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Outsourcing, The Non-Issue Issue of Election 2004

There is a problem with the “issue” of outsourcing… it should not be an issue. The Republicans are supporting outsourcing and at the same time avoiding discussing it. Democrats oppose outsourcing and offshoring -- but economists are quick to point out that outsourcing is damn good for America and the world. When President Bush’s Chief Economic Advisor Gregory Mankiw said as much, Democrats roasted him alive, and Bush danced a sidestep. Evidence that outsourcing is good for America is ignored and even refuted by John Kerry, even while his campaign rakes in donations from companies which are heavily involved in outsourcing, and spending lots of money on lobbyists to make sure Congress sees the light. EVOTE.COM explains in depth why so many politicians are talking about something they shouldn’t: ‘evil’ outsourcing.




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Real Benedict Arnolds    

Outsourcing has been demonized often by the Kerry campaign -- but does John Kerry know what outsourcing really does for the economy?

Outsourcing, The Non-Issue Issue of Election 2004

[July 13, 2004 evote.com]  Since America’s founding, its campaigns for public office have featured a common practice ubiquitous among all democracies—and quite an ugly and damaging one to boot. That during campaign races, a period where each candidate must distinguish himself from what may be a group of very similar office seekers, certain issues or arguments get injected into the election that may be incorrect, unimportant or misleading.

Although a particular argument is invalid, candidates will often take advantage of the public’s ignorance of the subject by pushing that issue to appear as the best choice. Perception is reality; which can help especially if the issue is easily “understood” and makes voters feel good.

An erroneous knee-jerk explanation to a problem can often go further for a candidate than a valid argument, especially one that damages rivals or requires long pedagogic explanations to the electorate, many of whom do not have enough interest, intelligence, education or time to understand complex issues.

Indeed, candidates will sometimes not even try to fully explain their support of a self-damaging campaign issue, even when the world’s scholars strongly support their side of the argument, because doing so either barely helps or makes matters worse.

How Did “Honest Abe” Get Elected?
In politics, honesty is often the worst policy for getting elected, which partially explains why virtually all politicians are continually mendacious. Trying to successfully explain to vacuous or disinterested reporters or the masses the esoteric details of environmental or biological science, economics, foreign policy, psychology, or social science can be a very frustrating or impossible endeavor.

Quick and easily understood “explanations” are often the ones most believed, especially if it is heard first and seems to explain the problem clearly. And with all the special-interest and lobbying groups feverishly marketing their self-enhancing propaganda to the world’s ignorant reporters and media outlets, knowing the truth about an issue can be almost impossible as the journalists are often tricked into retelling misinformation.

Political correctness can also block the truth from surfacing. Issues supported by erroneous information can make choosing the best candidate for public office almost impossible. And this campaign is no exception with the “issue” of outsourcing, or American businesses hiring foreign employees for work that could be done by the home team.

When Bush's chief economic advisor laid it out plain about outsourcing, Bush sidestepped an economist's truth.

Outsourcing is Good for Everyone, So Help Us, God.
If one is looking for a great example of how simple honesty, telling the truth, has no business in politics, then just look at what happened recently to poor Gregory Mankiw, President George W. Bush’s chief economic advisor. He got burned for simply stating how economics works.

In response to a question, he answered in the same way virtually every college economics graduate (unless he spent the whole four years getting juiced), erudite scholars of manifold disciplines, historian or Indian chief would respond. That sending American jobs to foreign countries “is probably a plus for the economy in the long run.”

Mankiw also reportedly said recently “outsourcing is just a new way of doing international trade…More things are tradable than were tradable in the past, and that’s a good thing.”

Granted; some Americans have been fired because some shoeless guy living in an insect-ridden mud hut far away in a jungle is willing to work ten years for five bucks and a raw fish. But the fact is the standard of living for all Americans will improve because of that unfortunate fellow’s labor. And that fired American will eventually find a more productive job, one which is more efficient and better for both him and the U.S. economy.

Dean got a lot of mileage out of 'evil' outsourcing... not to mention offshoring.

Unions, Union Money Making Outsourcing an Issue
And in the meantime, because of that foreigner’s labor, the American can go to a Wal-Mart and buy quality clothing for what amounts to a few cups of coffee at Starbucks. And with low prices in American stores, inflation is stifled, allowing for lower interest rates, lower cost for borrowed money, and subsequently another boost to the U.S. economy.

But don’t tell that to the myopic American unions who are quite satisfied in stifling American business and other workers for their own selfish employment gains, forcing companies to raise prices and lose business. Self-interested unions then contribute campaign dollars to their local elected representatives who are happy to sing the union song for votes and cash.

