Free Markets, Free People

outsourcing

“Outsourcing” and “Offshoring” are not the same thing

John Hinderaker at Powerline makes a point that I wish more people would make:

President Obama has decided to make the claim that Mitt Romney “outsourced” jobs as head of Bain Capital a major theme of his reelection campaign. Today in Waterloo, Iowa, Joe Biden repeated the “outsourcing” mantra.

I’m not sure that either Obama or Biden has any clear idea what outsourcing means, and their application of the charge to Romney’s business career is dubious at best.

I’m not sure they understand the term either.  It is entirely probable that Mitt Romney’s Bain Capital did outsource jobs – but that’s not necessarily bad.

As I understand outsourcing, it can be as simple as a company deciding, for whatever reason (but usually because of cost and/or efficiency) to quit doing something internally and contract the work outside the company.  So instead of making widgets to go in their gadget, they contract with another company to make the widgets for their gadgets.  The savings in cost and efficiency go to the bottom line and make the company more profitable (and, obviously, helps the bottom line of the new widget maker as well).  Depending on the circumstances, such outsourcing could end up with a net job gain.

Offshoring, of course, is when the job is moved, well, offshore. To another country.  A net job loss.  Certainly an outsourced job can also be offshored.

This is offshoring:

The Obama campaign spent nearly $4,700 on telemarketing services from a Canadian telemarketing company called Pacific East between March and June, a Washington Free Beacon study of federal election filings shows.

Pacific East is not the only overseas telemarketing firm raking in cash from the president’s reelection campaign. Obama paid a call center in Manila, Philippines$78,314.10 for telemarketing services between the start of the campaign and March.

Pacific East is headquartered in British Columbia, Canada, though the campaign issued more than a dozen checks to a P.O. box located in Washington State—about 1,000 feet from the Canadian border and 9 miles from its headquarters in Canada.

Neither Obama for America nor Pacific East returned requests for comment.

I’m sure they didn’t.  Ironic, no?

Someone pass this along to Joe Biden, will you?

~McQ

Twitter: @McQandO

Georgia city demonstrates the efficacy of the “public/private model” for efficient and debt free government

This is a pretty cool vid.  Sandy Springs is right down the road from me and in a few short years since they’ve incorporated, they’ve literally become a model for how a city should (and can) be run:

 

Note the warning at the end as to who you can expect to see oppose anything like this in existing cities.  This is where unions become a deterrent to good and efficient government, not an aid.

~McQ

Twitter: @McQandO

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Outsourcing "outrage"

A union, outraged over the fact that non-union workers were being used in the construction of a Washington office building decided to protest and picket. 

But, uh, it was just too hard or too much of a hassle to have real union people do it, so they hired some non-union unemployed at minimum wage instead:

"For a lot of our members, it’s really difficult to have them come out, either because of parking or something else," explains Vincente Garcia, a union representative who is supervising the picketing.

So instead, the union hires unemployed people at the minimum wage—$8.25 an hour—to walk picket lines.

Which I’m sure has the developer and non-union workers in the building just quaking in their boots.

The article goes on to say that a lot of protest groups and advocacy groups have hit a bonanza with the unemployed.  They can hire them for peanuts (min. wage) and swell their groups and pad their numbers in public.

For the unemployed?  Well, I’m sure any little bit does help, of course.  And it sure beats standing on street corners waving “we buy gold” signs – I guess.

But keep that in mind the next time numbers are quoted at a protest or rally for something.

~McQ

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Against Obama’s Global Tax Hike

I’m not keen on many taxes to begin with, but as a practical matter, some are more destructive than others. Some are so bad that they’re a train wreck even by their proponents’ stated standards.

President Obama has proposed a package of tax hikes on the overseas operations of American firms. The supposed benefits sound like political winners: over the next decade the feds get $210 billion to shovel into the yawning budget hole, and at the same time discourage those companies from outsourcing jobs. Congressmen who promise more jobs but are wary of mounting deficits might think they’re hitting two birds with one stone.

But there are more appetizing birds than the goose that laid the golden egg.

See, there are just a few things that offer relief from the fact that the US is one of the few countries to tax its companies’ operations all over the globe. One is “deferral” – companies don’t pay taxes on most earnings until the money is returned to the US parent company, so they can delay getting slapped with the double tax by reinvesting their foreign earnings in foreign operations.

Another big relief is being able to claim credits on the taxes they pay to foreign governments.

Obama is proposing, among other things, to place new limits on deferral and clamp down on tax credits. These changes won’t work as advertised: they won’t reduce outsourcing (they may increase it) and won’t raise nearly as much revenue as originally claimed.

First, most American companies that expand overseas do it to get around trade barriers and get close to their customers. When a new KFC opens up in China, that’s not an outsourced American job; that’s an American business getting to expand into a growing market. The vast majority of sales made by foreign affiliates – think 90 to 94 percent – were to foreigners, not exports back to the US.

Second, the roughly 2,200 US-based corporations with overseas operations either employ or support the employment of 22 million Americans, and those companies create half of all American exports. Jobs here rely on providing direction to foreign workers (managers, engineers) and producing goods for affiliates to sell in foreign markets.

The growth of US foreign affiliates is “consistently accompanied(PDF) by the growth of their parent companies, the opposite of what you would expect from a zero-sum perspective on “outsourcing”. More expansion abroad means more jobs, compensation and investment at home.

