Bush Adviser Supports Outsourcing

Gregory Mankiw (search), President Bush's chief economic adviser, gained recognition as a Harvard college professor for writing a popular textbook that explained complex economic principles in clear and precise language.

But now he's finding that being too clear and precise in the political world can land a person in a lot of hot water.

Not only Democrats but the top Republican in the House are castigating Mankiw for comments he made on the hot-button political issue of the outsourcing of American jobs to foreign countries.

Mankiw, head of the president's Council of Economic Advisers (search), discussed the advantages that offshore outsourcing of jobs can provide to U.S. companies in the "Economic Report of the President" released this week.

Mankiw argued that in economic terms, the outsourcing of a customer call-center job to India was the equivalent of buying a manufactured product shipped into this country from overseas.

"When a good or service is produced more cheaply abroad, it makes more sense to import it than to make or provide it domestically," the president's economic report stated in a chapter on trade.

Mankiw said Monday in a briefing on the report that "outsourcing is just a new way of doing international trade. More things are tradable than were tradable in the past and that's a good thing."

Mankiw's comments drew criticism from Republicans, including House Speaker Dennis Hastert, R-Ill., who released a statement Wednesday criticizing the remarks.

"I understand that Mr. Mankiw is a brilliant economic theorist, but his theory fails a basic test of real economics. An economy suffers when jobs disappear," Hastert said. "Outsourcing (search) can be a problem for American workers and for the American economy."

Mankiw's comments were a red flag to the administration's critics, who have been charging that Bush has failed to address the loss of 2.2 million jobs since he took office or the 3 million lost manufacturing jobs that have occurred since July 2000.

Democratic presidential candidate Sen. John Kerry told supporters Tuesday that the administration was finally admitting what was behind its economic policies. "They said that shipping American jobs overseas is good for America," he said.

A group of Democratic senators led by Sen. Hillary Rodham Clinton of New York introduced a nonbinding sense of the Senate resolution on Wednesday taking the administration to task for Mankiw's comments.

White House spokesman Scott McClellan said Wednesday that Mankiw's job was not in jeopardy, calling the suggestion that the remarks might get Mankiw fired "laughable."

"The president is strongly committed to creating jobs here at home," McClellan said, adding that the administration also supported "free and fair trade."

Mankiw was also being called to task for a section of the economic report which stated China had not played a role in the huge loss of U.S. manufacturing jobs even though America's trade deficit with that country has soared in recent years, running at an annual rate of $124 billion through November of last year.

The report argued that the biggest manufacturing job losses in the United States have occurred mainly in industries where imports from China are relatively small.

Rep. Donald Manzullo, R-Ill., said that point flew in the face of the fact that thousands of people in his district had "lost their jobs specifically because those products are now being made in China."

But Federal Reserve Chairman Alan Greenspan defended Mankiw in an exchange with Manzullo.

Like many economists, Greenspan supports free trade, believing that allows each country to produce the products it makes best, providing consumers with the benefit of goods at the cheapest prices.

Greenspan and Mankiw have also both advanced the argument that the jobs shipped overseas in manufacturing in recent years are not lost forever because a dynamic U.S. economy will produce new jobs in different fields.