Bush Distances Himself from Aide on Exporting Jobs

Reuters ^ | February 12, 2004 | Adam Entous

[Deliberator]

HARRISBURG, Pa. (Reuters) - Under pressure from fellow Republicans, President Bush distanced himself on Thursday from one of his top economic advisers who said the outsourcing of U.S. jobs to workers overseas may benefit the economy.

"The (economic) numbers are good. But I don't worry about numbers, I worry about people," Bush told students and teachers at a high school in Pennsylvania -- a pivotal state in this year's election and one of the hardest hit by factory job losses during his presidency.

Without mentioning by name the chairman of his Council of Economic Advisers, Gregory Mankiw, Bush said he was concerned "there are people looking for work because jobs have gone overseas" and vowed to "act to make sure there are more jobs at home" by keeping taxes low and by retraining displaced workers. Bush offered no new initiatives to curb outsourcing and aides said he opposed restrictions on free trade.

With political concern about unemployment heating up ahead of the November presidential election, critics have seized on Mankiw's characterization of "outsourcing" by U.S. companies as "something that we should realize is probably a plus for the economy in the long run."

Democrats said his comments and the council's annual report were evidence that the Bush White House is insensitive to the plight of out-of-work Americans.

Senate Democratic leader Tom Daschle predicted Mankiw would quit.

But Democratic Sen. Hillary Rodham Clinton of New York said, "This is the economic report of the president and not the economic report of Mr. Mankiw ... We cannot allow our Republican friends to shift the blame and the burden to Mr. Mankiw."

Senate Democrats said they would propose new protections for workers whose employers send their jobs overseas. Their proposal would require that outsourcing companies disclose their plans to their employees and to the Labor Department.

On Wednesday House Speaker Dennis Hastert of Illinois joined the bipartisan chorus of criticism from the U.S. Congress and the campaign trail, saying of Mankiw: "His theory fails a basic test of real economics."

The White House has rebuffed any suggestion that Mankiw resign. "That's kind of laughable," spokesman Scott McClellan said, adding: "Our economic team is doing a great job."

U.S. Commerce Secretary Don Evans defended the comments, telling CNBC: "What he praised was free trade and open trade. Every president since Herbert Hoover (1929-33) has said that free and open trade - as long as it's fair trade - is good for our economy."

At issue is the practice of a growing number of U.S. companies to move all or a portion of their operations to places like Mexico, India and China, where labor costs are lower and goods can be produced more cheaply, in order to improve corporate profits.

Nearly 2.8 million factory jobs have been lost since Bush took office and the issue looms large ahead of November's vote, where victory in rust-belt states like Pennsylvania could be key.

Underscoring its political importance to Bush's re-election, Thursday's visit was his 25th to Pennsylvania as president. He narrowly lost the state in the 2000 election, and analysts say he may have hurt his chances of winning it this year when he scrapped U.S. tariffs on steel imports in December to avert a trade war with Europe.

© Reuters 2004. All Rights Reserved.

[Alberta's Child]

Trucks which would have quickly become obsolete anyhow

That's a handy excuse -- but even if you were right, how about at least junking them and re-using the steel scrap?

[XBob]

175 - "It never sold them. In fact, the Truman administration even made a concession to the United Auto Workers by taking U.S. military vehicles used in Europe during World War II and dumping a substantial number of them in the Atlantic Ocean instead of bringing them back.
The utter irony of it all was that the worker on the Ford assembly line was able to buy a new car every few years, but only because his kids were slowly being saddled with a massive debt to pay off the cost of the Ford trucks that were dumped overboard."

Not just in Europe, but the Pacific too.

We had a vehicle shortage in Vietnam, and one old colonel remembered, organized an expedition to Guam, and pulled out and refurbished many flat bed trailers which were dumped into the pacific after WWII.

[drlevy88]

There "could be," but there is no first principle dictating that there must.

As for 100% efficiency in growing lettuce, bullhockey. That's what my production was, because that was all the lettuce you wanted until the "market grew."

[drlevy88]

Nowadays the anti pollution mavens would not have stood for such a dumping but would have insisted on recycling. That would have actually helped the autoworkers because it would have meant cheaper steel.

[XBob]

Good list - where's Walmart?

[Alberta's Child]

There "could be," but there is no first principle dictating that there must.

I've used the phrase "could be" in purely theoretical terms. The reality is that the world operates under any number of economic "imbalanced conditions" nearly 100% of the time. In fact, the day you think everything is "balanced" is a good time to be concerned -- because in economic terms, "balanced" and "stagnation" are pretty much synonymous.

As for 100% efficiency in growing lettuce, bullhockey.

