Date: Fri, 29 Oct 2004 23:17:43 -0700 From: Norm Matloff To: Norm Matloff Subject: experts say not much difference between Bush, Kerry To: H-1B/L-1/offshoring e-newsletter In one of the recent TV debates between Bush and Kerry, the moderator said to Kerry that it was clear that Kerry's tax-policy approach to the problem of offshoring of programming work would basically be useless. Kerry, obviously prepared should such a question come up, basically agreed with the moderator. Kerry then quickly changed the subject, but it should be clear to anyone who watched that debate that Kerry's talk of "Benedict Arnold CEOs" a few months ago was just that--talk, nothing more. That wasn't the first time Kerry or his campaign had made such an admission. When confronted by the Washington Post last February, Kerry said the same thing. But hey, who reads the Post? :-) The vast majority of the American people (and for that matter, the vast majority of readers of the Post) didn't see it. Nor did most people see analyses in the LA Times and the New Yorker saying pretty much the same thing. But they did watch the debates, and now have no excuse to think Kerry is going to stop, or even make a dent in, the offshoring trend. And people who read this e-newsletter, and Rob Sanchez's e-newsletter, especially have no excuse for thinking that Kerry is going to save their profession from oblivion. Yet Rob and I encounter people all the time who think exactly that. They say, "Look, Kerry's recent position paper is a step in the right direction, it's the start of a dialog, etc."--all hopeless political naivete. The enclosed three articles show that the "experts"--by which I mean in this case the people with vested interests in offshoring--are not worried about a Kerry victory, as they know that Kerry would continue business as usual concerning policy on offshoring. So, if some people out there still are clinging to hope that Kerry will do something substantive on this issue, they can see that people who really have a stake in the continuation of offshoring--these are people with an inside knowledge track concerning what Kerry would REALLY do--know full well that Kerry's rhetoric is just for show. The most interesting of these "experts" is Harris Miller, president of the ITAA industry lobbying group. Miller once ran unsuccessfully for Congress as a Democrat, and is extremely well connected in the party. He is a contributor to Kerry's campaign, according to what John Miano found at OpenSecrets.org, and much more importantly, stated publicly that he was active in the Howard Dean campaign before Kerry emerged as the nominee. It is plausible that he is influential in the Kerry campaign. So, if anyone with a vested interest in offshore has an inside track to the Kerry campaign, it's Harris Miller. Here's what he says: Still, topics that might normally be a snooze to the average voter -- such as the candidates' positions on copyright policy, computer encryption products and special visas for foreign tech workers -- are being monitored closely by Wall Street, Silicon Valley and just about every tech policy hawk. And what they are noticing is that Kerry and Bush really don't differ much on the importance of technology and how to go about supporting it. "At the end of the day, they are pretty much saying the same thing," said Harris Miller, president of the Washington, D.C.-based trade group the Information Technology Association of America. "There are few differences in terms of policy issues. They are just trying to spin it differently." The only one quoted in the three articles enclosed below who thinks there is much difference between Bush and Kerry on offshoring is an official in Kerry's campaign: "If you don't enforce your trade agreements, like with China or Korea, that means those countries can continue to favor products made in their countries with tax rebates, which encourages U.S. companies to build plants or send jobs overseas," said Jason Furman, economic policy director for the Kerry-Edwards campaign. "John Kerry, of course, sees outsourcing as a negative." Kerry "sees outsourcing as a negative"? Furman really IS counting on the fact that most people didn't see the Washington Post article, which quoted Kerry as saying, in response to the Post's point that many of Kerry's own corporate donors were heavily engaged in offshoring, On Monday, Kerry was asked why two of his biggest fundraisers were involved with "Benedict Arnold" companies. "If they have done that, it's not to my knowledge and I would oppose it," Kerry told a New York television station. "I think it's wrong to do [it] solely to avoid taxes." Then he sought to clarify his position: "What I've said is not that people don't have the right to go overseas and form a company if they want to avoid the tax. I don't believe the American taxpayer ought to be giving them a benefit. That's what I object to. "I don't object to global commerce. I don't object to companies deciding they want to compete somewhere else." Furman, by the way, is the one who distributed Kerry's position paper on H-1B/L-1/offshoring