Protectionism

**app_engine** · 9th September 2010, 08:34 AM

Ohio bans outsourcing for state jobs :
http://economictimes.indiatimes.com/...ow/6515714.cms

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**ajithfederer** · 9th September 2010, 11:37 PM

Obama will encourage companies to invest more in the U.S.

Persisting with the theme of protecting American jobs, President Barack Obama in his latest speech on the economy said that he would press for tax breaks only for companies that created jobs on U.S. soil and not those that created jobs abroad.

In a series of speeches across the U.S. over the summer, Mr. Obama also specifically mentioned “jobs of the future” going to countries such as India and China, and repeatedly underscored his intention to pre-empt that trend.

Addressing a gathering at Cuyahoga Community College in Parma, Ohio, on Wednesday, Mr. Obama said, “For years, our tax code has actually given billions of dollars in tax breaks that encourage companies to create jobs and profits in other countries. I want to change that.”

He said that instead of tax loopholes that incentivise investment in overseas jobs, he was proposing a more generous, permanent extension of the tax credit that went to companies for all the research and innovation they did in the U.S.

His comments also followed in the wake of steps taken by the U.S. Congress to hike the fees for H1-B and L visas, mostly requested by Indian companies with U.S. operations. Following the passage of this bill and comments by its sponsor, Senator Charles Schumer, criticising companies such as Infosys for being “body shops,” Indian companies and industry bodies such as National Association of Software and Service Companies (Nasscom) had warned of negative fallout of protectionism.

In a reference to White House plans announced this week to help the economy grow and spur hiring by businesses, Mr. Obama noted that it was encouraging companies “to invest more in the U.S.” was the key to job creation.

As part of this plan, all American businesses would be allowed to write-off investments made in 2011, a tax break designed to aid small businesses in upgrading their plants and equipment. Mr. Obama said, “If we are going to give tax breaks to companies, they should go to companies that create jobs in America — not that create jobs overseas.”

He said that in fact making this distinction was one of the key differences between the Republican vision and the Democratic vision for the economy and the country. “That's what this election is all about,” Mr. Obama added

http://www.thehindu.com/business/Eco...?homepage=true

First stop buying cheap goods from the chinese, America.

**app_engine** · 10th September 2010, 01:23 AM

I read in a report that about 3 million jobs are currently in India in "off-shore" stuff with 61% of them doing U.S. work (obviously the turnover is billions of $).

I wonder how many U.S. people can be employed for the same cost (may be 1/10th or even less) and how much work can be done by that force, that could possibly be lazy / complaining / not work "round the clock" etc...

**rajraj** · 14th September 2010, 06:30 AM

af and ae :

Is it really protectionism? I don't think so! Obama is sending a message to corporations to give the American workers their fair share.

To underestand that you have to go back to the 70s. In 1970 a fresh graduate in engineering (B.S) was paid about $10K by a large corporation. The CEO's compensation was about $200K, 20 times the starting salary of a fresh graduate.

The fresh graduate could buy a townhouse for $25K to $30K in a Washington D.C suburb.
This year a fresh graduate is paid about $60K to $70K. The compensation for that CEO is $25 Million, about 400 times the salary of a fresh graduate.

The townhouse that sold for $25K to $30K now sells for more than $400K. Owning a house is out of reach for a family with single income.

That is known as salary compression for the worker.

Now, look at the changes in benefits in the last 40 years:
-there is no traditional pension where the employees did not contribute. The company took care of the pension fund

-the employee did not pay any premium for health care in 1970 and the deductible was insignificant. Now, they pay for health care - premium and high deductible

-there was employee stock purchase plan at 15% discount. Now it is 5% discount

-the annual pay raise was 10% to 15% or even higher. Now, it is very low around 5%

-There was a time when an employee could accumulate vacation upto 50 days. Now, they have to take it in the year they earned it

On top of that jobs were shipped overseas at low salaries - about $15K or lower for a beginner (correct me if I am wrong)

And they got a tax break for creating jobs overseas!

Where did all those savings go?

