NEW YORK (CNN) — Victorious Democrats will, with the opening of the 110th Congress, have a historic opportunity to right the course of a country that has been hell-bent on permitting free-trade corporatists and faith-based economics to bankrupt the nation.

As the New Year approaches, newly elected Democrats in the House and Senate will be battered by calls, even demands, to stay the course, rather than right it. And we can only hope they and their new leadership in both houses will have the courage and character to be rationalists and realists and overcome their partisan political debt to corporate America, and U.S. multinationals in particular.

Eye-glazing stuff, international trade.  But the consequences of faith-based free-trade will be eye-popping in the disaster it wreaks on our economy and working Americans.  The facts are anything but dull: For 30 consecutive years the United States has run a trade deficit, and our trade deficit has surged to record highs in each of the past four years.  Our monthly deficits have reached record levels in two of the past three months.

Our current account deficit — the broadest measure of international trade — is on track to approach $1 trillion this year.  And our current account deficit is almost 7 percent of our nation's gross domestic product, considerably above the threshold at which Federal Reserve studies have acknowledged our economy must make policy adjustments or face major financial crisis.  We're borrowing about $3 billion a day just to pay for our imports, and our trade debt now stands at $5 trillion.

But most disturbing of all are the comments of new Treasury Secretary Henry Paulson, who said in London Tuesday, "A strong dollar is clearly in our nation's interest and I feel very good today about the strength of the U.S. economy," as the U.S. dollar hit a 20-month low against the Euro.  Treasury secretaries are not paid for their candor, but Paulson's rejection of our current reality won't bolster his credibility with either our trading partners or the new Democratic-led Congress.

The new Congressional leadership understands that, at least in part, their majority was won as a result of growing middle-class concerns over job insecurity, stagnant wages and disgust at a class of elites that has subordinated the well-being of our middle class to the dictates of corporate masters.

I hope they can acknowledge that so-called free trade has come at an inordinate cost to working men and women in this country.  We've lost three million manufacturing jobs as a result of these so-called free trade agreements that enable corporate America to export plants, production and jobs to cheap foreign labor markets.  Millions more American jobs remain at risk of being outsourced. And wages in industries where jobs are being created, on average, pay 21 percent lower than industries in which jobs are disappearing, according to the Economic Policy Institute.

Instead of opening new markets to U.S. products and services, the U.S. government over the past 10 years has negotiated nothing more than a series of outsourcing agreements.  Aside from agriculture, our trade representatives have consistently steered clear of negotiations with Western Europe and Japan.  We'll never achieve a tangible reduction in our trade deficit without significant exports to those markets.

The new Democratic-led Congress will be called a lot of names by the devoted servants of corporate America and the U.S. multinationals who have no regard for the standard of living or quality of life for working Americans and their families.  I hope that we'll be able to call this new Congress true reformers and servants of the people.

NEW YORK (CNN) — With upraised right hand and left hand on the Bible, each of our presidents, from George Washington to George W.  Bush, has solemnly sworn to "preserve, protect and defend" the Constitution of the United States.

The American Bar Association claims President Bush has violated that oath by issuing hundreds of "signing statements" to disregard selected provisions of the laws that Congress passed and he signed.

A bipartisan, 11-member panel of the ABA found that President Bush is not only disregarding laws but using such signing statements far more than any president in history.  In fact, Bush has used signing statements to raise constitutional objections to more than 800 provisions in more than 100 laws.  All of the presidents combined before 2001 had issued only 600.

The ABA asserts that signing statements cannot be a substitute for a presidential veto and that such an assertion of presidential power amounts to a line-item veto, which the Supreme Court already has ruled unconstitutional.

The matter will likely be resolved in court.  But it stands as a metaphor for a 21st century America that is no longer secure in the claim to be a nation of laws.

The federal government is failing to enforce our laws on a wide range of issues. Trade agreements such as the North American Free Trade Agreement, which is clearly a treaty, have not been approved by two-thirds of the Senate as required by the Treaty Clause of the Constitution.

That clause states the president "shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur."  And why has the Senate not been required to approve these treaties?  Because the last three presidents have claimed these trade deals are executive agreements rather than treaties.

But if these so-called free-trade agreements are not to be considered treaties, then they are clearly within the power of Congress, not the president.  Article I, Section 8 of the Constitution gives Congress the power to "regulate Commerce with foreign nations."  But Congress has given up its exclusive constitutional authority to negotiate and regulate trade agreements by ceding "fast-track authority" to the executive branch.

The president's fast-track authority is set to expire next year, more than 30 years after its passage.  It is no coincidence that the United States has now posted a trade deficit for 30 consecutive years.

The federal government is also undermining the rule of law in this country when it comes to enforcement of our immigration laws and securing borders and ports.

The Bush administration in its first four years was responsible for 318 fines against employers who hired illegal workers, an average of fewer than 80 each year.  That's down from 5,587 fines against illegal employers during the eight years of the Clinton administration, according to the Congressional Immigration Reform Caucus, an average of 698 each year.  And the problem is getting worse; in 2004 only three employers received fines for illegal hiring.

Work site arrests have fallen even more drastically under this president.  From 1995 to 1998, there were between 10,000 and 18,000 work site arrests of illegal aliens each year.  But during the Bush administration, work site arrests fell to just 159 in 2004.

Apprehensions along the border averaged 1.05 million from fiscal year 2001 to 2004, according to the independent, progressive group Third Way, down from 1.52 million from 1996 to 2000.  Border apprehensions have plummeted more than 30 percent, despite a doubling in the number of Border Patrol agents over the past decade and the rising number of attempted crossings.

It is not only the federal government that had diminished our claim to be a nation of laws.  More than 70 U.S. cities, including New York, Los Angeles, California, and Chicago, Illinois, have set up "sanctuary" policies that offer safe haven from the law to illegal aliens and their families.

"It most certainly is a blatant violation of the law," says Rep.  Tom Tancredo, a Republican from Colorado.  "There is a provision of the 1996 Immigration Act that is very clear: It says states and localities can't do this.  The unfortunate thing is there are no teeth in it."

As Abraham Lincoln said, if bad laws exist they should "be repealed as soon as possible, still, while they continue in force, for the sake of example they should be religiously observed." President Lincoln devoutly believed that rule of law assured that ours would continue to be a government of the people, by the people and for the people.

And that should be the first demand of every American today.

Is your job safe?  Not if it can be done abroad.  The only safe jobs are in domestic services that require a "hands-on" presence, such as barbers, hospital orderlies, and waitresses.

Wholesale and retail trade, waitresses and bartenders account for 46% of the new jobs.  Education and health services, administrative and waste services, and financial activities account for another 46%.

This has been the profile of US employment growth for a number of years, along with some construction jobs filled by legal and illegal immigrants.  It is the job profile of a third world economy.

From January 2001 to January 2006 the US economy lost 2.9 million manufacturing jobs.  The promised replacement jobs — "new economy" high-tech knowledge jobs-have failed to materialize.

High-tech knowledge jobs are also being outsourced abroad.  According to the Bureau of Labor Statistics, US employment of engineers and architects declined by 189,940 between November 2000 and November 2004 (latest data available). Economist Alan Blinder estimates that as many as 56 million American jobs are susceptible to offshore outsourcing.  That would be about half of the US work force.

Most economists are confused about offshoring.  They mistakenly think offshoring is an example of free trade bringing mutual benefit through the principle of comparative advantage.  It is not.  Offshoring is an example of companies obtaining absolute advantage by combining high-tech capital with low-cost labor. The gains from absolute advantage are asymmetrical or one-sided.  The cheap labor country gains, and the expensive labor country loses.

In 1206, in India, a Turkish general named Qutb-ub-Din Aybak took over the empire of his dead king, Mohammad Ghori.  About 44 years later, in another country, Turkish soldiers known as the Mamluks ("owned ones" in Arabic) dethroned their Arab overlords, the Ayyubids, and took control of Egypt and other parts of the Near East for the next three centuries.

The Mamluks and Aybak were slaves.  They had been imported from the hard lands of Central Asia, which bred a superior kind of warrior in those days, and they were able to dethrone much softer native rulers by virtue of sheer strength.

Eight hundred years later, Indian IT (and Chinese manufacturing) is a cadre of what are essentially slaves to America and Western European corporate interests. Like the Turkic peoples of the thirteenth century, the Indians and Chinese have grown up in much harder conditions than those of the people they serve.  While an average American may be concerned about gas mileage, millions of people in Asia must think merely about surviving until the next day.

It is this struggle for survival that has conditioned India, Inc., and that provides the framework for understanding what is going to happen next in the economic evolution of the world.

Successful countries who import key labor from abroad (think of the barbarians in Rome's armies as well as of the slave dynasties of India and Egypt) often end up ruled by that labor and/or its local interests.  If your power rests with the army, it is not surprising that a dedicated group of super-soldiers with deep tribal loyalty and ties to each other could take over your country; if your power rests with the economy, as is the case in America, it will not be surprising if those shock workers who do $70,000 jobs for dollars a day also come to dominate the economy.

Today, America hires Indians to do otherwise expensive IT and business process outsourcing (BPO) work more cheaply than Americans.  Yesterday, the Ayyubids imported Kipchak Turks and other Central Asians to do military work more cheaply (and, in their case, more competently) than the local Arabs.  The Mamluks ended up ruling those Arabs for several centuries.

Historically, then, the question becomes to what extent one can hand over so much responsibility for the strategic direction of a country to workers from another country (and now, unlike the Mamluks, operating in their own country, not relocating to the center of power) while maintaining one's strategic advantage in the first place.

Yesterday, when I spoke to an Indian IT/BPO vendor named Patni, I was told that, in product engineering outsourcing, the innovation comes from the U.S. and is realized in India.  This got me to thinking.  The innovation comes from the U.S. not out of the blue, but because there are a lot of people here deeply involved with and passionate about products in the first place.  After all, there's a chain; an engineer who starts by working on minor problems may eventually have the inspiration to innovate.  If all the actual work is being done in India, there is no inherent reason that people in the U.S. will keep having innovative ideas.  The innovative ideas will ultimately come from India.

