. That, of course, is utter socialism.

Posted by: jim at December 12, 2008 11:50 AM

I love to see the Yanks overpay, but I hate seeing the government overpay. I wonder why that is?

Posted by: msnthrop at December 12, 2008 12:22 PM

Easy msnthrop. The Yankees are an Evil Empire. The US Government is only sometimes misguided. The POV on when it's misguided is up to each of us. The Yankees are always evil.

Posted by: Daryl Rosenblatt at December 12, 2008 12:27 PM

jim,

It doesn't matter how you slice it, that is the personnel cost per employed employee. Calling it something else is not going to make those costs disappear.

Posted by: Dave in St. Louis at December 12, 2008 1:04 PM

The Wilpons are taking a rip in the Madoff Ponzi scheme. I think Omar has signed his last FA for quite some time. Kinda bizarre, his results and lack of disclosure were epic red flags. Those beat were either idiots or greedy pigs. That said the SEC as we know is gone. This miss is the last straw, the agency is a tear down. Strange days...

Posted by: Dave2 at December 12, 2008 1:17 PM

So $73/ hour (yes, I know it's a made-up number used to blame unions) is outrageous?
EVERY executive on Wall Street (speaking of failed businesses) is making a bit more than $730/ hour. Where' the finger-pointing on that?*

* It's a rhetorical question. The "blame the unions" thing is just another part of the shell-game, which those in power have been playing for years. It's ALWAYS the fault of the unions, the homeless, illegal immigrants, welfare recipients, etc.
(Pay no attention to the $9 billion unaccounted for in Iraq, that homeless guy is bankrupting our country. Somehow).

America's long-standing mantra: When the shit goes down, blame brown (people).

Posted by: Berto at December 12, 2008 1:30 PM

But the way it is written makes people assume that auto workers are garnering 6 figure annual pay which they simply are not. Name ONE other industry where they calculate worker pay like this and tell the public that this is what people get paid. The freaking government doesn't even do it that way and they are the largest pensioneer in the country. They don't calculate teachers' pay this way yet there are untold numbers of retired teachers with lifelong pensions. It is purely a way to make people think auto workers are overpaid. How about the layers of executives and "vice-presidents" that work for those companies? No one cares what they get paid. Nice.

Posted by: jim at December 12, 2008 1:31 PM

If I had to make a guess, the number probably comes from the bloated costs incurred before a car comes off the line, which is higher for the big 3 than the foreign makers. However, where THAT number is derived is interesting: it probably includes debt service, charges, executive bonuses, 401K's, who knows what else. Probably the same people who figure the net profits for movies.

Say, did anyone force GM and company to say yes to the UAW year after year?

Posted by: Daryl Rosenblatt at December 12, 2008 2:35 PM

...In terms of hourly wages, the pay scales are similar. For instance, General Motors says the average UAW laborer makes $29.78, while Toyota says it pays about $30 per hour.

The difference is in the benefits, however. GM's hourly labor costs (including pensions and health care) total $69 for active workers. Toyota's total about $48 per hour at older U.S. plants.

http://www.foxnews.com/politics/2008/12/12/auto-workers-union-lashes-gop-senators-bailout-collapse/

Posted by: dave2 at December 12, 2008 2:44 PM

It is my understanding the $73/ hour is GMs cost per laborer, not the wage of the employer. This includes:

Health benefits
Disability insurance
A certain amount of life insurance
401(k) matching contributions
Pension contributions
Employee matching of personal income tax
Other items related to INDIVIDUAL employee expenses

It does not include pensions currently being collected by those workers already retired. It does not include other global corporate expense, such as rent, property taxes, executive compensation, etc.

Typically benefits are worth about 66% to 100% of the employees salary. For GM, this probably runs on the high side. Using this, you can back into wages of $36 - $45/hour.

Again, this is an average of all the union workers, so there may be some first year employees making $25/hour and some long-time veterans making $60/hour.

The reason this number is so prevalent in the debate is that foreign automakers with factories in the US, such as Toyota, Honda, BMW, are paying an average of not quite $50/hour per laborer. The factory workers working for these manufacturers are not part of the UAW.

Now figure this

100,000 UAW factory employees for the Big 3.
$25/hour more per employee hour over the foreign automakers with factories in the US
2000 hours per year per employee.

Multiply 100,000 * 25 * 2000
That's $5 BILLION of extra cost per year that can be traced to union versus non-union staff.

