Overblown ogre of 'outsourcing'

The Washington Times ^ | 18 Aug 03 | By Bruce Bartlett

[.cnI redruM]

Everybody seems to be worried about manufacturing these days. All the Democratic presidential candidates condemn the practice of "outsourcing" — laying off manufacturing workers and buying their output more cheaply from China. This is not surprising, given that organized labor has made it a high-priority issue. But they are being joined by some on the far right as well, such as Pat Buchanan and Paul Craig Roberts, who warn we are exporting our sovereignty along with our jobs. They all seem to think that more trade protection is the answer.

[.cnI redruM]

Another myth exposed. Gephardt should read it and weep. We produce a higher percentage of our GDP through physical manufacturing than we did when we had mobilized to fight the Nazi's in WWII!

[ChromeDome]

ping

[tkathy]

There is a lot more to outsourcing than cutsey little statistics. This is a serious problem, and the party that puts out phoney spin is going to lose big time.

[jim_trent]

> Remember, what really matters for employers is not absolute wages, but unit
> labor costs — how much the labor costs to manufacture a given product.

Reminds me of the old Fruehauf Corporation ( an over-the-road trailer manufacturer). They decided to close down the Fort Wayne manufacturing plant and open one in Scott County Tennessee. The wages were $11 to $14 in Ft. Wayne and were $6 to $8 in Tennessee (this is in mid-1970's dollars). They figured that they would save $1,000 per trailer.

Unfortunately, they were never able to match the hours needed to produce the trailer -- even with brand new equipment and a year and a half of ramping up the speed (to get the workers ready). The Tennessee plant took more of those lower cost hours to make each and every trailer. The cost savings was not there. Makes me wonder about sending work to Mexico or India.

Fruehauf is now out of business and the last I heard, the Tennessee plant was closed down. So much for low wage rates.

[kms61]

"The truth is that manufacturing is doing just fine in every way except employment."

Other than that, Mrs Lincoln, how was the play?

The free trader pundits clearly are feeling the heat and have their talking points. What they fail to comprehend is that none of their statistics mean a damn thing to a man whose job has been outsourced.

If the Republicans don't get a handle on this, come November 2004 they'll be trying to get the license plate number of the truck that hit them.

[Uncle Miltie]

"The truth is that manufacturing is doing just fine in every way except employment. However, few economists would judge the health or sickness of any industry solely based on employment. By that standard, agriculture has been the sickest industry of all for decades. Rather, such things as output, productivity, profitability and wages better determine industrial health. On this score, manufacturing is actually doing quite well in the United States."

Exploding Heads Alert!

[.cnI redruM]

exactly. That's why the US produces a greater proportion of it's GDP in factories today than it did in WWII. People try outsourcing and come back when here when they want to produce something that has enough quality to market somewhere other than Walmart.

[.cnI redruM]

What's so phoney about those statistics? Refute them with an objective rather than a subjective sritique that suggests the decline and fall of US manufacturing. If the US is producing a greater proportion of it's economic wealth via manufacturing than it did in either WWII or The Gilded Age, how is the manufacturing sector actually in decline?

[BlackbirdSST]

Spin it any way you want it. Blackbird.

[Cronos]

No, it isn't in decline. BUt the gloom n doomers and the anti-Bush, anti-Americans here would like you to think so and they'd like their socialist agendas put up including protectionism and tariffs and high taxes.

[.cnI redruM]

Percentage of GDP produced in factories 2003 - 39.6%.

Highest percentage of GDP produced in factories during the 40's - 35%.

Highest percentage of US GDP produced in factories ever (2000) - 40%.

A 0.4% decline in the proportion of GDP produced in factories over a three year period is not a deep and fundamental change in our national economic paradigm.

Spin it any way you choose. redruM.

[ChromeDome]

Remember, what really matters for employers is not absolute wages, but unit labor costs — how much the labor costs to manufacture a given product. If a U.S. worker is 5 times as productive as a Mexican worker making one-fifth as much, they are exactly equal from the point of view of a producer.