the other day, which I criticized as deliberately vague and insincere. Well, you be the judge. Read Furman's claim about Kerry's view above, and then read what Kerry himself said to the Post, which is that offshoring is fine as long as it is not just because of the tax break. (And recall that during the debates, the moderator's question was, "Senator, I want to extend for a minute. You talk about tax credits to stop outsourcing. But when you have I.B.M. documents that I saw recently where you can hire a programmer for $12 in China, $56 an hour here, tax credits won't cut it," to which Kerry agreed.) Still think Bush and Kerry aren't identical twins on these issues? Norm (additional references:) http://heather.cs.ucdavis.edu/Archive/Kerry.txt http://heather.cs.ucdavis.edu/Archive/KerryLAT.txt http://heather.cs.ucdavis.edu/Archive/KerryPositionPaper.txt http://heather.cs.ucdavis.edu/Archive/NewYorkerOnOffshoring.txt http://heather.cs.ucdavis.edu/Archive/DemocraticParty.txt http://heather.cs.ucdavis.edu/Archive/Hillary*.txt (various files whose names begin with "HIllary") Detroit Free Press (MI) October 25, 2004 WHERE CANDIDATES STAND: LOST JOBS ADD FUEL TO THE FIGHT FOR VOTES BUSH, KERRY DIFFER ON OFF-SHORING JEFFREY McCRACKEN FREE PRESS BUSINESS WRITER President George W. Bush and Sen. John Kerry disagree on pretty much everything about the ever-growing business phenomenon known as off-shoring -- including whether it's really a problem or not. Off-shoring, sometimes called outsourcing, is the increasingly popular practice of sending U.S. work overseas to cut costs. The candidates dispute its cause, whether it can be stopped, how to stop it or even if it should be stopped. "We don't think outsourcing is something to be feared, but a phenomenon that needs to be better understood so we can decide what the appropriate policy response would be. There are a lot of people throwing out proposals that we think may not serve the country well," said Tim Adams, policy director for the Bush-Cheney campaign. "We think some of these ideas proposed by Kerry are gimmicks, silver-bullet ideas that won't solve anything." Kerry's campaign disagrees and accuses Bush of encouraging off-shoring by letting other countries ignore trade pacts. "If you don't enforce your trade agreements, like with China or Korea, that means those countries can continue to favor products made in their countries with tax rebates, which encourages U.S. companies to build plants or send jobs overseas," said Jason Furman, economic policy director for the Kerry-Edwards campaign. "John Kerry, of course, sees outsourcing as a negative." Kerry will be at Macomb Community College in Warren tonight, where he is expected to discuss the economy and Michigan's struggle to add jobs. Michigan finished September with the nation's fourth-highest unemployment rate -- 6.8 percent. The practice of outsourcing -- what a company does when it contracts with outsiders nearby, in another county or state, or in another country to make things or do tasks it used to do itself -- may well be a topic of discussion because some metro Detroit employers have done it. The outrage over outsourcing has grown during the last 12 months, fueled by election-year politics and business realities. Some of the country's largest employers, ranging from Detroit automaker General Motors Corp. to software manufacturer Oracle Corp., moved white- and blue-collar work to lower-cost foreign markets such as China and India. Sometimes, corporations move manufacturing work overseas to address those expanding markets, but the concerns grow when they employ lower-cost foreign workers to handle high-tech jobs previously done in the United States. Troy-based auto supplier Delphi Corp., for example, decided earlier this year to move some IT engineering and designing jobs to India. The positions paid $50,000 to $80,000 a year. Forrester Research, a technology-research firm that has become the most widely cited expert on outsourcing, estimates that 500,000 white-collar service jobs have been outsourced. It estimates that in 10 years, that number will grow to about 3.5 million jobs. "Outsourcing has been blamed for difficulties in our job market, our falling standard of living and the rising disparity between the rich and the poor. The notion that outsourcing is completely to blame is misleading, but it has been used that way," said Catherine Mann, a senior fellow who has studied outsourcing for the Institute of International Economics, a nonpartisan think tank. Off-shoring: Good or bad? Bush: His administration was criticized, even by Republicans, when top economic adviser Greg Mankiw said in February that off-shoring was "a good thing," and the White House issued a report saying it "makes more sense" for goods or services to be produced more cheaply abroad. They've since backed off, realizing it didn't play well amid an uncertain economy that still is producing fewer jobs than predicted. They don't discuss it much, unless prompted. Bush's advisers now say that off-shoring is probably inevitable, especially as long as labor rates