Get angry: Congress can't even agree to mildly discourage outsourcing

As with all things U.S. government, this article will baffle you, annoy you, and probably tick you off.
Written by David Gewirtz, Senior Contributing Editor

I think I'm happy that my formal training is in computer science, rather than in law. Both disciplines create documents that follow a formal structure, but somehow, it seems easier to read code than it does to decipher the status and meaning of a bill before Congress.

I'm bringing this up because our own Jason Perlow turned me on to two outsourcing-related bills winding their way through Congress. The bills, H.R.5622 and S. 3816 claim to reduce outsourcing and bring jobs back to the United States.

Sort of.

As with all things U.S. government, what follows will baffle you, annoy you, and probably tick you off.

Stop Outsourcing and Create American Jobs Act of 2010

Let's start with the House bill, H.R.5622, the "Stop Outsourcing and Create American Jobs Act of 2010". This thing was sponsored by New York Representative Timothy Bishop and Michigan Representative Gary Peters. It was introduced at the end of June and, according to the U.S. Congress THOMAS database, is:

Referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Government Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

In other words, it's in limbo. But that's not the worst thing about it. The worst thing about it is that it barely addresses outsourcing and doesn't -- at all -- address creating American jobs.

The bill is really about reducing corporate use of tax havens. This, in itself, is not a bad thing. The bulk of the bill requires identifying countries that give U.S. corporations an unfair advantage by giving those companies a way to avoid paying most of their U.S. taxes. The bill then goes on to increase penalties for those corporations proven to be taking advantage of tax haven countries.

Indirectly, this provision could keep jobs in the U.S., but it won't do us much good. According to the bill, the Secretary of the Treasury can take an entire year to come up with a list of tax haven countries. A year! After that, Treasury doesn't have to update the list for another three years. A lot can change in three years.

If technology moved at the rate that government legislation changes to fix America's problems, we'd still be using punch cards.

Now, here's where we get to jobs -- and where this bill is so completely without teeth that it's absolutely infuriating. Section 4 of the bill states:

A Federal department or agency may give a preference in the award of a contract for the procurement of goods or services in a fiscal year to any potential contractor that has not engaged in outsourcing during the fiscal year preceding the fiscal year in which the contract is awarded.

May give. Not "must give" a preference to those not outsourcing. Just an agency may, if it feels like it, give a preference to the company that isn't shipping jobs overseas.

This is absolutely unacceptable. There is no reason -- if you believe in America and Americans -- that this bill shouldn't require all contracts go to companies that don't ship jobs overseas. Period.

I talked about this at length in How To Save Jobs. As it stands now, about 10% of all U.S. taxes collected go to employing people outside the U.S. I recommended we require all purchases made by the U.S. government to come from goods and services created here, in the U.S.

Instead, those gasbags in Congress provide a limp, barely-stated preference for buying goods and services from companies who don't outsource, while at the same time, allow for practices where we actually pay foreign workers to learn skills so they can take jobs from Americans.

I wrote about this in Get angry: your tax dollars are being used to train foreign IT workers to take your jobs. It's a worthy read and it will make your blood boil.

Anyway, the bill is in limbo for now. Maybe when it comes out of committee it'll be renamed as the "Let's Take Years to Find Tax Havens and Mildly Discourage Outsourcing Act".

So now, let's move on to the Senate's bill, S. 3816.

Next: The Senate's turd »

« Previous: The House' worthless attempt

Creating American Jobs and Ending Offshoring Act

This turd is designed to provide two key pieces of legislation: provide a payroll tax cut for companies that return jobs to the United States from overseas and end tax loopholes that encourage the off-shoring of jobs.

Why is this a turd? I'll tell you why: it rewards outsourcers.

The bill claims to create jobs by creating a "payroll holiday" for businesses that kill a job offshore and recreate it in the United States. What is a payroll holiday, you ask? It means that an outsourcer who brings a job back to the U.S. doesn't have to pay the employer share of the Social Security payroll tax for two years.

