White House Under Fire for Outsourcing Proposal

Under new legislation introduced by a group of Senate Democrats on Thursday, American employers would be required to warn their employees and affected communities before moving any jobs overseas.

The Jobs for America Act (search) was introduced in response to President Bush's annual economic report, released Monday, in which he highlighted the benefits of sending jobs to other countries.

"This week, Americans learned something important. Exporting jobs isn't an accident — it's administration policy," Senate Minority Leader Tom Daschle, chief author of the bill, told reporters on Capitol Hill.

"This is Alice in Wonderland economics," Daschle, D-S.D., continued. "Nearly every state in the nation has lost manufacturing jobs, and contrary to the administration's economic theories, there is nothing good about it. The administration is putting corporate profits ahead of American jobs. And the exporting of jobs is hurting millions of Americans and countless communities across the country."

Lawmakers on both sides of the aisle have begun hitting the administration over its support for outsourcing.

House Speaker Dennis Hastert (search) said that Gregory Mankiw (search), chairman of the president's Council of Economic Advisers (search) and the primary author of the report, is way off-base when he describes outsourcing U.S. jobs as "just a new way of doing international trade."

Mankiw's theory "fails a basic test of real economics," which is that an economy suffers when jobs disappear, Hastert said Wednesday in a written statement.

Outsourcing (search) is when American companies transfer jobs from the United States to places like India, China and Mexico. India is an increasingly popular destination for jobs because of its cheap, educated and English-speaking labor force.

Among the jobs that are migrating are those of telemarketers, software developers, radiologists, and most recently journalists. Reuters news service just announced plans to hire reporters in India to cover the U.S. financial sector. Reuters is also sending about 200 of its data-entry jobs to Bangalore from England and the United States.

The administration's argument is that by outsourcing low-skilled jobs to cheap destinations, companies will have the resources to train American workers in high-skilled fields. Mankiw, who first caught lawmakers' notice when he and two other White House officials gave congressional testimony on Tuesday, added that outsourcing is of long-term economic benefit for the country.

"Outsourcing is just a new way of doing international trade. We're very used to goods being produced abroad and being shipped here on ships or planes. What we're not used to is services being produced abroad and being sent here over the Internet or telephone wires. More things are tradeable than were tradeable in the past and that's a good thing," Mankiw told reporters in a press briefing on Monday after the report's release.

The adviser acknowledged that outsourcing would cause some "dislocations," but said they are the natural byproduct of trade.

"We need to help workers find jobs and make sure to create jobs here. But we shouldn't sort of retreat from the basic principles of free trade. Outsourcing is sort of the latest manifestation of the gains from trade that economists have talked about at least since Adam Smith," Mankiw said.

On Thursday, Bush visited Harrisburg, Pa., for an address promoting U.S. job training initiatives that he says are central to getting the workforce closer to full employment. He tiptoed around the outsourcing issue, stressing only that jobs are on his administration's agenda.

"There are still some people looking for work because of the recession. There are people looking for work because jobs have gone overseas. And we need to act in this country. We need to act to make sure there are more jobs at home, and people are more likely to retain a job," Bush said.

But Democrats say any policy supporting outsourcing is a foolish one.

"We need to create jobs in this country, not China, Bermuda or anywhere else," said Sen. Tom Harkin, D-Iowa.

On Wednesday, Sen. Hillary Rodham Clinton (search), D-N.Y., introduced a nonbinding resolution saying Bush's policies "have either failed to address or exacerbated the loss of manufacturing jobs" in the United States.

The resolution said the Senate should oppose efforts to send American jobs overseas and approve tax incentives to discourage U.S. manufacturers from doing so.

A group of more than a dozen Senate Democrats also called on Bush to repudiate Mankiw's positive remarks about outsourcing.

"We are troubled by the report's tone and its conclusions, which fail to capture the human toll behind the recent rise in offshore outsourcing. As we have seen from recent announcements, virtually every job category up and down the pay scale is now at risk: software engineers, machinists, newspaper reporters, accountants and radiologists. It is surprising that your advisers would categorize this new phenomenon so casually," read a letter sent to the president Wednesday.

House Minority Leader Nancy Pelosi (search), D-Calif., also weighed in.

"The president's report is further proof that he needs a reality check," she said Wednesday.

White House spokesman Scott McClellan dismissed the barrage of criticism.

"The president is strongly committed to creating jobs here at home. I think that's reflected in the actions we have taken and the actions we're calling on Congress to take in addition to that," McClellan said. "Any job loss is regrettable."

Nonetheless, the jobs issue is expected to have political traction in the fall — unless U.S. companies begin filling a large portion of the 2.6 million new jobs Bush said he expects will be created this year. The unusual attack by Hastert on an administration official of his own party underscores the expected impact the issue will have on this year's presidential and congressional elections.

On Tuesday, Democratic presidential candidate Sen. John Kerry (search) launched his attack against the president's call for outsourcing.

“In their economic report, the Bush administration said that sending American jobs overseas is good for America and good for the economy. They've delivered a double blow to America's workers — 3 million jobs destroyed on their watch, and now they want to export more of our jobs overseas. What in the world are they thinking?"

The Associated Press contributed to this report.