Great, so you only have to work 5 times harder than everyone else to have a chance. Sounds fair to me </sarcasm>

[mhking]

Notice that they've completely ignored the effect of outsourcing on the high tech sector...

"It's OK, you can ignore it now..."

[scottlang]

Yes, exactly. People are feed up with it. I know of several that are for the first time in ages considering voting for dems because of how they feel Bush has screwed up the economy. To quote one, "If a conservative is a liberal who has just been mogged, a liberal is a conservative who was just laid off because his job is going to India."

[maui_hawaii]

However, few economists would judge the health or sickness of any industry solely based on employment.

Its the 1000 pound gorilla though.

Fortunately those out of work can vote, and those companies and corporations can't.

[Walkin Man]

The truth is that manufacturing is doing just fine in every way except employment.

I'm sure that will make the millions of unemployed sleep better at night under the overpass in their cardboard boxes!

[.cnI redruM]

Ever heard of leveraging technology? Work two times smarter and your easily five times more productive.

[maui_hawaii]

"conservatives" in denial BUMP

[Lazamataz]

"It's OK, you can ignore it now..."

Actually it would have been much funnier if they had written:

Outsourcing Not Found. (A)bort, (R)etry, (I)gnore?

[Lazamataz]

There is a lot more to outsourcing than cutsey little statistics. This is a serious problem, and the party that puts out phoney spin is going to lose big time.

It seems to be our guys.... I've got a bad feeling about this....

[Lazamataz]

"conservatives" in denial BUMP

C.I.D. bump.

[maui_hawaii]

Remember, what really matters for employers is not absolute wages, but unit labor costs — how much the labor costs to manufacture a given product.

In China thats all irrelevant. Figure up the end cost then give yourself a 30% discount...

Labor cost is only a small portion of the costs though. It depends highly on what one is making. In some cases labor is 5% of the cost of manufacturing, in other cases it is .5% the cost...

[harpseal]

First the program to fix the structural problems in teh economy that have resulted in the continues decline in employment during the "recovery."


In no particular order of importance.

1. Get rid of government subsidies for offshore investment of US companies. OPIC is the first such program which should go but support of World Bank programs that subsidize the outflow of Capital would be another.

2. Use tariffs on those nations which are engaged in unfair trade practices such as currency manipulation (China and India for example), those nations which refuse to open their markets to US products (China for example with its 50% tariffs on US consumer goods and non tariff barriers), those nations that subsidize competition to American Industry (airbus for example) and those nations which have slave conditions for their workers.

3. Use tariffs and other means to prevent the relocation of jobs offshore that are essential to the national defense. If necessary take control of the company seeking to export vital technology or industry by means of eminent domain (No I do not like this last option and I will only defend its use as an absolute last resort like say in the case of rare earth magnets essential to smart bomb technology).

4. An immediate end to guest worker programs. If people wish to come to the USA to work and make a life let them immigrate according to the rules.

5 Provide economic development zones where the corporate income tax is zero for operations within these zones. In order to operate in this zone a company must agree to only purchase American components if available and employ only American citizens or legal immigrants in these operations. These economic development zones shall be eventually be expanded to include every bit of every state once the benefits are shown I would like them to be totally implemented immediately but I realize4 that may be overreaching.

6. Scale back unnecessary regulation including the tort system. Institute a cap on punitive damages, limits on class action suits, and limits on liability to the actual percentage of liability with no plaintiff able to collect if said plaintiff was involved in the commission of a felony at the time of the alleged tort or was more than 49% negligent in the alleged tort. Note that the loser in a frivolous lawsuit shall pay the attorney fees of the winner. There are many other regulatory structures that also need to be included that need to be included such as repealing the Family leave mandate, getting rid of OSHA etc.

7. Increase the domestic content in purchases by the Department of defense and give absolute preference in non-domestic content to proven allies of the USA over say the French or Germans. The only reason any content for DOD purchase may come from non US allies is that content is not available elsewhere and is essential.

