Freeman and Blinder Enter the Debate

In last night’s presidential debate, the candidates discussed the issue of outsourcing and what they will do to make the American economy an attractive venue for businesses. Romney emphasized how he will do this, but it is only possible if other nations play by the rules (aka China). He pinned them as a “currency manipulator,” by pegging their currency to the dollar, and advocated for placing tariffs on them. Obama said he would bring back US companies by closing loopholes that allow US companies to invest overseas and not having to pay taxes on their profit.

The most intriguing part of their debate was, to me, how they defined what jobs we should bring back to the US. Obama emphasized manufacturing jobs, which Romney then said were not high-skill, to which Obama replied later that we need high-skill and high-wage jobs like manufacturing. It seems to me that if we take out the political lingo and get down to the basic concepts, both want to bring back high-skill jobs to the US; the oh-so-comical jargon is preventing them from realizing their common goals.

In regard to manufacturing, I was reminded of Freeman’s article on factor price equalization in Beijing. In his article, US wages have gone down for manufacturing and we have a high opportunity cost for domestic production; a topic neither Obama nor Romney addressed. While both advocated for a reversal of outsourcing, they did not identify their methods for preventing this detrimental effect of the return of US jobs. Neither did they address the problem of offshoring people who are not in the manufacturing sector, as Blinder does in his article on the offshoring of jobs that do not demand personal relationships. He claims that with the rise of technology, more and more jobs will be transferred to the developing world and the US will not be prepared for “the coming industrial revolution.” To recap: neither candidate addressed the repercussions that bringing back manufacturing jobs will have on the US or the effect that offshoring service-oriented jobs is having.

Romney said that we will create new industry, but he did not say what this industry could possibly be. Obama said we need more engineers. In this context alone, Obama comes off as a Freidman supporter, who claims that we must create more engineers (and does so with an incredibly high level of urgency). If Romney would explain what this new industry could be, his argument would be more credible, and if Obama could explain why we need more engineers but not more people-oriented sectors, so would his. While both candidates addressed the problems of outsourcing, it seemed to be fairly inconclusive as to what will actually be done and how we will be prepared to handle any repercussions.