In math, all students start out by doing low-level problems and a lot of grunt work.  Building on this foundation, some gifted and determined people become mathematicians.  You don't just become a mathematician out of divine right or thanks to your citizenship.  It grows out of your lower-level work.  If, in the case of products, U.S. engineers actually stop being able to do much of the work — because it has been sent to India — they also lose the foundation on which innovation itself is built.  Still, in the U.S., there is a dogged belief that Americans simply innovate regardless of how much engineers here actually get to work.

The fact is that it is always those who do the actual work that keeps a country going that hold true power.  If American engineers don't get any practice time, as it were, on the entire spectrum of engineering work, their skills will atrophy and the innovations will simply stop coming.

Consumers deeper in debt and fresh from their first negative savings rate since the Great Depression show high consumer confidence.  It is as if the entire country is on an acid trip or a cocaine trip or whatever it is that lets people create realities for themselves that bear no relation to real reality.

How can the upbeat views be reconciled with the Bureau of Labor Statistics' payroll jobs data, the extraordinary red ink, and exploding trade deficit?

Perhaps the answer is that every economic development, no matter how detrimental, is spun as if it were good news.  For example, the worsening US trade deficit is spun as evidence of the fast growth of the US economy: the economy is growing so fast it can't meet its needs and must rely on imports. Declining household income is spun as an inflation fighter that keeps mortgage interest rates low.  Federal budget deficits are spun as letting taxpayers keep and spend more of their own money.  Massive layoffs are spun as evidence that change is so rapid that the work force must constantly upgrade skills and re-educate itself.

The denial of economic reality has become an art form.  Except for Lou Dobbs, no accurate economic reporting is available in the "mainstream media."

Occasionally, real information escapes the spin machine.  The National Association of Manufacturers, one of outsourcing's greatest boosters, has just released a report, "US Manufacturing Innovation at Risk," by economists Joel Popkin and Kathryn Kobe.  The economists find that US industry's investment in research and development is not languishing after all.  It just appears to be languishing, because it is rapidly being shifted overseas: "Funds provided for foreign- performed R&D have grown by almost 73 percent between 1999 and 2003, with a 36 percent increase in the number of firms funding foreign R&D."

US industry is still investing in R&D after all; it is just not hiring Americans to do the R&D.

US manufacturers still make things, only less and less in America with American labor.

US manufacturers still hire engineers, only they are foreign ones, not American ones.

In other words, everything is fine for US manufacturers.  It is just their former American work force that is in the doldrums.

As these Americans happen to be customers for US manufacturers, US brand names will gradually lose their US market.  US household median income has fallen for the past five years.  Consumer demand has been kept alive by consumers' spending their savings and home equity and going deeper into debt.  It is not possible for debt to forever rise faster than income.

When manufacturing moves abroad, engineering follows.  R&D follows engineering, and innovation follows R&D.  The entire economy drains away. This is why the "new economy" has not materialized to take the place of the lost "old economy."

The latest technologies go into the newest plants, and those plants are abroad. Innovations take place in new plants as new processes are developed to optimize the efficiency of the new technologies.  The skills required to operate new processes call forth investment in education and training.  As US manufacturing and R&D move abroad, Indian and Chinese engineering enrollments rise, and US enrollments decline.

The process is a unified whole.  It is not possible for a country to lose parts of the process and hold on to other parts. That is why the "new economy" was a hoax from the beginning.  As Popkin and Kobe note, new technologies, new manufacturing processes, and new designs take place where things are made.  The notion that the US can lose everything else but hold on to innovation is absurd.

Someone needs to tell Congress before they waste yet more borrowed money.  In an adjoining column to the NAM report on innovation, the February 6 Manufacturing & Technology News reports that "the US Senate is jumping on board the competitiveness issue."  The Bush regime and the doormat Congress have come together in the belief that the US can keep its edge in science and technology if the federal government spends $9 billion a year to "fund innovative, big-payoff ideas that have the potential to transform the US economy."

The utter stupidity of the "Protecting America's Competitive Edge Act" (PACE) is obvious.  The tremendous labor cost advantage of doing things abroad will equally apply to any new "big-payoff ideas" as it does to the goods and services currently outsourced.  Moreover, US research is open-sourced.  It is available to anyone.  As the Cox Commission Report made clear, there are a large number of Chinese front companies in the US for the sole purpose of collecting technology. PACE will simply be another US taxpayer subsidy to the rising Asian economies.

The assertion that we hear every day that America is falling behind because it doesn't produce enough science, mathematics and engineering graduates is a bald-faced lie.  The problem is always brought back to education failures in K-12, that is, to more education subsidies.  When CEOs say they can't find American engineers, they mean they cannot find Americans who will work for Chinese or Indian wages.  That is what the so-called "shortage" is all about.

I receive a constant stream of emails from unemployed and underemployed engineers with many years of experience and advanced degrees.  Many have been out of work for years.  They describe the movement of their jobs offshore or their replacement by foreigners brought in on work visas.  Many no longer even know American engineers who are employed in the profession.  Some are now working in sawmills, others in Home Depot, and others are attempting to eke out a living as consultants.  Many describe lost homes, broken marriages, even imprisonment for inability to make child support payments.

Many ask me how economists can be so blind to reality.  Here is my answer: Many economists are bought and paid for by outsourcers.  Most of the studies claiming to prove that Americans benefit from outsourcing are done by economic consulting firms hired by outsourcers.  Or they are done by think tanks or university professors dependent on corporate donors.  Or they reflect the ideology of "free market economists" who are committed to the belief that "freedom" is good and always produces good results. Since outsourcing is merely the freedom of property to act in its interest, and since this self-interest is always guided by an invisible hand to the greater welfare of everyone, outsourcing, ipso facto, is good for America.  Anyone who doesn't think so is a fascist who wants to take away the rights of property.

American "manufacturers" are becoming merely marketers of foreign made goods. The CEOs and shareholders have too short a time horizon to understand that once foreigners control the manufacture-design-innovation process, they will bypass American brand names.  US companies will simply cease to exist.

Norm Augustine, former CEO of Lockheed Martin, says that even McDonald jobs are no longer safe.  Why pay an error-prone order-taker the minimum wage when McDonald can have the order transmitted via satellite to a central location and from there to the person preparing the order.  McDonald's experiment with this system to date has cut its error rate by 50% and increased its throughput by 20 percent.  Technology lets the orders be taken in India or China at costs below the minimum wage and without the liabilities of US employees.

Americans are giving up their civil liberties because they fear terrorist attacks.  All of the terrorists in the world cannot do America the damage it has already suffered from offshore outsourcing.

Last week the Bureau of Labor Statistics re-benchmarked the payroll jobs data back to 2000.  Thanks to Charles McMillion of MBG Information Services, I have the adjusted data from January 2001 through January 2006.  If you are worried about terrorists, you don't know what worry is.

Job growth over the last five years is the weakest on record.  The US economy came up more than 7 million jobs short of keeping up with population growth. That's one good reason for controlling immigration.  An economy that cannot keep up with population growth should not be boosting population with heavy rates of legal and illegal immigration.

Over the past five years the US economy experienced a net job loss in goods-producing activities.  The entire job growth was in service-providing activities — primarily credit intermediation, health care and social assistance, waiters, waitresses and bartenders, and state and local government.

US manufacturing lost 2.9 million jobs, almost 17% of the manufacturing work force.  The wipeout is across the board.  Not a single manufacturing payroll classification created a single new job.

The declines in some manufacturing sectors have more in common with a country undergoing saturation bombing during war than with a super-economy that is "the envy of the world." Communications equipment lost 43% of its workforce. Semiconductors and electronic components lost 37% of its workforce.  The workforce in computers and electronic products declined 30%.  Electrical equipment and appliances lost 25% of its employees.  The workforce in motor vehicles and parts declined 12%.  Furniture and related products lost 17% of its jobs.  Apparel manufacturers lost almost half of the work force.  Employment in textile mills declined 43%.  Paper and paper products lost one-fifth of its jobs. The work force in plastics and rubber products declined by 15%.  Even manufacturers of beverages and tobacco products experienced a 7% shrinkage in jobs.

The knowledge jobs that were supposed to take the place of lost manufacturing jobs in the globalized "new economy" never appeared.  The information sector lost 17% of its jobs, with the telecommunications work force declining by 25%.  Even wholesale and retail trade lost jobs.  Despite massive new accounting burdens imposed by Sarbanes-Oxley, accounting and bookkeeping employment shrank by 4%. Computer systems design and related lost 9% of its jobs.  Today there are 209,000 fewer managerial and supervisory jobs than 5 years ago.

In five years the US economy only created 70,000 jobs in architecture and engineering, many of which are clerical.  Little wonder engineering enrollments are shrinking.  There are no jobs for graduates.  The talk about engineering shortages is absolute ignorance.  There are several hundred thousand American engineers who are unemployed and have been for years.  No student wants a degree that is nothing but a ticket to a soup line.  Many engineers have written to me that they cannot even get Wal-Mart jobs because their education makes them over-qualified.

Offshore outsourcing and offshore production have left the US awash with unemployment among the highly educated.  The low measured rate of unemployment does not include discouraged workers.  Labor arbitrage has made the unemployment rate less and less a meaningful indicator.  In the past unemployment resulted mainly from turnover in the labor force and recession.  Recoveries pulled people back into jobs.

Unemployment benefits were intended to help people over the down time in the cycle when workers were laid off.  Today the unemployment is permanent, as entire occupations and industries are wiped out by labor arbitrage as corporations replace their American employees with foreign ones.

Economists who look beyond political press releases estimate the US unemployment rate to be between 7% and 8.5%.  There are now hundreds of thousands of Americans who will never recover their investment in their university education.

Unless the BLS is falsifying the data or businesses are reporting the opposite of the facts, the US is experiencing a job depression.  Most economists refuse to acknowledge the facts, because they endorsed globalization.  It was a win-win situation, they said.

They were wrong.

At a time when America desperately needs the voices of educated people as a counterweight to the disinformation that emanates from the Bush administration and its supporters, economists have discredited themselves.  This is especially true for "free market economists" who foolishly assumed that international labor arbitrage was an example of free trade that was benefitting Americans.  Where is the benefit when employment in US export industries and import-competitive industries is shrinking?  After decades of struggle to regain credibility, free market economics is on the verge of another wipeout.