8. Do not allow expense involved in moving operations overseas to be included in business expenses under the IRS code.

9. Prosecute for perjury anyone who has made a false statement in order to employ an H1B or L1 visa worker. I will be lenient on the actual perjurer if he/she was ordered to make this false statement and he/she provides testimony to aid in the conviction of the person ordering the perjury. Just because a person is a CEO does not give them a pass on criminal behavior.

10. Prosecute anyone who orders the transfer of vital defense technology or funds a R&D project that could be of use to our military overseas except to strong allies of the USA. Make the necessary enhancements to our espionage laws so that continued support or funding of any R&D in a nation whose government has threatened the USA is guilty of espionage. The UK and Australia come to mind as meeting these criteria for being eligible for transfer of technology first. There will be other nations and a gradation of what can be transferred to which specific nation. Under no circumstances may technology be transferred to any nation whose government has threatened the USA within five years without a complete change of government or specific exemption from Congress and the administration.

11. Deport all illegal aliens immediately and take measures that prevent the entry of any more illegal aliens. Fine all companies knowingly employing illegal aliens Criminal sanctions should be imposed on anyone helping an illegal alien stay in the USA in violation of our laws.

12. Decrease the punishing levels of taxation on companies and eliminate the double taxation on corporate dividends. See effects of item 5 for how minimal this will be if item 5 covers the entire USA. Eliminate all IRS provisions that inhibit free use of independent contractors by businesses for example section 1706.

13. Eliminate the minimum wage so that the worker can be paid based on productivity. Overtime compensation will remain the same but instead of 150% of the "wage" the worker would receive 150% of the production pay. If one through 13 are enacted # 14 becomes an irrelevancy as no one will be working for that low a wage.

[harpseal]

Ping on or off let me know

[maui_hawaii]

Ever heard of leveraging technology? Work two times smarter and your easily five times more productive.

Yup. Thats the way it should be, but thats not the way it is.

If we make a product, then invest to get our productivity up 30%, the Chinese will just get more subsidies to offset the difference and negate everything we just did.

[harpseal]

No, it isn't in decline. BUt the gloom n doomers and the anti-Bush, anti-Americans here would like you to think so and they'd like their socialist agendas put up including protectionism and tariffs and high taxes.

Excuse me but this is a blatant misrepresentation of what tariffs and protectionism are about. Calling tariffs sociailist is like saying the USA in early 1800's was Socialist. Globalism and internationalism has been a central tenet of Marxist governments since Lenin.

Now if you would like to discuss things plainly and clearly without calling names thats fine we can deal with an issue based discussion but name calling has no real place on Free Republic particularly when it is contray to what facts are.

[eniapmot]

I doubt this article will make Gebhardt weep: he is probably saying "Is that the best they can do...?". Hillary is reading this and watching from the reeds, licking her lips.

[nightdriver]

Bruce Bartlett just hasn't been replaced in his job by a foreigner with a bright, shiny new H-1B visa yet.

[harpseal]

Highest percentage of GDP produced in factories during the 40's - 35%.

Highest percentage of US GDP produced in factories ever (2000) - 40%

Now just what do you interpret this statistic to mean? What do you say it shows about the economy or proves for that matter. One can argue that it is either a healthy statistic or an unhealthy statistsic or an irrelevant statistic that is cobbled together to obfuscate the issue. Now just what are the effects of the offshoring of IT. Does the fact that perhaps the prices of manufactured items have risen in relationship to non-manufactured items factor into this of course it does. Does the destruction of a lot of our mining industry have a realtinship to this statistic have anything to do with it of course it does. Does the fact that a far more significant percentage of our petroleum account for a portion of this difference have meaning of course it does.

Please let us forego the smoke and mirrors and honestly discuss issues with facts taht are clear and honest.