The Joint Committee on Taxation estimates that this provision will cost us taxpayers $1.09 billion over ten years in lost taxes. Not only that, as I said, it rewards companies that have been outsourcing. Sure, it has a limited, two year period where there's a bit of tax savings, but it's certainly not enough to create a business incentive to create a job in the U.S. and after the two years, any job created would almost certainly go back offshore.

But that's not the worst of it. the worst of it is how completely it "misunderestimates" the problem.

When it costs $2 a day to employ a worker in China and $2 an hour just to provide health insurance in the U.S., a payroll tax holiday isn't going to incent any business to move jobs here. You know what would? How about a tax that makes it cost exactly the same to employ a Chinese worker or Indian worker as it does a U.S. worker?

For example, let's say it costs $70,000 a year to employ an American programmer, but only $7,000 to employ an Indian programmer. Fine. We allow the U.S. company to employ that Indian worker for $7,000 and charge the company $63,000 in penalties for the privilege. Then we take that $63K and use it to provide tax holidays (and, especially, tax paperwork holidays) for small American businesses with under 10 employees.

In the year of research I did for How To Save Jobs, it became clear that even if all of America's largest companies doubled in size, they wouldn't be able to employ enough Americans to make up for our recent job losses. However, if each small American company were able to hire just one -- just one -- additional employee this year, we'd be able to solve our unemployment problem completely in less than a year.

The Senate's bill doesn't do anything for our tiny companies or our real jobs problem. Instead, it once again rewards the very largest companies for their previous anti-American practices.

Honestly, I'm not a fan of raising taxes on any business, but America is at a crossroads here. It's fair that we have to compete against other countries. But it's not cool when we have to compete against ourselves -- and those putting America's future at the most risk are compensated for it by our own government.

There is one more feature to the Senate's bill that has some merit. The bill (to some limited degree) limits the tax deductions American companies get when moving production facilities offshore. It's a weak provision, but there's at least some upside here.

This bill, too, may be dead-on-arrival. It needed three fifths of the Senators to vote to move it forward, and the vote was only 53 to 45 (with two abstentions).

What you can do

Look, we're about a month from elections and we're going to have the chance to elect an entirely new batch of idiots to Congress. This isn't a Democratic or Republican thing. It's not like if the House or Senate was Republican controlled, we'd suddenly have more jobs. In How To Save Jobs, I wrote about some of the insane outsourcing allowed under Republican Congresses, so don't be blaming everything on the Dems.

Instead, this is about lobbying efforts from major businesses, including many of those we cover here at ZDNet. We American geeks are much more expensive to employ than foreign geeks. In a tough economy, every business is trying to find a way to save money, and saving 90% on skilled and educated payroll costs (not to mention benefits) is incomprehensibly tempting to most U.S. employers.

Those savings, though, are short-sighted. The U.S. economy is the biggest economy in the world and it's driven by our strong middle class -- just the sorts of jobs we're shipping offshore. If our large companies keep insisting on shipping jobs overseas to save money, what's happening is they're also shrinking their total available customer base in the long run.

In other words, it's short-term smart to save bucks by offshoring, but in the long term, the practice will likely kill the very companies doing it, because they're effectively strangling their customer base.

This, then, is the purpose of government in the U.S. It's to set policy to the long term benefit of the nation and its citizens. These bills -- and most of the tail-chasing (yes, you can interpret that either way) that our Congress has been engaged in for the last decade -- is not to the benefit of either.

The only way this will stop is if we truly hold our elected leaders -- and our corporate leaders -- accountable. As long as corporate leaders are measured by the most recent quarter's performance and not long-term company health, these practices will continue.

As long as our political leaders can name a bill one thing but have it do something completely different -- and get away with it because no one is willing to take the time to study their actions, these practices will continue.

America is a strong nation, but for it to remain strong, it must once again practice wisdom.

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