Obama-Romney Debate Over Offshoring Is Phony and Harmful – Bloomberg

The U.S. presidential campaign seems
to have time-traveled back to 1992, when independent candidate
Ross Perot thought he heard the “giant sucking sound” of
American jobs moving to Mexico.

Perot lost his presidential bid, along with the argument
against globalization. The winner, Bill Clinton, went on to sign
the North American Free Trade Agreement. The resulting U.S. job
losses, primarily in manufacturing, were offset by gains
elsewhere, according to numerous studies.

Two decades of bipartisan support for globalization should
have settled the matter as a political issue. Instead, President
Barack Obama reopened the debate with television ads attacking
Mitt Romney’s tenure at Bain Capital, saying Bain invested in
companies that shipped work to overseas call centers and
factories. The president hopes voters will conclude Romney isn’t
the job creator he claims to be — even though FactCheck.org, a
nonprofit group, found no evidence to support the charge that
Romney, while still running Bain Capital, sent jobs overseas.

Romney responded with equally specious claims alleging that
millions of stimulus dollars were diverted offshore, making
Obama the real “outsourcer-in-chief.” Most of the claims,
however, are a mishmash of exaggeration and falsehood, including
that one company, Fisker Automotive, a maker of hybrid vehicles,
took stimulus money to make cars in Finland. On closer
inspection, the company received loans through a program begun
under President George W. Bush and nearly all of the money was
spent in the U.S.

Stable Employment

The reasons for the charges and countercharges are obvious.
Victory in November will require winning some combination of
swing states such as Michigan, North Carolina, Ohio and
Pennsylvania, where the outsourcing allegations hit home with
millions of workers who can no longer rely on comfortable
paychecks or even stable employment.

Yet despite the cheap shot from Obama, and a foolish retort
from the Romney camp, perhaps this is a debate worth having. Is
it possible for the U.S. to engage in globalization without
offshoring jobs? Are the benefits of globalization still worth
the costs?

Virtually all U.S. companies and consumers have benefited
from the lower cost of clothing, cars and computers made
overseas. At the same time, hundreds of millions of people in
emerging markets — more than the entire population of the U.S.
— have climbed out of poverty because of the free flow of goods
and services across borders. Globalization is transforming
people in Asia and elsewhere into consumers of U.S. products.
Eventually, some jobs will flow back to the U.S. because of
rising wages abroad, a stronger Chinese currency and inexpensive
natural gas. Such “inshoring” is already happening.

For U.S. corporations, globalization isn’t just about
cheaper wages. Companies create jobs outside the U.S. to pursue
sales opportunities in new markets, get closer to suppliers in
fast-growing regions and employ people who understand local
tastes. Even if labor costs were equal, companies would still
hire abroad because that’s where the talent pool is. India, for
example, has an abundance of young, college-educated IT workers.
Companies that don’t do any of this for patriotic reasons will
be at a disadvantage to European and Asian competitors, probably
resulting in lost market share and more U.S. layoffs.

As millions of Americans who have seen their living
standards diminished can attest, there are brutal downsides to
globalization. U.S. institutions have done a poor job of
cushioning the blows to workers compared with some other
advanced economies such as Germany. But it’s a little late now
for Obama, or any other politician, to pretend that offshoring
is somehow unethical or un-American.

Eliminate Incentives

Is there a way to accentuate the positives of globalization
while mitigating the negatives? Obama has sought to eliminate
incentives for moving jobs offshore, including ending tax
deductions for the cost of overseas labor. In addition, the
president would require companies to pay a 28 percent income tax
on overseas profits. (Companies can now avoid paying taxes as
long as earnings aren’t repatriated.) Obama hasn’t been able to
persuade Congress to accept these proposals, and for good
reasons: They wouldn’t stop jobs from leaving, and they might
even harm job growth at home.

Think about it. When work is transferred abroad, it isn’t
because of lower taxes. It’s largely because of the cost
differential between U.S. workers and those in China and India.
Information technology jobs in those countries pay about one-
fifth of what they command in the U.S. The president is on surer
footing when he calls for investment in education and training.
But the evidence of success there is mixed.

An honest discussion would require both sides to face such
unpleasant facts. Many jobs have been lost to automation, not
necessarily just to offshoring. That explains why employment in
middle-wage occupations is declining rapidly. High-skill and
high-wage jobs, or low-skill and low-wage ones, are more
plentiful — though certainly not immune to the forces of
technology.

If the presidential candidates want to be constructive,
they will tell voters the hard truth: Well-paying midlevel jobs
may have to wait for new industries to be born, and the wait
could be a long one. Barring such displays of courage, both
Obama and Romney should quit pretending they oppose outsourcing.
They don’t.

Read more opinion online from Bloomberg View. Subscribe to
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and op-ed articles.

Today’s highlights: the editors on why China should think small
to spur growth; Caroline Baum on the presidential outsourcing
debate; Edward Glaeser on why Australia’s mineral wealth does
little to create jobs; Michael Kinsley on the glories of
outsourcing; Ezra Klein on Obama’s tax gamble; Laurence
Kotlikoff on Social Security’s solvency.

To contact the Bloomberg View editorial board:
view@bloomberg.net.