No sane economist can possibly maintain that a deplorable record of merely 1,054,000 net new private sector jobs over five years is an indication of a healthy economy.  The total number of private sector jobs created over the five year period is 500,000 jobs less than one year's legal and illegal immigration! (In a December 2005 Center for Immigration Studies report based on the Census Bureau's March 2005 Current Population Survey, Steven Camarota writes that there were 7.9 million new immigrants between January 2000 and March 2005.)

The economics profession has failed America.  It touts a meaningless number while joblessness soars. Lazy journalists at the New York Times simply rewrite the Bush administration's press releases.

On February 10 the Commerce Department released a record US trade deficit in goods and services for 2005 — $726 billion.  The US deficit in Advanced Technology Products reached a new high.  Offshore production for home markets and jobs outsourcing has made the US highly dependent on foreign provided goods and services, while simultaneously reducing the export capability of the US economy. It is possible that there might be no exchange rate at which the US can balance its trade.

Polls indicate that the Bush administration is succeeding in whipping up fear and hysteria about Iran.  The secretary of defense is promising Americans decades-long war.  Is death in battle Bush's solution to the job depression?  Will Asians finance a decades-long war for a bankrupt country?

Libertarians and free trade economists don't realize it, but they are pulling Marx out of his grave.

Free traders are resurrecting class war, not because they are Marxists but because they confuse free trade with global labor arbitrage.  Free traders turn cold shoulders to US job losses from offshore outsourcing, because they mistake the losses for the beneficial workings of comparative advantage.

Committed to a 200 year old theory that they no longer understand, free traders are cheering on the destruction of middle class jobs and the dismantling of the ladders of upward mobility that make large income disparities politically acceptable.

The destruction of the stabilizing middle class is occurring simultaneously with an extraordinary increase in income inequalities.  Not so long ago CEOs were paid 20 times more than the average employee; now some are paid hundreds of times more.  The "gilded age" is returning while the value of a college degree is declining.

According to the Bureau of Labor Statistics' 10-year jobs forecast, majority of US jobs that will be created in the coming decade will be in domestic services that do not require a college education.  This is a strange job outlook for a high tech economy allegedly benefiting from free trade.

Domestic services are nontradable.  The US economy has not created a net new job in tradable goods and services in the 21st century.

Free trade economists have forgotten that not all trade reflects the beneficial workings of comparative advantage.  For comparative advantage to function, a country's capital must stay at home and be allocated to activities in which the country has comparative advantage.  The other necessary condition is that countries have different internal cost ratios of producing different goods.

When the principle of comparative advantage was discovered, capital was mainly kept at home under the watchful eye of the owners and protected by the country's laws.  Tradable commodities were primarily products influenced by climate and geography, guaranteeing that the cost of a yard of wool in terms of a bottle of wine would vary among countries.

Today capital is more mobile than tradable goods.  Modern production functions are based on acquired knowledge and produce identical results regardless of location.  When a US corporation closes a factory in Ohio and relocates its production for US markets to China, the loss of US jobs is not the result of a Chinese firm gaining a comparative advantage over the Ohio one.  It is the result of US capital seeking absolute advantage in lower cost of Chinese labor.

Free trade economists have completely forgotten that the flow of resources to where they have absolute advantage does not result in mutual benefit.  The country that receives the resources gains and the other country loses.

When capital and technology flow from the US to China and India, the productivity of labor in China and India rises.  In the US it falls.

Outsourcing is eliminating entire American occupations in engineering and information technology.  As there are fewer jobs for graduates, engineering enrollments in the US are declining.

Libertarians and free traders are so emotionally enamored of the market that they have forgotten that markets can as easily work against a country as for it. In the US, markets are working to reduce the supply of American engineers as US corporations lay off their American employees and replace them with cheaper Chinese and Indians.

Product development, or research and development, follows manufacturing.  As US manufacturing moves offshore, so does R&D.  Innovation follows R&D, with the consequence that US science is also in relative decline.

In brief, the US is developing the labor force characteristics of a third world country in which jobs are available only in lower productivity, lower paid "hands on" domestic services.

For engineering and IT jobs that remain in the US, fewer are filled by Americans.  US firms have learned that they can pay foreigners on H-1B and L-1 work visas lower salaries, force their American employees to train their foreign replacements, and then discharge their American workers.

Consequently, there is double-digit unemployment among American software engineers, IT professionals and computer programmers.

As Lou Dobbs exposed recently on CNN, the US Department of Labor is currently reserving some 52,000 high tech job openings in US firms for H-1B visa holders. "Bodyshops" use the visas to bring in foreigners who take Americans' jobs by undercutting their pay.  American firms advertise openings for H-1B visa holders only.  No Americans need apply. Gene Koprowski in TechNewsWorld (August 20) reports that "in excess of 600,000 new visas have been granted during the last five years.  Thirty-nine percent of H-1B visas were for workers in computer-related occupations."

In other words, 600,000 Americans lost the occupations in which they have invested their human capital.  You can be assured that these 600,000 did not move up to better jobs.

As bad as it is for the individuals, it is even more costly for the country.  The outsourcing of jobs and the importation of foreigners on work visas are emptying the pipeline of qualified Americans and destroying US technical occupations.

It is paradoxical to hear the very executives who replaced their US employees with foreigners now complain about the declining interest of Americans in science and engineering.  Last July Bill Gates expressed his worries about the precipitous decline in the number of students entering computer science.  Why is Bill surprised when he helped to lead the offshore outsourcing movement?

Obviously, it is a vicious cycle.  As Americans are discouraged from the occupations, the corporations lobby for more work visas, which discourages more Americans.

Seeking to protect their careers from being outsourced, Americans are turning to domestic services, such as nursing and teaching.  However, H-1B visas threaten these occupations, too.  Hospitals struggling with costs and school systems struggling with budgets are importing lower cost foreigners to teach American kids and care for American patients.

The pressure on school budgets comes from the lost middle class jobs.  As manufacturing and now white collar work move out of US communities, tax revenues become more scarce.  Administrators seek foreign employees who will work for less.

Eventually, all Americans will be working for less except the fat cats at the top, who will earn large bonuses by substituting foreigners for Americans.

What occupations will be left to native citizens?  This question comes to me from many frustrated parents who are trying to give their children some career counseling.  It is possible for Americans still to earn good incomes from being dentists and lawyers (if they are in the top 20% of their class).  Next one thinks of skilled trades such as electrician, plumber and auto mechanic.

However, Mexican immigrants are crowding Americans out of the construction trades and may soon dominate other trades as well.

Opportunity for native born Americans is collapsing.  The loss of opportunity is showing up in declining median household income and rising poverty rate.  On September 1, Edwin Rubenstein reported (vdare.com) that according to the Census Bureau's August 30 report, "median household income declined for an unprecedented fifth straight year in 2004."  The main reason for declining household income, says the Economic Policy Institute, is "ongoing weakness in the job market."

Higher paying jobs are being lost to outsourcing and to work visas.  Lower paying jobs are being lost to Mexicans.  With real income falling for five years (despite an economic recovery), the US poverty rate has climbed from 11.3% in 2000 to 12.7% in 2004, adding 5.4 million more persons to the poverty roll.

Economic science no longer exists in America.  Its place has been taken by emotional commitments to dogmas. Americans and their hopes are daily paying the price for this great failure of economic thinking.

The August payroll jobs report from the Bureau of Labor Statistics repeats the consistent pattern of 21st century America — no net job creation in high productivity sectors.  The only jobs created are in nontradable lower paid domestic services.

Brand name companies that once were symbols of US manufacturing are today assemblers of foreign made parts.  An industry of assemblers has no need for engineers or scientists.  The dismantling of the US economy cannot be corrected by education and job retraining.  The US is on its way to becoming a third world country.

It is detrimental to the future of freedom that at this time, when our civil liberties are under attack by the Bush administration and diminishing economic opportunity is breathing new life into class war, libertarians and market economists are demonstrating more commitment to ideology than to the welfare of fellow citizens.

By associating freedom and market solutions with policies that are eroding Americans' prospects, freedom's defenders are unwittingly stabbing freedom in the back.

President Bush has made several bold second-term appointments, among them naming John Bolton as U.S. ambassador to the United Nations and Paul Wolfowitz to head the World Bank.  But the president's choice for the nation's top trade office is predictable and represents the administration's allegiance to failed trade policies that have led to the loss of American jobs, record trade deficits, and mounting, unprecedented trade debt.

Most of those agreements have resulted in the loss of manufacturing and other jobs to cheap foreign labor markets.  Portman's votes for the North American Free Trade Agreement, permanent trade relations with China, and all the recent bilateral trade agreements make clear that he is part of the problem, rather than an independent thinker who bases his policy decisions on the overwhelming evidence of the need for a solution.

Albert Einstein defined insanity as "doing the same thing over and over again and expecting different results."  Yet the United States continues to enter into similar free-trade agreements with countries and regions that allow corporate America to outsource plant, production, and jobs to other parts of the world. When those products and services are then exported back into our $11 trillion marketplace, we only add to our unsustainable trade deficit.

Red ink.  The U.S. trade deficit last year soared to a record $617 billion, a nearly 25 percent increase over 2003's record deficit and more than 5 percent of our nation's gross domestic product.  Sadly, with each new trade agreement, the administration promises more exports and the trade deficit continues to balloon.  A broader measure of trade, the current account deficit, is now $666 billion.  A change in policy is absolutely essential if we are ever to drastically reduce those deficits.  There is nothing in Portman's career of public service to suggest that we are going to break from Einstein's definition of insanity.

While we may expect CAFTA to turn out differently than did the North American Free Trade Agreement, these six countries possess an even larger pool of cheap labor than Canada and Mexico.  American workers have lost nearly 900,000 jobs as a direct result of NAFTA, most of them in the high-paying manufacturing sector, according to the Economic Policy Institute.  And since the implementation of NAFTA, the trade deficit with Canada and Mexico has surged from $9.1 billion in 1993 to $110.8 billion last year.