Posted by: Chris at December 12, 2008 2:56 PM

Again, that is lumping ALL EXISTING pensions into the pay. Believe me I understand total payroll but to calculate the average wage of someone by putting all the other stuff on top of it is absurd. If there was 1 employee making $50,000/year and 2 retired employees drawing benefits totalling $80,000 would you then say the average employee at this company gets paid $130,000? Of course not. It is patently absurd.

Posted by: jim at December 12, 2008 3:01 PM

The $73/hour does not include money being paid to retirees under pension plans.

The pension contributions is what GM, Ford, Chrysler, contribute to the pension plan for the current workers to draw from 20-30 years from now.

Former employees already retired are drawing from a different pool.

Posted by: Chris at December 12, 2008 3:34 PM

Example,

Let’s say your current wage is $36/hour. When you retire in 20 years your wage will have reached $60/hour. This amounts to $120,000/year. When you retire, you can collect a pension that is 2/3 of your salary or $80,000/year.

To fund your pension, GM makes a contribution today. GM probably has an actuary to do the exact calculation, but it would go something like this:

What is your life expectancy beyond retirement?
What is the present value at retirement of all your future pension collections?
How much does GM have to put in the bank to today to be able to pay your pension in 20 years?

Assume the first answer is 25 years. Retire at 60 and live to 85. Assume 5% interest, GM needs to have $1.1M in the bank account in 20 years to fund the current employee’s eventual retirement. To have this money available, GM needs to contribute about $1,100 month for the current employee, which amounts to about $6.25/hour. And that just covers the wage part of the pension plan.

There is still the health benefits part, which is of course more expensive by virtue of age than the general work population. The health benefits are worth at least as much as salary at that point, so the total is probably about $15/hour.

That covers the current employee’s future pension, not current retirees collecting a pension today.

Posted by: Chris at December 12, 2008 3:57 PM

"Assume the first answer is 25 years. Retire at 60 and live to 85. "

Chris, this quote of yours highlights the single largest economic problem we have in this country, and it will get worse. Plain and simple. Because the idea of anyone retiring (except the military) at an age where they are actuarily going to live another 20-25 years is so absurd that Kafka couldn't make it up. So the social security system becomes (when we boomers age up, as we now are) impossible, the pension system of private companies become even more impossible, and the entire system crashes.

Yes, GM and all agreed to fund such pension schemes and let people do nothing for 25 years. Now the price comes due. And it's not them alone. We have to reconcile the modern medical miracles that now let people think of 75 as not old and deal with the rest of the ramifications. And that will only happen when we boomers are too doddering to vote anymore, and our kids votes us dead, because this stupid idea that you get out more than you get in is simply, from an evolutionary standpoint, a dead end, a non-viable mutation.

Posted by: Daryl Rosenblatt at December 13, 2008 9:46 AM

Hey, at least this time when the Mets trade away four players and get a Putz in return, they know it beforehand! ]:-)

Posted by: M. Scott Eiland at December 13, 2008 1:43 PM

By the way, Crank, I was just looking over your article comparing Bob Gibson and Grover Cleveland Alexander, and I was wondering if--with Maddux retiring--if you might consider writing an article comparing Maddux and Alexander, who probably are the best candidates for "best starting pitcher in the history of the NL" at this point.

Posted by: M. Scott Eiland at December 13, 2008 5:14 PM

If the Bloomberg account is correct, that Sterling lost 300m in the Madoff affair, the Mets may be on the block.

Posted by: dave2 at December 13, 2008 5:44 PM

Daryl,

When these pension plans were put in place, life expectancy wasn’t anywhere near what it is now and 65 was the general retirement age, so I don’t think it is that GM, etc. agreed to fund workers for doing nothing for 25 years as much as they haven’t adapted to the changing world – poor management. The union (leaders, not workers) deserves some blame as well, for continuing to push and threaten to strike over a reduction in these benefits. The economic consequences of these union benefits is now clear. Did the Big 3 management see this coming? Probably. I don’t think when the last CBA was negotiated that GM, Ford, Chrysler management teams were simply focused on busting the unions. They likely saw the complete cost and realized part of their adjustment had to include a reduction in pension benefits and wages.

