Jack Kemp

The hot-button issue for the Democratic Party this year is "outsourcing," the latest political euphemism that seeks to stigmatize companies voting with their feet and escaping high taxes and onerous regulations that drive up the cost of labor, increase the cost of capital and drive down rates of return on investment. By way of illustration, Sen. John Kerry seeks to demonize firms that move operations offshore to more business-friendly environs by labeling their CEOs "Benedict Arnold CEOs" with the obvious implication that they are traitors.

The enemy of American jobs is not Japan, India or China, but rather stupid policy made in Washington, D.C. Therefore, a more apt metaphor is "refugee CEOs" who are fleeing punitive government policies that hurt both capital and labor.

Kerry's analysis of the "outsourcing problem" is faulty, and his policy prescriptions are fundamentally absurd. He looks only at the cost side of the ledger where mobility of capital investment is concerned, and he ignores completely the benefits side. Free trade and free mobility of businesses create gains from trade and permit foreign companies, such as Toyota and Mercedes, to locate plants here - "insourcing" - creating high-value jobs that more than compensate for jobs lost when companies leave the United States.

According to a recent study by the Organization for International Investment, foreign companies with U.S. subsidiaries employ 6.4 million Americans here in the United States. These jobs pay, on average, 16.5 percent more than U.S. companies. Also, over the last 15 years "outsourced" jobs grew at an annualized rate of 1.5 percent, whereas total "insourced" jobs grew by 117 percent - at an annualized rate of 3.8 percent.

 A good example is the Toyota Motor Co., on whose North American Diversity Board I serve with former Secretary of Labor Alexis Herman, who chairs the board. Since setting up U.S. operations in 1957, Toyota has invested more than $14 billion in the U.S. economy, which is roughly equal to the company's profits earned here during that time. Presently, Toyota directly employs 31,000 Americans. If you include dealerships and suppliers, that number exceeds 180,000. Toyota also has announced plans to expand current operations in Indiana, Tennessee and West Virginia. Moreover, Toyota will open a new truck manufacturing facility in San Antonio, which will employ another 2,000 employees.


Jack Kemp

Jack Kemp is Founder and Chairman of Kemp Partners and a contributing columnist to Townhall.com.
 
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