Originally Published: October 4, 2004 7 a.m.
WASHINGTON – 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, 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. Bush, the Massachusetts liberal says, has exported millions of jobs overseas through outsourcing.
In fact, outsourcing, a decades-long practice of moving the 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 that 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 some company has outsourced, 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 Kerry is right, then you'd think that his senior economic advisers and supporters would be defending his statements against outsourcing. In fact, they are saying that 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 that send jobs overseas would stop outsourcing, here's what President Clinton's Treasury secretary had to say:
"No, I think that outsourcing is part of a much larger issue. It's part of trade liberalization, and trade liberalization as Senator Kerry has said and President Clinton used to say, is very much beneficial to our economic well-being."
Rubin later said that 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 Rubin isn't the only Democratic economic guru who parts company with 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," 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 at a cheaper price with far fewer workers, Schultze says. This structural change in our economy has been going on for decades and isn't going away.
Much of the outsourcing we are seeing now is the result of the global revolution in telecommunications in which many services – from income tax preparation to information services – are possible to perform 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 concluded earlier this year.
This study found that "the gains of trade have been shown to vastly outweigh the costs, even when job dislocations are factored into account."
As for Kerry's complaint about "Benedict Arnold CEOs" who engage in outsourcing, it turns out that many of them are 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 claims to be against outsourcing, his richest supporters are promoting it. Is there a credibility problem here?