Washington Post | By Mike Allen | February 12, 2004
House Speaker J. Dennis Hastert (Ill.), one of the nation's highest-ranking Republicans, rebuked the chairman of President Bush's Council of Economic Advisers yesterday for calling the transfer of U.S. service jobs overseas "just a new way to do international trade."
The chairman, N. Gregory Mankiw, a prominent Harvard economist, made the comment Monday as he released the annual Economic Report of the President. The report included a similar assertion, that "when a good or service is produced more cheaply abroad, it makes more sense to import it than make or provide it domestically."
The speaker's statement, headlined "Hastert Disagrees With President's Economic Advisor On Outsourcing," reflected GOP concerns that Bush's record on manufacturing jobs could be one of the party's biggest vulnerabilities in November's elections.
"I understand that Mr. Mankiw is a brilliant economic theorist, but his theory fails a basic test of real economics," Hastert said. "We can't have a healthy economy unless we have more jobs here in America."
White House press secretary Scott McClellan, asked if Bush might fire Mankiw, called the idea "laughable . . . because our economic team is doing a great job helping the president work to strengthen our economy even more."
"The president is strongly committed to creating jobs here at home," McClellan said. "Certainly, free and fair trade is important to strengthening our economy even more and expanding job growth here at home."
Mankiw released a statement that began: "Some of my recent comments on outsourcing have been misinterpreted. It is regrettable whenever anyone loses a job."
"Some would respond to the recent challenges facing the economy by erecting trade barriers," he added. "History teaches that a retreat to economic isolationism would mean lower living standards for American workers and their families. At the same time, we have to acknowledge that any economic change, whether arising from trade or technology, can cause painful dislocations for some workers and their families. The goal of policy should be to help workers prepare for the global economy of the future."
Joe Lockhart, a Democratic consultant who was press secretary to President Bill Clinton, predicted that Bush's opponents will put a lot of money in advertising to draw attention to the statement.
"I guarantee you this document will become a central element of the economic debate," he said.
Mankiw's comments referred to "outsourcing," or "offshoring," which is sending service jobs to low-wage countries, especially India, and manufacturing jobs to such countries as Mexico, China and the Philippines. Most of the jobs involved are service jobs, including radiology and call-center work such as computer support. But many of the administration's critics pounced on the possible impact on manufacturing employment.
"Whereas imported goods might arrive by ship, outsourced services are often delivered using telephone lines or the Internet," the report says. "The basic economic forces behind the transactions are the same, however."
A chorus of Democrats preceded Hastert in condemning Mankiw's argument. Sen. John F. Kerry (Mass.), the front-runner for the Democratic presidential nomination, said his "economic policy is not to export American jobs, but to reward companies for creating and keeping good jobs in America."
Federal Reserve Chairman Alan Greenspan was asked about Mankiw's comments yesterday by Rep. Donald Manzullo (R-Ill.) at a House Financial Service Committee hearing, but Greenspan said he had not read about them.
The controversy is embarrassing for Bush, whose tax cuts have failed to produce the job growth his administration had promised. Now, he is traveling around the country promoting a six-point plan for job creation, with stops planned in the electoral powerhouses of Pennsylvania today and Florida on Monday.
Bush nominated Mankiw in February 2003 to succeed R. Glenn Hubbard, who returned to Columbia University.Washington Post:
