Bush's treasury head reopens job loss issue

Wednesday, March 31, 2004

WASHINGTON -- Treasury Secretary John Snow reignited the political argument over U.S. companies shipping jobs overseas Tuesday with comments that "outsourcing" was an integral part of a global trading system.

Snow's comments in economically hard-hit Ohio were published as President Bush was delivering a speech defending his free trade policies in Wisconsin, a state that has lost 80,000 manufacturing jobs.

Democrat John Kerry is hoping to capitalize on Americans' concern about an economic recovery in which job growth has lagged badly and the country's manufacturers have suffered more than 3 million lost jobs since mid-2000.

Asked in a newspaper interview whether he thought outsourcing of jobs to other countries made the U.S. economy strong, Snow replied, "It's one aspect of trade and there can't be any doubt about the fact that trade makes ... America strong."

A recent Associated Press poll showed that the economy is the most important issue to voters and 53 percent of those surveyed think Kerry is best suited to create jobs.

Bush told an audience in Appleton, Wis., Tuesday that he understood there was concern about "jobs going overseas. ... For some people looking for work, I understand that."

But Bush said the way to confront the problem was to "make sure America remains the best place in the world to do business" and not to resort to "economic isolationism" by erecting barriers to the U.S. market.

The president has been using the phrase "economic isolationism" to attack Kerry's trade proposals including the Democrat's promise that he will re-examine all the country's trade agreements in his first 120 days as president to make sure they are fair to American workers.

Snow's remarks were similar to comments N. Gregory Mankiw, the president's chief economist, made last month in which he said the outsourcing of jobs would probably be a long-term benefit for the United States. Mankiw later apologized for comments he said were misinterpreted and made him appear to be insensitive to the issue of job losses.

Both Bush and Snow insisted that the administration's policy of pushing for free trade agreements as a way to tear down barriers to American goods around the world was the best approach.

However, they are having to make that argument at a time when worries about outsourcing have grown along with the country's trade deficit, which last year hit an all-time high of $541.8 billion amid continued plant closing announcements.

Just Tuesday, 87-year-old Radio Flyer Inc. announced it was closing its Chicago plant and moving the production of its metal red wagons loved by generations of American children to China, resulting in the expected layoffs of nearly half of its 90 employees.

In his interview with The Cincinnati Enquirer, Snow said the answer to the problem of outsourcing, the movement of jobs to lower-waged countries, was to promote stronger economic growth in the United States.

"If we can keep the American economy strong and growing and expanding, we'll create lots of jobs. We always have," he said, seeking to address fears that many lost manufacturing jobs will never come back.

Economists, who as a group are big supporters of free trade, said the administration appeared to be bungling the politics of trade in a period when many jobs have been lost and there are now worries that high-paid white-collar workers could be vulnerable to having their jobs sent abroad as well.

"There is no difference from an economic standpoint from outsourcing manufacturing jobs, which we have been doing for 20 years, and outsourcing white collar service jobs except college-educated workers whine louder when they lose their jobs," said David Wyss, chief economist at Standard & Poor's in New York.

For his part, Kerry last week proposed a major change in corporate tax policy that would eliminate a $12 billion annual benefit that U.S. companies receive by being able to defer taxes on income earned from their overseas operations. He referred to "Benedict Arnold" companies that get tax breaks for moving jobs overseas.

Kerry said he wants Congress to halt the tax deferral option for companies producing for sales back into the U.S. market and use the savings to lower the corporate income tax rate from 35 percent to 33.25 percent.

Economists have questioned how much impact Kerry's proposal would have in halting job losses, given that other factors including large wage discrepancies between the United States and many other countries play a role in decisions to move production abroad.

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