White House Outsourcing Remark Ignites Firestorm

Feb. 13, 2004 -- On Thursday — the day before the U.S. Commerce Department reported a record $489.4 billion trade deficit for 2003 — travelocity.com, the internet travel company, announced it was "outsourcing" 300 call-center jobs from Texas and Virginia to India.

Such news comes on the heels of the political firestorm set off earlier this week by President Bush's chief economic adviser, Greg Mankiw, who said "outsourcing" — sending white-collar service jobs abroad where labor is cheaper — was a good thing.

"It's something that we should realize is probably a plus for the economy in the long run," said Mankiw chairman of the White House Council of Economic Advisers. Outsourcing, Mankiw said, was part of a larger picture that would eventually be good for the American economy, "just a new way of doing international trade."

Though Mankiw's comments are somewhat less controversial in the world of economists, they became nearly radioactive in the world of politics, where perceived insensitivity to American job loss is seldom seen as shrewd.

Tom Donohue, U.S. Chamber of Commerce president and CEO, told CNN Mankiw's comments were "a pretty stupid delivery of a message in a political year."

Even normally loyal House Speaker Dennis Hastert, R-Ill., clearly felt the need to distance himself from the administration with which he works so closely.

"I understand Mr. Mankiw is a brilliant economic theorist, but his theory fails a basic test of real economics," Hastert said in a statement. "We can't have a healthy economy unless we have more jobs here in America."

Rep. Don Manzullo, R-Ill., chairman of the House Small Business Committee, called for Bush to fire Mankiw. "He would probably stick his finger in the face of one of my unemployed people and say, 'You are out of work. Congratulations. That is good for the economy, good for America,'" Manzullo said.

Democrats Pounce

Democrats — hoping the president will be vulnerable this November on the economy, 2.2 million American jobs having been lost under his watch — pounced. Sen. John Edwards, D-N.C., told a cheering crowd on Wednesday that "we need to outsource this administration."

According to an ABCNEWS poll this week, 57 percent of Americans polled think Bush doesn't understand the problems of ordinary Americans, with overwhelming majorities disapproving of the way the president has been handling both the economy and job creation.

"I think the Bush administration is completely out of touch with lives of ordinary Americans," former Vermont Gov. Howard Dean told ABCNEWS Thursday. "A half-trillion-dollar debt is going to have be paid at some point by somebody sooner or later and it's the very people whose jobs the president is sending offshore."

At the Capitol, Senate Democrats introduced legislation demanding that U.S. companies planning on outsourcing explain why they intend to do so.

"This is a disturbing trend not only in my community, but in many other communities," said Chuck Hackett, a computer programmer from Cleveland whose job was outsourced two years ago. "Middle-class workers are feeling the brunt of it."

White-Collar Jobs Fleeing

Some analysts say the outsourcing phenomenon may gut the American middle class. Forrester Research estimates that 3.3 million American white-collar jobs will leave the U.S. by 2015.

Two University of California-Berkeley economists, Cynthia Kroll and Ashok Bardhan, say approximately 14 million American service jobs may be vulnerable to outsourcing in the long run — more than 10 percent of all U.S. jobs.

But in his Monday briefing, Mankiw sounded almost nonchalant. There was little difference between manufacturing jobs and white-collar service jobs sent overseas, he said.

"We're very used to goods being produced abroad and being shipped here on ships or planes; what we're not used to is services being produced abroad and being sent here over the Internet or telephone wires," Mankiw said. "But does it matter from an economic standpoint whether values of items produced abroad come on planes and ships or over fiber-optic cables? Well, no, the economics is basically the same."

This jibes with a recent White House economic report, signed by Bush, which states that "when a good or service is produced more cheaply abroad it makes more sense to import it than make or provide it domestically."

And it fits in with the attitude of many in corporate America, like Goldman Sachs Asia official Ken Courtis, who told ABCNEWS' Mark Litke that outsourcing just makes economic sense.

"We pay hundreds of thousands of dollars a year to hire a good engineer," Courtis says. "You can hire 10 engineers for that price in India. And much of their work can be transferred back and forth over the Internet."

Calling the Delta Airlines Promotions Number

On Thursday, a call to Delta Airlines Promotions 800-number was connected to employees working in Bangladore, India. "We do have a lot of agents over here," one employee said.

They said their names were "Brian," "Ron," and "Shirley" — who later revealed that her real first name was actually Shantee.

A representative named "Ben" said he uses that name because he was told to do so while servicing Americans.

"That is my pseudo-name [sic]," "Ben" said. Indians with outsourced jobs for many companies are instructed on how to sound more American. They watch films like A Few Good Men and are trained in the use of American slang.

"A word that you say, it's 'wack,'" one instructor taught attendees of a call-center boot camp in 2002. "W-a-c-k. I'm going to say, 'yo, that's wack.'"

Possibly fearing Americans will conclude its views on outsourcing are "wack," the Bush administration on Thursday began backing off Mankiw's comments.

On Thursday Speaker Hastert released a letter written to him by Mankiw allowing that his "lack of clarity left the wrong impression that I praised the loss of U.S. jobs."

Almost simultaneously in Harrisburg, the president observed that there "are people looking for work because jobs have gone overseas. We need to act to make sure there are more jobs at home."

ABCNEWS' Mark Litke, Mike Lee, Linda Douglass, Joy Kalfopulos, Ramona Schindelheim, and Anna Grabenstroer contributed to this report.