The Great Debate

Revival of U.S. automaking awaits if UAW will follow Toyota

morici– Peter Morici is a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission. The views expressed are his own. –

General Motors and Chrysler are on the anvil of history. United Auto Workers President Ron Gettelfinger holds the hammer and will determine whether they emerge more competitive or shattered in pieces and sold to foreign investors.

In December, George W. Bush granted $17.4 billion in temporary loans on the condition those firms convert two-thirds of their debt into equity. Another condition was to persuade the UAW to accept stock for one half of what these companies owe to fund retiree health care and align wages, benefits and work rules with those of the Japanese automakers operating in the United States.

GM and Chrysler must complete these negotiations by March 31 or repay the money and face bankruptcy.

At U.S.-based Toyota factories, workers receive about $25 dollars an hour and good health care benefits. But they don’t retire at 50 after 30 years or get as much time off and huge severance packages. Toyota does not endure the medieval work rules and job classifications imposed by UAW contracts.

Pension assumptions hitting the wall

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

That 8 percent annual return on investment you and your pension fund manager were banking on is now looking almost as optimistic as Madoff’s magic 12 percent, as deleveraging and deflation bite.

With extremely low or negative interest rates and everyone from consumers to banks trying to shed debt and assets at the same time, what seemed like reasonable projections for a mixed portfolio of stocks, bonds and other assets are now substantially too high.

Global imbalances and the Triffin dilemma

John Kemp Great Debate– John Kemp is a Reuters columnist. The opinions expressed are his own –

For the world monetary system, the financial crisis which erupted in the summer of 2007 is a cataclysmic shift that will prove every bit as significant as the outbreak of the First World War (which heralded sterling’s demise as a reserve currency) and the suspension of gold convertibility in 1971 (which marked the end of bullion’s monetary role).

The crisis marks the passing of an era in which the U.S. dollar has been the world’s undisputed reserve currency for making international payments and storing wealth.

Ukraine gas crisis spurs EU energy policy

Paul Taylor Great Debate– Paul Taylor is a Reuters columnist. The opinions expressed are his own –

The gas dispute between Russia and Ukraine that has left hundreds of thousands of Europeans shivering in the winter cold is bound to accelerate plodding European Union efforts to build a common energy policy.

The cut-off of Russian gas supplies to Europe via Ukraine highlighted how little progress the 27-nation EU has made in connecting national energy networks and diversifying supplies since the first such crisis three years ago.

Do tough times draw TV-viewers to Web?

— Eric Auchard is a Reuters columnist. The opinions expressed are his own –

In the first global recession of the Internet Age, budget-conscious consumers are showing they no longer have an endless appetite for every new gadget or media service.

Many users are looking to eliminate overlapping services that offer more of the same old formula entertainment in a different package or on another device.

Of boom, bust but maybe not the Black Death

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

As the crisis has deepened we’ve had to search farther back in history for precedents, and with deflation at hand much of the debate now centers on how similar the next while will be to the Great Depression.

But what if, rather than the 1930s, we ought to be thinking about the revolutionary crisis of the 18th century, or even further back to the 14th century lending and spending spree that ended with the Black Death?

The $300 billion tax cut: Let’s do it right

Diana Furchtgott-Roth – Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –

President-elect Obama announced on January 8 that he is planning to use $300 billion of his $700 billion two-year stimulus package for tax cuts—but we should not celebrate too soon. Obama is proposing a series of temporary tax cuts, not permanent cuts that would hasten economic recovery.

For two years only, Obama wants to give a tax cut of $500 a year to individuals and $1,000 a year to families, at a cost of about $145 billion over the two years.  Rather than mail out U.S. Treasury checks, as was done last spring in an effort to ward off a recession, he would lower withholding rates so that the tax cut would be spread over the year.

Protectionism risks rise in 2009-2010

John Kemp Great Debate– John Kemp is a Reuters columnist. The opinions expressed are his own –

Commentators are focused on the risk countries will respond to the worldwide slump in demand by resorting to protectionist measures (either competitive devaluations, tariff rises or other trade barriers) in a mutually self-defeating attempt to reserve what remains of shrinking demand for domestic industries — leading to trade wars, a reversal in the trend towards global integration and a fall in living standards.

Parallels with the 1930s abound. But the tariff wars of the 1930s belong to a vanished world of fixed exchange rates, militarism and failed multilateralism. The tariff history of the 1930s is not a good parallel for today’s world.

China’s growth obsession may spawn jobless upturn

Wei Gu – Wei Gu is a Reuters columnist. The opinions expressed are her own –

China is pulling all the stops to keep the economy growing by at least 8 percent, a pace considered necessary to absorb millions of migrant workers and graduates that hit the job market every year.

Ironically, with all its attention focused on the vigorous “defense of the eight”, Beijing risks losing sight of its ultimate goal — creating enough jobs to preserve social peace — and may end up engineering a jobless recovery.

EU enters lame duck year amid challenges

Paul Taylor Great Debate– Paul Taylor is a Reuters columnist. The opinions expressed are his own –

The European Union is entering a lame duck year just as new challenges are mounting from Israel’s assault on Gaza, Russia’s gas cut-off to Ukraine and the impending inauguration of U.S. President Barack Obama.

The EU’s active crisis management in the Georgia war and the global financial meltdown last year under the energetic leadership of French President Nicolas Sarkozy was an exception, not the dawn of a new, more effective Union.