I would urge Portman to consider another of Einstein's observations: "The significant problems we face cannot be solved at the same level of thinking we were at when we created them."  What is now required is an intelligent policy of fair, balanced, and mutually beneficial trade to overcome our trade deficits. Economic markets, whether domestic or international, reward bold and innovative thinking.  We've learned that those same markets only punish those who believe that faith in markets is all that's needed to ensure success.

The state of our unions is weak.  Organized labor has never been less influential, at a time when corporate America possesses unprecedented political power and overwhelming influence in both parties and the White House.  After fighting for decades to improve the quality of lives of our nation's working men and women, organized labor is no longer the countervailing influence to the dominant power of corporate America.

Unions have undoubtedly improved the lives of all working Americans, and we often take for granted the changes they've helped implement in the workplace. Labor has been successful in establishing the 40-hour workweek, creating minimum-wage standards and unemployment insurance, and developing overtime pay regulations, child labor laws, and worker safety and health codes.  But today's unions are virtually impotent in the face of corporate America's political supremacy.

Declining union membership is not the only reason for organized labor's recent weakness, but it does explain the unions' diminished bargaining power.  Clearly, failed union leadership and poor union management play a significant role in organized labor's decline.  At precisely the moment in history when American working men and women are under the most vicious assault from so-called free trade, job outsourcing to cheap foreign labor markets, rising healthcare costs, a failing educational system, massive illegal immigration, and stagnant wages, our labor unions continue to follow failed practices of the past and are all but helpless in the face of corporate America's domination.

Unions refuse to throw down the gauntlet in order to fight the exporting of American jobs and often get in bed with corporate America on basic issues like a minimum-wage hike.  At the same time, organized labor flipped its position on open borders, supporting a guest-worker program as well as amnesty for illegal aliens, a practice that depresses wages for many of its existing union members and countless other workers by an estimated $200 billion a year.  As membership decreases, it's important for unions to find new workers and expand, but recruiting illegal aliens at the expense of existing members is not only counter to the interests of union membership nationwide but also further evidence of the hapless powerlessness of organized labor.

Losing ground.  Real wages for production workers, or nonsupervisors, fell by half a percent last year after rising less than 1 percent a year from 2000 to 2003.  Compounding the pressure on our working middle class, the percentage of employees receiving health insurance fell for the third straight year in 2004. "Here's a climate with productivity growing at a very strong clip, more than 4 percent, yet the wages of many American workers are lagging behind inflation," says Jared Bernstein, senior economist at the Economic Policy Institute.  "That's stark evidence that the economic pie is growing but many workers are failing to share in that growth."

The question is whether organized labor can restore sufficient strength to counteract the excessive power of business.  At least one labor leader is proposing radical reforms, however.  Andrew Stern, president of Service Employees International Union, the fastest-growing private union with 1.8 million members, has proposed consolidating the AFL-CIO's 58 member unions into about 20, organizing Wal-Mart's workers, and keeping half the member dues to create a $2 billion war chest for recruitment and organization.  "We can reward American work and American workers," Stern says, "but we're going to need...  labor unions to be strong again."

To achieve that goal, organized labor must recommit itself to the origins of the union movement and put the well-being of American workers first and foremost. Let's hope that our unions can recapture their spirit and their soul.

(CNN) — The Bush administration is trying to push the Central American Free Trade Agreement through Congress quickly and quietly.

But this agreement represents the same free trade at all costs policy that has led to a 70 percent increase in the trade deficit since 2001.  We're not signing trade agreements to open new markets for our exports.  Instead we're continuing to enter into outsourcing agreements with countries that cannot possibly buy our goods.

If you add up the gross domestic products of the six CAFTA economies, the total market comes to about $85 billion, according to the latest available figures. That's only slightly larger than the economy of New Haven, Connecticut and less than a fifth of the size of New York City.  As such, expanding trade with this bloc cannot possibly be a serious growth driver for the $11 trillion U.S. economy.

The CAFTA trading partners are simply too poor and too small to serve as major consumer markets for anything made in America, if indeed we still are manufacturing anything in this country.  But with 40 percent of workers in Central America earning less than $2 a day, CAFTA will pit the working poor of these countries against American workers, especially textile workers and small farmers.  U.S. multinationals don't exactly have a great track record when it comes to keeping jobs at home in the face of cheaper labor overseas.

More than 35 percent of all U.S. goods exports to the six CAFTA countries consist of turnaround exports, which are unfinished textile, apparel and other materials that are not ultimately consumed in these countries.  These "round-trip" imports are assembled by low-wage workers and exported right back to the American marketplace.

CAFTA may bring lower prices to consumers, but it would most likely lead to more jobs being shipped to cheap foreign labor markets.  And a new poll on CAFTA shows American consumers do not want to give up their jobs for lower prices, according to the nonprofit organization Americans for Fair Trade.  In fact, 74 percent of those polled said they would oppose CAFTA if it reduces consumer prices but eliminates jobs for American workers.

"The only people who stand to gain from CAFTA," Baynard adds, "are people who are offshoring jobs already or want to offshore jobs."

That is something we simply cannot afford.  Working Americans know all too well the high cost of free trade.  I can only hope Congress has learned that lesson as well.

President Bush has begun his second term in precisely the same manner as he ended his first: He's campaigning hard and selling hard.  And by putting Social Security reform at the top of his agenda, he will either become a hero to the smallest-government-possible, free-market-at-any-expense libertarian acolytes who are crowding the Republican Party these days or he will fall victim to the law of unintended consequences that so frequently asserts itself in economics and politics.  As is often the case with the president's policies, there seems to be no middle ground.

President Bush declared in his State of the Union address that a dramatic change in Social Security is necessary to "build a better world for our children and our grandchildren."  A noble goal, certainly, but isn't it also the least that future generations should expect from us in every regard?  Shouldn't that noble goal be our standard for other issues as well, including homeland security, foreign policy, education, the environment, immigration, healthcare, fiscal responsibility, and trade?  Should we muster the courage to add honest and representative government to the list, or would that just complicate things a bit?

Let's try out honesty and representation on the issue of Social Security reform. Put another way, what's privatization got to do with it?  The answer: nothing. But borrowing somewhere between $750 billion and $2 trillion to pay the transition costs to so-called personal accounts would add to our record budget deficit.  It's hard to see how that would help our children and grandchildren, let alone the rest of us.

Last year's report on Social Security projected the program will take in less revenue than it pays out in 2018, ultimately reaching insolvency in 2042.  Even after that year, however, Social Security will still be able to pay out nearly 75 percent of scheduled benefits.  The nonpartisan Congressional Budget Office followed those estimates by reporting benefits would be cut by only 22 percent following the program's insolvency in 2052, nearly five decades from today.  And that problem may recede as time elapses.  In 1997, the Social Security trustees projected the trust fund would be exhausted in 2029, but over the past seven years, that date has been pushed back 13 years.  It might be wise and prudent, then, to slow down, think about potential solutions, and see if the estimates continue to improve.

Less than 1 in 5 Americans now believes the Social Security system is in crisis, according to the latest Gallup/ CNN/ USA Today poll.  And 47 percent of Americans agree that the current system works pretty well and needs only minor changes. More respondents are concerned about the state of our healthcare, education, and legal systems, according to the Pew Research Center.

Deficit denial.  "Right now we're 37 years away from [insolvency] according to the president's numbers and 47 years away according to the Congress," says Mark Weisbrot, co-director of the Center for Economic and Policy Research.  "So should we be worried about it now?  I can point to at least 10, maybe 20, other problems that are a lot closer and a lot more urgent.  So it's not even anything anybody in their right mind would worry about if they knew the facts or if they weren't ideologically against the program."

Yet the Bush White House is calling Social Security the biggest crisis affecting our nation today.  What about the federal government's unsustainable record deficits?  Why does the Bush administration describe Social Security's shortfall, which the CBO projects at about 0.4 percent of gross domestic product over the next 75 years, as a national crisis when our nation's worsening trade deficit is approaching 6 percent of GDP and the federal budget deficit is now 3.6 percent of our economy?

Of course, President Bush would first have to focus on those critical issues before formulating policies to deal with them.  But because of the president's insistence on reforming Social Security, Congress and the rest of us are now forced to put Social Security in context with other looming crises that pose grave challenges.  Social Security isn't even No.  2 on the list.

The law of unintended consequences may already be at work.

When American manufacturing jobs headed overseas in the 1990s, supporters of tariff-free trade argued that newly unemployed workers could simply find jobs in the growing high-tech sector.  Yet multinational corporations soon outsourced white-collar and service-industry jobs as well, with overseas labor fielding support questions from computer users, programming software, and even examining X-rays and MRI scans for American consumers.

Outsourcing has found a fierce opponent in journalist Lou Dobbs.  Since 2003, his CNN news show Lou Dobbs Tonight has featured a recurring segment in which Dobbs and his team report on corporations sending jobs overseas.  He has compiled an online list of outsourcers, and recently wrote a book on the practice entitled Exporting America.  Dobbs recently spoke with MotherJones.com about outsourcing and its effects, current and potential, on the American economy.

MotherJones.com: When did the current outsourcing trend really begin in earnest?

Lou Dobbs: It began really with the collapse of the telecom and communications bubble in 2000.  The corporations took advantage of a digital universe to start moving jobs overseas to cheaper labor markets, and then expanded from there — to what's now an estimated 400,000-500,000 jobs a year being exported to cheap overseas labor markets.

Moving from the manufacturing offshoring to outsourcing was really a creation of the Internet; the bandwith made it all possible.  And while the web-based companies and technology companies and telecommunications companies were obviously first with outsourcing, it's now expanded to nearly every industry in the country and the world.

MJ.com: In your book, you also describe how state and local governments are now outsourcing.  How did that start?

LD: It's come about because state governments are being approached by the outsourcing facilitators, consultants and outsourcing companies themselves. We've reported extensively on a number of state governments whose outsourcing contracts are based in their unemployment divisions and departments of labor — where, for example, people in Indiana at one point could call up their state unemployment office and be talking to someone in India about unemployment benefits — denying citizens of Indiana a job to help citizens of Indiana.  It becomes increasingly mind-boggling what's going on.

MJ.com: Obviously, the most immediate cost of this outsourcing is the loss of people's jobs and livelihoods.  What are some of the other long-term consequences?