and energy costs are higher in the United States. "We've not done a good job, as a government, in preparing for these changes. We're still trying to address the industrial age, and we should be looking ahead to these new challenges," Adams said. Kerry: He has consistently said that he thinks off-shoring is harmful for U.S. workers and wages. He, too, has called it inevitable, but complains the Bush administration's trade policy and tax code encourages companies to send work overseas. Kerry proposes changing the U.S. corporate tax policy. Currently, companies can avoid paying taxes on money made overseas for a decade or more. Kerry said he will close that loophole and give multinational corporations a year to repatriate the $600 billion they have in overseas profits. His argument is that this will encourage companies to reinvest in the United States. He will take the $20 billion he estimates will come in new tax revenues and use that for a 2-year tax credit for jobs created in the United States. Analysts: Economists, unrestrained by political concerns, are quick to point out the potential positives of off-shoring. They said it is simply business acting in the same efficient -- albeit harsh -- way it has always acted. "U.S. companies need to do this if they are going to be competitive," said Virendra Singh, senior economist for Economy.com. "If U.S. companies don't do it, then their competitors in Europe probably will." Singh and other business experts said the practice is basically a win-win-win-lose proposition. A study by the McKinsey Global Institute, a business-consulting firm, found that the off-shoring of U.S. jobs is a "win" for the country the job goes to, like China. It's seen as a win for the corporations and consumers, because both save money. The losers? The workers who lose their jobs. And when they find new jobs, those jobs pay less. Why is it happening? Bush: His advisers said off-shoring is happening because it is too expensive to do business in the United States. This is a common refrain from the Bush-Cheney campaign on economic issues. "Capital is going to go where it feels like it is treated well, where it can buy land for less or the labor rates are lower or there won't be lawsuits," Adams said. Kerry: He agrees that off-shoring it somewhat inevitable because of higher costs in the United States, such as the health care tab a company must pay for a worker. His campaign said companies are opening up engineering centers and plants in other countries because Bush has let other countries break their word on trade agreements. They cite China, which has credits and subsidies for goods and services made in their country. Analysts: Economists said both candidates are right -- it is much cheaper to do work overseas, and part of that reason is the incentives other countries like China use to attract companies. They say the United States is also suffering from a lack of technical skills. Countries like India and China have spent years building up their workforce's skills. "Companies go there because of lower costs, but also because the technical skills are as good, or even better. Plus, there are more people to choose from over in a place like India, which further pushes down labor rates," Singh said. Outsourcing: What to do? Bush: His campaign doesn't offer any specific proposals to halt or limit outsourcing. The policy is, basically, to make it less expensive to do business in the United States by cutting taxes or limiting lawsuits. Instead of specifics to halt outsourcing, Bush's thrust is to spend more on worker re-training and community colleges for people who lose their jobs. Kerry: Besides changes to the corporate tax policy and a $20-billion tax credit to employers who add jobs, Kerry said he will also lower the corporate tax rate by 5 percent. His campaign said his health care plan, which would expand health care to about 25 million Americans and have the government pick up some catastrophic health care costs, will bring down the cost of providing health care and help keep jobs in the United States. Analysts: An Economy.com analysis called Kerry's tax proposals "laudable" in the direction they are taking corporate tax policy, but added they would probably have only small, albeit measurable, affects on slowing outsourcing. Economists agree that retraining workers needs to be a key component to deal with outsourcing, especially as moving from job to job becomes more common. Contact JEFFREY McCRACKEN at 313-222-8763. http://www.post-gazette.com/pg/04295/399190.stm Bush vs. Kerry: Candidates more alike than different on tech issues Thursday, October 21, 2004 By Corilyn Shropshire, Pittsburgh Post-Gazette Out on the stump, President Bush and Democratic rival Sen. John F. Kerry don't talk much about technology issues, possibly because the discussion may be too arcane for the average voter to grasp -- or care about. "You can't reach Americans and inspire them to come out and vote for you when you talk about interpretations of court rulings in the 1996 Telecom Act," observed Declan McCullagh, chief political correspondent at online technology journal Cnet.com. Still, topics that might normally be a snooze to the average voter -- such as the candidates' positions on copyright policy, computer encryption products and special visas for foreign tech workers -- are being monitored closely by Wall Street, Silicon Valley and just about every tech policy hawk. And what they are noticing is that Kerry and Bush really don't differ much on the importance of technology and how to go about supporting it. "At the end of the day, they are pretty much saying the same thing," said Harris Miller, president of the Washington, D.C.