CA-Sen: Carly Fiorina, Outsourcing and the 21st-Century Economy

Carly Fiorina has been relentlessly taking a hit the past two weeks in a blistering television ad shown above. But, is it fair to criticize Fiorina for a common 21st-Century business practice?

Probably not and this Wall Street Journal piece explains.

It’s campaign season, so “outsourcing” is being used as a four-letter word. The practice of hiring workers overseas to handle certain functions of American corporations is, according to some politicians, a major cause of our ongoing economic woes.

Sen. Barbara Boxer (D., Calif.) has slammed her opponent, Carly Fiorina, for outsourcing jobs when she served as CEO of Hewlett-Packard. Ohio Gov. Ted Strickland has attacked his Republican opponent, John Kasich, for serving on the board of a company that outsources. And other politicians from Pennsylvania to Oregon have tried to use the issue to stir up voter dissatisfaction with the economy.

The Democratic leadership in the Senate has also used outsourcing as a political football. This week, three days before the projected close of the 111th Congress, Democrats brought a bill to the floor that would penalize companies that outsource. The Creating American Jobs and Ending Offshoring Act was intended to provide a payroll tax holiday to companies that shift overseas jobs back to the United States. It would also have limited the use of tax deferrals that allow U.S. companies to postpone paying taxes on foreign income until after the funds are transferred to the U.S.

The bill never received an up-or-down vote, as it failed to receive the 60 votes necessary for cloture. But merely by bringing it up, Senate Democrats showed their preference for campaign-season symbolism over serious recognition of why companies choose to outsource.

Companies outsource for two reasons. The first centers on the nature of the global economy. In today’s world, outsourcing can save companies money, reduce the time it takes to deliver products and services to customers, and provide access to skilled employees unavailable in the U.S. Outsourcing also allows companies to capitalize on incentives offered by foreign governments to attract investment. Outsourcing is here to stay for companies hoping to remain internationally competitive.

The second reason U.S. companies outsource is that our own government pursues policies that drive investment and job creation offshore: excessive taxes, needless regulations, lengthy permit processes, a decreasing supply of U.S. citizens with technical and engineering degrees, and a general governmental misunderstanding of how to support private-sector jobs. For example, taxing new U.S. corporate investment at 35%—when the world average is just over 18%—pushes U.S. companies to invest offshore to increase return to shareholders.

While the U.S. government takes this harmful approach, foreign governments comprehend as never before what it takes to attract businesses and allow them to thrive. Many learned invaluable free-market lessons from the U.S. Now those same lessons are being lost on our own leaders.

Had the recently defeated Senate bill become law, job losses would have accelerated. The U.S. government once again would have misunderstood how jobs are created and caused even more companies to relocate jobs overseas.

Politicians may want to prey on the apprehension of voters during these anxious days, but condemning U.S. companies that outsource will come back to haunt them. Politicians’ formulas for recovery are reminiscent of the days of the Great Depression, when erecting trade barriers through the Smoot-Hawley Tariff Act appeared the common-sense way to protect American jobs. It wasn’t. After the tariff, GDP fell by half, the jobless rate more than tripled, and the U.S. economy plummeted.

While outsourcing is a modern fact of life—many leading U.S. companies now do over 50% of their business outside the domestic market—it doesn’t have to become the default path just because the U.S. government is pushing American companies into more competitive foreign lands.

Politicians who accuse the business community of being solely responsible for the loss of U.S. jobs are disingenuous at best. They need to look at their own contributions to U.S. joblessness—and recognize the competitive nature of the 21st-century world economy.

Mr. Barrett is the former CEO and chairman of Intel. Mr. Moore is a former U.S. assistant secretary of commerce for trade development.

California voters should remember that as CEO of Hewlett-Packard, Carly Fiorina’s fiduciary duty was to earn MONEY for the corporation. This is private enterprise. If the American government wants to keep jobs in the United States they have that opportunity by passing pro-growth legislation.

But, Senator Barbara Boxer who has sponsored NO meaningful legislation in her decades in the U.S. Senate is being more than disingenuous in this anti-Fiorina television ad. Like a Boxer Vs. Fiorina debate moderator said yesterday:

Senator, excuse me. Ms. Fiorina is not running for the head of HP right now. She is running for the Senate and there is a big difference between running a company, where you have to make those choices, and running the government.” (Gabriel Lerner, KPCC U.S. Senate Debate, 9/29/10)