Thursday, February 19, 2004

The Democrats on jobs: they got nothin’ (a continuing series)

Senator Splunge and the unsavory characters at the DNC have hammered President Bush on the issue of jobs. Almost universally, they’ve decried Bush tax policies as the root cause. But as the WashPost points out today in “Democrats can’t get firm grip on jobs issue” almost all the Democrats’ rhetoric is empty:

Democratic presidential candidates have made the loss of U.S. jobs to international competition the centerpiece of their campaigns, but even some of the candidates' economic advisers acknowledge that remedies offered -- such as closing tax loopholes on overseas income and offering tax breaks for domestic hiring -- would probably do little to stop the bleeding.

The issue is that no manner of tax tinkering will erase the immutable fact that wages are much lower in other countries:

But virtually no one would say that taxes are a primary -- or even a significant -- factor in the movement of as many as 300,000 white-collar jobs and many more manufacturing jobs abroad in the past several years. No matter how sweet the tax incentive is to expand in India, for instance, it could not be more enticing than lowering a software developer's pay from $60 to $6 an hour, a figure cited recently by the consulting firm McKinsey & Co.

And George Will in “How to Kill Jobs” reveals the consequences of moral demagoguery supplanting economic common sense:

Recently, Indiana Gov. Joseph Kernan canceled a $15 million contract with a firm in India for processing state unemployment claims. The next highest bidder was a U.S. firm that would have charged $23 million. Because of this potential 50 percent price increase, there would have been $8 million fewer state dollars for schools, hospitals, law enforcement, etc. And the benefit to Indiana would have been . . . what?

When Kernan made this gesture he probably was wearing something wholly or partly imported and that at one time, before "offshoring," would have been entirely made here. Such potential embarrassments are among the perils of making moral grandstanding into an economic policy.

Meanwhile (this just in!): “New jobless claims drop sharply”. I blame the Bush tax cuts.

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