-based trade group the Information Technology Association of America. "There are few differences in terms of policy issues. They are just trying to spin it differently." The differences are indeed murky. For example, Bush has said he wants to bring affordable broadband available to every American home by 2007. Kerry has echoed that pledge and tried to up the ante by vowing to have first responders -- firefighters and other emergency workers -- wired to the Internet a year earlier, in 2006. Both frequently tout the importance of funneling money to support cutting edge research, such as nanotechnology; are practically identical on making the research and development tax credit permanent -- Bush wants it set in stone immediately, while Kerry has said he plans on extending for at least another four years; and want to boost math and science education. Their biggest divergence, McCullagh said, comes in the candidates' choice to head the Federal Communications Commission -- a key appointment that could affect major business issues for years to come. If Bush is re-elected, he's expected to stick with current chairman and fellow Republican Michael Powell, McCullagh said. Powell supports free-market solutions, believing that most telecommunications laws are outdated and that Web-based services shouldn't be regulated. Kerry is expected to push for Democrat and FCC Commissioner Michael Copps, who has called for regulating Internet Service Providers such as Yahoo! and America Online and taxing their users. He also has called for regulating Voice-over-Internet-Protocol, a way to provide phone service via the Web. The tech community welcomes Bush's stance against Internet taxes and worries about Copps' proclivity toward stronger regulations, McCullagh said. Not that Kerry scores poorly with the tech community. The Information Technology Industry Council, another Washington, D.C.-based tech trade group made up of leading hardware and software firms including Sun Microsystems and Intel Corp., gave the Massachusetts senator a lifetime rating of 83 percent for votes considered favorable to the tech industry. The Bush administration isn't rated. While the trade group will not comment on either candidate's platform, at least one high-powered member has expressed annoyance with the candidates' silence on tech issues. Intel Chief Executive Officer Craig Barrett told a crowd of tech workers earlier this week that the country is losing its global competitive edge and that Bush and Kerry, in their debates, virtually ignored the country's declining tech infrastructure. Ultimately, tech wonks say, it is not who is president but who is in the majority in Congress and at the helm of the FCC. And what most tech proponents want, said the trade association's Miller, is a laissez-faire approach from government. "The Internet hippocratic oath is 'First, do no harm,' " he said. http://www.townhall.com/news/politics/200410/FOR20041013a.shtml Townhall.com 214 Massachusetts Ave NE Washington, DC 20002 202-608-6099 Fax 202-544-7330 India Sees Kerry's Anti-Outsourcing Stance As Mere Rhetoric Pacific Rim Bureau (CNSNews.com) - The head of the leading information technology trade association in the U.S. has reiterated the industry's support for "outsourcing" at a time when the Democratic National Committee continues to press the claim that the practice costs American jobs. "We believe that the best way to develop trade is to allow companies to locate their IT work at the best places, be it India or the U.S.," Information Technology Association of America (ITAA) president Harris Miller was quoted as saying in New Delhi Tuesday. "Global trade is good for the U.S. and its economy," added Miller, who is attending an India-U.S. information security summit, jointly organized by the ITAA and its Indian equivalent, NASSCOM. Harris' views are in line with a number of assessments by non-partisan bodies this year that outsourcing stimulates the U.S. economy and, over time, creates more jobs at home than those that have been lost. Job losses are expected to feature in Wednesday's third and final debate between President Bush and Sen. John Kerry, who has pledged to eliminate tax breaks that encourage firms to move jobs abroad. Although Kerry admitted in the campaign's second debate that "you can't stop all outsourcing ... I've never promised that," Democrats continue to attack Bush on the issue. "We've lost a million jobs to other countries and George Bush thinks outsourcing is a good