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Politics and Economy:
America and Jobs
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The Outsourcing Debate

It's no surprise that jobs were a huge issue in Campaign 2004. The debate is hottest around the issue of American jobs heading overseas — or offshoring. Loaded terms such as "protectionism," and "Benedict Arnold CEOs" have made it into the discourse. Even though the election is over — the debate is still raging on the Hill and in the media.

In February 2004, President Bush faced harsh questioning from both sides of the aisle when N. Gregory Mankiw, the chairman of the White House Council of Economic Advisers and a prominent Harvard University economist, released a report which spoke favorably of some aspects of the offshoring of jobs. "When a good or service is produced more cheaply abroad, it makes more sense to import it than make or provide it domestically." The President quickly countered by pointing to job retraining programs and a new bill forbidding the outsourcing of federal jobs overseas. In recent speeches, President Bush has defended his administration's policy while balancing it against concern for domestic jobs. In May, the President spoke to this point at the "Ask President Bush Event" in Dayton, Ohio:

We care about outsourcing in America. We want people working here. But the wrong policy would have been, let's go through economic isolationist policy, let's wall us off from the world. Instead the right policy was to stimulate growth at home…. My point is, let us be confident about ourselves. Let's put the right policies in place that encourage growth at home.

John Kerry has made headlines with his contention that companies who move their operations overseas should face special taxes. In a speech entitled "A Jobs-First Economic Plan" given in Detroit, Michigan last March, Kerry remarked:

We now have a tax code that does more to reward companies for moving overseas than it does to reward them for creating jobs here in America. So if I am elected President, I will fight for the most sweeping international tax law reform in forty years — a plan to replace tax incentives to take jobs offshore with new incentives for job creation on our own shores.

The debate is complex. It's not just manufacturing jobs that are headed overseas but also technology and service jobs, bringing new life to economies in India and the former Eastern bloc. The British financial publication THE ECONOMIST recently outraged some readers by labeling outsourcing fears "The Great Hollowing-out Myth" and maintaining that "contrary to what John Kerry and George Bush seem to think, outsourcing actually sustains American jobs."

A recent CNET and Harris Interactive poll found that more than 40 percent of U.S. technology executives would be willing to pay higher taxes to compensate for jobs they send offshore.

Read more about the debate below and discuss your thoughts on the topic.

"The fact that foreign competition now impinges on services as well as manufacturing raises no new issues of principle whatever. If a car can be made more cheaply in Mexico, it should be. If a telephone enquiry can be processed more cheaply in India, it should be. All such transactions raise real incomes on both sides, as resources are advantageously redeployed, with added investment and growth in the exporting country, and lower prices in the importing country. Yes, trade is a positive-sum game."

- "The great hollowing-out myth," THE ECONOMIST, February 19, 2004

"Millions of jobs in manufacturing and technology are shipped overseas to countries where companies can pay employees far less money. There are a number of companies that have continued to get federal funding while at the same time outsourcing jobs overseas... The Defending American Jobs Act of 2004, sponsored by more than 50 legislators, proposes to cut federal funding from companies that lay off workers at higher rates in the U.S. than abroad. The legislation would also require companies that apply for federal grants and loans to declare the salaries of employees in the U.S. and abroad."

- Joel Barkin, spokesman for Rep. Bernie Sanders, I-VT., H. R. 3888's principle sponsor

"An historical restitution appears to be taking place, as hundreds of thousands of jobs, many of them good ones, flee to the economy we ruined. Low as the wages for these positions are by comparison to our own, they are generally much higher than those offered by domestic employers. A new middle class is developing in cities previously dominated by caste. Its spending will stimulate the economy, which in turn may lead to higher wages and improved conditions of employment."

- George Monbiot, "The Flight to India"

"The argument that we will create new jobs in highly paying fields simply is not true. We have no comparative advantage or superiority in innovation. To assume that we are inherently more creative than our foreign competitors is both arrogant and naive. We are currently empowering our competition with the resources to innovate equally as well as we... The costs of the decision to outsource are not borne by the decision maker. Loss of jobs reduces the tax base, creates high unemployment benefit costs, and raises the cost of government retraining programs."

