Does The Heritage Foundation Support Outsourcing Or Not?

April 01, 2011 1:59 pm ET — Walid Zafar

A writer over at the Heritage Foundation's blog argues that the best way to discourage American companies from outsourcing jobs overseas is to cut corporate tax rates. In a post on The Foundry blog, Conn Carroll writes, "Yesterday, Gallup released a poll showing that the number one way Americans would like to see more United States jobs created is to stop sending new jobs overseas. That is a fabulous idea, and the simplest way to accomplish it would be to lower out nation's corporate tax rate."

Obviously, there are a variety of factors (including taxes) that American companies take into account when deciding whether or not to move U.S. jobs to, say, India. But the main factor is the cost of labor. Businesses outsource because they can pay workers in other countries much less than they would have to pay them in the United States.

For instance, General Electric, which paid absolutely no federal taxes last year despite posting $14 billion in profits, continues to outsource jobs overseas because labor is cheap. GE won't bring those jobs back to the United States no matter how low the corporate tax rate is.

Oddly, that same point has been made by none other than the traditionally outsource-friendly Heritage Foundation. Here are several Heritage scholars dispelling the "myths" of outsourcing. The authors argue, amongst other things, that outsourcing jobs abroad helps grow our domestic economy and warn that changing existing tax rules "will carry unintended consequences."

Myth 5: A job outsourced is a job lost.

Fact: Outsourcing is a means of getting more final output with lower cost inputs, which leads to lower prices for all U.S. firms and families. Lower prices lead directly to higher standards of living and more jobs in a growing economy.

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Myth 9: The government can protect American workers from outsourcing.

Fact: Protectionism is isolationism and has a history of failure.

Proposals to punish businesses that outsource jobs, institute tariffs or change tax rules will carry unintended consequences if enacted. Such measures would injure U.S. firms that export goods and services and erode U.S. competitiveness, often in unexpected ways.

America's workers deserve a more informative, less partisan debate on outsourcing. The negative impact of outsourcing on the economy and American employment has been greatly exaggerated, and the benefits of outsourcing almost entirely ignored.

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