Man Without Qualities

Thursday, March 04, 2004

Hillary Speaks! And World Trade Trembles!

Unlike Herr Doktorprofessor Paul Von Krugman, Senator Hillary Clinton is ready and willing to state what she thinks should be done to stem the loss of manufacturing jobs in this country!

Senator Clinton says we should subsidize "old economy" industries through the tax system:

The senator argued for the creation of an across-the-board 10-percent cut in corporate taxes for American factories in order to retain and attract jobs that might otherwise go overseas. She also proposed the creation of a Manufacturing Research Agency, most likely within the Commerce Department, to oversee and encourage research and development projects in manufacturing. ... Nationwide, 3 million manufacturing jobs have been lost since July 2000.

Herr Doktorprofessor is also concerned about what he sees as a jobs shortage: U.S. employment is at least four million short of where it should be. Imports and outsourcing didn't cause that shortfall.

Dear me, Herr Doktorprofessor seems to be saying that Senator Clinton is way off base - that the jobs shortage is not caused by jobs moving overseas. If that's so - and the manufacturing jobs "shortage" is being caused by, say, increasing productivity through fancy automation - giving factories a tax break might still increase the number of US manufacturing jobs just by encouraging an inefficient over-investment in manufacturing facilities. Of course, that would all be accomplished at the expense of other American jobs - which would have to be taxed (directly or indirectly) more to finance the tax subsidy given to manufacturing. Is that coherent economics or policy? Is there some reason why we should prefer to tax people in the United States who do things efficiently in order to subsidize less-efficient manufacturing businesses? Of course, that would also create an incentive to move those over-taxed jobs off-shore - and most of the things the US is really good at now are services. Like financial services - the kind they do a lot in New York City.

So Senator Clinton seems to be proposing a scheme that will probably lead to more of the services consumed in America being provided by non-Americans. Maybe by people in India or China? Isn't that called "outsourcing?" Isn't outsourcing supposed to be the BIG PROBLEM? (The Wall Street Journal reports today: Research budgets are so spare the brokers have even dabbled in outsourcing. J.P. Morgan Chase & Co. has hired 50 junior analysts in Bombay, India. The move has helped cut the yearly cost of covering a stock to $117,000 from $185,000 in 2001, a spokesman says.) Well, at least in the first instance it's a tax cut on somebody she's proposing. [BTW: Blogger Don Luskin's financial research shop and its fortunate clients are noted in the Journal article.]

Herr Doktorprofessor gives wise counsel: old fallacies about international trade have been making a comeback lately (yes, Senator Charles Schumer, that means you).

But, hey, Herr Doktorprofessor! You missed one! Yoo-hoo! Check out the other Senator from New York! Yoo-hooooooooo!

Yes, indeed. Leave it to the smartest person in the world to think of something like that. And, of course, send her to the White House in 2008 as her reward!

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