I used the "100% efficiency" condition to help illustrate how the process would work if we were trading commodities or finished products that weren't as easy to produce (in terms of the labor requirements) as a head of lettuce.

If you were producing commercial bakery ovens and I were producing farm tractors, then doubling your output wouldn't be so easy.

Consider the question again, and for the sake of the argument assume that two heads of lettuce per week is your current capacity. How would you address the problem?

[drlevy88]

As you allude, an imbalance should be an opportunity to grow. But if a government (e.g. Chicommunism) halts the growth, then we mostly cause more misery by feeding to the imbalance.

[maui_hawaii]

First check out this

Wal Mart isn't actually outsourcing. They are importing. It might sound like a technicality, but there is a big difference.

The above link says that about 80% of our imports from China are NOT related party trade.

Wal Mart doesn't make what it sells. Its not in the manufacturing business. You can't outsource what you don't do.

Wal Mart merely buys from suppliers and in turn retails the products.

Many of Wal Mart's suppliers are outsourcing, but Wal Mart itself is not.

[drlevy88]

How would you address the problem?

Better technology for all

[Alberta's Child]

That would have actually helped the autoworkers because it would have meant cheaper steel.

Bingo! Go to the head of the class, sir -- you've just identified a tangible "imbalance" along the lines of what I was describing. The auto workers are "helped" because they are able to take advantage of a situation (albeit temporary) in which they can produce cars using recycled steel -- while the workers in the iron and coal mines who would have been producing the steel must suffer on the unemployment line for a period of time because their commodities are not needed.

At the risk of sounding sarcastic, I'll point out that in this case, it is obviously imperative for the U.S. government to dump the vehicles overboad rather than recycle them -- because we must maintain full employment in our economy no matter how inefficient it may be.

[drlevy88]

Outsourcing is another flavor of importing.

As for the outsourcing "rogues list" I would want to know how much of that means overseas and how much to domestic operations. I am a contractor now at a firm where I used to be a regular employee, but I'm still in the USA. That job was not sent to India or China. Yet.

[drlevy88]

I would say they could have fed the material into the hopper, but slowly.

[Alberta's Child]

Better technology for all.

What does the phrase "better technology" mean when we're talking about a closed system of two consumer/producers? Are you going to stop growing your lettuce one year and let your child starve while you invent a John Deere combine and some genetically modified Monsanto lettuce seeds?

This isn't intended to be sarcastic -- it simply shows how difficult it is to react to the countless "imbalances" we come across on a regular basis in our economy.

The way I see it, there's only one solution to this problem that may end up working to the advantage of both of us. Give it one more shot!

[drlevy88]

More people in the market.

[Alberta's Child]

I would say they could have fed the material into the hopper, but slowly.

Sounds good, but maybe not. If you feed it into the hopper too slowly, then the money you save by recycling the material may be offset by the cost of storing the material for a long period of time while waiting for it to be fed into the hopper.

[drlevy88]

It could have sat on European shores. They were beholden to us for saving their hides, and wouldn't have minded a temporary junkyard or two.

[Alberta's Child]

More people in the market.

That's right -- but it does change the original problem statement.

Consider this solution:

Based on the original parameters, we really only have a limited number of factors to deal with. We've got a farm (yours), a bakery (mine), a farmer (you), a baker (me), and a child who consumes but does not produce. If we assume that we are both operating at 100% efficiency, then neither one of us has the option of increasing our output. You need two heads of lettuce and two loaves of bread every week, but you can only produce two heads of lettuce (which leaves none to trade for my bread).

The Marxist solution would be for you to assert your right to take one of my loaves of bread without compensating me for it, because you need it more than I do. You may be able to do this to me simply by overpowering me (if you are stronger), but I can assure you that I won't be baking two loaves of bread every week after this happens for the third time. This explains why Marxist states are always reduced to sh!t-holes by the time Marxism runs its course.

The real solution, of course, is that there is no way to meet all of our "needs" under these conditions, but we can make trade-offs in our individual situations that will allow us to allocate our resources in a manner that works out for both of us (hopefully) -- either now or in the future.

My suggestion is that we should both "settle for less" in the short term by making sacrifices for the longer term. Here's the deal: I will provide you with one of my loaves of bread every week (or every other week, or whatever we determine to be fair while keeping me from starving), and you will be permitted to keep both of your heads of lettuce. I will do this for a period of ten years, after which I will own your farm.

The social crusaders out there will call this "exploitation!" and complain about "all the wealth being held in the hands of a few people," but in our example it may work out well for both of us. We'll both make sacrifices in the short term, but we also both have a "goal" to aim for. My goal is to own your farm, at which point I will charge you some kind of rent for staying there (I can't evict you after the ten years, because I'll want your lettuce even after I own you farm -- especially if I haven't had any for ten years!). Your goal, on the other hand, is to trade off one of your major assets (your farm) in exchange for the ability to develop what may end up being an even more valuable (even in purely monetary terms!) asset -- your child.

I may own your farm after ten years, but at that point your child will be able to increase the output of the farm by helping you cultivate your lettuce. If you can produce three heads of lettuce per week with your child, then we've got another "imbalance" that now works in your favor. You can even defer the "payout" on your investment by refraining from having your child work on the farm after he turns ten -- and instead cultivate his interest in science, engineering, etc. By the time he's 20, he may end up with the ability to build that John Deere equipment that will allow you to harvest 200 heads of lettuce a week!

[XBob]

26 - 'I heard the other day that India's tariffs are some of the highest in the world. '


http://www.usibc.com/Documents/HuntsmanSpeech.pdf

'India's Circumspect Embrace of Globalization'
Keynote Address by Ambassador Jon M. Huntsman Jr.
Deputy United States Trade Representative
First Manhattan India Dinner
Organized by U.S.-India Business Council, U.S. Council for International Business and Asia Society
February 5, 2003

India has made in the past, and has begun to change very slowly. India’s tariffs are today, more than ten years after the beginning of economic reform, the highest in the world, except for those of Pakistan, according to the World Bank.

India likes to export, but has a grudging attitude at best towards imports. Indians understand the almost universally accepted truth that a vibrant export sector is necessary for poverty alleviation and sustainable development. Yet they remain skeptical of imports - even of products such as life-saving medical equipment not manufactured in India. So the country maintains tariffs among the highest in the world, imposes additional taxes when tariffs come down, and erects non-tariff barriers. These multiple, onion-like barriers discourage potential exporters.

For example, India’s tariff and taxation structure undermines its tariff commitments in the WTO. This structure has impeded trade in such items as medical equipment, chemicals, soybean oil, and distilled spirits. Differential treatment of imports and domestic production of phosphates, for instance, has caused a $400 million U.S. market to evaporate while India’s agricultural sector suffers from lack of quality fertilizer. Special taxes have increased the price of imports so that they no longer are competitive in the Indian market. The recent change in customs valuation methodology for imported films threatens to suffocate substantial opportunities in bilateral trade and creative collaboration.

India has proposed that by 2010 all peak tariffs be reduced to three times a country’s average duty. In the case of the United Sates, our average duty is 2.6 percent; three times that amount would be 7.8 percent, which is very close to the 8 percent we have proposed.

Trade in services has created a substantial number of jobs in India. For example, General Electric employs more than 15,000 people in India who provide services such as accounting and customer service to its offices throughout the world. Approximately 3,300 software engineers are employed by Hewlett-Packard Co. in India. In addition, as I have already noted, developed-country firms are increasingly outsourcing back-office and technology services from Indian firms, creating high-paying jobs in engineering, medical services, research and development, and other services fields. The tremendous success of India’s high-technology sector offers a potent argument for India’s interest in an open trading system. India exported over $6 billion worth of software last year -- accounting for 13 percent of the country’s total exports. Over the past five years, the annual growth rate for India’s software exports has been 45 percent. And there’s every reason to believe it will keep growing. The Software Engineering Institute at Carnegie Mellon University gives its ‘top quality’ ranking to only 48 software companies in the world; nearly two-thirds of them are based in India.

[XBob]

37 - "The fact that the U.S. population, resource base, transportation infrastructure, etc. far exceeded anything that Great Britain had to offer was the major cause of this, not the tariffs. In fact, if you look at Great Britain compared to the rest of the world in these areas I mentioned, it's a wonder they managed to remain an economic power for as long as they did."

Horay - you got it - we have all this bounty here - just like Africa, just like Soviet Union, just like India and China, Just like South and Central america and Mexico, who all have more wealth than Poor countries like Germany, Japan, US, etc. </sarcasm>

[XBob]

67 - "In reality, this example is overly simplified because the Ford Motor Company never started at the first step with a single auto worker making everything with his bare hands. But the reality is also this: Henry Ford was "outsourcing" part of his process from the very first day he started manufacturing cars . . . because he was building cars using steel from mills in Pennsylvania and tires from Ohio, using materials from iron mines in Tennessee and coal mines in West Virginia -- and none of these other workers was driving to work in a brand-new Ford automobile."

Actually, you have got this bass ackwards. Read up on a history of Ford Motor Company, and you will find it fascinating, and that Ford attempted and to a large degree succeeded, in a Ford car being wholly ford owned process, from mining the ore, to smelting the iron, to forging the steel, to making the glass, to manufacturing and assembling the parts, and along with his friend Harvey Firestone, just about succeeded in total end to end manufacturing to sales.