States Tackle Outsourcing

Outsourcing (search) isn't just a hot topic on the presidential campaign trail this year. Many states are moving to ensure that more workers and businesses are homegrown.

But critics of putting limits on the amount of work sent overseas — called outsourcing, or offshoring — say such marketplace "walls" will lead to higher product costs and possibly retaliation from foreign governments to limit trading activity with the United States.

"It is the message that it sends to companies overseas that might be interested in investing in various localities, bringing business into the United States, creating jobs and opportunities for Americans," said Bob Cohen, spokesman for the Information Technology Association of America (search), which represents the likes of Time Warner, Dell, KPMG LLP, Merrill Lynch, Microsoft, PricewaterhouseCoopers LLP and Verizon.

"It essentially whisks away the welcome mat for that kind of investment," he said.

Since 2000, more than 2 million jobs have been lost to countries like India and Mexico, where labor is cheaper. Currently, about 40 state governments are outsourcing government jobs like issuing welfare checks and food stamps through overseas call centers.

"At first it was like, 'Oh, don't worry, it's just all these old manufacturing jobs that are going overseas,' but now it's these computer jobs that everyone got degrees for," Georgia state Rep. Curt Thompson (search) told

Thompson's district, located just outside of Atlanta, is a high-tech hotbed that's been hard-hit by the outsourcing trend. The topic was the focus of three town hall meetings last fall and "everybody seemed to be up in arms," he said. "This hit my constituents close to home."

Now, 30 states are considering bills that would ban state contracts from being sent abroad. Where bills are floundering, governors like those in Minnesota and Michigan are passing executive orders to keep contracts in-state.

"What we have seen is a lot of governors taking action," said Justin Marks, who tracks outsourcing legislation for the National Conference of State Legislatures (search), adding that many bills are being introduced to light a fire. "It's a ripple effect — they're putting pressure on the executive branch to do something, even if they don't pass something."

But Marks said that banning the outsourcing of state contracts is a "specific solution they see to a larger problem, and the larger problem is job creation."

As of March 22, Arizona, California and South Carolina were considering measures that would prohibit work involving confidential information — such as medical records — from being outsourced, according to NCSL. Three states — California, Colorado and South Carolina — are considering bills where companies would have to notify the state within a certain time frame if jobs are going to be lost to overseas workers.

And nine states are debating bills involving "consumer right to know," where companies, like Internet service providers, would have to disclose their location.

"When it comes to taxpayers' dollars as it relates to … state government and keeping a program or a benefit conversation between a citizen and the person they're talking to in-state, I think that the public has a right to have that person be here," said Oregon Gov. Ted Kulongoski (search), a Democrat who recently asked state agencies to avoid outsourcing government jobs.

Just Say 'No' to 'Overprotectionalism'

Some Republican state lawmakers say that limiting outsourcing will do more harm than good and that there are other moves — such as reducing overbearing taxes and health-care costs for small businesses and offering tax incentives for job creation — that should be taken.

"Overprotectionalism is not the answer," Michigan state Sen. Nancy Cassis told

Cassis said that the recent order signed by Michigan Gov. Jennifer Granholm (search), a Democrat, merely restates laws already on the books and that the move was mainly a political tactic by Granholm designed to align herself more with Democratic presidential contender John Kerry in an election year where outsourcing is such a hot-button issue.

A main principle in Kerry's economic platform is that he promises to tax companies who continue to have an overseas presence.

"This is a political environment, it's campaign season — there's electioneering going on and Gov. Granholm is backing Senator Kerry for president of the United States and his economic [message] has been embraced" by her, said Cassis, a Republican. "All she did was restate what's on the books to sound like she's taking action but it's about as effective as trying to catch an elephant in a butterfly net."

Cassis noted that outsourcing has been going on for years and that as foreign countries' economies grow, so will their standards of living and demand for U.S. goods.

Federal Reserve Chairman Alan Greenspan (search) has criticized efforts to limit offshoring, saying they will reduce American living standards and not help American unemployment. Boosting math and science programs and technical skills of Americans is the key, he said, so that companies won't look for workers with better skills abroad.

The Computer Systems Policy Project (search) notes that while the Bureau of Labor Statistics predicts that the United States will have 165.3 million jobs by 2012, only 3.3 million of them, according to Forrester Research, will be outsourced. ITAA recently released a study showing the benefits of outsourcing.

Despite the focus on jobs left, the Organization for International Investment (search) this month released a list of the top 10 states that have been most successful in attracting "insourced" jobs — jobs supported by U.S. subsidiaries of companies headquartered abroad.

"U.S. subsidiaries are insourcing to every state in the country, attracted by the world's best, brightest and most creative workforces," said Todd Malan, OFII's executive director.

But despite those numbers, states like Minnesota appear to be pursuing their own measures to keep jobs within their borders.

Minnesota Gov. Tim Pawlenty (search) recently issued an order requiring vendors to disclose where the work will be performed and that that location will not change during the duration of the contract. It also pushes for establishing programs that will ensure Minnesota-based companies will be made fully aware of state work up for grabs. State agencies must also consider where companies make their products before awarding contracts.

"We need to encourage jobs in New Prague or New Ulm, not in New Delhi," Pawlenty said.

Fox News' Anita Vogel contributed to this report.