Perception has a way of trumping reality in politics. Just ask former president George H.W. Bush, who was denied re-election in November 1992 largely because he was perceived as doing too little to end a relatively mild national recession that actually had been over for a year-and-a-half.

It was the elder Bush’s bad luck that payroll employment growth usually picks up steam a little later in the economic cycle — which, come to think of it, is similar to the situation his son now faces heading into the 2004 election.

Like Bill Clinton a dozen years ago, Sen. John Kerry hasn’t let the facts get in the way of some good old-fashioned demagoguery about jobs and the economy, especially in battleground states such as Ohio.

On domestic issues, much of Kerry’s rhetoric has focused on “outsourcing,” a subject of intense media hype even before Democrats made it one of their favorite symbols of all that’s wrong with President George W. Bush.

In fact, numerous studies show that those computer programmers in India, consumer call centers in the Philippines and other outsourcing outposts supposedly stealing our service jobs add up to little more than a blip on the American economic screen — and a generally positive one, at that.

Nonetheless, investment adviser and economic commentator Todd G. Buchholz suggests in his new book that free-marketers shouldn’t be too smug.

The title is misleading: Buchholz doesn’t really seem to believe that outsourcing is a “crisis” — not yet, anyway. But as a former White House director of economic policy under George H.W. Bush, he clearly understands the danger of pretending that all is well when most people are convinced it isn’t.

If a majority of Americans persist in believing outsourcing is a problem, then Buchholz would like to give them a healthier outlet for their worries.

“Of course, outsourcing reflects an efficient way of doing business — given the situation confronting firms,” Buchholz writes. “Of course we should expect CEOs to strive for efficiency and cut costs, which ultimately gives American consumers more buying power. But those businessmen are often acting as they do and often finding outsourcing more efficient than hiring Americans precisely because our tax, litigation, immigration, regulation and education regimes push them out the door.”

While it’s ridiculous to blame “Benedict Arnold CEOs” for moving jobs offshore, Buchholz says, it’s also “naive for conservatives to blithely bless outsourcing without asking whether it may be a symptom of policy stupidity.”

Take U.S. immigration policy, which (thanks to a 1965 law spearheaded by Bobby Kennedy and other congressional liberals) exalts “family unification” over skills and education. The result, says Buchholz: “If Albert Einstein showed up at the border today, most bureaucrats would care less about his brain than about photos of his grandkids and brother-in-law to prove his family ties.”

In fact, many companies have found it necessary to outsource jobs precisely because they can’t import the kind of skilled workers they need to work in the United States. That points to another problem: the shortcomings of our own workforce.

Buchholz says America’s ability to create and retain decent, well-paying jobs is undercut by mediocre schools, “incredibly high” litigation costs, anti-competitive regulations at both the state and federal level, and the prospect of ever-rising payroll taxes to support Social Security and Medicare.

In effect, he argues, too many of our home-grown workers carry the same sign on their backs: “I’m very expensive and really don’t know much.”

The solutions will be as familiar as they are well-argued by Buchholz in this compact, highly readable volume: a serious dose of real competition for union-dominated public schools; tort reform to curb the growth-stifling power of trial lawyers; relaxation of excessive professional licensing and certification requirements at the state level; tax reduction to level the playing field with overseas competitors, and individual retirement and health care savings accounts to give workers a greater sense of responsibility for their own futures.

In short, if we want our country to create more well-paying jobs in what is fast becoming a more open and competitive global economy, we will need to create a more open and competitive economy here at home. Buchholz uses the red herring of “outsourcing” to highlight the domestic issues that really belong at the center of every American political campaign.

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About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

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