WWL>Topics>>11-13 12:135m Garland talks to Howard Rosen about outsourcing

11-13 12:135m Garland talks to Howard Rosen about outsourcing

Nov 13, 2012|

Garland talks to Howard Rosen, Visiting Fellow at Peterson Institute for International Economics about outsourcing.

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Automatically Generated Transcript (may not be 100% accurate)

First sale until we overnight look at the. Us multinational companies cut their American workforce -- up almost no. During the 2000. While hiring almost two and a half million. New workers over seats. And they talked about all the B minuses. And it was all part of book a story about some workers that pure heart just bleeds -- Freeport Illinois. Worked for a company Moussa and 2530 years. And it Syria and technology company since satellite technologies. And they're transferring virtually all of the job 270 jobs over to China. And the people were protesting and saying you're born during most of the tax. That we have here today certainly suggest that. But we. Just talk to one expert. Who -- news what I found -- I begin to Google what the current situation it is. And it would seem. This is not always a bad thing. In fact I think from what I'm reading from what I'm hearing. The pro and cons are kind of almost evenly and balanced I mean about Clinton's. Certainly seeing a lot of cons but some throats river Howard Rosenberg that presenting pro Peterson Institute. For international economics Howard welcomed -- joked thank you very much do you agree that. There or some proves. To outsourcing. Yes actually there are. You know all of these trade -- always come down to two issues which is timing and who gets affected. But the pros for a before outsourcing or -- US multinationals actually expanding their operations overseas is the hope. That by doing so -- will expand their sales expand their profits but then reinvest those profits back here in the United States. And what's happening what we've been seeing over the last 1020 years is we get the first half of that equation but not the second half. Which is that the companies are expanding taking advantage of the growing markets overseas. Hiring people overseas. But they're not repatriating their profits back here to United States and expanding their operations here. Now about the way this is what we saw back in the sixties and the seventies somewhat into the -- what we're priority it. Well I mean that that's the big question we have right now -- in a written with a one thing we do know. Is it's not any it's it's not the capital lack of them of money because we know. Also knows that there are US companies have about two trillion dollars two trillion dollars. Right now and profits. That they are not reinvesting. So it's not a question of you know -- you know not having the the -- the capital by which to make the investments in fact. If you look at the amount that profits that they have relative to their sales it's the highest you know profit rate that we had in years. So that the US companies are flush with cash. I think a big part of it and you know it's hard to repeat what everyone's been saying recently is there has been a lot of uncertainty. There's uncertainty just in terms of where the economy is going there's been uncertainty in policy in terms of health care tax policy we just had a major election. So what we've seen you know now we're beginning you know some of these variables we can start settling and hopefully this will turn around. Does your 35 fruits and corporate tax -- is is that. If the money you repatriated. Is that tax that 35%. So again that that is one of the issues that's raised which is inferior to. Issues one is. -- the communique the tax rate in the United States relative to other countries. And the argument is is at the rate is higher here in the United States than it is in -- in other countries. So therefore that's a disincentive for US companies to bring back those profits. But on the other hand we do have things in in place policies in place that allow offsets and deductions and things like that so there is no double taxation of -- paying tax. In the -- overseas and they can -- deduct that name out taxing need to -- in the United States it's a very it was a lot of always with taxes a lot of complicated things. And the effective rate the rate that corporations pay is not as high as 35%. And it is a little bit more imbalance with. The effective rate in other countries. So it's not a slam dunk. But certainly tax policy does play a role. Syria find that fascinating here and tell me -- plateau oversimplified. If I don't know appeared low introductory or not talked about a company Freeport Illinois I did -- senate technologies. And didn't get people who do their jobs fully understandable they say it's not fair. But let's say one of those workers. Has its stock in Wal-Mart. Well and they want him to repatriate. Those profits because their shares. Are going to be worth as much right. Now the person that's where I disagree which is. There are certain things I mean in terms of US companies operating overseas we want them to take advantage of the growing markets and also. Cheaper costs of production. But there are some things that we can do here in the United States better than can be done overseas. You know we we know I understand that and so we want those companies to bring back the profits to do the high end stuff here in the United States. An outsourced to low and stuff but they're not doing and they're not doing that book and anonymity being -- on their final -- wal mart's stock right. In and they say well you know I can -- troops have money you know sheriff screwed around ten cents or whatever. I say no. So if they were usually. A conflict there and well of course I mean their trade offs and everything in life but I mean it but the problem is like I just mention is that we're not. Doing we. I mean. That -- the problem actually is and this has been I've actually document that this is that the jobs. That we are terminating here in the United States tend to be higher wage jobs. And the jobs that we are creating tend to be lower wage jobs so we're doing exactly the opposite of what we should be doing. We should be terminating low wage jobs in the US companies are moving oversee you know to compete. -- US computed in overseas. And bringing back the highway jobs here are now part another part of the problem I mean that we mentioned tax. Another part of problem is having the skilled workforce. We need to have problem yet we need to have the people in place and companies can't wait around. And look you know looking in we hear about these vacancies. That -- you know companies are looking for and so that that you know that