idea," declares the narrator in a new DNC ad, aimed at younger voters and running this week. "He just doesn't care," says one man on camera, while another adds: "He sure isn't on my side." Any implication that a Kerry presidency would reduce outsourcing doesn't hold much weight in India, which is the world leader in providing U.S. companies with low-cost offshore services. In the world's most populous democracy, every statement and nuance of the U.S. presidential campaign relating to outsourcing is reported and dissected in the media. The general conclusion is that Kerry's stance -- or what one Indian newspaper editorial called his "mealy-mouthedly populist" attack on outsourcing -- is merely campaign rhetoric. That view was bolstered, two weeks ago, by widely-reported comments by former Clinton administration official Strobe Talbott, now president of the Brookings Institution. "Outsourcing will continue regardless of who wins in the November elections," he was quoted as telling reporters in India. "Good economic sense will prevail over politics," added Talbott, who said of Kerry: "His government's attitude towards outsourcing would be very different to his campaign." The Indo-Asian News Service quoted Talbott as saying Kerry understood "the economic good reason of trading through outsourcing as a necessity despite his political opposition." NASSCOM president Kiran Karnik was quoted as telling the AFP wire service this week, in the context of Kerry's anti-outsourcing comments, that "in an election year all the political parties go through rhetoric." Former U.S. Senator Larry Pressler, a Republican with a strong affinity for India, said during a recent visit that the Democrats took an anti-outsourcing stance "because the party has close ties with labor unions." During a visit to the U.S. last week, India's Harvard-educated finance minister, Palaniappan Chidambaram, also described Kerry's stance on outsourcing as "pre-election rhetoric." "Business understands very well that outsourcing brings insourcing and keeps it competitive," he was quoted as saying in New York. "Nobody questions the wisdom of outsourcing." 'Win-win' Chidambaram represents a government that recognizes the huge importance to the Indian economy of outsourcing, but non-partisan experts in the U.S. take a similar stance. Outsourcing is "a win-win arrangement," the Michigan-based Mackinac Center for Public Policy said in a report published last month. "Foreign outsourcing allows U.S. companies to dramatically cut the cost of certain information technology services," it said. "As a result, US companies become more competitive in what they do best, their core competencies. Better and more affordable services become available for consumers and taxpayers." The practice also has political benefits, the Mackinac Center report said. "As the United States seeks to win friends and influence events in South Asia and elsewhere, it would be hard to find a more naturally pro-American enclave than the Indian high-tech sector." (In an opinion survey of 35 countries around the world, carried out by the University of Maryland's program on international policy attitudes (PIPA), India was one of only three countries in which a majority or plurality of respondents said Bush's policies made them feel better about the United States. The other two were the Philippines and Thailand, both outsourcing centers.) Earlier this year, independent economics thinktank the McKinsey Global Institute said the U.S. reaps significant economic benefits from outsourcing, which in turn can be used to retrain American workers for higher-skilled and better-paying jobs. In another study this year, sponsored by the ITAA, the consulting firm Global Insight acknowledged that IT software and services outsourcing had displaced and would continue to displace some IT workers. But, it added, "increased economic activity creates a wide range of new jobs - both IT and non-IT. As the benefits compound over time, the U.S. economy operates more efficiently, achieves a higher level of output, creates more than twice the number of jobs than are displaced, and increases the average real wage." Malaysia is another Asian country described by the CIO magazine's Offshore Outsourcing/Global Guide Study as an up-and-coming outsourcing market. Malaysia's IT industry is also not overly perturbed about Kerry's stance on outsourcing. "Never mind Bush-Kerry, local outsourcing market set to grow," the Star newspaper in Kuala Lumpur said in a headline Tuesday. The accompanying report cited research by the market research firm IDC predicting that Malaysia's IT outsourcing market would see a compound annual growth rate of 27 percent over the next five years. The chief executive officer of Malaysia's government-owned Multimedia Development Corporation, Arif Nun, told the Star last month that if Kerry wins the election, he would be sure to temper his views on outsourcing. "I think any incoming president will probably have to sit down and rethink about what is actually going to be implemented in the interest of the overall economy," Arif said.