Benedict Arnold idiocy

Although I just covered the outsourcing issue, I can't help it again, prompted by Kerry's bombast. Apparently, according to John Kerry, if you are a CEO of an American company and you attempt to lower costs by outsourcing labor overseas you are a "Benedict Arnold CEO." That is a traitor--the penalty for which, I suppose, is to be shot. I suppose the same is true for companies who not only buy services from abroad but materials as well. And of course, the same must go for consumers who don't buy American. Who can be spared from Kerry's inquisition? Personally, I think, as the WSJ put it, the opposite is closer to the truth: a CEO that doesn’t look to lower costs anyway he can is jeopardizing his or her own company.

I don't think Kerry even believes what he's saying. This is very cynical. Surely he understands the rudiments of free trade theory, come on. Yes, there are transition and dislocation costs when labor is outsourced abroad. And they hurt to those affected. But there are also corresponding benefits, and usually the benefits outweigh the costs. One doesn't deserve a spot on the moral high-ground by failing a basic cost/benefit analysis just because he can demogague to those caught in the transition.

I think it is an interesting stance to take, as Dean did by suggesting prices at WalMart would go up under his presidency, to impose costs on all nearly 300 million Americans in order to preserve short term erosion--at the expense of future payroll growth. It's in all of our interest that resources be allocated to their most efficient uses. This does not make for good campaign rhetoric, but no serious economist, left or right, disputes it. The costs of protectionism, and forbidding companies to outsource, would be higher prices on American consumers and businesses and as a result lost jobs.

The solution to lost jobs due to outsourcing is not demagoguery or protectionism but to replace those jobs as fast as possible by encouraging growth. Greenspan made the point well recently when:

Rep. Barbara Lee, a California Democrat, asked what legislators could do to help young people, especially minorities, when they graduate and can't find jobs. Mr. Greenspan answered: "If jobs are not available, you have a hopeless task. The only way that you have possibilities of success is if you have an economy in which jobs are growing and opportunities are growing."

Poor Greg Mankiw, an economist who had the audacity to speak the plain, obvious, undisputed truth in an election year. From the WSJ:

Greg Mankiw, chairman of the President's Council of Economic Advisers, is getting a tiny taste of the inanities of the political season. Mr. Mankiw, a noted economist and author of a best-selling text on macroeconomics, ventured to repeat what all economists and businesspeople know: Trade is good.

Specifically, Mr. Mankiw dared to point out the potential economic benefits of relocating the production of goods or services to lower-wage countries. "Outsourcing is a growing phenomenon," he said this week, "but it's something that we should realize is probably a plus for the economy in the long run."

Wham! Bam! Faster than you can say Bangalore, Senator John Kerry was all over him. The front-runner for the Democratic Presidential nomination is smart enough to understand the law of comparative advantage, but chose to ignore it by declaring that "My economic policy is not to export American jobs. . . . Unlike the Bush Administration, I want to repeal every tax break and loophole that rewards any Benedict Arnold CEO or corporation for shipping American jobs overseas."

But Kerry should be careful casting stones in glass ketchup bottles. From Tech Central Station - Exporting Lou Dobbs and John Kerry:

Sen. John Kerry, in his stump speech inveighs against the "Benedict Arnold CEOs [who] send American jobs overseas."

By the way, the Kerry family business, H.J. Heinz Co. of Pittsburgh, operates 22 factories in the United States and 57 in foreign countries. I don't think that Kerry should shut down The Heinz 57, but he might drop the rhetoric and talk about trade responsibly. He should support, not trade's contraction, but its expansion, like George W. Bush, Bill Clinton and every president since Herbert Hoover.

Carly Fiorina gets it right--Be Creative, Not Protectionist:

Any job losses to foreign countries are particularly painful when the U.S. economy is failing to produce net job gains. Every job is important because each one represents an American's livelihood and ability to raise a family. Yet spending our time building walls around America will do nothing to help us compete for the millions of new jobs being created. Instead, we must focus on developing next-generation industries and next-generation talent -- in fields like biotechnology, nanotechnology and digital media distribution; around issues like IT security, mobility and manageability -- that will create long-term growth and jobs here at home, while raising all of our living standards in the process.

The growing protectionist sentiment, visible both on the left and right these days, is very worrying.