Thursday, March 4, 2010

Obama Rewards Another Outsourcer

Obama Rewards Another Outsourcer
Alan Tonelson
Monday, March 01, 2010

President Obama’s decision to put Honeywell Chairman David M. Cote on the new bipartisan commission to reduce America’s debts and deficits is like putting Tiger Woods on a national commission to promote marital fidelity. And here’s why this unflattering comparison is eminently justified.

Like so many of America’s other manufacturing giants, Honeywell has long been a champion outsourcer, and the strategy has continued under Cote. Since Cote assumed the top job in 2002, Honeywell figures show that its foreign assets have remained at about 20 percent of its global assets. But through 2008, the American share of its workforce has sunk from 55.05 percent of the global total to 45.31 percent, as the company shed 2,000 domestic employees and hired 21,000 foreign employees. Final 2009 figures aren’t yet in, but news reports indicate that last year, Honeywell sent at least 1,100 more jobs offshore – along with the associated production work (in jet engines and elsewhere in aerospace, no less)

You don’t need the textbook economics brilliance of chief Obama economic advisor Larry Summers to figure out the problem. The new commission is supposed to come up with ways to fix America’s broken national finances. But the kind of outsourcing long practiced by Honeywell and its multinational peers has played a huge role in breaking them.

After all, as is clear from the massive collective trade deficits run by these multinationals (and documented by the Commerce Department’s Bureau of Economic Analysis), sending jobs and production abroad slashes U.S. net exports (and future export opportunities) and boosts U.S. net imports. In other words, outsourcing widens the chronic trade and current account deficits.

Meanwhile propping up American living standards in the face of these deficits requires ever more borrowing from creditors everywhere or asset sales to foreign interests. If you’re now thinking “credit bubble” and “worst recession since the Great Depression,” you deserve higher marks than the President and his aides.

Honeywell-type outsourcing also increases national indebtedness on a more micro-focused level. Since job exports typically lower wages as well as reduce domestic employment, they shrink the country’s tax base. At the same time, they increase demand for public services ranging from unemployment benefits to food stamps to counseling and other social services for individuals and families under stress.

Even worse, Cote’s appointment continues an Obama pattern of rewarding outsourcers with plum positions. As I wrote last year, he named two leading practitioners – General Electric’s Jeffrey Immelt and Caterpillar’s Jim Owens – as the only manufacturing representatives on his Economic Recovery Advisory Board (the so-called Volcker panel, named after its chair, the former head of the Federal Reserve – see

Someone with the President’s ear needs to tell him that “businessman” and “outsourcer” are not synonymous. There are plenty of American executives focused on creating jobs, production, and innovation in this country, rather than overseas, and with a proven record of success. Unless Obama starts seeking their counsel, optimism about the economy, and about his political future, will be painfully difficult to justify.

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