The document summarizes reactions to comments made by White House economic advisor Gregory Mankiw about outsourcing jobs overseas. While Mankiw argued that outsourcing provides long-term economic benefits, his remarks sparked criticism from Democrats. However, some prominent Democratic economists also contend that outsourcing can benefit the economy by reducing costs, though it may hurt some workers in the process. The controversy highlights the political sensitivity of jobs and outsourcing in an election year.

1. 1
Excerpt from the Testimony before the
Joint Economic Committee, U.S. Congress
"The Economic Report of the President"
By N. Gregory Mankiw, Kristin J. Forbes, and Harvey S. Rosen
February 10th, 2004
New types of trade deliver new benefits to consumers and firms
in open economies.
Growing international demand for goods such as movies,
pharmaceuticals, and
recordings offers new opportunities for U.S. exporters. A
burgeoning trade in services
provides an important outlet for U.S. expertise in sectors such
as banking, engineering,
and higher education. The ability to buy less expensive goods
and services from new
producers has made household budgets go further, while the
ability of firms to
distribute their production around the world has cut costs and
thus prices to consumers.

2. The benefits from new forms of trade, such as in services, are
no different from the
benefits from traditional trade in goods. Outsourcing of
professional services is a
prominent example of a new type of trade. The gains from trade
that take place over the
Internet or telephone lines are no different than the gains from
trade in physical goods
transported by ship or plane. When a good or service is
produced at lower cost in
another country, it makes sense to import it rather than to
produce it domestically. This
allows the United States to devote its resources to more
productive purposes.
Although openness to trade provides substantial benefits to
nations as a whole, foreign
competition can require adjustment on the part of some
individuals, businesses, and
industries. To help workers adversely affected by trade develop
the skills needed for new
jobs, the Administration has worked hard to build upon and
develop programs to assist
workers and communities that are negatively affected by trade.

3. The Administration has also worked to strengthen and extend
the global trading system.
International cooperation is essential to realizing the potential
gains from trade. Trade
agreements have reduced barriers to international commerce,
and contributed to the
gains from trade. A system through which countries can resolve
disputes can play an
important role in realizing these gains.
From the Council of Economic Advisors
https://georgewbush-
whitehouse.archives.gov/cea/economic_report_20040210.html
2
Democrats Criticize Bush Over Job
Exports
By Edmund L. Andrews
February 11th, 2004
Democrats in Congress and on the campaign trail, citing
remarks by a top White House
economic adviser, accused President Bush on Tuesday of

4. encouraging companies to
export jobs overseas.
''The Bush administration said that sending American jobs
overseas is a good thing for
America and good for the economy,'' Senator John Kerry of
Massachusetts, the front-
runner for the Democratic presidential nomination, said in a
statement released by his
campaign.
''They've delivered a double blow to America's workers -- three
million jobs destroyed on
their watch, and now they want to export more of our jobs
overseas. What in the world
were they thinking?''
Mr. Kerry and other top Democrats were reacting to remarks on
Monday by N. Gregory
Mankiw, chairman of the White House Council of Economic
Advisers, who had been
summarizing his office's annual economic report to the
president.
The new report predicted that the economy would gain as many
as 2.6 million jobs this
year, which is more optimistic than most private-sector

5. forecasts but barely enough to
offset the jobs that have been lost in the last three years.
Asked about the role of farming out production and services to
low-wage countries like
China and Mexico, Mr. Mankiw acknowledged that the practice
was on the rise but said
it would ultimately benefit the United States.
''I think outsourcing is a growing phenomenon, but it's
something that we should realize
is probably a plus for the economy in the long run,'' Mr.
Mankiw told reporters on
Monday.
''We're very used to goods being produced abroad and being
shipped here on ships or
planes,'' Mr. Mankiw continued. ''What we are not used to is
services being produced
abroad and being sent here over the Internet or telephone wires.
But does it matter from
an economic standpoint whether values of items produced
abroad come on planes and
ships or over fiber-optic cables? Well, no, the economics is
basically the same.''
Many if not most economists contend that the expansion of free

6. trade, in goods as well
as services, ultimately benefits all countries that participate.
3
But anger over ''free trade'' has proved to be a potent issue for
Democratic presidential
candidates, and it has eroded political support for Mr. Bush in
major Midwestern
industrial states and in Southern states like South Carolina,
where textile manufacturers
and furniture companies have shed tens of thousands of jobs.
Mr. Kerry voted in favor of treaties that greatly expanded
international trade, including
the North American Free Trade Agreement with Canada and
Mexico and a market-
opening treaty with China.
In Congress, numerous other Democrats seized on Mr. Mankiw's
comments to attack
Mr. Bush.
''If this is the administration's position, I think they owe an
apology to every worker in

