Posted on 02/13/2004 6:11:03 AM PST by 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.
Ironically, the Japanese manufacturer that builds cars in the U.S. typically keeps more Americans at work than their U.S. competitor. Not because they are less efficient, but because a company like General Motors has to carry such enormous pension/insurance costs and pay exorbitant union labor rates that they can only stay in business by outsourcing a large chunk of their operations. Basically, they can only afford to pay these high labor costs for final assembly by having the parts shipped from a supplier in Mexico.
In the case I cited -- yes. Remember that I was talking specifically about a complex manufacturing process that is becoming increasingly high-tech over time -- and involves a large product that must be transported in specialized equipment. That's why this works in the U.S., but you don't see any Japanese companies producing textiles in the U.S. The basic premise of globallization is that an economy functions best when individual processes are done in those places that are "best suited" to do them.
Remember, it was Henry Ford who realized he had to pay his workers enough to afford one of his cars if he was going to sell any cars. (And it worked).
Henry Ford sounds like quite the compassionate executive, but that famous approach of his was a bit misleading. Regardless of how much he paid his employees, the Ford Motor Company was not going to generate any kind of profit unless it had the ability somewhere in the production process to exploit what could broadly be defined as an "inefficiency" in the market. This is a complex concept to understand, and a lack of understanding of this is the underlying cause of much grief in our economy. I'll use a very simple example to illustrate the point.
Let's suppose that Henry Ford hired one auto worker to produce a single automobile with his bare hands, using materials he made from his bare hands or dug out of the ground with his bare hands. If Ford paid this worker $1,000 to make this car, and then sold him the car for a price of $1,000, he'd be out of business tomorrow. More likely -- he'd never be in business in the first place.
The only way the scenario I presented would ever work is if the auto worker produces cars that Ford sells to outsiders -- and the difference between his labor cost and the price of the vehicle (plus any profit that Ford makes) is a cost that is "carried" by someone outside the closed system of the auto plant. Ford can pay the worker $1,000 and sell the car for $1,000 -- but only if the worker also produces another car that can be sold for $1,000. This means reducing the unit labor cost of a vehicle from $1,000 to $500 -- and this can only be done by doing something that doubles the efficiency of the worker. At its most basic level, this involves the use of materials that are not made by the same worker who makes the car -- they are made by someone who is "best suited" to make auto parts. And they must be provided to Ford by a source that will charge less than $500 for the materials for that car -- or else there is no reason to use the outside supplier.
When you examine this scenario carefully, you'll notice that Henry Ford's pragmatic approach to his business had to end at the walls of his own plant -- or else he'd be out of business. Maybe he could pay the auto worker enough to allow the auto worker to buy a Ford, but the worker who provided the auto parts could not. Over time, maybe the worker who provided the auto parts could be paid enough to afford a Ford car, but the miners who provided the coal and iron to make the steel for the auto parts could not. Eventually, maybe all of the people involved in the production process would be paid enough money to buy a Ford, but then the truck driver and railroad worker who shipped the supplies to the plant and the Fords from the plant could not.
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.
Do you want to know what "outsourcing" today is all about? It's the natural progression of an economy in which "everyone can afford everything" -- because somebody has to serve as the "inefficiency" in the market.
That will bring just about any emotionally charged discussion to a screaming halt on any forum. Never bring facts into the picture until you are fed up with the nonsense being spewed.
Just love your brainy observations! Truth is evil to those who deny it. Keep bringing out these facts, please.
Actually, the reverse is true. "Our economic team is doing a great job." spokesman Scott McClellan said, (That's kind of laughable)
Why not just admit you support Agenda 21 and be done with it?
How do you think this will happen unless we yell loud enough for him to hear us? So far, Karl Rove has made sure the President is kept in outside sound free areas only. He's pushing Agenda 21 (without ever mentioning the words "One World Government") as hard as he can and doing a better job at it than his father did.
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