- Rory L. Terry, "Answers on Outsourcing for The Dobbs Report," CNNFN

"Calls for new trade restrictions to preserve current jobs are misguided. There is no significant difference between jobs lost because of trade and those lost because of technologies or work processes. All of those job losses are a painful but necessary part of the larger process of innovation and productivity increases that is the source of new wealth and rising living standards."

- Brink Lindsey, "Job Losses and Trade A Reality Check," The Cato's Center for Trade Policy Studies

"Some have suggested that the jobs lost to outsourcing are offset by the millions of American workers hired by foreign companies to produce new goods and services. However, the vast majority of employment associated with new investments by foreign companies has taken the form of acquisitions of ongoing U.S. companies, such as Daimler's takeover of Chrysler. As a result of insourcing, 2.78 million U.S. jobs were lost in foreign-owned firms between 1991 and 2001."

- "'Insourcing' myths: Jobs and insourcing ," Economic Policy Institute Snapshot, April 6, 2004

More on Outsourcing

The Brookings Institution, "Offshoring" Service Jobs: Bane or Boon and What to Do?"
The Brookings Institution is an independent, nonpartisan organization devoted to research, analysis, education, and publication focused on public policy issues in the areas of economics, foreign policy, and governance. This paper looks at the "incomplete or contradictory" evidence surrounding offshoring.

Center for Trade Policy Studies
This Cato Institute Center for Trade Policy Studies's mission is "to increase public understanding of the benefits of free trade and the costs of protectionism." The site features a wealth of reports and opinion pieces supporting free trade as a crucial element of economic efficiency.

The Dobbs Report: Exporting America
CNN's financial news show LOU DOBBS TONIGHT host Lou Dobbs has been hosting an extended series on the issue of outsourcing. His position, which he calls "balanced trade" has earned him the ire of many financial publications. Read more about the debate on his Web site.

Economic Policy Institute: Trade and Globalization
The Economic Policy Institute is a nonprofit, nonpartisan think tank that seeks to broaden the public debate about strategies to achieve a prosperous and fair economy. The EPI Web site includes such Web features as analyses of key government data; a weekly presentation of downloadable charts and short analyses; issue guides providing data, charts, fact sheets, and links to relevant publications; opinion pieces and speeches; and tables on historical labor market, earnings, and income data. See Josh Bivens, "Shifting blame for manufacturing job loss," Economic Policy Institute Briefing Paper, April 8, 2004

H. R. 3888
Bill currently under consideration in the House of Representatives titled "To prohibit business enterprises that lay-off a greater percentage of their United States workers than workers in other countries from receiving any Federal assistance, and for other purposes."

NASSCOM: National Association of Software and Service Companies
A position paper by the Indian industry group which "makes an attempt to demythologize the pandemonium of 'Outsourcing'. And argues that regulatory efforts to stop worldwide sourcing represents a retreat to economic isolationism that would raise prices for consumers and taxpayers in US.

Offshoring and the 2004 elections
Analysis of offshoring electioneering by CNET's Declan McCullagh.

This online companion to the PBS broadcast on WALL STREET WEEK, "Rage against offshoring," includes election information, viewer debate, pro-offshoring editorial response from David Kirkpatrick of FORTUNE, and estimates on the number of jobs expected to move offshore.

Washington Alliance of Technology Workers
WashTech, a local affiliate of the Communications Workers of America (CWA), is a lobbying organization of high-tech workers and allies which is concerned with the offshoring of high-tech jobs. Their Web site recently introduced an "offshoring tracker" which monitors the number of jobs moving overseas using government and business data.

White House Council of Economic Advisors (CEA)
The CEA was established by the Employment Act of 1946 to provide the President with objective economic analysis and advice on the development and implementation of a wide range of domestic and international economic policy issues. A controversial report by the CEA on outsourcing sparked criticism earlier this year. The Web site hosts the President's current economic policy plans.

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