With the economic boom of the 90s, the retirement trend moved downward. Further, medical advances over the past 50 years have pushed life expectancy up. With advanced age, comes increased medical expenses, so the medical portion of the pension has increased even more than the wages portion. However, medical advance will not keep reflexes from deteriorating which is part of the reason manufacturers want employees to take the pension.
This trend toward early retirement is contributing to the drain on the US Social Security system. As the higher wage earners leave the workforce and are replaced by younger workers, contributions to the social security system drop. Further, as the retirees live longer the money taken from the system increases rapidly. If we are going to think of 75 as not old, then we need to raise the age for collecting Social Security retirement benefits. I expect, with the great drop in both equities and home prices over the past 18 months, that more people will continue working into their late 60s, so some of this may take care of itself.

Pensions do serve a benefit to both corporations and workers. Younger workers are paid less than older workers. For skilled laborers, there comes a point when reflexes and energy levels drop, hence productivity. For the company, it eventually becomes more efficient to pay a pension to a senior worker and replace him/her with a lower wage earning younger worker. The same holds true for desk jobs, but for some different reasons. My point here is that pensions themselves aren’t a bad thing – there are benefits to both sides. In the case of the Big 3, the problem lies in the size of the pension, like ¾ salary and full medical benefits. In my case, I’m eligible for a pension at 55 (about 15 years), but it is only good for ½ salary and medical benefits at employee rates. I plan on taking it, but supplementing it with a second career.

One more thing on corporate pensions: corporate employees tend to change jobs more frequently so the accumulation of benefits tends to be less than those accumulated by factory workers.

To expand on the amount I calculated earlier, per an article I saw on CNN.com, the number of current workers in the UAW employed by the Big 3 is 240,000. That means the $5 billion I calculated as yearly cost for union over non-union employees is really 2.4 * 5 = $12 BILLION. So 85% of the $14 billion bailout is really just covering the union.

Posted by: Chris at December 13, 2008 7:27 PM

Chris, you've actually agreed with me. We set a retirement standard in the 1930s. when life expectancy was THIRTY years less than now. But we set a retirement point, where payout with no input, in the 30s, and it needs to be readjusted. Politically, I have no idea how, until the system is so damn broke that there will be no checks at all, and suddenly, the votes will be there. Until then.....

Posted by: Daryl Rosenblatt at December 14, 2008 11:01 PM

Daryl,

Yes, I do agree with you. Perhaps, I should have phrased that better.

This situations illustrates why people need to accept pushing the age for Social Security retirement benefits to 70. It's not just that benefits need to be delayed to save the system. It's not that we are trying to squeeze any one segment of the population. It comes down to numbers. Even if my generation doesn't start collecting until 70, on average we will collect for more years than those who got the first benefits back in the 1930s.

Will my model - work to 55, second career from 55-70 - become the norm?

Posted by: Chris at December 15, 2008 9:26 AM

Maybe Chris, but the problem I have is why retire at 70? My own plan is to gradually change SS benefits, by adding a year every three years (which is politically pushing it) until we get to 75. I would say 85, but that won't happen. So if you want to change careers at 55 (which puts me 2 years away), be my guest. And then, you want to change again at 70? I also don't care. But I don't want to pay for it.

So it comes down to this again:

1. Do we as a nation have the obligation to cover EVERYBODY at some seemingly random retirement age chosen over 70 years ago?

2. Do we as a nation have the obligation to cover EVERYBODY for some form of medical care, and if so, where do we draw the line?

Posted by: Daryl Rosenblatt at December 15, 2008 9:58 AM

If I do my math right, when I’m 70, you will be 85 so you won’t have to worry about paying for my retirement. :) In my case retirement will be funded largely by my own savings and private pensions. I’m not counting on Social Security being around then.

At some point, retirement becomes a social problem from any angle. If we are going to have a whole bunch more people working past 70, we could run into unemployment problems. If the older workers don’t retire, where do the new workers find jobs? Some of it comes down to where do we want to pay, via Social Security or via unemployment benefits? Further, in the case of manual labor, there could be a lot more workers comp injuries, leading to rising insurance costs.

And here’s another thought – do we really want a whole bunch of people over 70 on the roads during rush hour? This is a serious question. The accident rates for drivers over age 70 are pretty bad, actually worse than those drivers between ages 18 and 22.

To specifically answer your questions:
1. Pushing the Social Security retirement benefits to age 70 certainly moves us away from a retirement age chosen over 70 years ago. I understand the political problems in doing so, but it must be done.
2. Given the results of the recent election for which health care was such a big issue, the people have spoken and said yes, the nation does have an obligation to cover everybody not covered by a private plan

Posted by: Chris at December 15, 2008 11:46 AM
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