I'm I'm not trying to -- took to -- -- crowd wants all the problems it's that gets into the education issue. And then you know then then the companies say well if we don't have the existing workers here in the United States we need to for import those workers. So we need you know of -- status for these people. Well you know that might be a short term fix but if we don't just allow -- -- to solve the problem with bringing in. Immigrants then will never develop the skills for people who are born here in this country so you know there are that this is a problem that there is no single answer to this problem -- -- in and it needs a lot of work on a lot of different areas since. An and it's at an -- and we hadn't been doing it. Or -- music break your -- come back conceive -- confined talk about some answers. -- -- number talking about outsourcing but in a fashion. All the cons but there are some pros that would I think most of which were not aware. Garland Robinette recall at the picture I think you probably agree would we always thought that outsourcing. Particular united states of how we're jog through -- series. It was surely a bad thing but I'm looking -- area and London school of economic report over at seven year period. 2002007. And they said that -- -- -- towards outsourcing. Has no effect on native employment in the aggregate. While all sure workers compete directly with the natives. There employment generation productivity gains and increase the size of the -- Leading to an overall neutral impact. There -- retail horror of his business group founded foreign investment by US firms does not detract from their investment. In the US but rather compliments of 10% increase in the form leaves. Through two point 6% increase in a letter. I'm Howard Rosenberg is visiting fellow Peterson institute for international. Economics what do you think of those who -- well. You know I hope you're I I hope you have your listeners are listening to this and I wish you had more listeners because. Both points that you just made are really excellent and and and all of me just say let's go back to the 1960s and 1970s. It was exactly that strategy that was helping to build and expand and strengthen the US economy. As US companies were moving over to you were up and expanding. And invest and we were doing on high the high end stuff here in the United States and doing the production over in. In in in in Europe. And help us it helps you are up and it was great for everybody but somehow an and I agree I mean I I I think that the studies that you. Presented just now are really it's great it's excellent that you pointed to these. And so. I I believe that the that that the strategy still works but we have not been. Following our end of it and the way and that's why -- the outcomes have fallen have come out differently the way I would think about his if you will break it down into two major things. Capacity. And the business environment on the capacity side we need to invest in research and development so that we're producing. The new innovative products and not just the products but also the proxy -- how to make those products. We have to have the skilled workforce. And we have to invest in plant and equipment. And in order to you know build those factories and produce those things here in the United States and by the way this is not just a manufacturing issue although it is a big big thing to do -- manufacturing but it's also a service issue. And so that's in those three of them aged major categories under capacity but then. We need to have access into foreign markets in order to sell our goods and services. And we also have to have an exchange rate that is going to you know allow or you know it's not going to hurt our exporters. And it you know and on all of those -- hype things that I just raised with you we've been moving in the wrong direction and we need to change that and move into the right direction. And then and and those were the conditions that we had back in the sixties and the seventies and then we can take this model. You know US companies. Occurred to producing overseas bringing back the profits expanding their operations here keeping the high end stuff here X you know prevents shifting the low end stuff. Overseas. As employees we certainly don't like losing our jobs having concern overseas. As consumers which is what our economy I'm told is based on. We certainly don't like the cost of things if they were married in the United States were like apples cost because it's familiar and so used. Then. You're talking about we've got to have educated people in science and math and technology. Isn't everything you're talking about. 51015. Years twenty years old ways if there we're overdue. Oh look clearly there's a long time like in order to get this stuff especially when you deplete your resources we've got to catch up and then stay competitive with everyone else. But I just wanna add to you don't comic you just said. We've got to make sure that we're not thinking in very static terms that we're thinking in very dynamic terms every day a new products are coming into the market new technology. We and it used to be that we -- we produce all of that here. Now maybe we can have monopoly anymore and act like we did back fifty years ago but we're losing our edge. And so it you know we have to keep thinking about it in a dynamic sense. And and that's why we another aspect of it which -- not talking about today is we need to help our workers retrain and move from job to job so that they don't stay in the obsolete industries but moved to the higher end but the other thing I wanna mention because it was very good that you you mentioned this. That really what we're talking about and and and and unfortunately. Our analysts and our policy makers I think do a disservice to the American people are not explaining this better. We are not talking about the level of employment we are talking exactly what you just said about the composition of employment. As we now know going through the last couple years the level of employment has everything to do with the business cycle. The composition of employment which jobs we have high heat low tech high wages low wages all of the Wear those jobs are that. It is all based on policy on the things that I mentioned in terms of R&D spending capacity. Business environment so so again and we need to clarified that we're not necessarily talking about how. The level of jobs were talking about the composition of those shops. Our roads and very interest -- bureau learned a lot are appreciative tone very much good well thank you very much. Our roads and visiting fellow Peterson institute for international economic this is. Governor -- 170 AM 053 year effort.