Treasury chief calls outsourcing a plus for US
Treasury Secretary John W. Snow, in the latest sign that the Bush administration intends to directly defend free trade despite the loss of American jobs overseas, argued in an interview published yesterday that outsourcing ultimately helps the US economy.
Snow told The Cincinnati Enquirer that outsourcing "is a part of trade . . . and there can't be any doubt about the fact that trade makes the economy stronger." The comment echoed those made recently by two of President Bush's top economic advisers, N. Gregory Mankiw, chairman of the Council of Economic Advisers, and Stephen Friedman, director of the National Economic Council, who also suggested that shifting some jobs overseas would benefit the United States.
Political analysts said yesterday that the administration has apparently decided to address the issue of outsourcing head-on by arguing that free trade in the long run means greater choice for consumers, lower prices, and greater prosperity. Many economists, including the Federal Reserve chairman, Alan Greenspan, say the competition leads to the type of innovations that drive the US economy forward and ultimately create far more jobs than are lost.
But political analysts say that while the economic reasons may be sound, they are likely to be lost on parts of the electorate increasingly worried that their jobs -- blue- and white-collar -- are going to India, China, or Eastern Europe, where the wages are lower.
The issue of job loss is especially powerful in the industrial regions of Ohio, Michigan, and Pennsylvania, which are shaping up as crucial states in the 2004 presidential race. Ohio, for example, has lost about 200,000 manufacturing jobs since 2000.
"They're good economic arguments, but stupid political arguments," said Norman Ornstein, a political analyst at the American Enterprise Institute, a Washington, D.C., think tank. "They're fine if you're prepping for Econ 101, but not a presidential campaign."
Free trade and the loss of US jobs to cheaper labor markets have moved to the center of the presidential campaign as the economy continues to grow without adding significant numbers of jobs. Job growth has been anemic at best recently, and the United States has hundreds of thousands fewer jobs than when the recovery began in November 2001.
The manufacturing sector, in particular, has been steadily losing jobs, shedding nearly 3 million over the past three years. And in the background are the frequent announcements about jobs being moved to China. Yesterday, for example, Chicago-based Radio Flyer Inc., maker of the little red wagon loved by generations of children, said it would outsource its manufacturing operations to China and lay off about half its 90 employees.
Democrats, viewing the Bush administration as particularly vulnerable on the economy, have targeted the administration for its trade policies. Last week, Senator John F. Kerry unveiled a tax proposal he said would reward companies that kept jobs in the United States, and yesterday, through a spokeswoman, the Massachusetts senator ripped Snow's outsourcing comments as part of "Bush's secret plan to send more American jobs overseas."
Kerry, speaking at a campaign rally yesterday before more than 1,500 students and others at the University of California at San Diego, touched on outsourcing in 30 minutes of remarks.
"What we need to do is make America more competitive with steps of common sense. This administration believes that outsourcing is just dandy, that it's good for America, fine and acceptable," he said. "Well, I will say to you that no American president, no president, can possibly stop all the outsourcing, but . . . we can make this workplace more fair and more sensible by not asking American workers literally to subsidize the loss of their own job."
President Bush, meanwhile, has accused Democrats of embracing "economic isolationism" and protectionist policies that would lead to the closing of foreign markets to US products and massive job losses.
"See, I think that would be absolutely wrong for America to be so pessimistic about our ability to compete that we've become economic isolationists . . . that we say to our farmers and ranchers, our entrepreneurs that we don't think you can compete," Bush said while speaking at the Fox Cities Chamber of Commerce in Appleton, Wis. "I believe this nation can compete anywhere, any time, any place, so long as the rules are fair." Economists, meanwhile, say the impact of outsourcing has been overstated, and attribute the jobless recovery primarily to technology-driven productivity gains. A study released yesterday by the Information Technology Association of America said outsourcing accounted for less than 3 percent of the job losses in software and tech services since the dot-com bubble burst in 2000.
The study estimated that global outsourcing would save US technology companies some $21 billion a year by 2008; as those savings ripple through the economy, productivity and wages would rise, creating more than 317,000 jobs in 2008.
While the short-term dislocations are painful, economists said, they nonetheless lead to long-term gains. In the 1990s, for example, the United States lost some 3 million manufacturing jobs to other nations, but gained some 25 million net, said Nariman Behravesh, chief economist at Global Insight, the Waltham-based consulting firm that did the study.
Patrick Healy of the Globe staff contributed to this report from San Diego. Material from wire services was also used.
