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Outsource this!

By James Ruhland
web posted April 26, 2004

We're continually bombarded with the assertion that the economy is a problem for Bush. Democrats and Liberal pundits invoke Herbert Hoover at every opportunity, trying to conjure the specter of breadlines and shantytown "Bushvilles" despite the fact that none exist. New York Times commentator Paul Krugman claims there is a "great unraveling" underway in the economy.

George W. BushBy objective standards, however, things are going well for the American economy. The recession was fairly mild and short, despite the shock of Sept. 11th, and growth has surged since the tax cuts took effect. Indeed, by international standards America's economy compares favorably with the countries in continental Europe that are often held up as an example and which Kerry would emulate if his policies were enacted. Our growth has been consistently higher and our unemployment rate consistently lower than theirs. Indeed, even Britain's Guardian recognized that the U.S. economy is the dynamo generating global recovery.

When discussion turns to the facts, the assertion that the Bush economy is bad fails to hold water. By almost every measure, the economy is doing quite well indeed. From economic growth to productivity gains to the stock market and housing starts, America has prospered, not faltered, over the last couple of years. So critics point to the one indicator, and it's a significant one, that has lagged behind. That is job growth, and the critics blame outsourcing of jobs as a result of Bush's pro-corporate policies and tax incentives for this. Kerry has invoked it in ads. They emphasize the loss of manufacturing jobs, to imply that America is deindustrializing.

Of course, these assertions are economically ridiculous. Even Liberal commentators like Noam Scheiber aknowledge they are absurd. None the less, they are happy to use them for political gain. Scheiber wrote in TNR Online that he has "no problem with John Kerry scoring political points on the jobs issue if it helps elect an administration that cares about the long-term consequences of its economic policies." In other words, demagogy in the name of raising taxes and spending as Kerry would do is fine, if it helps the Democrats regain power. Whether those policies really show concern for long-term economic consequences is another debatable point, as empirical studies have shown they are detrimental. Again, continental Europe is the perfect example here and their economic performance consistently lags behind America's, in no small part due to higher taxes, and their fiscal overhang of unfunded future liabilities is proportionately higher as a result of their spending policies.

The indifference that Democrats and their supporters have for economic reality if it gets in the way of their pursuit of power would be humorous if it weren't so dangerous. Misinforming the public about what is happening in the economy and whipping them into a frenzy of hysteria and jingoism aimed at foreigners who are "taking our jobs" is hardly a sign of political statesmanship. People need to know the real facts, and the fact is that the 21st century economy is a plus for Bush, not a minus.

Even the supposed negative is really a positive, though Bush's critics demagogue the honesty of the Administration. The fact is, we are not deindustrializing. Though there are fewer Americans working in the manufacturing sector, manufacturing makes up approximately the same proportion of our economy as it did twenty years ago. Outsourcing of jobs to developing economies is not really the problem. The culprit, if there is a culprit, is surging productivity. Just as in agriculture before, in manufacturing we are making more with fewer people. People wrung their hands about the loss of the family farm, but most of those doing the hand-wringing would not prefer to be working from dawn to dusk on the farm, just as most of those who are bemoaning the loss of industrial jobs would not want to be working on the factory floor from dawn till dusk. The American economy is undergoing another transformation, as significant as the one that took us from an agricultural economy to an industrial power without any loss of our ability to feed ourselves. We are moving into an information and technology economy.

In any dynamic economy there are dislocations along the way. The alternative is not having one's cake and eating it too, however. The alternative is European-style stagnation and economic sclerosis. But the fact remains that if Americans were not optimistic about their economic prospects, they would not be investing so much in new homes. While people decry our current unemployment rate, it is at a level that was considered quite good in the mid-90s, when Clinton was running for re-election with 5.6 per cent unemployment. There's a real question as to whether we have even lost the jobs that critics claim we have. The employer job survey has shown a loss, but the household job survey has consistently shown a gain of two million jobs. The employer survey tracks existing businesses, but lags in catching up with jobs created by new businesses. In an economy where two thirds of all jobs are created by small business, this can be significant.

If the debate on the economy was carried out in honest terms, it is likely that it would be seen as a plus for Bush's re-election. As it stands, the Democrats can only score points by distorting reality, and even they know it.

James Ruhland lives in Colorado and writes at www.porphyrogenitus.net.

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