LD: Among the many consequences is the pain that is being felt by working men and women in this country, particularly our middle class.  But the other impact is the transfer of technology and our knowledge base.  We're exporting our privacy as well, because medical and financial records are being exported so that cheap overseas labor can work with those documents and records.

Each time we transfer knowledge bases overseas, whether it be manufacturing or technology or research, that is a service that will obviously be performed by a competing economy — whether emerging or not, a competing economy.  And it is work that will not be done by the U.S. economy and our workers.  The result is — and this is at the margins at this point, but could grow to an increasingly larger share of the trade-deficit problem — the result is further pressure on the U.S. economy.

And a further impact in terms of labor is not just the loss of jobs.  Study after study, survey after survey, shows that every job that replaces one that is outsourced pays approximately 20 percent less than the job that was exported overseas.  So we have a continuing downward pressure on wages in this country. That has an impact on education because obviously that money's not available to the tax base that pays for education.  It diminishes, in point of fact, the income-tax base for the federal government and state governments.  So the impact is broad and it is deep.

MJ.com: When asked about outsourcing during the presidential debates, George Bush talked about workers needing more education and more skills.  But where will the jobs come from for them to use those skills?

LD: That's a question I've been asking for two years.  This faith-based economics that seems to be the hallmark of this administration is leading us into a no man's land of inexplicable possibilities.  This administration — and frankly, it's both parties, Democrats and Republicans as well as the administration — seems indifferent to the impact of a trade deficit that now amounts to $4 trillion in external debt.  We have to borrow nearly $3 billion a day to support it.  The dollar has plummeted.  And yet everyone keeps saying, "Free trade is good for you."  I cannot find anyone for whom free trade is good.

As we go deeper in debt, we continue to lose jobs and diminish our manufacturing base.  Many people want to talk about our dependency on foreign oil, and it's a legitimate and real concern.  But so is our dependency on the rest of the world for our clothing, our food, our computers and our consumer electronics.  Our dependency isn't just on foreign oil; we can't even clothe ourselves.  Free-trade economists will tell you we're a technology economy, but we don't even produce the technological components that are the foundation of a technology economy.

MJ.com: What steps have overseas markets such as India and the Philippines taken to attract these jobs?

LD: It's just a straightforward sales proposition: "Give us your business, whether it is Wall Street research, call centers or radiology, and we will provide the same service for one-tenth of what you're paying."  It's impossible for an American worker to compete with that.  It's not because the American worker is any less educated, because he or she is not.  It's not because our workers are any less productive, because they're more productive.  It's simply the labor-cost issues.  In all the talk from the U.S multinationals, and the orthodoxy of business, government, academia and media, they're all using code words like "competitiveness," "productivity" and "efficiency."  Those are simply code for "the cheapest possible labor."

MJ.com: It seems there isn't as much debate about the merits of outsourcing as one might expect in politics and in the media.  Why do you think that is?

LD: Over the course of the past 20 years, there has been an absolute move to market-based economics.  And there's a libertarian impulse to American politics right now, whether Democrat or Republican.  That outlook, of course, means as little government as possible.  What I'd like to see is a government that would actually be responsible for its citizens, who are workers as well as taxpayers, but that runs absolutely counter to the prevailing political notion, which is basically libertarian in foundation.

MJ.com: How do you respond to the free-traders' argument that outsourcing is a short-term problem required for long-term economic growth?

LD: Well, there's nothing short-term about 28 consecutive years of trade deficits.  There's nothing short-term about a mounting external debt as a result of our reliance on imports — an external debt that has reached $4 trillion.  I see no basis whatsoever for the sophistry that's coming from some of the conservative think tanks and much of academia that says this is a short-term issue.  This is real and present pain for literally millions of Americans, and a clear and present danger to an economy that has generated most of the wealth of the entire world over the past 50 years.  We could be near the end of that role.

MJ.com: Proponents of outsourcing also point to what they call "insourcing," with overseas companies opening factories here.  Does that provide any hope?

LD: It's an interesting semantic game that has been played in the free-trade debate.  The Bush administration has created this expression of "insourcing" to counter arguments and concerns about outsourcing of American jobs to cheaper labor markets.  When they talk about insourcing, they're really referring to foreign direct investment in this country.  We can't even keep up with the Chinese government on foreign direct investment in this country; China has for the first time surpassed the United States in that regard.

The Japanese car plants are here because Ronald Reagan — who many of the so-called free traders hold up as a paragon of free trade — demanded that those plants be created here if they were going to participate in our economy and enjoy the benefits of the world's largest consumer economy.  That wasn't free trade; it was rational, balanced, reciprocal trade — which is the course we should be pursuing right now, and which all of our trade partners are pursuing. We're the only nation in the world that just mindlessly opens our markets irrespective of the constraints on our own goods and services.

MJ.com: You talk about the need for a balanced middle ground between protectionism and wide-open trade.  What would be an ideal balance?

LD: Overall, we're going to have trade deficits with a given country and a given economy.  But we should not be borrowing money to support our consumption habits over the course of 28 years.  The argument has been styled by the free-traders as opposition between economic isolationists and free trade.  The fact is free trade isn't working, and nobody's talking about economic isolationism.  We're talking about mutuality and balance in which we eliminate deficits and maintain vigorous, healthy trade with the world.  But that requires that we have a manufacturing base and reduce our dependency on foreign oil, clothing and a host of other goods and services that we can no longer afford to import.

MJ.com: Do you see a tipping point where the U.S. will have outsourced so many jobs that the economy becomes unsustainable?

LD: The Federal Reserve did a study four years ago that demonstrated that any time a trade deficit rose above 5 percent of a national economy's GDP, an inflection point had been created.  We are now approaching 6 percent of GDP. Obviously, I hope this does not result in crisis.  That is, a debt crisis because of the amount of money we have to borrow from overseas to support our imports, nor a diminishment of our tax base through outsourcing to the point that jobs become so poor-paying that we can't maintain our tax base.  But all of that is entirely possible unless people awaken to the dangers that are being posed.  I know this is dull stuff for many people, to talk about external debt and currency devaluations.  But the fact is, they're all in prospect if we do not reverse these mindless policies.

MJ.com: What type of protections can the U.S. include in future trade agreements to place the American worker at less of a disadvantage?

LD: To make the American worker more competitive, what we should really be talking about is preserving the American way of life.  Environmental protection. Protection for our working men and women.  That has built up over 100 years in this country, and we are simply at risk of losing all of those protections. As we should have with NAFTA, we should sign only agreements with protections on the environment and on labor.  Either we have that with every trading partner, or we will be at a disadvantage.

The ultimate extension of the free-trade policies that are being pursued is that not only will there be a race to the bottom for wages for working men and women, but we're also going to have to eradicate the "inconvenient" and uncompetitive environmental protections that allow us to drink clean water and breathe clean air.  And, by the way, those nasty child-labor laws could be an encumbrance to competitiveness; maybe we should get rid of those as well.  How far are we going to roll back the progress of the past century?

MJ.com: If the federal government were suddenly to choose to fight outsourcing, what should it do?

LD: The first issue is to stop the destruction of an American job.  The principal issue I have with outsourcing is that American companies — based in the United States, providing goods and services to the U.S. consumer economy — are killing jobs in this country and sending them overseas to provide the same goods and services back to the U.S. economy.  I have no problem if they want to invest and create a market in India or the Philippines or wherever.  That's great, but don't kill an American job and put it in the hands of someone making one-tenth as much just to send that same good or service back to the United States.  That's what's unique and different, and that's what has to be stopped.  As far as ways to do it, we could do it with regulation.  One would hope that before that, corporate America would find a conscience.  But failing that, regulation is entirely necessary, I'm all for it, and my apologies to the libertarians.

MJ.com: What about those jobs already shipped overseas?  Could some of those come back?

LD: Some of those jobs are already coming back, because companies are finding that despite whatever huge labor savings [the gain], there are also hidden costs, including the quality of the programming that's being done.  For example, the quality of the code work that's being done by programmers in a number of the cheap labor markets, including India.  Indian workers are remarkable people, highly entrepreneurial and well-educated, but they still cannot compete with American programmers where it's a matter of quality instead of cost.  There's also a bit of a backlash now on the export of these jobs on the part of consumers.  And my guess is that backlash is going to rise, and there will be economic costs as a result.

MJ.com: It seems like you've been more active about outsourcing than probably any other issue during your years as a journalist.  Why has this issue gotten you so involved?

LD: Because at a time when this economy needed to be growing jobs, we were exporting jobs.  At a time of economic downturn, we were raising the U.S. trade deficit even further.  And the sophistry of the free-trade orthodoxy — talking about how uneducated Americans are, how unproductive and incapable of competing — just frankly rankles the hell out of me.  We were smart enough in the `90s to generate 22 million new jobs.  Did we, in the course of four years, become so stupid, so lazy and so unproductive, or did something else change? I maintain something else changed, and that was policies that permitted destructive business practices like outsourcing, and a continuation of free-trade policies that are leading to greater trade deficits and greater indebtedness on the part of the United States.  We simply cannot sustain the path we're on.

(CNN) — President Bush dedicated a major part of his State of the Union address to what he has been calling one of the biggest problems facing our nation: Social Security.

While there are many issues requiring immediate congressional action, reforming Social Security is not chief among them.

Our leaders in Washington have more pressing issues to solve first.  Surely we have more urgent crises, like illegal immigration, border and port security, health care, and perhaps most important, our nation's exploding budget and trade deficits.

The Bush administration, and specifically Treasury Secretary John Snow, has restated its commitment to reducing our growing twin deficits.

The record trade deficit, however, continues to widen at a faster rate than ever before.

New projections show no sign of any real effort to reduce the budget deficit, and the dollar is still trading near its recent lows, despite our renewed commitment to a strong dollar policy.

If this is the Bush administration's idea of commitment, I'd hate to see what neglect looks like.  Can we stand any more such commitment from our leaders?

As the United States records its 29th consecutive year of trade deficits, we must acknowledge our current policy of free trade at all costs is not working and begin a real dialogue on balanced trade like our principal trading partners pursue.

