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What Doesn’t Destroy Jobs

Posted By Tait Trussell On August 15, 2011 @ 12:01 am In Daily Mailer,FrontPage | 6 Comments

The depth of economic ignorance of the Obama Administration has no bottom. They don’t have a clue how to fix our historic unemployment (9.1 percent in July). In their endless blame game are two major villains they believe with dumb persistence are responsible for our loss of jobs. The Administration levels the guilty charge at 1. Automation and 2. Outsourcing.

As for automation, the President tries to guide voters to think that high joblessness can be blamed on businesses that are too efficient through technology and automation. Obama must believe that anti-free market and pro-union policies have nothing to do with botched hiring. Machines, in Obama’s brain get the blame. He said on NBC, for instance, on June 14 in taking a crack at job reduction:

“[A] lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller. Or you go to the airport and you’re using a kiosk instead of checking in at the gate.”

The President doesn’t understand that, unlike government, private businesses tries to maximize output with  minimal input. As Economist Henry Hazlitt wrote years ago in “Economics in One Lesson”: A coat manufacturer brings in a new machine, replacing Joe. But Tom just got a new job making or servicing that new machine. Ted just got a job operating the machine. And Daisy can now buy a coat at half what it used to cost. The coat maker now has high profits to spend on new machines, which increases employment.” Old Joe may be enterprising enough to get a new job or, maybe, develop an even better machine.

Real manufacturing output per worker, according to the Bureau of Economic Affairs, showed a rise from 1997 of $75,000 to $149,000 in 2010. This reflects an industry thriving, not in decline.—producing more with less and improving our standard of living.

As noted by wordpress.com, if one had observed in 1973 that polio vaccine keeps people alive and active without the aid of nurses and other workers who were once employed building iron-lung machines, crutches, and wheelchairs, not a lot of people would have griped at the jobs lost as a result of the vaccine discovery. Meanwhile, more people were hired in labs to make and distribute the vaccine.

2. Outsourcing. Democrats have been attacking businesses for sending jobs to India and China, rather than keeping them in the U.S. One reason some work goes to India is because that country has 1 million more bachelors of science graduates than does the U.S. In China, there is no federally-enforced minimum wage. Last October, Obama called out Republicans for “un-American policies” that reward companies for sending jobs overseas. Republican support of outsourcing came after the U.S. Chamber of Commerce had the audacity to make political contributions mainly to Republicans before the mid-term election. The President threatened wiping out any tax provisions that rewarded corporations for sending employment to foreign countries, Ironically, the Obama Administration has spend $1.6 billion in Chinese and other foreign wind-power production, according to a story April 28 in The Examiner.

Democrats have gotten emotionally tied in a knot because they think U.S. companies are shipping all our jobs overseas, thereby jacking up the U.S. jobless figures. That’s the real reason for our staggering unemployment, they claim. Yet foreign affiliate activity “tends to complement, not substitute for key parent activities in the United States…” according to a study published by the Business Roundtable and the United States Council Foundation. The central role of U.S. multinational companies in underpinning U.S. economic growth and job creation is even more important today as the United States seeks to address the challenges presented by the current economic environment. Strong multinational U.S. companies that are able to compete effectively in foreign markets will be better positioned to help lead America out of recession,” the study said.

The worldwide operations of U.S. multinationals “are highly concentrated in America in their U.S. parents, not abroad” in their foreign affiliates….Foreign-affiliate activity tends to “complement, not substitute” for, key parent activities in the U.S. “such as employment, worker compensation, and capital investment.” Parent U.S. multinationals employed more than 21.7 million U.S. workers (versus 9.5 million at affiliates). That’s 19.1 percent of the total private-sector payroll.

Sure, America has lost some jobs to workers abroad. But what is either unperceived or unacknowledged by the Obama wizards is that hundreds of foreign companies are investing in America and in our workers. It’s called “insourcing.” Matthew J. Slaughter, professor of management at the Tuck School of Business at Dartmouth, says insourcing companies are equal to18 percent of all exports. “They pay an average of $73,000 per worker…They are knowledge intensive…and are precisely the kind of companies we need growing in the United States.”

So, what are barriers to their growth? Slaughter says foreign CEOs tell him U.S. business taxes are too high. The statutory business tax rate—at 35 percent—is one of the highest in the world. During the past decade, foreign direct investment (FDI) swelled by 82 percent to more than $325 billion. This resulted in insourcing of 5.3 million American jobs, or close to 5 percent of the nation’s workforce. That’s more jobs than Obama said he would create or “save” with any subsidized project.

As Andrew Liveris, CEO of Dow Chemical, said recently in an NPR interview, typifying many business leaders, “At stake is whether new jobs and industries take root in this country or somewhere else. In the United States, I not only have high taxes. Right now I have more regulations coming at me that are not fact-based, not science-based, not data-based. I actually don’t know what my costs are going to be in the next five years…uncertainty around the healthcare bill…uncertainty in the energy policy….”

Meanwhile, Obama–off-base as usual–dumps the blame for unemployment on industrial America.


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