It can be quite hard for elected officials to ignore the selfish pleas of people like Dave Doolittle, a shop steward for the United Auto Workers, who recently stepped up to a podium on Capitol Hill with a placard proclaiming, “Stop Exporting American Jobs.” He spoke against Electrolux AG’s decision to shut down its Greenville, Mich. refrigerator plant and head to Mexico. And get this; the company Doolittle (a perfect name) chose to complain about is not even American. It is headquartered abroad, so it has been insourcing in America for years, taking jobs out of their own country. I guess according to Doolittle this company can’t do anything right.

And to some it is quite bothersome that relatively wealthy Americans need to find a scapegoat and complain about the labor of some foreign folks who live in abject poverty. For Christ’s sake, they need crumbs to live on too. And by the way they will take those crumbs or dollars and then buy American products, thereby generating jobs in the United States. As the dollars and jobs are circulated, everyone benefits.

Outsourcing Is New—If What You Call New Is Thousands of Years Old
Need proof that outsourcing is good for the American worker? Just look at history. For thousands of years countries have benefited from engaging the best and most efficient workers for certain jobs, wherever they may be, whomever they may work for. It just wasn’t called outsourcing but is essentially the same economic principle.

Craftsmen around the Mediterranean supplied the ancient Romans with products of all sorts, and hundreds of years ago the Dutch took the wool grown in England and supplied finished textiles to the British (with complaints from English workers)--and all that has happened since then is great improvements to the world’s standard of living, despite the continual spreading of technical knowledge and capital throughout the world.

And the common perception that globalization, an issue closely tied to outsourcing, is a new and powerful force that is erasing national borders and linking the world in an unprecedented web of trade and investments, is one of today’s greatest economic myths. Globalization at today’s levels is NOT new.

By some measures, its peak occurred about a century ago, making the 20th century’s retreat from globalization a significant aspect of its economic history. In some ways, only now is the planet’s economy becoming close to being as connected as it was in the 19th century. Without many of today’s restrictive laws, goods and labor on the great Clipper and steam ships flowed more easily among countries.

Reich, the shortest guy in the Clinton Administration, told the economic truth.

If You Are Good At It, Do It.—If Not, Do Something Else
Americans must do what they do best and efficiently, such as working in technology or industries with high capital costs—and poor foreign countries must do what they do best, such as creating textiles or working in businesses with low capital costs. All sides will benefit, as it is not a zero sum game.

If a person is really good at fixing cars, for example, but a lousy plumber, then for him to work as a mechanic would be better for both him and the country. It works similarly and profitably for all when expanded to business on the world’s stage. It is called the “law of comparative advantage.”

Just hear the fiscally liberal Robert Reich, who was labor secretary under President Bill Clinton, put it in his own words to the New York Times, "Outsourcing does not reduce the total number of jobs in America. If other countries can do something cheaper, we ought to let them do it and concentrate on what we can do best.”

And that is the economic truth. Period.

But for poor Mankiw to state this truism, that outsourcing is probably a plus for the economy, in an election year when jobs are an important issue, is unfortunately just dumb politics. Democrats, and even a few Republicans, pounced on him like a lioness on a gazelle. Republican Speaker of the House Dennis Hastert, a staunch supporter of fellow GOP member George Bush, retorted, “An economy suffers when jobs disappear.” Bush deftly side-stepped Mankiw’s comment. So much for stating the truth.

Outsourcing Becomes an Issue Just In Time for E2K4
So how did outsourcing become an issue during the 2004 campaign when it shouldn’t have? It all started with the economy.

After business began to slow down from its feverish acme at the end of Clinton’s administration in 2000 and the subsequent terrorist attacks, by 2003 the financial gurus in New York and Boston skyscrapers were again buying stock and talking about their companies making a profit. They were saying the economy had rebounded and soon firms would start hiring more.

But with the stronger economy the unemployment rate still hardly moved, so some academics said, “don’t worry, companies will start hiring, but it will just be a little later than predicted.” And this continued month after month as companies showed little interest in increasing personnel expenses. As 2003 became 2004, with the economy still strong (except accelerated hiring), stupid television charlatans and other “business journalists” began to push the absurdity that somehow this job loss was permanent.

It was a knee-jerk explanation for something they could not correctly explain. Some even said it was the result of a new kind of economy where outsourcing would permanently keep jobs in America from returning.

Outsourcing realities they looked at include corporations in California such as Oracle Corporation of Redwood Shores that more than doubled its Indian staff to 4,200 since 2002; PeopleSoft Inc. in Pleasanton recently said it will hire 1,000 more in India, tripling its numbers there by the end of 2004; Hewlett-Packard Co., founded in Palo Alto, now has 8,000 Indian workers and Cisco Systems Inc. of San Jose employs another 600.

Many of these television charlatans were the same type of morons, hired not for their brains but for their beauty, who said during the economically strong late 1990s that America had also reached a new kind of economy, where significant economic cycles were gone forever because of computer and internet efficiency improvements.