Our nation's trade deficit is certainly not improving.  In fact, it's worsening almost every month: The deficit in November surpassed $60 billion for the first time ever, putting last year's trade gap on pace to top $600 billion.

This administration is not alone, though: The trade gap has dragged down annual GDP growth in every year but one since 1992.

Our swelling trade deficit with China alone reached a record high of $148 billion through the first 11 months of 2004, already a 30 percent increase over 2003's record gap with another month to be reported.

And while this has mostly led to lower prices for consumers, increased and unbalanced trade with China has resulted in the loss of 1.5 million American factory jobs over the past 15 years, according to the Economic Policy Institute. The job losses have accelerated as the trade deficit with China has grown.

"The American consumer is also the American worker," Republican Sen.  Lindsey Graham of South Carolina told me, "and if we don't do something to protect our manufacturing base here at home, it is going to be hard to buy any retail goods."

We've lost more than 2.5 million manufacturing jobs since the beginning of 2001, and not surprisingly, our annual trade deficit has risen by nearly 70 percent over that time.  At this rate, we can expect our trade gap to grow to $1 trillion within just the next few years.

This trend will only increase as we continue to outsource American jobs and import low-priced goods from countries with which we willingly enter into free trade agreements.

The so-called crisis in Social Security is the top priority of the president's domestic agenda, but that problem may be decades away from inflicting any pain on Americans.

Our nation's trade deficit, however, represents nearly 6 percent of our nation's GDP, and historically that will lead to tough choices: Either we must make a change in policy now or there will be a difficult adjustment on the part of markets, which can lead to an economic future none of us want to experience.

Talk about a crisis we need to solve immediately.

(CNN) — While the shift of manufacturing jobs from developed nations to cheaper labor markets has been well documented, a major study of the forces shaping the world economy is now acknowledging outsourcing's effects on the service sector.

The report, from the Central Intelligence Agency's National Intelligence Council, is the first in its series to specifically mention outsourcing and to link it directly to the changing global landscape.  The report also warns that outsourcing's growing role in globalization is detrimental to the middle classes in Western nations.

Outsourcing is often treated as an anecdotal factor amid much bigger patterns of shifting global trade.  But the report suggests it could become a driving force in the future.

Because of a lack of reliable and thorough data on outsourcing's impact, the weight given to outsourcing in the report was somewhat surprising, said Josh Bivens, an economist at the Economic Policy Institute.  But "more and more people are at least taking the scenario seriously that something big is happening and that services are much more tradable than they have been," he said.

The CIA's semi-annual survey attempts to predict global trends for the future, and its authors' view of the path to the year 2020 contains some additional threats to job security.  China and India's integration into the global economy is creating a huge, low-cost labor force, the report states.  And as more companies take advantage of this labor, "the transition will not be painless and will hit the middle classes of the developed world in particular."

The authors also suggest that such a trend could lead to a stronger anti-globalization movement with serious political consequences.  While few events could stop the process of globalization entirely, they write, its pace may be slowed by "a popular backlash against globalization prompted, perhaps, by white collar rejection of outsourcing in the wealthy countries."

"I don't think it's a fait accompli that it's going to make the middle class poor in the United States," Bivens said.  "But I do think it's a useful warning that this is going to be tough for a large swath of workers in the United States, if managed poorly."

Outsourcing's effects are part of the broader trend of shifting power from West to East.  The CIA's previous survey, written in 2000 and looking ahead to the year 2015, unquestioningly places the United States as the top economic and technological power and the main driving international force.  In the 2020 report, the United States remains the dominant force, but sees its position of power slipping as China and India emerge as "major global players."

There is a fundamental contradiction between advocating open borders and claiming to favor containment of corporate power and the defense of New Deal reforms.  It is high time American progressives examined this issue seriously.

Conservatives often point out the fundamental contradiction between the existence of a Social Welfare State and mass immigration.

But the reality is much more serious: United States immigration policy is a key part of a Corporate Welfare State.  Immigration policy helps protect established interests from democratic control — and from market competition.

Corporate Welfare as defined by Ralph Nader involves use of a public asset for private purposes — "a program is considered Corporate Welfare if its public cost outweighs its public benefits."

A classic example of Corporate Welfare: allowing broadcasting networks and corporations to use the airwaves without paying the fair market value that could be obtained at public auction.

Corporate Welfare practices are typically defended politically by wealthy interests.  It typically ensures a substantial profit for wealthy or politically influential interests.  Less well-capitalized or well-connected concerns will not get the same consideration from political authorities.

The point for progressives: immigration policy is generally a form of Corporate Welfare.

One example: First-World countries like the US have a history of fairly uniform rights of citizenship.  Citizenship has been coupled in recent decades with substantial growth of the welfare state and an increasing wage differential between wealthy and developing nations.

That means US citizenship (or legal permanent residency) has real economic value.  If one could purchase US citizenship or residency on the open market (as is possible with some countries), its value would be substantial.

We don't really have "markets" in U.S. immigration rights.  But India does.  In the Indian dowry market, an Indian IT worker can expect the dowry from the bride's family to double when he acquires an H-1b visa (which also confers barely a 50% chance of attaining citizenship).

The bride's family is paying for US citizenship for their grandchildren — and a chance for other family members to take advantage of chain migration practices.

In raw terms, this means a young H-1b applicant can expect an additional $50-$70,000 soon after obtaining an H-1b visa.

In turn, this means that the H-1b expansion legislation granted corporations the chance to lure employees with the equivalent of a $50,000 sign-on bonus — using a publicly provided resource.

There were about 1.2 Million H-1b visas issued over the last 6 years.  That was in effect a subsidy of over $60B to corporate interests — obtained at a cost of little more than $113M in campaign donations.

Another example: H-1b expansion also helps companies to operate "outside the rules." For example, Enron engaged in a technically complex, fundamentally illegal business.  An H-1b worker has strong incentive to cooperate with such an employer until he obtains permanent residency rights.  An employer can also whisk an H-1b holder out of the country at will if anything happens that prompts the attention of investigators.

However the most extreme example of passing costs onto the public may be not requiring corporate interests to pay anything close to a reasonable amount for the increases in risk associated with "open borders."

For example, if extreme mobility across borders creates a health crisis — or accelerates the next viral pandemic, or causes billions of dollars in terrorism damage — the public — not the corporations who profited — will bear these costs.

For these corporations, the government has assumed the role of insurer of last resort.

Illegal immigration also has a Corporate Welfare aspect.  Many illegal immigrants eventually obtain residency through amnesty, asylum or marriage to a US citizen. Most of these mechanisms require maintaining residency in the US.  This provides employers of illegal aliens an enormously compliant, inexpensive workforce driven by a chance at permanent residency — a plum so big there are even "game shows" built around that goal.  Of course, illegal immigration increases crime and law enforcement expenses — and public health risk.

Especially insidious is illegal immigration's interaction with the broad-based US tax system that — I would argue — is lax on taxation of concentration of wealth or monopoly influence.  Employers can avoid taxes by hiring illegal alien workers who can easily get out of the reach of the IRS if anything goes wrong.

The result: US citizens are forced into the most "protected" and monopolistic aspects of the economy, while becoming dependent for basic services on others who live like serfs.

Ultimately, the costs of excessive immigration are human.  For example, corporate agricultural interests played a major role in making sure that mass importation of illegal alien farm workers would continue.  That gave many of the larger farms in the West a marked advantage in terms of labor costs — playing a major role in the 1980s Midwestern farm crisis which displaced hundreds of thousands of Americans and destroyed whole communities.

Even Republican economists like Milton Friedman accept that current immigration practices are "subsidies."  High current levels of immigration are associated with economic deterioration.  To work well, free market systems fundamentally require that all costs be reflected in consumer prices.  That just isn't happening in US today.

Legal and illegal immigration is a weapon in a vicious class war.  Corporate America and elites have supported the restoration of a form of indentured servitude in America, which helps concentrate economic power.

These spoiled owners of capital now enjoy all the rights of both a free society and a slave society — with the responsibilities of neither.

There is no uncertainty about the outcome of this presidential election in terms of certain characteristics of the man we elect and the political environment in which he must lead for the next four years.  We're electing, no matter how long it takes for our votes to be counted or litigated, a millionaire, educated at Yale and a member of Skull and Bones.  Our president will be dealing with a Congress more accustomed to satisfying the demands of special interest groups and corporate America than the wishes and needs of middle-class constituents.

Another certainty in the midst of all this is that majority rule in this country is far more an ideal than a reality, especially for working men and women.  The most sweeping corporate tax legislation of the past two decades provides nearly $140 billion in tax breaks, bailouts, and subsidies for U.S. multinationals and other special interests.  As Sen.  Bob Graham of Florida has pointed out, there are 14 additional incentives for corporations to export U.S. jobs to cheap foreign labor markets, and the new tax law rewards, rather than punishes, companies that have moved both jobs and profits overseas.  Congress continues to ignore our conflated crisis of border security and illegal immigration, which is driving down the wages of working Americans and taxes collected by local and state governments.

These lawmakers are hardly representative of American society.  I can't find more than a few blue-collar workers in the House, but about a third of House members are lawyers.  While fewer than 1 percent of our population can claim millionaire status, about 30 percent of the Congress is made up of millionaires.  None of our elected officials lives in poverty, as do 36 million of us, and, of course, none has had to apply for welfare or training assistance after his or her job was shipped overseas.

Blacks and Hispanics make up 26 percent of our diverse society, but minorities make up only 14 percent of those serving in Congress.  While the middle class is the most underrepresented and least-served majority in Congress, women have the next largest complaint.  Fifty-one percent of our population is female, but women make up only 14 percent of Congress.

Congress is more highly educated than the public at large, but there's no evidence that it's any smarter.  Ninety-two percent of Congress has a bachelor's degree, compared with only 18 percent of the U.S. public.  Certainly a diploma isn't required to understand the impact of outsourcing, deficits, and immigration on our quality of life and standard of living.  "People appear to be forming a pretty highly developed understanding of what's going on," says Christopher Whitney, director for studies at the Chicago Council on Foreign Relations.  "That's one of the common refrains in Washington, that the public doesn't actually know about this stuff.  And the reality is they tend to know more than [politicians] give them credit for."

