Among the Obama campaign’s many accusations this year, one of the more interesting ones has been the claim that Mitt Romney was an “outsourcer” during his days at Bain Capital.
When exploring this claim, we must remember the job of a company like Bain Capital: it’s to create value for the investors by building a successful company. The vast majority of companies that Bain shepherded to success during Romney’s tenure were and are, in fact, major employers, major retail, wholesale, or manufacturing firms that employ thousands and thousands of Americans.
The net result of Mitt Romney being involved in the American economy has unquestionably been the creation of hundreds of thousands of good jobs here in the United States, and also, naturally, many overseas as well, when these companies expand to other markets and include other origins in their sourcing.
There was a time, not too long ago from a historian’s perspective, but perhaps far indeed in terms of modern pop culture, when Democrats understood how that worked. Democrat presidents used to recognize that added trade can spur increased transportation and retail activity, can enable good increases in the standard of living, even bring stability to international relations.
It was a Democrat, after all, who said that “A rising tide lifts all boats.” Unfortunately, the only thing modern Democrats learned from JFK is how to talk in sound bites. They never did learn how to make that sound bite make sense.
What is Outsourcing?
Let’s begin with a definition. Outsourcing is broadening your supply network. It’s beginning to purchase materials or finished goods from some point farther away than you used to.
If a Detroit car factory used to stamp its own door panels, hood and truck panels, fender and roof panels, but then decides to contract them to metalworkers in Flint or Toledo, that was outsourcing. If the vendor in Flint or Toledo got too expensive, so they had to look farther away for the parts, like Gary or Raleigh-Durham, that was outsourcing too. And if those vendors got too expensive, so they had to look to Japan, Germany, or China to supply these parts, then that also is outsourcing.
Did we oppose outsourcing when it meant losing the work in Detroit and creating jobs in Flint or Toledo? Of course not. Nor should we oppose it when we turned to Indiana and North Carolina. But yes, we should indeed be worried when jobs are exported overseas, and we have to turn to Chinese and Japanese vendors for parts we used to make ourselves.
The Democrats demonize the recipient of the jobs; they attack the people making the hard choices to move production, rather than recognizing that there’s a reason why they’re doing it. The Democrats want to punish the manufacturer, demonize the purchasing agents, vilify the new vendors. The Democrats never want to ask why people find it necessary to make such moves in the first place, because they don’t like the answer.
The big secret of international trade
There is a secret that economists and politicians either don’t know or don’t talk about. Nobody really “wants” to outsource.
Oh, they do, certainly; companies outsource a lot. But they don’t like to do it. They only do it when they have to.
We all have some personal fondness for some imported products; on principle, or out of ethnic pride, we German-Americans might buy German beer, or we Italian-Americans may buy Italian wine, or we Irish-Americans may buy Irish cotton sweaters. If we think they’re the best, or if they just give us the warm feeling of identity with our landsmen, we may do some such purchasing, now and then.
But in the workplace, such distant purchasing is NOT desirable, not in the least.
The nearby vendor is handy, efficient, convenient. The on-time delivery schedules are guaranteed to be easily met. When Detroit buys from Flint or Toledo, and runs out, or finds a flaw, they can give the order for replacements and those replacements can often be delivered within hours if in stock, within a day if they have to be custom-made.
Transportation is cheap across a state or county line. A full 53’ truckload of parts can be delivered in mere hours, for mere hundreds of dollars.
Contrast that with the expense of shipment across an ocean. A smaller container, just 20’, 40’, or 45’ long at most, takes four to eight weeks to get from vendor to buyer, and costs thousands of dollars, usually a multiple of ten times the cost of that local quick transit from the old vendor just over the state line. And if we can’t wait four to eight weeks? Then you’re looking at airfreight, which still takes several days and bears a cost of ten or even twenty times as much as seafreight does.
The global marketplace IS a good thing. A rising tide does indeed lift all boats, giving consumers and employees worldwide more options. But that doesn’t mean that a global supply chain is the best of all possible worlds for a manufacturer. All other things being equal, any manufacturer would prefer to have all his vendors be nearby, within the same metro area if possible, within a couple hundred miles if necessary. Any manufacturer wants to be able to visit his vendors, meet with their production and engineering staff, expedite a rush order, with ease and convenience.
American manufacturers don’t want to deal with the long transit times, the great transportation expense, the language issues, currency issues, billing issues, Customs issues, quality issues, all of which explode when outsourcing to a foreign vendor. American executives don’t enjoy the 14 hour flights to China, living in a foreign country out of a hotel for weeks or months at a time, far from the comforts of home. And yet we do, so many times, because we have to, to save money and keep our businesses above water. We need to outsource, so often, because it’s the only way to survive.
So the better question is, why is that the case?
The Democratic Party’s war on jobs.
Manufacturers run numbers every day. Are we producing enough, are we selling enough, are we saving enough, to become or remain profitable? Are we gaining customers, distributors, retail outlets? Is our customer base happy with us or upset?
And they act on these numbers. If they aren’t selling enough, they must boost their marketing efforts. If costs are too high or margins too tight, they must save money. The worse the economy, the more focused on savings they must be.