7. America,'' said Senator Tom Daschle of South Dakota, the
Senate Democratic leader.
''There is absolutely no justification for arguing that we could
support jobs going
overseas, especially under these circumstances.''
Claire Buchan, a spokesman for Mr. Bush, did not contradict
Mr. Mankiw's remarks but
said the administration was committed to ''free and fair trade.''
''The argument that
we're exporting our good jobs is false,'' Ms. Buchan said
Tuesday. ''American workers
earn the highest wages in the world. They are the most
productive workers in the world
and in fact they are becoming more productive.''
Ms. Buchan said Mr. Bush remained committed to expanding
free trade and opening up
more markets to American exports, but she added that ''the
president's view is that we
need to work to assure a level playing field for goods and
services.''
From The New York Times

8. https://www.nytimes.com/2004/02/11/us/democrats-criticize-
bush-over-job-exports.html
4
Some Democratic Economists Echo
Mankiw on Outsourcing
By Bob Davis
February 12th, 2004
White House chief economist Gregory Mankiw set off a
political firestorm this week
when he said that outsourcing U.S. jobs helps the economy. But
some prominent
Democratic economists make the same argument.
At a Monday news conference, Mr. Mankiw said that sending
U.S. service jobs abroad
"is probably a plus for the economy in the long run." That is
because foreign workers can
do the jobs more cheaply, reducing costs for U.S. consumers
and companies.
"Outsourcing is just a new way of doing international trade," he
added.
Since then, his remarks have brought sharp rebukes from
lawmakers, including some

9. Republicans. "Incredible indifference," said Democratic
presidential contender Sen.
John Edwards of North Carolina. "What planet do they live on?"
Even Republican
House Speaker Dennis Hastert of Illinois said Mr. Mankiw's
"theory fails a basic test of
real economics."
The White House has offered Mr. Mankiw only tepid support.
Calls for his resignation
were "kind of laughable," said White House spokesman Scott
McClellan, because the
economic team is "doing a great job."
Even among Democratic economists, though, Mr. Mankiw's
remarks were mainstream.
"Basically I agree with Greg's thrust," said Janet Yellen, who
was President Clinton's
chief economist. "In the long run, outsourcing is another form
of trade that benefits the
U.S. economy by giving us cheaper ways to do things."
But Ms. Yellen added that many moderately paid U.S. workers
are suffering because of
outsourcing, especially call-center workers whose jobs have
been shipped to India and

10. elsewhere.
The controversy surrounding Mr. Mankiw's remarks spotlights
the political potency of
the jobs issue this year. Since Mr. Bush has taken office, the
U.S. has lost more than two
million jobs -- a statistic that has become a major point of
attack for Democrats who cite
outsourcing as one cause. In recent months, the economy has
sharply rebounded, but
job growth remains weak.
Mr. Mankiw, who is chairman of the White House's council of
economic advisers, may
have been trying to put the outsourcing issue in perspective, and
speaking more as an
economist than a politician. But to some critics he sounded
cavalier -- for instance, in
5
suggesting that high-paying jobs in radiology might be better
done abroad than in the
U.S.
Said Laura Tyson, dean of the London Business School and

11. another of Mr. Clinton's
former chief economists: "The traditional economic response
does sound hard-hearted
and can be criticized for not taking nearly as seriously the
dislocation as one should."
A chastened Mr. Mankiw said yesterday, "I wish I had been
more clear at the press
conference; any loss of jobs is regrettable. If I suggested
otherwise, I failed to
communicate."
Though Mr. Mankiw also trumpeted the administration's job-
retraining initiatives, the
message was obscured by his outsourcing remarks.
"On efficiency grounds, he [Mr. Mankiw] is right," said former
Clinton Labor Secretary
Robert Reich, meaning that the economy becomes more efficient
when costs are
reduced through trade. But Mr. Reich, who advises Democratic
presidential front-
runner Sen. John Kerry, said the administration hadn't made "a
serious attempt to deal
with the profound structural problems of an economy in
transition as it affects middle-

12. class jobs."
Monday, Mr. Kerry joined in the Mankiw bashing, saying the
administration wants "to
export more of our jobs overseas." But Brad De Long, a former
Clinton treasury
economist, cautioned that Mr. Kerry ought to be careful with his
word because the
outsourcing trend is bound to continue. "Linking outsourcing to
aggregate employment
decline is a bit of demagoguery that will bite him in the butt
next February if he becomes
president," Mr. De Long said.
From The Wall Street Journal
https://www.wsj.com/articles/SB107654550648527656