-accumulated cash in trillions of dollars

-buying smaller companies instead of hiring workers for new projects

-paying enormous compensation for higher level executives(CEO,VP and others)

-The worker did not get anything but a squeeze in salary and benefits!

That is what Obama is concerned about.

A recent news item projects people below poverty line to go upto 45 million. That is a shame in a country like the US

Obama is a compassionate man who cares about the average American unlike his predecessor. It is a question of who is to bell the cat? He is stepping up.

It is not protectionism!

America is no more the land of milk and honey I came to in 1965! Things have changed and changed a lot for the worse. That is why I have been telling Indian students to go back. At least they have a support to system to fall back on. Here nobody cares if you run into trouble. Sad! But, that is the harsh truth.

(There is more!

I am not sure I want to scare people!

)

**app_engine** · 14th September 2010, 08:50 AM

rajraj sir,

I didn't comment anything on Obama

My only remark is that the state telling something like "don't import" is nothing but protectionism and reminds me of the "license Raj / high customs duties era" experienced in India during my initial career days

There's not much difference between both.

Having said that, I'm totally against the greed by "officers" of corporations, who themselves alone cannot claim the total stake for profit or loss of any org.

In any case, the current workforce in U.S. cannot simply claim entitlement to a great life because their "forefathers worked hard". They got to work with current realities and compete in a global market. If they want max share (or) want to control global market, they need to play by global rules, isn't it?

(BTW, for all practical purposes, I'm a U.S. worker at present and have been so for the past seven years, so it applies to me as well

)

**rajraj** · 14th September 2010, 08:54 AM

a_e !

I very rarely get into a debate!

**ajithfederer** · 14th September 2010, 09:01 AM

RR sir

I agree with everything you said. But I believe this is a case of misled policy making. This is not a complete solution and it has repercussions. I am up for New Laws and Govt Trade Policies which either curb outsourcing or encourage Local employment more. That would be a more rightful solution. After all its their country and no body can question if new laws ban such practices. Another example is the US Govt increased the h1/l1 fees by 2,000$ to prop up mexican border projects. I am afraid that many perceive it as something very wrong. I really don't know what to say

.

Obama recently spoke about an idea called "Made in America". I don't know whether you heard about it. Its a move to make the manufacturing jobs shifted outside the country to you know where (China) to inside the country. I believe if they really want to stop outsourcing they should start with that one. And the Chinese have been flooding the American Market with cheap goods which have been given subsidies by the Chinese Govt. You name it any product(electronic, dress, household items) be it anything they have the stamp "Made in China". I believe he has to stop that one and make policies as such. I don't even want to start about the Chinese Govt's deliberate attempts to undervalue their currency which increases US Trade deficit.

Foreign workers within the country at least bring some tax revenue, don't they. This move may even hamper that. Outsourcing has its woes I understand but at-least it is done legally. And to stop outsourcing the country needs new laws which defend worker's rights and more stringent procedures which prohibits companies to avoid outsourcing. Frankly I don't see that happening as they have a lot of problems now. I am also alarmed at the fact this also would be one of their broken systems like healthcare, Immigration(Legal and Illegal) and their foreign policies.

**rajraj** · 14th September 2010, 09:51 AM

af,
You are right. Moving manufacturing to other countries was their first blunder.

Moving jobs requiring college education is probably right. Because, the US produces only 70 thousand engineers a year. But, why move call center jobs by banks and other companies when the jobs do not need a college degree or a degree in engineering? That is greed!

Higher salary is not an entitlement. Salaries should at least keep up with inflation. That has not happened. The purchasing power of $70K today is less than the purchasing power of $10K in 1970. The corporations know that and the government knows that.
The rule of thumb is that starting salary should double every ten years. That has not happened. That is one reason for people under poverty line increasing. It is not that they don't want to work or don't work. That below poverty line population includes those who work but do not earn enough to feed a family.

Europe has better laws to protect the worker. We don't have. That is a problem.

Global economy has a downside for developing countries like India. India will feel it ten or fifteen years from now. By that time it will be too late to do anything.

( I don't want to be columnist or a preacher here! If you like I can say more!

)

**ajithfederer** · 14th September 2010, 09:54 AM

. You just nailed it.