The movement of American factory jobs and white-collar work to other countries is part of a positive transformation that will enrich the U.S. economy over time, even if it causes short-term pain and dislocation, the Bush administration said Monday.
The embrace of foreign outsourcing, an accelerating trend that has contributed to U.S. job losses in recent years and has become an issue in the 2004 elections, is contained in the president’s annual report to Congress on the health of the economy.
“Outsourcing is just a new way of doing international trade,” said N. Gregory Mankiw, chairman of Bush’s Council of Economic Advisors, which prepared the report. “More things are tradable than were tradable in the past. And that’s a good thing.”
The report, which predicts that the nation will reverse a three-year employment slide by creating 2.6 million jobs in 2004, is part of a weeklong effort by the administration to highlight signs that the recovery is picking up speed. Bush’s economic stewardship has become a central issue in the presidential campaign, and the White House is eager to demonstrate that his policies are producing results.
In his message to Congress on Monday, Bush said the economy “is strong and getting stronger,” thanks in part to his tax cuts and other economic programs. He said the nation had survived a stock market meltdown, recession, terrorist attacks, corporate scandals and war in Afghanistan and Iraq, and was finally beginning to enjoy “a mounting prosperity that will reach every corner of America.”
The president repeated that message during an afternoon discussion about the economy at SRC Automotive, an engine-rebuilding plant in Springfield, Mo., where he lashed out at lawmakers who oppose making his tax cuts permanent.
“When they say, ‘We’re going to repeal Bush’s tax cuts,’ that means they’re going to raise your taxes, and that’s wrong. And that’s bad economics,” he said.
Democrats who want Bush’s job were quick to challenge his claims.
Sen. John F. Kerry of Massachusetts, the front-runner for the Democratic presidential nomination, supports a rollback of Bush’s tax cuts for the wealthiest Americans and backs the creation of tax incentives for companies that keep jobs in the United States. However, he supported the North American Free Trade Agreement, which many union members say is responsible for the migration of U.S. jobs, particularly in the auto industry, to Mexico.
Campaigning Monday in Roanoke, Va., Kerry questioned the credibility of the administration’s job-creation forecast.
“I’ve got a feeling this report was prepared by the same people who brought us the intelligence on Iraq,” Kerry said. “I don’t think we need a new report about jobs in America. I think we need a new president who’s going to create jobs in America and put Americans back to work.”
In an evening appearance at George Mason University in Fairfax, Va., Sen. John Edwards of North Carolina mocked the Bush administration’s economic report.
Edwards, who also supports repealing tax cuts for the richest Americans and offering incentives to corporations that create new jobs in the United States, said it would come as a “news bulletin” to the American people that the economy was improving and that the outsourcing of jobs was good for America.
“These people,” he said of the Bush administration, “what planet do they live on? They are so out of touch.”
The president’s 411-page report contains a detailed diagnosis of the forces the White House says are contributing to America’s economic slowdown and a wide-ranging defense of the policies Bush has pursued to combat it.
It asserts that the last recession actually began in late 2000, before the president took office, instead of March 2001, as certified by the official recession-dating panel of the National Bureau of Economic Research.
Much of the report repeats the administration’s previous economic prescriptions.
For instance, it says the Bush tax cuts must be made permanent to have their full effect on the economy.
Social Security also must be restructured to let workers put part of their retirement funds in private accounts, the report argues. Doing so could add nearly $5 trillion to the national debt by 2036, the president’s advisors note, but the additional borrowing would be repaid 20 years later and the program’s long-term health would be more secure.
The report devotes an entire chapter to an issue that has become increasingly troublesome for the administration: the loss of 2.8 million manufacturing jobs since Bush took office, and critics’ claims that his trade policies are partly to blame.
His advisors acknowledge that international trade and foreign outsourcing have contributed to the job slump. But the report argues that technological progress and rising productivity -- the ability to produce more goods with fewer workers -- have played a bigger role than the flight of production to China and other low-wage countries.
Although trade expansion inevitably hurts some domestic workers, the benefits eventually will outweigh the costs as Americans are able to buy cheaper goods and services and as new jobs are created in growing sectors of the economy, the report said.
The president’s report endorses the relatively new phenomenon of outsourcing high-end, white-collar work to India and other countries, a trend that has stirred concern within such affected occupations as computer programming and medical diagnostics.
“Maybe we will outsource a few radiologists,” Mankiw told reporters. “What does that mean? Well, maybe the next generation of doctors will train fewer radiologists and will train more general practitioners or surgeons.... Maybe we’ve learned that we don’t have a comparative advantage in radiologists.”
Government should try to salve the short-term disruption by helping displaced workers obtain the training they need to enter new fields, such as healthcare, Mankiw said, not by erecting protectionist barriers on behalf of vulnerable industries or professions. “The market is the best determinant of where the jobs should be,” he said.
Bush’s quick visit to Missouri -- his 15th to a state considered a critical election battleground -- was the first of several events this week intended to underscore recent economic gains. Although U.S. job creation remains relatively sluggish, the nation’s unemployment rate fell from 6.4% in June to 5.6% in January, and the economy grew at the fastest pace in 20 years during the last half of 2003.
The format of his visit to SRC Automotive -- one that he particularly likes -- involved several employees and local business owners sharing the stage with the president to discuss their perspectives on the economy, with Bush elaborating on their stories to emphasize particular aspects of his economic program.
Today, Bush is scheduled to meet with economic leaders at the White House. On Thursday, he goes to Pennsylvania’s capital, Harrisburg -- in another swing state that he has already visited more than two dozen times since becoming president.
Vieth reported from Washington and Chen from Springfield. Times staff writers Scott Martelle in Norfolk, Va., and Maria L. La Ganga in Roanoke, Va., contributed to this report.