That business cycles were gone forever despite the fact that economic downturns and upswings have been occurring for thousands of years. It was just overpaid television models saying stupid things, about subjects they are ignorant of, and that has not changed. It was not based on science, but rather a simple-minded knee-jerk reaction to short-term events.

Another reason outsourcing was blamed for poor American job creation was the internet itself. Now the world seemed much smaller, as extreme amounts of information were much easier to access and letters now flowed across oceans in seconds. A guy with little more that a patch of grapes and a barrel in France could now easily peddle his wine worldwide, with up-to-date pictures and prices on American computer screens in seconds.

The internet made it appear like outsourcing was more likely today, which in some circumstances it probably is. But the fundamentals of outsourcing have not changed.

We're sure Teresa outsources both the lawn and the laundry. How bad can outsourcing be?

Outsourcing Affects the Upper Castes
Outsourcing also became a particularly effective topic of discussion because it packs a powerful new wallop. Concern for outsourcing spread from the textile mills of North Carolina to the programming departments of Silicon Valley. That is because it hits middle-and-upper income employees, such as software engineers, telephone customer service representatives, financial analysts and X-ray readers who had thought they were immune to the great job exodus to China and Mexico that has decimated blue collars since the early 1970s. These are folks who thought they were safe in a global economy because they worked with their minds, not with their paws.

With outsourcing complaints coming from the more educated classes, the brainless beauty broadcast queens convinced some voters the stagnating unemployment rate, despite the overall strong economy, was a result of companies hiring foreign workers, which they have been doing for centuries when it was not called outsourcing.

The politicians joined with the union mouthpieces and television idiots and created an issue out of nothing. Everyone needs a scapegoat. Everyone needs to blame somebody for everything that is not perfect. Time magazine also got into the act with a March 1, 2004 outsourcing cover story. A computer magazine this year pictured the names and faces of dozens of tech workers who were fired because of overseas workers, some of whom trained those replacing them.

And with the media increasingly talking about outsourcing, soon the people did too. Recently Republican Sen. Charles E. Grassley of Iowa complained during a hearing: "I don't have a single town meeting where something isn't brought up about outsourcing."


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Howard Dean

The Politicians Love to Discuss It

[July 13, 2004 evote.com]  Last year some Democrats, including presidential candidate and former Governor Howard Dean of Vermont, talked about outsourcing as a means to attack the economy during Bush’s presidency and his free-trade support, such as the North American Free Trade Agreement that was signed under Clinton’s watch. But with the “jobless recovery” continuing until this year, other Democratic candidates began to speak continually louder about outsourcing, spewing their oral anthrax.

This could lead to protectionist measures and economic retaliation by foreign countries that would negatively affect American exports and jobs in the United States. Outsourcing became the rallying cry for many politicians, the impetus for dozens of state and federal bills, and a hot-button agenda item for corporate lobbyists.

The fiscally liberal Democratic presidential candidate, Massachusetts Senator John Kerry reportedly accused the Bush administration of wanting to “export more of our jobs overseas.”

Kerry’s web site states, “My economic policy is not to export American jobs, but to reward companies for creating and keeping good jobs in America. Unlike the Bush Administration, I want to repeal every tax break and loophole that rewards any Benedict Arnold CEO or corporation for shipping American jobs overseas.”

He also ran an advertisement that claimed that Bush’s economic policies have moved U.S. jobs overseas.

Kerry also states on his web site that if elected he will “direct his cabinet secretaries to look at procurement policies and assure wherever possible federal contracts are not being outsourced overseas.”

This of course will result in more expensive federal contracts and higher taxes.

Kerry also supports a bill that would require foreign-based call centers for United States companies to identify their location to American callers or customers.

Kerry's vice presidential pick, Senator John Edwards, states on his web site that America should “offer tax incentives for companies to manufacture here in America. We should be exporting American products, not American jobs."

This proposal will subsidize inefficient businesses, a very bad proposal.

Kerry & Possible Veep Poised to Turn Up the Volume on Outsourcing
Edwards also referred to U.S. trade policy as “a moral issue.”

So, John, does that mean that those who oppose it are immoral?

It would not be surprising if someday Kerry and Edwards ratchet up the rhetoric and complain of good ole American Girl Scout cookies being replaced by Chinese fortune cookies, manufactured by sweating four-year-old girls chained to assembly lines 14 hours diurnally. Just you wait.

Both Kerry and Edwards talk about reexamining NAFTA, a proposal that could result in other countries making American exports or insourcing more difficult. Yes, insourcing in America is a significant positive for the U.S. economy; many people in America do work for foreign-based corporations, so the outsourcing jobs benefits go both ways.

According to the Organization for International Investment, which represents foreign companies with U.S. subsidiaries, "US units of foreign companies employed 6.4 million so-called insourced jobs in 2001, up from 5.1 million in 1996 and 4.9 million in 1991."

