KERRY VS. SMITH:

Kerry's Plan to Rein In Outsourcing Has Holes (David Streitfeld, October 8, 2004, LA Times)

Democratic presidential candidate Sen. John F. Kerry cites the shuttered steel plant in Massillon, Ohio, as a symbol of what's wrong with the economy under President Bush.

Under current tax laws, Kerry has complained, the owners of factories like Massillon Stainless get "special breaks" for outsourcing work. Not only were the jobs at the steel plant sent overseas, but so was the equipment.

Kerry may well bring up outsourcing at tonight's second presidential debate, especially if the national employment report for September, set to be released today, is weak.

Yet changing the tax code to keep companies from shipping work abroad — a centerpiece of Kerry's proposal to create 10 million jobs in the U.S. — may not do much to solve the problem.

Some economists note that getting a tax break is only one reason that companies outsource, and rarely the most important. Others maintain that the outsourcing of office work — the big growth area of the future — will be hard to control.

And even with factories, there are cases that apparently wouldn't be affected by the kind of change in the tax law that Kerry is talking about. Among them: the Massillon steel plant. [...]

"Traditional low-wage manufacturing jobs — the backbone of so many communities for so long — are fleeing," said Douglas Shackelford, a professor of taxation at the University of North Carolina. "Maybe we can slow it down a tad" by altering the tax code or taking other steps, "but we're just talking about whether a factory closes in one year or two."

You just can't pay them as little as their labor is worth.

Posted by Orrin Judd at October 8, 2004 9:51 AM