Barack Obama and Mitt Romney agree on one thing: Outsourcing is a problem.
Of course, they disagree on who’s to blame. To Obama, it’s private equity firms like Romney’s Bain Capital. To Romney, it’s deficit spending like Obama’s 2009 fiscal stimulus.
(As I pointed out two weeks ago, there’s plenty of evidence that the 2009 stimulus created millions of jobs right here in America. But never mind.)
“Countries around the world are…giving their workers and companies every advantage possible,” says Obama, but “we can win that competition.”
On Romney’s website, you can find the same language. He says our tax code “needs to be more competitive and business friendly.” We need to create a “level playing field for American products in foreign markets.”
This rhetoric is more dangerous than it seems.
It’s true that many of our exports are at a disadvantage. In countries that we trade with, the average manufacturing wage is 65 percent of the American average. In Mexico, manufacturing workers earn 11 percent of what their U.S. counterparts make. In China, they earn 3 percent.
So, the question is: Just how “level” does Mitt Romney want the “playing field” to be?
When it comes to outsourcing, Romney has a solution, but he won’t say it…because you won’t like it: The easiest way to create a “level playing field” is to lower American wages.
The dirty secret about Republican economics is that it’s all about cheap labor.
While most of the industrialized world (and much of the developing world) has experienced rising real wages in the past thirty years, American wages have stagnated.
Union membership has plummeted. The minimum wage has failed to keep up with inflation. Taxes and regulations that previously restricted the rich from siphoning the wealth of the middle class have been eviscerated.
In short, Mitt Romney’s game plan has already been put to the test.
We were told that it was a new era. We were told that we needed to sacrifice our job security, our wage increases, our retirement benefits — all in the name of globalization. We were told that America couldn’t compete with those costs around its neck. We were told that the manufacturing sector was deadweight. We were told that the working class was pulling us down. We were promised a better world filled with high-tech jobs and rapid innovation, low taxes and rising asset prices, cheap imports and even cheaper investments.
We did everything we were told. We gave up our protections and our power. And, in return, we got lower economic growth, higher inequality, productivity growth that went almost entirely to the top 1 percent, and — irony of all ironies — even bigger trade deficits.
All that cheap labor didn’t make us “competitive” after all.
All it did was line corporate coffers with more profits than ever before.
But not everyone made that mistake. According to the conservative Heritage Foundation, U.S. tax revenue is currently 27 percent of GDP. In Denmark, it’s a whopping 49 percent. They have the world’s highest minimum wage and arguably the lowest level of income inequality. Yet their unemployment rate (7.7 percent) is currently lower than ours (8.1 percent), and their economy grew at the same rate as ours from 1979 to 2007.
For another comparison, look at Sweden, where tax revenue is 48 percent of GDP. They consistently battle Denmark for the world’s lowest level of income inequality, yet they’re also ranked as the second most competitive country in the world (after Switzerland). Their unemployment rate (7.8 percent) is also lower than ours, and their economy grew faster than ours from 1979 to 2007.
Needless to say, unions are more prevalent and powerful in both of these countries than in the U.S. But arguably the most heavily unionized country is Germany, where employee representatives sit on corporate boards and have a say in industry-wide decisions. Germany’s unemployment rate (5.6 percent) is way lower than ours, and they boast a large trade surplus.
Clearly, we can raise wages and compete in the global economy at the same time. We don’t need a “level playing field” to beat outsourcing. We just need a proactive government.
This op-ed was published in today’s South Florida Sun-Sentinel.