You?ve almost got to feel sorry for George W. Bush. Out on the campaign trail his Democratic opponents attack him for being dishonest. They say he lied to get us into war in Iraq. Yet, back in Washington he?s also being attacked -- and this time for telling the truth.
According to the president?s annual economic report, sending some service industry jobs overseas can be a good idea. In fact, Greg Mankiw, the chairman of Bush?s Council of Economic Advisors, called offshoring ?just a new way to do international trade.?
That?s true. But it?s not politically expedient to say so. It?s much more popular to respond with overheated rhetoric, as politicians on both sides quickly did.
House Speaker Dennis Hastert, R-Ill., warned, ?outsourcing can be a problem for American workers and the American economy.? Democratic frontrunner John Kerry also jumped to the offensive. He claimed the Bush administration thinks ?sending American jobs overseas is good for America and good for the economy ? they want to export more of our jobs overseas.?
Tough talk is, of course, predictable in an election year. But before we go off half cocked, let?s consider the truth of what Mankiw said.
Offshoring is simply a part of free trade -- the process that?s creating a new economy, here and overseas.
Sadly, with free trade, some American jobs are going to be lost. That?s painful, especially for those who do lose a job. But, overall, free trade produces far more jobs for Americans -- and better paying ones -- than it takes away.
Consider NAFTA. During the 1992 presidential campaign, Ross Perot memorably predicted that free trade with Mexico would create a ?giant sucking sound? as American jobs moved south of the border. Indeed, the Congressional Research Service estimates some 200,000 workers have been displaced since 1994.
But according to the U.S. trade representative, NAFTA exports now support 2.9 million American jobs. And those jobs pay 13 to 18 percent more than the average U.S. wage. At the same time, U.S. manufacturing wages have also increased dramatically. Real hourly compensation is up by 14 percent under NAFTA, more than double the 6.5 percent increase in the decade before NAFTA.
And according to a University of Michigan study, the Uruguay Round and NAFTA resulted in income gains of $1300-$2000 for the average American family of four.
So on the whole, it?s been a boon to the American economy.
Again -- free trade will displace some workers. That?s a sad fact of life. There are always going to be people losing -- or, in other words, changing -- jobs.
That?s because the job market never stands still. And even if it did, and we didn?t lose any existing jobs, we?d still fall behind. Our population is growing, so we need to constantly add jobs.
That?s why we must follow the policy that will give the greatest number of people the best chance to find a good job: free trade. And it?s a two way street -- it?s not possible to get the benefits of free trade (more, better-paying American jobs) without the somewhat bitter medicine (losing some American jobs).
Senate Democrats responded to the president?s economic report by introducing the ?Jobs for America Act,? which would require American companies to warn their employees before sending any jobs overseas. That?s ironic, because more jobs are probably lost through congressional actions than through free trade.
As columnist George Will wrote recently, the city of Chicago alone has lost more than 7,000 jobs in the candy-making industry. These jobs are going overseas -- but not because labor is cheaper there. They?re going overseas because sugar is cheaper there.
Sugar is a heavily subsidized crop. That means American taxpayers chip in to pay farmers to grow sugar beets or sugar cane. Meanwhile, we maintain stiff quotas to keep the price of imported sugar artificially high. Thus, it?s far cheaper to make candy overseas and import it than it is to make it here.
But don?t expect lawmakers, who get fat on campaign donations from the American sugar industry, to spend much time complaining about those job losses -- losses they could prevent by removing tariffs and quotas and promoting free trade.
In real life, honesty is the best policy. That should be true in politics as well. Maybe we?ll find out. The president has proclaimed the good news about free trade. Now, we?ll see if that good news will play in Peoria.