The correct response for elected officials with regard to outsourcing is for them to do something they hate to do—which is nothing. It would be better if they received the rare credit from the public of doing nothing (except eliminate more trade barriers). Then no harm will result.

The Lobbying Begins
Companies have now begun mobilizing to lobby hard against the anti-offshoring measures. More than 200 trade groups and many individual companies have formed the Coalition for Economic Growth and American Jobs, whose primary function is to limit state and federal legislation that would restrict offshoring jobs and bringing foreign workers to America. It includes such big horses as the Information Technology Association of America, the American Bankers Association and the U.S. Chamber of Commerce.

Eight chief executives from the nation’s largest technology firms are part of another group, the Computer Systems Policy Project that is actively campaigning in opposition to a protectionist backlash, saying improving education and research is what the United States needs to stay competitive.

“There is no job that is America's God-given right anymore,” said Hewlett-Packard CEO Carly Fiorina in January, a member of the group.

On the other side, lobbying groups who blame outsourcing for their troubles include Rescue American Jobs, Save U.S. Jobs and the Coalition for National Sovereignty and Economic Patriotism.

Ok, if your wife is a billionaire, perhaps it's hard to find profitable things to invest in that *don't* outsource.

The Numbers on Outsourcing Do Not Lie—Or Do They?
So how many jobs have been outsourced to foreign countries? Well, that depends on whose numbers you believe.

For the first time, the United States Bureau of Labor Statistics, while admitting their figure is not comprehensive, published the impeachable number of jobs it believes were sent abroad. Labor officials say 4,633 workers saw their jobs sent to foreign countries during the first three months of 2004, only about two percent of the 240,000 private-sector nonfarm workers who were fired during the same period.

But the BLS number only includes firings at companies employing at least 50 workers, where at least 50 persons filed for unemployment benefits during a five week period and who lost their jobs for at least 31 days from January to March.

Even if all the outsourced workers were included in the survey, if one is to believe the BLS, then outsourcing appears to be a very minor economic aspect of the American economy.

But other outsourcing numbers are much higher. Forrester Research Inc. of Cambridge, MA recently estimated in a report that about 830,000 jobs will be moved offshore by the end of 2005 since the start of 2000. It figures 225,000 will be shipped out this year. Forrester estimates the jobs outsourced by the end of 2004 since 2000 were worth $23.3 billion in wages and $36.7 billion counting next year’s expected losses.

John McCarthy of Forrester, the report’s lead author, has said he believes the increased visibility outsourcing has received has spurred its growth. “People are looking at offshoring as a way of doing more with less.”

So now that America has had a few months in a row of strong job creation, let’s forget about outsourcing and focus on more important and real issues, such as the mess in Mess-opotamia.

Kerry Doesn't Walk the Walk on Outsourcing
Even though the Democratic presidential candidate of Massachusetts, Senator John Kerry, often complains against American companies outsourcing jobs to foreign countries, federal records show he is heavily invested in such companies and has received large campaign contributions from some of their top executives. Bush also receives such donations, but does not generally speak against outsourcing.

According to published reports, Kerry has received upwards of $370,000 from employees at 25 companies that were identified by Lou Dobbs of CNN as “either sending American jobs overseas, or choosing to employ cheap overseas labor, instead of American workers.”

Kerry has said recently, “When I am president, and with your help, we’re going to repeal every benefit, every loophole, every reward that entices any Benedict Arnold company or CEO to take the money and the jobs overseas and stick the American people with bill.”

Kerry contributions from outsourcing companies include Morgan Stanley executives pumping $38,000 to his presidential bid; Citigroup officials giving Kerry $68,250; AOL Time Warner officials donating $29,750 and the guys at Goldman Sachs gave $50,300.

Additionally, Kerry’s Senate financial disclosure record shows that he and his wife, Teresa Heinz Kerry, are heavily invested in companies that outsource jobs.

Kerry has direct investments and trusts that range from $124,000 to $636,000 in outsourcing companies. Teresa controls trusts totaling at least $8.5 million in such holdings, including Proctor & Gamble, Pfizer, Goldman Sachs, General Electric, IBM, Anheuser-Busch and AIG.

Capital gains and dividends from those holdings or transactions generated between $1.07 million and $9.47 million.

So does this mean Kerry is a “Benedict Arnold?”

[John Pike is a veteran journalist based in Boston. He has been a guest commentator on many radio stations and his articles have appeared in numerous magazines, newspapers and web sites, including the Boston Globe, Reason Magazine, Insight Magazine, Access Magazine and the Associated Press. He has been misled on numerous issues so often by journalists and candidates of every persuasion, knowing the truth has become very difficult indeed. He can be reached at pike@EVOTE.COM.]

© 1995-2004, evote.com  an ideacast network. Comments or questions? Click here.
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