Out of Control Policy Blog

Remember when outsourcing was going to destroy America?

Harvard economist Greg Mankiw has a pretty tranquil life these days, at least compared to what he went through a couple of years ago.

As chairman of Bush's Council of Economic Advisors he uttered the completely mainstream comment (mainstream among economists, that is) that international trade is a good thing that tends to benefit all nations involved. He said that offshore outsourcing is merely a new kind of trade in which exports come to our shores via the internet or our phones, instead of by ships and planes.

Many reporters simply yawned at what was then regarded as an uneventful press conference. Then the LA Times ran a story titled "Bush Supports Shift of Jobs Overseas."

What followed was a (clichÈ alert) political firestorm. Our nation worried that the teachings of Adam Smith and David Ricardo no longer applied to our new economy. Speaker Hastert called for Mankiw's head and Candidate Kerry had himself a great issue. He railed against "Benedict Arnold CEOs" and outrageous tax policies that supposedly encouraged this kind of traitorous activity. Politicians penned more than 200 anti-outsourcing bills, mostly at the state level (although few were passed).

Today the panic has largely subsided, at least for now.

In this paper Mankiw looks back at that loopy time. Pretty interesting stuff.

Related: A study Adrian Moore and I wrote on the topic

Related: My pre-election take on Kerry-Edwards' rhetorical strategy

BTW, later on Kerry backed away somewhat from his infamous line:

    Asked about outsourcing and his use of the "Benedict Arnold" epithet, Mr. Kerry replied: "The Benedict Arnold line applied, you know, I called a couple of times to overzealous speechwriters and said, 'Look, that's not what I'm saying.' Benedict Arnold does not refer to somebody who in the normal course of business is going to go overseas and take jobs overseas. That happens. I support that. I understand that. I was referring to the people who take advantage of non-economic transactions purely for tax purposes – sham transactions – and give up American citizenship. That's a Benedict Arnold. You give up your American citizenship but you want to continue to do business and deduct and do everything else. That's what I'm referring to."

Actually, it seems this explanation isn't entirely accurate.

But more importantly--does Ben Affleck still think outsourcing is "criminal"?

Ted Balaker is Producer


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