Outsourcing of U.S. jobs to foreign countries has been a major theme of the Kerry-Edwards campaign. During his debate with Vice President Cheney, John Edwards repeated the standard Democrat line: "The administration says over and over that the outsourcing of millions of American jobs is good. We're against it." A search of John Kerry's campaign Web site turned up 176 separate statements on the evils of outsourcing.
What you won't find on the Kerry Web site are any references to serious studies of outsourcing. The reason is that they all find the issue to be seriously overblown, responsible for a trivial amount of job loss at most and generally a positive thing for the U.S. economy. These include studies by former Democratic administration officials.
In July, economist Martin N. Baily, chairman of the Council of Economic Advisers under President Clinton, looked at who benefits from outsourcing. He found that for every $1 spent by a U.S. corporation on outsourcing to India, only 33 cents stayed in India. The other 67 cents came back to the United States in the form of cost savings, new exports and repatriated profits. However, productivity gains add another 45 cents to 47 cents of value to the U.S. economy. Thus, on balance, the U.S. economy gains $1.12 to $1.14 for every $1 invested in outsourcing.
In August, economist Charles Schultze, chairman of the CEA under President Carter, looked at the number of jobs lost to outsourcing. He found that between the end of 2000 and the end of 2003, at most 215,000 jobs service sector jobs were lost. This is a minuscule amount in a working population of close to 150 million. Moreover, Schultze says, the productivity gains produced by outsourcing raised real incomes and living standards in the United States. He concluded that outsourcing cannot be blamed for the "jobless recovery."
Also in August, the nonpartisan Public Policy Institute of California looked at the costs and benefits of restricting outsourcing. It found that the cost of restricting outsourcing would greatly exceed any gains. Policies targeted toward those affected by outsourcing are far preferable to a ban on outsourcing. For this reason, California Gov. Arnold Schwarzenegger recently vetoed several bills that would have restricted outsourcing in that state.
In September, International Monetary Fund economists Mary Amiti and Shang-Jin Wei did the most thorough study of outsourcing to date for the prestigious National Bureau of Economic Research. These are their findings:
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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