Date: Thu, 22 Jul 2004 13:05:33 -0700 From: Norm Matloff To: Norm Matloff Subject: Clinton wing of the Democratic Party STILL supports H-1B expansion To: H-1B/L-1/offshoring e-newsletter Bill Clinton's rise to the presidency came through his formation of a new wing of the Democratic Party, dubbed "the new Democrats." Their official entity is called the Democratic Leadership Council, with an associated think tank, the Progressive Policy Institute (PPI). They put out a magazine, The New Democrat. (In the interest of full disclosure, I should mention that I once wrote an article for that magazine.) The theme of the "new Democrats" is Clinton's famous "third way," meaning an alternative to the classical conservative/liberal dichotomy. In practice, what that really means is centrist politics, basically meaning a highly pro-business stance while being rather liberal on social issues. This characterizes not only Clinton but also Al Gore, John Kerry, Joseph Lieberman, Hillary Clinton and so on. In this light, it is important to point out that the PPI report described in the enclosed article, while presented as a plan to stem globalization, is actually a strongly pro-business support of globalization. It would do NOTHING to help American workers. In short, the report is a statement of the industry party line. You can download the PPI report at www.ppionline.org/offshoring2_0704.pdf The first problem I have with the report is that it once again appeals to "the usual suspect" of remedies--education. It calls for more education in science and engineering, more funding for R&D, etc. As long-time readers of this e-newsletter know, Pushing the Education Button is the tried-and-true politician's method of distracting attention from any issue. So, we have the absurd situation in which this report calls for increasing the number of engineers in the U.S., while tons of engineers are being laid off! Come ON, folks, the issue is cheap labor. It's not that we don't have enough engineers; the "problem" is that we don't have CHEAP engineers. The report also calls for another "remedy"--retraining of the displaced programmers and engineers. Again, this is nothing more than Roman "bread and circuses," and would do nothing to stem the problem. Employers do NOT want to hire a 40-year-old engineer who has retrained in The Next New Thing. They want cheap labor, and they would rather hire a 22-year-old new graduate in The Next New Thing, or better yet, an even cheaper H-1B or offshore worker. You can see that the issue is cheap labor rather than retraining by going back to the first ITAA report in 1998, which said basically that retraining makes programmers too expensive: Training employees in IT would seem to be a win-win for both worker and employer. And often that is the case. However, extensive training creates other issues. ``You take a $45,000 asset, spend some time and money training him, and suddenly he's turned into an $80,000 asset,'' says Mary Kay Cosmetics CIO Trey Bradley. That can lead to another problem. New graduates trained in cutting edge technologies become highly marketable individuals and, therefore, are attractive to other employers. Again, it is clear that Bradley is not willing to pay the salaries offered by other firms. The main issue is money, not skills. Similarly, having more federal funding for R&D is not the answer. Most of that funding is wasted anyway (it goes to building up academic empires rather than helping the economy). But in any case, the new model is for industrial R&D to be done by foreign workers, either offshore or here in the U.S. by H-1B visa holders, with Americans having only the sales and marketing jobs. Recall that even the industry's own commissioned study had findings along these lines; see http://heather.cs.ucdavis.edu/ITAAOffshore.txt http://heather.cs.ucdavis.edu/Lieberman.txt Yes, sales and marketing jobs ARE jobs, but as usual my point is that globalization's net effects will be for the U.S. to lose jobs requiring a rigorous level of education, such as programmers and engineers, and gain jobs requiring lesser education, such as sales and marketing. You don't have to be a rocket economist to see that this would be a disaster for the U.S. The worst part of the report concerns the H-1B program. This part of the report might as well have been written by industry lobbyists. It was certainly informed by them, as can be seen in an earlier report written by the same author, at http://www.ppionline.org/ndol/print.cfm?contentid=250572 That report came from PPI's New Economy Task Force, whose members include all kinds of people from industry, not to mention Rep. Zoe Lofgren, queen of the H-1B advocates in Congress. See the task force membership list at http://www.ppionline.org/ppi_ci.cfm?knlgAreaID=107&subsecID=196&contentID= 1266 As to the current report, first it implies that the only abusers of H-1B are the Indian-owned firms such as