So making American firms uncompetitive abroad not only threatens jobs at home but even encourages businesses to headquarter themselves outside the US.

And as a result of that, the policy changes won’t raise nearly as much revenue as Obama claimed.

  1. The global downturn has been worse than Obama suspected back when that $210 billion figure was calculated.
  2. We’ve tried cutting back deferral before: in 1986, the government repealed deferral for the shipping industry, and consequently we lost half of our shipping capacity, taking a bunch of jobs and tax revenues with it.
  3. Even still, never underestimate the creativity and industriousness of tax lawyers.

That last part might not be such a problem if Obama’s proposals simplified the tax code, like he claims. But they make things worse on that score, not better.

As a note to my fellow Virginians: these companies with overseas operations are responsible for over half of the private sector jobs in the commonwealth (PDF source), and they tend to be the better-paying jobs (averaging over $70k compensation) like computer systems design and telecommunications. Is that going to sit well with the likes of Sen. Warner?

Bills that hurt this many people are loaded with political liabilities, yet I got word a few days ago that a bill with Obama’s proposals may come up for consideration in the House in September.

Get the word out. The more people know what this is going to cost them, the harder it will be to sell. By all rights, Obama’s Globo-Hike should fail politically before it has a chance to fail as policy.

Climate Change Update – Falling Dominoes

For the American taxpayer, under the shadow of the recently passed House cap-and-trade (Waxman-Markey) bill, the news continues to be grim. However for the traitorous “deniers”, aka skeptics, who believe the whole climate change hysteria to be an economy killing farce, things are looking better.

For instance India has announced it will not participate in the Western world’s attempts to kill their own economies:

India said it will reject any new treaty to limit global warming that makes the country reduce greenhouse-gas emissions because that will undermine its energy consumption, transportation and food security.

Cutting back on climate-warming gases is a measure that instead must be taken by industrialized countries, and India is mobilizing developing nations to push that case, Environment Minister Jairam Ramesh told the media today in New Delhi.

“India will not accept any emission-reduction target — period,” Ramesh said. “This is a non-negotiable stand.”

Heh … fairly blunt and straight foward wouldn’t you say? Of course, China took the same stand a couple of weeks ago. I call that good news because it is another country which has decided to put its economy first and this nonsense second. When two countries which are or expected to be very soon the two leading emitters of CO2 say “no”, it makes it rather ridiculous for the rest of the world to say “yes” given the consequences vs. payoff, doesn’t it?

And the US cap-and-trade legislation? Well India sees that as a “no-go” as well:

But last week, the US House of Representatives backed a “border adjustment tax” to equalise carbon emissions charges between domestic production and imports from states that do not cap emissions. The legislation is likely to face tough opposition in the Senate.

Mr Ramesh denounced as “pernicious” US efforts to impose “trade penalties” on countries that do not match its carbon reduction moves.

Meanwhile in the EU:

The European Union risks driving industry out of the region if it continues to push for deeper cuts in carbon dioxide emissions than other economies, according to the chief executive of Eon, one of the world’s biggest renewable energy companies.

Wulf Bernotat, Eon’s chief executive, told the Financial Times that the EU was imposing higher energy costs on its industry than competing regions, and criticised the US for doing “basically nothing” to cut its carbon dioxide emissions.

He added that if there were no international deal to cut emissions agreed at the Copenhagen meeting at the end of the year, the EU would have to rethink its plans to take a lead in fighting the threat of climate change.

“It is a European political issue whether the European Union can continue to lead the policy process if the rest of the world is not joining in,” he said.

“We are adding additional costs to our industries, and if other countries don’t follow, then those industries will move to lower-cost regions.”

Yeah, like India or China … or Mexico. That’s the irony of this nonsense. We have a president and Congress who’ve made a cottage industry of demonizing corporations who “outsource” jobs while they pass legislation that encourages corporations to outsource jobs.

And for those who worship at the feet of Al Gore, another inconvenient truth is to be found in a recently published paper from the Journal of Atmospheric and Solar-Terrestrial Physics:

The Abstract states:

Daily temperature and pressure series from 55 European meteorological stations covering the 20th century are analyzed. The overall temperature mean displays a sharp minimum near 1940 and a step-like jump near 1987. We evaluate the evolution of disturbances of these series using mean squared inter-annual variations and “lifetimes”. The decadal to secular evolutions of solar activity and temperature disturbances display similar signatures over the 20th century. Because of heterogeneity of the climate system response to solar forcing, regional and seasonal approaches are key to successful identification of these signatures. Most of the solar response is governed by the winter months, as best seen near the Atlantic Ocean. Intensities of disturbances vary by factors in excess of 2, underlining a role for the Sun as a significant forcing factor of European atmospheric variations. We speculate about the possible origin of these solar signatures. The last figure of the paper exemplifies its main results.

The paper concludes:

In concluding, we find increasingly strong evidence of a clear solar signature in a number of climatic indicators in Europe, strengthening the earlier conclusions of a study that included stations from the United States (Le Mouël et al., 2008). With the recent downturn of both solar activity and global temperatures, the debated correlations we suggested in Le Mouël et al. (2005), which appeared to stop in the 1980s, actually might extend to the present. The role of the Sun in global and regional climate change should be re-assessed and reasonable physical mechanisms are in sight.

Shorter conclusion?

“It’s the sun, stupid”.

~McQ