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Mon, Jan. 20

His outsourcing view draws plenty of flak

WASHINGTON – The political furor sparked by a senior White House adviser's comments about the benefits of producing goods and services overseas is the latest chapter in the debate over global trade.

The flap was triggered when N. Gregory Mankiw, a prominent Harvard economist who chairs the White House Council of Economic Advisers, said last week that Americans benefit economically when companies can perform manufacturing and services less expensively abroad.

It's an issue that could have a big impact in pivotal electoral states like Michigan and Pennsylvania, where manufacturing jobs have been hit hard and voters blame businesses who move their production centers abroad.

As Mankiw was releasing the CEA's annual Economic Report of the President, which President Bush signed, Mankiw talked about "outsourcing" jobs, a sensitive subject that the Democrats hope to turn into a political weapon against Bush's economic policies. This "outsourcing," he said, was just "the latest manifestation of the gains from trade" from which our economy benefits and that economists have long promoted.

"Outsourcing is just a new way of doing international trade. More things are tradable than were tradable in the past and that's a good thing," he said.

Makes perfect sense to me. But Mankiw's remarks drew condemnation from the Democrats, who pointed to job losses over the past three years and even from GOP leaders like House Speaker Dennis Hastert. In a release entitled "Hastert Disagrees With President's Economic Adviser On Outsourcing," the speaker said Mankiw's "theory fails a basic test of real economics. We can't have a healthy economy unless we have more jobs" – a point that the CEA report made eminently clear.

Mankiw, prodded by a worried White House, made a statement saying that his off-hand remarks were misinterpreted. "It is regrettable whenever anyone loses a job," he said.

But, very much to his credit, he didn't back down from his fundamental and irrefutable point that the global movement of goods and services is a very good thing for economic growth and for American pocketbooks.

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