Tata. This is absolutely false, as one can see by looking at the records of Intel etc. in the DOL database; see http://heather.cs.ucdavis.edu/Archive/IntelH1BWages.txt Second, the report endorses the Lamar Smith bill which would exempt from the H-1B quota any foreign worker student who gets a graduate degree from a U.S. university. This is a sham, through and through. See my posting on this subject at http://heather.cs.ucdavis.edu/Archive/ProposedMSPhDExemption.txt The report of course also offers the Kerry tax reform as a remedy for offshoring. But recall that Kerry himself has conceded that his reform would only tweak the offshoring problem around the edges, and that in fact he supports offshoring; see http://heather.cs.ucdavis.edu/Archive/Kerry.txt I sent an earlier posting I had written on the current PPI report to its author. He was quite offended, saying I had ignored all the pro-labor policies he had advocated in the report. Yet a check of those policies revealed that they were all pro-industry policies, e.g. R&D tax credits. In other words, the Democrats are advocating the same "trickle-down economics" approach as the Republicans always have. The bottom line is that the Democrats are just as much bought off by their industrial patrons as the Republicans are. The New Democrats have indeed replaced the Old Democrats. Norm http://www.sacbee.com/content/politics/nation/story/10076613p-10997611c. html Blueprint is offered to stem outsourcing Sacramento Bee By Les Blumenthal -- Bee Washington Bureau Published 2:15 am PDT Wednesday, July 21, 2004 WASHINGTON - Congress needs to spend billions of dollars on everything from research and science grants to worker training, and the administration needs to get tough on trade if the United States is to stem the flow of white-collar jobs to India and other countries, moderate Democrats said Tuesday. "These are hard problems and the solutions will be hard," Rep. Adam Smith, D-Wash., said as the Progressive Policy Institute released a report on what is needed to keep the United States competitive in the global economy. According to some estimates, American companies could move overseas more than 3.4 million information technology jobs ranging from call-center positions to software designers by 2015. The Progressive Policy Institute, an economic think tank with ties to the centrist Democratic Leadership Council, has warned that 12 million information-based jobs in the United States could be jeopardized by outsourcing as the digital economy spreads around the globe. "The U.S. needs to raise its game," Will Marshall, president of the institute, said at a news conference. "But, surprisingly, no one is talking about what we can do in Washington, D.C." Smith said both political parties seem to be missing the mark when it comes to a U.S. response to the global economic threat. Liberal Democrats are too focused on measures that smack of protectionism, he said, while conservative Republicans believe in a hands-off approach and just letting the global economic shake out naturally. "We need an approach that isn't wedded to ideology, but is based on common sense," Smith said. The report calls for a $10 billion-a-year boost in funding for science, research and development, an increase it said could make the United States the global leader in such "next-wave" technologies as nanotechnology, bioinformatics, robotics and voice and handwriting recognition. In addition, the report recommends that the research and development tax credit be increased from 20 percent to 30 percent, and that individuals who subscribe to broadband Internet access should receive a one-time $300 tax credit. As for workers, the report says trade adjustment assistance should be provided to those in the information technology sector who lose their jobs because of foreign competition. Currently, such assistance, which includes retraining and other benefits, is available mostly to manufacturing workers who lose their jobs. The report also recommends extending unemployment benefits and consolidating some Labor Department and Education Department programs into a quasi-governmental corporation that would focus on developing the skills needed for jobs in the global economy. On the trade front, the report says it is time for the United States to start enforcing trade treaties with such countries as China to stamp out currency manipulation, reduce piracy of computer programs, CDs, movies and other intellectual property, and eliminate tariffs and other unfair trade barriers. The report estimates that 70 percent of business software in India is pirated; in China, the number reaches 90 percent. "We need to get serious about research and development, worker training and global trade," said Robert Atkinson, the report's author. _____ About the Writer --------------------------- The Bee's Les Blumenthal can be reached at (202) 383-0008 or lblumenthal@mcclatchydc.com.