Sunday, September 26, 2004

John Kerry has a problem with some of his economic advisers: They don’t always agree with what he’s saying on the campaign trail.

Take, for example, Mr. Kerry’s condemnation of outsourcing or offshoring by big business. He has made it one of the chief complaints in his election brief against President Bush’s economic policies. Mr. Kerry says Mr. Bush has exported millions of jobs overseas through outsourcing.

In fact, outsourcing, a decades-long practice of moving production of goods and many administrative services overseas, represents only a small part of the nation’s $10 trillion economy. Studies by the Labor Department and outside groups say the number of jobs involved in outsourcing represents less than 1 percent of all U.S. jobs.

Of course, if it’s your job that has been lost to outsourcing, the issue of how many jobs are at stake doesn’t matter very much. But is this practice really bad for our economy and for the long-term outlook of job creation here at home?

If Mr. Kerry is right, you would think his senior economic advisers and supporters would be defending his statements against outsourcing. In fact, they say outsourcing is not that big a problem.

When ABC’s George Stephanopoulos asked Kerry economic adviser Robert Rubin if the senator’s proposal to deny tax breaks to businesses sending jobs overseas would stop outsourcing, here’s what President Clinton’s Treasury secretary said: “No, I think that outsourcing is part of a much larger issue. It’s part of trade liberalization, and trade liberalization as Sen. Kerry has said and President Clinton used to say, is very much beneficial to our economic well-being.”

Mr. Rubin later said outsourcing “is part of a much larger phenomenon, and the much larger phenomenon is trade liberalization, and I think trade liberalization has been good for our economy and I think trade liberalization will continue to be good for our economy.”

But Mr. Rubin isn’t the only Democratic economic guru who parts company with Mr. Kerry on the outsourcing question.

When I asked veteran Democratic economist Charles L. Schultze what he thought of this debate over outsourcing, here’s what the chairman of the President’s Council of Economic Advisers under Jimmy Carter had to say:

“Employment relative to other business cycles has been very poor, but offshoring isn’t a big part of that problem,” Mr. Schultze told me.

The biggest part of the slower job creation phenomenon over the past four years has been the sharp rise in high-tech-driven productivity that has allowed businesses to produce more goods and services more cheaply with far fewer workers, Mr. Schultze says. This structural change in our economy has been going on for decades and isn’t going away.

Much of the outsourcing we now see is the result of the global revolution in telecommunications in which many services — from income tax preparation to information services — can be performed just about anywhere in the world at less cost to American consumers.

While some jobs are, of course, lost to overseas contracts, “the trade-induced labor flows are a net positive for the U.S. economy,” a Heritage Foundation study found earlier this year.

This study said, “The gains of trade have been shown to vastly outweigh the costs, even when job dislocations are factored into account.”

But economic statistics, like mutual funds, are best measured over the long term, say over a 10-year period. When that measurement is applied, “America has averaged gross gains of 8.11 million jobs per quarter over the past decade — an average net increase of 400,000 jobs every quarter, swamping the impact of outsourcing,” the study said.

The other big myth Kerry Democrats have spread is that more Americans are unemployed than ever. Not true.

The best evidence for this is the Labor Department’s household survey, which provides a better count than the business payroll survey of the growing number of self-employed Americans, often working under — you guessed it — outsourcing contracts that reduce business costs and keep prices down.

The latest household surveys show “2.2 million more Americans are employed now than were employed before the recession ended in November 2001. Never before have this many Americans — 138.6 million to be exact — been employed,” the Heritage study says.

So much for the Democrats’ endlessly repeated claim that the total U.S. work force shrank under President Bush’s watch.

As for Mr. Kerry’s complaint about “Benedict Arnold CEOs” who engage in outsourcing, it turns out many are Mr. Kerry’s biggest supporters. If you look in Lou Dobbs’ new book, “Exporting America,” there is a list of 40 pro-Kerry business leaders whose companies are among this country’s biggest outsourcers, including Robert Rubin, a top executive at Citigroup; Theodore Waitt, chairman of Gateway; and Robert Haas, chairman of Levi Strauss.

So, while John Kerry says he opposes outsourcing, his richest supporters promote it. Is there a credibility problem here?

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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