Outsourcing Myths

IBD Editorials ^ | November 1, 2010 | Investors Business Daily staff

[Kaslin]

Trade: In the 2004 election, with the economy in full recovery mode, Democrats launched an all-out attack on outsourcing to win votes. It didn't work. This year, in a much weaker economy, they're trying again.

When Democrats made outsourcing a big issue in 2004, the economy was growing at a 3.6% annual rate, thanks to the Bush tax cuts the year before, and unemployment had fallen to 5.5% — on its way to below 4% two years later.

The arguments about outsourcing costing Americans their jobs just didn't resonate. The GOP not only added seats in the House and Senate, President Bush won a second term.

This year things are different. Economic growth has averaged a tepid 2.5%, while unemployment has hovered above 9% for 17 straight months during our so-called "recovery."

In such an economy, fear of outsourcing is a way to win votes.

In September, with just days to go before hitting the campaign trail, desperate Senate Democrats pushed a bill to penalize companies that outsourced jobs to other countries. It failed.

[KoRn]

"A 2005 study of the high-tech industry by Global Insight Inc., for instance, found that outsourcing was a "net positive for American workers and the U.S. economy," responsible for creating hundreds of thousands of U.S. jobs and boosting pay here."

It makes sense. If I lost my job because someone in India could do it for pennies on the dollar, it would be great for our economy! If the same thing could be replicated across the nation, imagine the prosperity that would be created! Sure we'd all be unemployed, but imported goods wouldn't cost as much. Makes the unemployment check go a lot further when doing the household budget.

[jiggyboy]

Boxer’s TV ads lately are hitting Carly Fiorina on her outsourcing of thousands of jobs during her tenure as HP CEO. Maybe there’s a rebuttal to that that satisfies bigshots in Silicon Valley, but there are far more voters than bigshots.

[MrEdd]

Outsourcing is a toxic discussion for the left, because government regulations and taxation are the primary drivers, with unions being just a bit behind those factors.

[proxy_user]

In any case, most of the foreign employees of US corporations serve foreign customers. If they get enough business over there, maybe they will just forget about the US.

[padre35]

It is the GoP’s Death Wish reappearing, they cannot help themselves.

[SunkenCiv]

Thanks Kaslin.

In the 2004 election, with the economy in full recovery mode, Democrats launched an all-out attack on outsourcing to win votes. It didn't work... the economy was growing at a 3.6% annual rate, thanks to the Bush tax cuts the year before, and unemployment had fallen to 5.5% -- on its way to below 4% two years later... The GOP not only added seats in the House and Senate, President Bush won a second term. This year things are different. Economic growth has averaged a tepid 2.5%, while unemployment has hovered above 9% for 17 straight months during our so-called "recovery." In such an economy, fear of outsourcing is a way to win votes. In September, with just days to go before hitting the campaign trail, desperate Senate Democrats pushed a bill to penalize companies that outsourced jobs to other countries. It failed.

Gosh, could it be because it's the effin' Demwit Party that's been in charge of both houses of Congress and the White House for over 18 months, and in charge in both houses of Congress since early 2007?

[dr_who]

If conservatives perceive the world the way socialists do, they become socialists in all but name. Free trade is just that, free trade. Free trade is fair trade in that the seller freely chooses the buyer,the buyer freely chooses the seller, and there’s no third party telling the buyer or seller what to do with their own property.

[bigbob]

Outsourcing is just the latest incarnation of David Ricardo’s theory of Comparative Advantage. There ought to be a net gain but what is lacking is an environment free of government intervention and interference where capital that is made available from outsourcing low level work can be reinvested to create new and bigger returns.

[desertfreedom765]

Freetraders always scream about the “Free Market” However when it comes to the price of labor they do everything they can to use Government Policies to manipulate the laws of supply and demand. Illegal Immigration, outsourcing, H1 Visa’s, etc.

The Free Market should apply to everyone, including big business.

[Mase]

Outsourcing ping. And a welcome respite from all the election news.

[bIlluminati]

Laying the trans-Pacific fiber optics lines in 1998-2001 caused a lot of outsourcing to be possible. This was funded by the dot-com money, and was mostly lost, except for early investors. The Telecommunications Act of 1996 meant companies like Global Crossing could go head-to-head with the Baby Bells on international phone and data services.

Over a period of about three years, from 1999 to 2002, international calls went from $2.00/minute to $0.10/minute, retail. This made outsourcing of customer service possible and profitable. Global Crossing borrowed $12 billion to build out the lines, and went bankrupt in January 2002.

Early investor Terry McAulife “invested” $100,000 and sold for only $18 million. The fact that he was chair of the DNC at the time was purely coincidental. Founder Gary Winnick sold his shares for a mere $735 million and was never charged with any crime nor fined for any action while scamming the world’s investors. And that’s how outsourcing of customer support to India, Pakistan, and the Philipines got started.

The Pacific fiber optic network, costing around $10 billion, was eventually sold to a Singapore telecom for $750 million, or slightly more than what Winnick looted. Before that, a Chinese company tried to buy Global Crossing, but US authorities under Bush stopped that deal.

[expat_panama]

LOL! Thanks Mase, a good respite is exactly what I needed to go with my morning coffee.

[csmusaret]

It is much, much worse than you said:

Years since 1933 that Republicans controlled the House, Senate and Presidency: 6

Years that Democrats controlled all three: 34

Years the Democrats controlled both houses of Congress: 56

[SunkenCiv]

I quite agree! The Demwits have been in control of district apportioning based on the census figures following every census since 1930. As someone pointed out in the 1980s (when I used to read political mags a lot), the Demagogic Party had gerrymandered a huge majority for itself in the House; the Senate had kicked over a few times because that’s at-large representation by state.

Even with their gerrymandering, and ballot fraud which goes back at least as far as the New Deal, and the partisan media shills (since Watergate or thereabouts, their control and/or influence is ubiquitous), they still have lost their grip on the House a few times, and more obviously, the Presidency since FDR died (I omit him because he was in office 13 years) 65 years ago has been Demwit for less than half that time.

[csmusaret]

Some startling figures(at least to me)to support your point:

Years since 1933 that Republicans controlled the House, Senate and Presidency: 6

Years that Democrats controlled all three: 34

Years the Democrats controlled both houses of Congress: 56