[txhurl]

'C'.I.D. bump

Also I'd like to be comforted regarding the job situation by somebody reassuring me that it takes fewer jobs and less money to support a household now than it did in the 50s. Anyone?

[lelio]

In the first quarter of 2003 ? the latest data available ? real goods production was 39.2 percent of real GDP.

How does GDP count for parts of the whole manufactured in foreign countries?
If 10% of the parts in 1950 were made in foreign countries how do you compare that to a car made of 80% foreign parts today?
I think this gets accounted for in the trade deficit numbers. Those numbers are oddly absent from this cheerleading article.

[Lazamataz]

Also I'd like to be comforted regarding the job situation by somebody reassuring me that it takes fewer jobs and less money to support a household now than it did in the 50s. Anyone?

It takes fewer jobs and less money to support a household now than it did in the 1950's.

[sauropod]

print out ping

[txhurl]

Well, thank you!

Back to my mint julep. I do wish the servants would muddle the sugar less. Perhaps it's time for another thrashing.

[Jeff Head]

Great points bro. We need to get back to sanity with respect to our economic dealings internationally...sanity that takes into account our soveriegnty, our defense and our ability to maintain them.

History is a harsh task master.

BTW, don't you mean there at the end if points 1-12 are inacted that 13 may become unnecessary?

[Lazamataz]

Well, thank you!

I live to serve.

[harpseal]

Yes but I chose the term irrelevant and that has been out for a while. Now the problemas I see it with uneccessary is that it gives away a politicla bargaining chip in getting points 1-12 enacted.

[Lazamataz]

In some cases labor is 5% of the cost of manufacturing, in other cases it is .5% the cost...

In pregnancy, labor is at least 60% of the cost.

[cdefreese]

This says it all:

[txhurl]

I think a lot of people misunderstand our grousing and carping about US job loss as directed AT the GOP, rather than TO the GOP. I swear I'll kill myself when the Rats manhandle this issue to their advantage.

And they will, too.

[Jeff Head]

I agree...implementation of the other steps may render it irrelevent practically, while it would still need to stay on the table politcally.

[GraniteStateConservative]

Outsource Congress.

[GraniteStateConservative]

There are Free Traitors who'll say with a straight face that the bigger the trade deficit, the better.

[lelio]

There are Free Traitors who'll say with a straight face that the bigger the trade deficit, the better.

Ah yes, the ole "I have a trade deficit with my local grocer" argument. Perhaps in a couple dozen posts someone will post a new variant of it.

I (or we on FR) should put together a web page that references all these common flase rebuttals. Sort of like the prisoners that resorted to saying "Number 13" instead of repeating the joke they've heard a million times.

[LibertyAndJusticeForAll]

In the 1st paragraph of this article:
[All the Democratic presidential candidates condemn the practice of "outsourcing" — laying off manufacturing workers and buying their output more cheaply from China. This is not surprising, given that organized labor has made it a high-priority issue. But they are being joined by some on the far right as well, such as Pat Buchanan and Paul Craig Roberts, who warn we are exporting our sovereignty along with our jobs. They all seem to think that more trade protection is the answer.]

Also on the right are William Hawkins, Steve Farrell, Henry Kissinger, Tom Tancredo, Phyllis Schlafly and Duncan Hunter to name a few more. I agree with you, Bush needs to join with these intelligent Conservatives ASAP.

[Lazamataz]

Unfortunately -- though it might say it all -- I cannot see it and therefore it is silent. :o(

[Lazamataz]

Interesting idea. Are you willing to put together some raw material for me to catagorize?

[harpseal]

I swear I'll kill myself when the Rats manhandle this issue to their advantage.

Do not even consider killing yourself when there are so many out there than need killing.

[Wolfie]

However, few economists would judge the health or sickness of any industry solely based on employment.

Correcttion, few employed economists...

[harpseal]

Some standard Free trade arguments

Buggy whip

Trade deficit with grocer

Tariffs are sociaist/marxist

We are better off becuase the prices are lower

There is a start.