Disconnect.  A recent Chicago council study examined the differences in views between the American public and the leaders it has selected to act in its best interests.  The study found that while terrorism and other national security issues are critically important to the public, preserving U.S. jobs is the most commonly cited goal of U.S. foreign policy.  Seventy-two percent of Americans said outsourcing is mostly negative, while only 31 percent of our leaders agreed.  A recent Zogby poll also showed that 71 percent of Americans believed outsourcing was hurting the economy, while 62 percent believed the government should penalize companies that export those jobs.  But that is obviously not the position of Congress or the White House.

While Congress and our presidential candidates have all but ignored the issue of illegal immigration, the public opposes any measure that would give illegal aliens temporary worker status.  Most of our representatives support making it easier for illegal aliens to work here or to gain outright amnesty, and both presidential candidates support either a guest worker program or outright amnesty.  Yet nearly three fourths of Americans said we should not make it easier for illegal aliens to become citizens.

While our political energies over the past year have been spent principally on deciding who will lead the nation over the next four years, it is now clear that among the many important goals we face will be efforts to achieve true representation for the American middle class and working men and women. Unfortunately, the outcome of the November 2 election hardly ensures success in that effort.  Next up, 2006.

1.  Human rights are for humans.  Corporations are not persons.  We must update the 14th Amendment to insert "natural" before the word "persons" so corporations can no longer claim the "right to lie," the "right to hide their crimes," the "right to buy politicians and influence elections," and "the right to force themselves on communities that don't want them."  Corporate charter laws should be amended on a state-by-state basis to reinstate the spirit of the Sherman Anti-Trust Act by again outlawing the ownership of one corporation by another, to limit the term of a corporation, to insert Corporate Code-like language requiring a corporation to place the needs of its community above its desire for profits, and, as Teddy Roosevelt so strongly urged us, to ban corporations from political activity of any sort.  Similarly, corporations are not nations and shouldn't stand on an equal footing with nations.  The United States should withdraw from support of treaties and agreements such as NAFTA, GATT, WTO, and its support of The World Bank.

2.  We own our government and our commons.  "Drowning government in a bathtub" as the neo-cons recommend may have been a good idea in the Soviet Union, but the United States is a constitutional representative democratic republic where our government is, literally, us.  It was designed to work for us, be owned by us, exist solely by virtue of our ongoing approval, and must answer to us. Government functions must be transparent, and that transparency must also apply to corporations hired by government, particularly any who handle our votes.  The shared commons of our nation — including our air, water, transportation routes, airwaves and cable networks, communication systems, military, police, prisons, fire services, health care infrastructure, and courts must be held either by locally-controlled non-profit corporations or by government responsive to its citizens.  Because our federal legislators represent us, any benefits, rights, and privileges they have voted for themselves must apply to all of us. Similarly, just as we must balance our budgets every year except when in a crisis, so must our governments.  Finally, government must not be a stepping-stone to private profiteering.  We must re-institute laws against "revolving doors," particularly with regulatory agencies and the military and those they regulate or who provide military supplies.

3.  In a democratic republic, government must represent the will of the majority of the citizens while protecting the rights of the minorities.  To make American government more democratic, we must join the rest of the world's modern democracies and institute either proportional representation or Instant Runoff Voting systems at local, state, and federal levels.  Similarly, human rights movements defending minorities and women against exploitation by corporate power structures or harm from paranoids, homophobes, and racists must be recognized, and the Equal Rights Amendment passed.

4.  A strong middle class is vital to democracy.  In 1792, James Madisonfined government's role in promoting an American middle class, "By the silent operation of the laws, which, without violating the rights of property, reduce extreme wealth towards a state of mediocrity, and raise extreme indigence toward a state of comfort."  To say that somebody who earns millions a year by arbitrage "works that much harder" than a middle-class wage earner is simple nonsense.  We recommend restoring inflation-indexed income tax and inheritance tax rates to those that were extant from the 1930s to the 1960s — during the golden era of the American middle class.  We also recommend that government become the "employer of last resort" by taking on public works projects and supporting the arts, as it did during that era, and establishing a truly livable minimum wage.

In the early 1980s, when I was assistant secretary of the treasury, the U.S. trade deficit was due to oil imports.

Currently, the U.S. deficit in manufactured goods alone is 3.5 times our oil imports.  Our trade deficit in vehicles is nearly equal to our deficit in oil, and our deficit in clothing, ADP equipment, office machines, TV and VCRs is 1.5 times our oil import bill.  The United States is ceasing to be a manufacturing country.  America has a trade deficit in almost every manufacturing product.

The United States has a trade surplus in corn, cotton, wheat, scrap metal and animal feeds.  The only manufacturing products in which the United States has a (small) trade surplus is airplanes and scientific instruments.

Since 1985, the U.S. trade balance with China has deteriorated from balance to a deficit of $160 billion.  Who has the high-tech economy, and who has the Third World economy? Normally, Third World countries run trade deficits with high-tech countries.

How was it possible for China, alone in world history, to outpace the most advanced country on earth?  Was China elevated to the forefront by U.S. firms who moved their production for the American market to China in order to take advantage of essentially free labor?

Americans no longer produce the "American goods" that they consume.  American incomes are falling, as economist Joseph Stiglitz recently pointed out.  When the dollar gives way, as Dallas Federal Reserve Bank President Robert McTeer says it must, Americans will not be able to purchase the goods and services that American firms produce abroad with foreign labor.

U.S. firms will have to sell their offshore-produced wares to the labor that produces them.  "Cheap foreign goods" will be beyond the reach of Americans, whose country is in rapid transformation from a superpower to a Third World economy.

Much has been made of the perceived political split in America, dividing the United States into red ones and blue ones.  But if one looks at the public sentiment on many important issues affecting the standard of living and quality of life of this country, our nation is not more polarized than ever before.  What we really have is deep division and polarization among our political and business elites and in the mainstream media.  There actually is broad consensus on many of these specific issues, but the public doesn't hear about consensus because it isn't compelling news.

Take, for example, the issue of illegal immigration.  There is plenty of debate in the media and in Washington concerning amnesty and border restriction.  But in a USA Today/CNN/Gallup poll taken shortly after President Bush announced plans for a guest worker program for millions of illegal aliens, nearly three-fourths of Americans said government should not make it easier for illegal immigrants to become citizens.  Roughly the same percentage in a Pew Research Center poll said that we should restrict and control people coming into the country more than we do now.  Broken down along party lines, 85 percent of Republicans and 76 percent of Democrats and independents agreed with that statement.

The public's views on the overall economy are actually fairly balanced, but there are certain economic issues on which a majority of Americans agree.  A Zogby International poll for the Foreign Policy Association found that 71 percent of Americans believed outsourcing American jobs to cheap foreign labor markets was hurting the economy, while 62 percent of workers believe the federal government should penalize companies that export those jobs.  According to an American Banker/Gallup Consumer survey, nearly four-fifths of respondents had an unfavorable opinion of outsourcing.

More than 60 percent of Americans in both traditionally Republican and Democratic states believe corporations have too much power.  Only 4 percent of Americans have a favorable opinion of the North American Free Trade Agreement. And almost 80 percent of Americans think we should provide universal health care even if it means raising taxes.

Then why do we continue to hear about an increasingly polarized America?

"Political elites are really divided," says Morris Fiorina, professor of political science at Stanford University and senior fellow at the Hoover Institution.  "The upper stratum of the political class in the United States — the candidates, the activists, the interest group leaders — they are in fact more divided than they have been in quite a while.  And these are the people everybody sees in the media."

Fiorina says he thinks we're basically a centrist electorate that perceives itself as lying between two more extreme parties.  And these extreme parties may speak the loudest, but they aren't accurately representing everyone's views.

"You tend to find that these are self-appointed, sanctimonious people who purport to speak for large constituencies, and in almost all cases they are more extreme than the constituency they purport to speak for," he says.

Instead of focusing on the differences of opinion that divide us and amplifying that diversity to score political points or higher ratings, we should instead dwell on the similarities that unite us as a nation.  We're not as far apart on the issues as some would have us believe.

The U.S. economy has ceased to create jobs in tradable goods and services.  The disastrous September payroll jobs data are a repeat of the monthly trend that has held for the nearly four years of the Bush administration.

Of September's 96,000 new jobs, 73% are accounted for by two categories: government jobs and temporary help!  There were only 59,000 private sector jobs created in September, and 33,000 of those — 56% — are temps!  Manufacturing lost another 18,000 jobs.  More Americans are employed in accommodations and food services than as production workers.

It is easy to blame the Bush administration, but the real blame lies with outsourcing and offshore production.  By locating production for U.S. markets offshore, U.S. firms can substitute much cheaper foreign labor for U.S. labor to make the goods and services sold to Americans.  The high speed Internet makes it possible for U.S. firms to hire foreigners residing abroad, where living costs are low, to do knowledge-based jobs formerly performed by U.S. university graduates.

The U.S. is losing the ability to manufacture a range of advanced technology products and is now dependent on imports of advanced technology goods from China and Japan.  Entire high tech occupations are beginning to disappear in America, with computer engineering enrollments in topflight schools such as M.I.T., Georgia Tech, and UC, Berkeley shrinking by 45%.

Last week economist Joseph Stiglitz reported that median U.S. income has fallen by over $1,500 in real terms over the past three and one-half years.

Despite all evidence to the contrary, "free market," "free-trade" economists continue to give assurances that Americans are prospering from outsourcing.

As high-tech U.S. jobs move offshore, economists chant a lemming-like chorus: the answer is more high-tech education.

Bill Gates responds to shrinking job opportunities for American engineers by beating the drums for more engineering majors.

Other economists claim that we need more tax cuts to help U.S. firms acquire more capital with which to make U.S. workers more productive and, thus, more competitive.  This is a pointless exercise when the capital (and technology) is being used to employ foreigners in place of Americans.

Outsourcing and offshore production are new phenomena.  They have not been around long enough to comprise a large share of U.S. production abroad.  But they have been around long enough to erode American employment and wages in tradable goods and services.

When a U.S. multinational ceases to produce in Ohio for its domestic markets, and moves the production abroad, the Ohio jobs disappear.  Wages fall or stagnate in similar lines of work that still remain the the US.