In this long slow sluggish era of stagnation – not quite a recession but certainly no kind of recovery! – American businesses have had to be ever more aggressive in identifying ways to save. To keep the doors open another month, we move this production line to China, we close this other one entirely, we move this line to India, we close this other one entirely. The larger the business, the more such options it can consider; the Democrats’ error is in thinking that the business likes it.
In fact, more and more, the one force driving businesses to outsource abroad is the Democratic Party, its platform and its practitioners.
The USA now has the highest effective corporate federal income tax rate on earth, at about 38%. That’s before you even count the huge corporate income tax rates of our once high-manufacturing states, California, New York, Illinois… When half your profits will be taken away, you need a lot more profits in order to make it worthwhile to stay in business.
The USA has unleashed an army of regulators in recent years, producing a flurry of red tape that has put a stranglehold on American manufacturing. Want to manufacture a showerhead? It better be under 2.5 gpm, or you can’t make it. Want to make a lightbulb? Forget that inexpensive incandescent, now they have to be the much more expensive compact fluorescent. Want to build or renovate an existing plant? It has to comply with the ADA building code. Want to have any employees? The Lily Ledbetter act makes it easier for them to sue you.
Want to plug any of your machinery into an outlet and get power so you can turn them on? Good luck, in an era of environmentalist extremists banning oil drilling, animal rights activists banning wind turbines, NIMBY-minded local governments banning nuclear facilities, so that power is ever harder to come by and ever more expensive to get at. Even as we discover more and more plentiful sources, the regulators of the EPA and the Departments of Energy and Interior establish more and more obstacles to make energy cost-prohibitive. It should be dirt cheap, but government has made it expensive.
With the passage of Obamacare, dozens of new taxes make expansions and new ventures an unaffordable proposition, and the hiring of new staff comes with the burden of more federal red tape than ever before.
The Democrats have built a legal system that encourages class actions and frivolous lawsuits that make the manufacture of many products in the USA simply foolhardy. More and more industries have fled over the decades, as red tape and litigation risks, empowered union thuggery and an army of tax collectors, have joined together to drive the American manufacturer away.
The fleeing businessman.
The American manufacturer is best viewed today as a man running down a street, chased by wild animals nipping at his heels. He’s running toward a safe house, a place with a door that he can slam behind him as he rushes in, leaving the animals outside.
The Democrats blame the man for running away; they also blame the safe house – China or India or Mexico perhaps – that he’s running to, sight unseen. He doesn’t want to run there; he was much happier at home in his own yard. But when the animals bared their fangs and started chasing after him, he had to run. Why blame him? And why blame the destination either, for that matter – they just opened their doors for him; they didn’t pull him in with magnets or ropes!
The Republicans lay the blame squarely where it belongs – on the pack of wild animals attacking the man. It is our regulatory excess, our punitive tax rates, our destructive employment law and our litigious system, that all conspire together to make America an inhospitable home for productive employers.
We have a talented and productive workforce, a sophisticated distribution/wholesale/retail infrastructure, and the greatest market in the world. We SHOULD be manufacturing far more at home, both for domestic sale and for international export. But we can’t ramp up manufacturing until we get Washington DC (and some overgrown states, too!) to call off the dogs and let the businessman do his job.
The Romney/Ryan team, if elected, will call off the dogs. They will work with Congress to reduce the tax and regulatory burden, and reform the legal system, so that American manufacturers can again employ Americans.
We WANT those one hour supply chains that we used to have; nobody actually likes depending on vendors half a world away. But we have to stop driving our employers away; we have to stop forcing them to save every penny by outsourcing far abroad.
Mitt Romney and Paul Ryan – and their colleagues in the Republican caucuses of the House and Senate – understand this problem, and they know how to fix it.
Barack Obama and Joe Biden – who never worked for a manufacturer a day in their lives – don’t understand it a bit. Along with their cronies in Congress – Nancy Pelosi and Harry Reid – the Democrats stand only for further regulations, further taxes, further legal impediments and czarist obstacles, to raise up against American employers. The Democrats act as though they won’t be satisfied until every American employer is driven out of business or out of the country.
This election – not just for the White House but for the critical US Senate and all the other legislative races as well – may well be the last time that the American people get to strike a blow for job creation and prosperity in our country.
We must end the Democratic war on jobs. We must remove Washington’s ability to cripple our manufacturing sector, to force our factories to shrink and shrink and shrink, until there’s nothing left at all.
If we want jobs, we need job creators. If we want prosperity, a rising standard of living for all those willing to work, a return to the growth that the American Dream has always provided before, then we must eject the Democratic Party from our capitol buildings once and for all.
By forcing our manufacturers to downsize at home, by driving manufacturing over the border and overseas, the Democrats have been the party of destructive outsourcing for decades, and Barack Obama, Harry Reid, and Nancy Pelosi have recently served as the Outsourcers-in-Chief.
Our recovery will not begin – cannot begin - until these destructive Democrats are finally out of a job.
On Tuesday, a struggling nation, tired and frustrated but full of hope and plans for better days to come, expresses itself in unison:
Thank heaven, November 6 is here at last.
Copyright 2012 John F. Di Leo
John F. Di Leo is a Chicago-based Customs broker and international trade lecturer. A fan of willing import/export activity when the result of conscious choice, he has seen this government force ever more reliance on foreign vendors through destructive policy for far too long. It’s time for a correction!
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