Dr. Norm Matloff On Obama And Tech Job Offshoring
September 01, 2008, 10:48 PM
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From Norm Matloff’s H-1B/L-1/offshoring e-newsletter.

Norm Matloff writes:

Obama And Tech Job Offshoring

Given my Subject line above, I must make my usual disclaimer that I am a lifelong Democrat, and that my criticism of Obama here should not be construed to mean that McCain is any better on issues like H-1B and offshoring; despite McCain's (largely deserved) reputation as a maverick, he's definitely no maverick on H-1B/offshoring.

Having said that, I must say I've been very disturbed by a tendency I've observed in Obama—and these days Democrats in general, and probably politicians in general—to deliberately deceive voters by using subtle wordings that technically say X but are intended to be understood as Y.

The first instance of this that I noticed was Obama's statement during the primaries that he did not have any ties with federal lobbyists. Well, guess what—he was then exposed as having ties with STATE lobbyists, including his New Hampshire campaign co-chair, who lobbies for the pharamceutical industry on the state level. (See for example Obama co-chair a state lobbyist - First Read - msnbc.com) Clearly Obama intended that voters would not notice his qualifier word "federal," and would assume that he was renouncing all ties with lobbyists.

Thus while watching Obama's nomination acceptance speech last week, I picked up immediately on his statement that he opposed tax breaks for firms that offshore. Again, this was clearly calculated to imply that Obama would take strong action against offshoring in general, instead of merely doing literally what he said—close a tax loophole, one which in fact plays almost no role in offshoring.

Hillary Clinton has made the same deceptive statements (see for instance here). Worse, this was exactly the same deceptive tack that John Kerry took in the 2004 election. I wrote about this extensively at the time; see in particular here and here.

Indeed, Kerry was thoroughly exposed on this in one of the televised election debates with George W. Bush. The moderator was ABC's Charlie Gibson. Here is the exchange:

GIBSON: Senator, I want to extend for a minute, you talk about tax cuts to stop outsourcing. But when you have IBM documents that I saw recently where you can hire a programmer for $12 in China, $56 an hour here, tax credits won't cut it.

KERRY: You can't stop all outsourcing, Charlie. I've never promised that. I'm not going to, because that would be pandering. You can't.

No, technically Kerry had never promising to stop all offshoring, or even a substantial portion of it. But he had definitely given the impression that he would do so, famously calling them "Benedict Arnolds." So yes, he was indeed pandering, and dishonestly doing so.

And note that up to that time, Kerry had basically been given a pass on the offshoring issue by the press, other than a couple of isolated articles not noticed by many people. Indeed, if I recall correctly, the only reason Gibson had asked the question in the first place was that it had been suggested to him by one of the anti-offshoring organizations.

The valuable article enclosed below goes into these issues in detail. Obama touts desire to keep tech jobs in the U.S.| Though he points to offshore outsourcing, his plan needs specifics, By Patrick Thibodeau,Computerworld, September 1, 2008 I have a few comments:

Joe Greco, director of California State University-Fullerton's Center for the Study of Emerging Markets, discounted the impact of tax code changes on the broader offshore trend. "Any plans for a tax code change are like trying to plug a hole in a leaky dam with your finger — to believe the U.S. government tax code promotes outsourcing is a major misconception of the fiery debate around outsourcing offshore," he said.
Yes, but always remember the source of that misconception—John Kerry. To my knowledge, tax issues had never been brought up in the offshoring debate prior to Kerry's statements. It was a "misconception" deliberately created by Kerry to deceive.
But Obama could have more success fighting the shift of jobs overseas through the second half of his point — by creating incentives for companies to add jobs in the U.S, said Greco. "If you want to be a magnet, you can be a magnet," he said.
Again, this is a great way to deceive people. Creating jobs in the U.S. means nothing if they are filled by H-1Bs and L-1s, which is what has happened in New York state under Senator Clinton. See here, and the links therein. Moreover, one must ask what kinds of jobs are created (it's common to send tech jobs abroad while creating lower-paying non-tech jobs here). And most importantly, as noted in the article below, there is the point that firms save so much money by offshoring that a mild tax break won't be enough to keep the jobs here.

Speaking of misconceptions, here's a common one:

Firms in India, in particular, aren't just competing on low cost but on the increasing quality of their services, said Stephanie Moore, an analyst at Forrester Research Inc., in Cambridge, Mass. The cost of doing work in India is increasing, but users are gaining through the better efficiencies these firms offer, which can deliver savings in their own right.
This is referring to the Indian firms' use of the Capabilities Maturity Model (CMM). But CMM merely assesses a project's management techniques, not the quality of its personnel. As one official in the CMM project at Carnegie Mellon University noted, "You can be an [highest CMM-rated] organization that produces software that might be garbage." Another red herring.

Norm