When Intel, Microsoft and all the rest hire Asian software engineers, the U.S. engineers are out of work.  U.S. careers are sent abroad and given to foreigners, and with them go the incomes that comprise America's ladders of upward mobility.

American students are becoming aware of the facts, but economists hold firmly to their fantasy that other new and even better jobs are taking the place of those that have been outsourced.  There is no evidence whatsoever in behalf of this claim.

Economics has ceased to be an empirical science and has become a religious faith.

(CNN) — We hardly need more evidence of the unparalleled political power of Corporate America.  But while Congress recently approved billions more in corporate tax cuts, a new report showed that the United States' biggest and most profitable companies have been paying less in federal income taxes over the past three years despite reporting higher profits.  And many of them are paying no taxes at all.

Rich corporate tax breaks and loopholes are not only making it easier for large U.S. multinationals to shelter their profits earned from operations in this country, but they're also putting pressure on smaller American companies to cut costs just to compete.  And that has led to an increase in the number of jobs we've mindlessly outsourced to cheap foreign labor markets.  Closing these loopholes may not be the sole solution to outsourcing, but it would serve the dual purpose of making sure all American companies compete on a truly level playing field and restraining our already unsustainable record twin deficits.

The report echoes recent Commerce Department data, which showed corporate tax payments fell 21 percent from 2001 to 2003.  During that same period, though, the Commerce Department reported that pretax corporate profits rose 26 percent.  U.S. multinationals are earning higher profits, but they're also finding more ways to protect that money from flowing back into our country.

Martin A.  Sullivan, contributing editor for Tax Notes and former Treasury Department economist, blames the corporate tax problem on the laws rather than the U.S. multinationals themselves.

"I think Congress and the administration have dropped the ball on enforcing and strengthening the laws," Sullivan said.  "It's not just the corporations on their own doing this, and they're not doing anything illegal.  They're doing everything within the law, but they have a lot of leeway within the law right now."

Not only is the government weakening the laws to aid these corporations, but they're also handing out more than just tax breaks.  The federal government has awarded billions in government contracts to companies that shelter their profits or set up headquarters in offshore tax havens.  More than half of the top 100 contractors doing business with the government also have subsidiaries in tax-haven countries.  That may explain why these corporations now pay only about 6 percent of federal revenue, the lowest level since World War II.

Both political parties in Congress should be doing more to prevent these contracts from going to these U.S. multinationals.  After Accenture was awarded a $10 billion Homeland Security Department contract in June, the department's largest contract ever, new legislation was proposed to prevent these corporations from bidding on Homeland Security contracts.  That's a good first step, but all government contracts should favor companies that do business here, employ our country's working men and women and pay taxes here as well.

Hard-working men and women are certainly paying their share.  It's time for our business leaders to make sure they do their part as well.

Dear Mr. President:

As professors of economics and business, we are concerned that U.S. economic policy has taken a dangerous turn under your stewardship.  Nearly every major economic indicator has deteriorated since you took office in January 2001.  Real GDP growth during your term is the lowest of any presidential term in recent memory.  Total non-farm employment has contracted and the unemployment rate has increased.  Bankruptcies are up sharply, as is our dependence on foreign capital to finance an exploding current account deficit.  All three major stock indexes are lower now than at the time of your inauguration.  The percentage of Americans in poverty has increased, real median income has declined, and income inequality has grown.

The data make clear that your policy of slashing taxes — primarily for those at the upper reaches of the income distribution — has not worked.  The fiscal reversal that has taken place under your leadership is so extreme that it would have been unimaginable just a few years ago.  The federal budget surplus of over $200 billion that we enjoyed in the year 2000 has disappeared, and we are now facing a massive annual deficit of over $400 billion.  In fact, if transfers from the Social Security trust fund are excluded, the federal deficit is even worse — well in excess of a half a trillion dollars this year alone.  Although some members of your administration have suggested that the mountain of new debt accumulated on your watch is mainly the consequence of 9-11 and the war on terror, budget experts know that this is simply false.  Your economic policies have played a significant role in driving this fiscal collapse.  And the economic proposals you have suggested for a potential second term — from diverting Social Security contributions into private accounts to making the recent tax cuts permanent — only promise to exacerbate the crisis by further narrowing the federal revenue base.

These sorts of deficits crowd out private investment and are politically addictive.  They also place a heavy burden on monetary policy — and create additional pressure for higher interest rates — by stoking inflationary expectations.  If your economic advisers are telling you that these deficits can be defeated through further reductions in tax rates, then you need new advisers. More robust economic growth could certainly help, but nearly every one of your administration's economic forecasts — both before and after 9-11 — has proved overly optimistic.  Expenditure cuts could be part of the answer, but your record so far has been one of increasing expenditures, not reducing them.

What is called for, we believe, is a dramatic reorientation of fiscal policy, including substantial reversals of your tax policy.  Running a budget deficit in response to a short bout of recession is one thing.  But running large structural deficits over a long period is something else entirely.  We therefore urge you to consider the fiscal realities we now face and the substantial burden they are placing on our economy.

We also urge you to consider the distributional consequences of your policies. Under your administration, the income gap between the most affluent Americans and everyone else has widened.  Although the latest data reveal that real household incomes have dropped across the board since you took office, low and middle income households have experienced steeper declines than upper income households.  To be sure, the general phenomenon of mounting inequality preceded your administration, but it has continued (and, by some accounts, intensified) over the past three and a half years.

Some degree of inequality is inherent in any free market economy, creating positive incentives for economic and technological advancement.  But when inequality becomes extreme, it can be socially corrosive and economically dysfunctional.  Problems of this sort are visible throughout much of the developing world.  At the moment, the most commonly accepted measure of inequality — the so-called Gini coefficient — is far higher in the United States than in any other developed country and is continuing to move upward.  We don't know where the breakpoint is for the U.S., but we would rather not find out. With all due respect, we believe your tax policy has exacerbated the problem of inequality in the United States, which has worrisome implications for the economy as a whole.  We very much hope you will take this threat to our nation into account as you consider new fiscal approaches to address the nation's most pressing economic problems.

Sensible and farsighted economic management requires true discipline, compassion, and courage — not just slogans.  Given the tenuous state of the American economy, we believe that the time for an honest assessment of the problem and for genuine corrective action is now.  Ignoring the fiscal crisis that has taken hold during your presidency may seem politically appealing in the short run, but we fear it could ultimately prove disastrous.  From a policy standpoint, the clear message is that more of the same won't work.  The warning signs are already visible, and it is incumbent upon all of us to pay attention.

Respectfully submitted,

The US might be a superpower, but it is not a country that controls its own fate.  Delusion does.

The deceivers emphasize the lower prices, not the lost incomes and destroyed careers, that result when American workers are replaced by cheaper foreign labor.  The deceivers allege that the trade deficit means that we get to consume more of the world's goods than we produce, with the added benefit that foreigners pay for our excess consumption by investing in America.

The truth of the matter is that "foreign investment" in the US today consists of Asian central banks, mainly Japan and China, using surplus earnings from massive trade surpluses to prop up the US dollar by purchasing US government bonds.

By propping up the dollar, Asians keep their goods and services cheap, thus worsening the US trade deficit.  Washington goes along because Asian countries use their export surpluses to finance the US budget deficit.

Propping up the dollar undermines investment in factories or businesses that produce jobs for Americans.  Stephen Roach, chief economist for Morgan Stanley, reports that in 2003 net investment in the US business sector was 60% below the level in 2000.

The US has become the world's largest debtor, in hock to foreigners for one-fourth of our Gross Domestic Product.  The ratio of US external debt (what we owe to foreigners) and US exports is approaching the crisis ratios of banana republics.

It is inevitable: America's mounting debts will produce a crisis.  The dollar's value will plummet, and US living standards will drop.  Everything will become more expensive for Americans.

The perilous condition of the dollar is one of the reasons Bush invaded Iraq. What keeps the overvalued dollar up is the fact that it is the currency in which the Middle East bills its oil.  Every country has to purchase dollars in order to pay for its oil, and these purchases keep the dollar afloat.

Just prior to the US invasion, sanctions on Iraqi oil had run their course and were about to be removed.  Saddam Hussein intended to bill Iraqi oil in Euros, which could have started the abandonment of the dollar by the oil producing countries.  Instead of fixing our economic problems, we started a war.

In the meantime, America continues to lose high-paying jobs and entire occupations to foreigners, because US corporations outsource jobs and produce offshore.  University of California professor Norm Matloff warns that outsourcing and H1-B visas, which bring foreign workers into US firms, are destroying the US software engineering profession.  (Matloff's writings are available online and are worth more attention than this column provides.)

The shrinking computer science enrollments in American universities have finally caught the attention of the academic establishment.  Computer science departments, which should have been speaking out long ago, have been muzzled, because they are heavily dependent on research and faculty funds from the very firms whose outsourcing practices are destroying the occupation in America.

Falling enrollments mean fewer faculty positions and graduate students.  Despite their funding being threatened by fewer enrollments, most computer science professors are unwilling to contradict their corporate benefactors' false claim that "outsourcing is good for America." Another year of biting the tongue, another grant received.

Instead, the professors acknowledge that programming is a lost occupation for Americans and claim that there is still a future for American students in designing computer systems — "computer systems architecture." Nonsense, says Matloff, a computer science professor himself.  He notes that it is impossible to design computer systems without having years of programming experience.  If you lose programming, you lose the base for the occupation, and all the rest goes offshore as well.

Some economists claim that lost occupations will return to the US once wages rise in India and China.  Matloff's answer: "Did manufacturing work return to the US over time as wages rose in developing countries?  Of course not."  Only America is stupid enough to give away its manufacturing and high tech occupations.

Other economists allege that new high tech professions will rise to take the place of the lost computer engineering profession.  Matloff punctures that delusion: Venture capitalists routinely demand that the new companies they finance outsource to the hilt.

US universities have educated enough Indians and Chinese to fill every high tech job American firms have to offer.  The false claim that only drudgery jobs are outsourced is laughable.

This job crunch is not fully reflected in the unemployment rate that politicians always talk about — because unemployment statistics basically cover folks who are drawing unemployment insurance.

The many omitted groups include: at least 3 million jobless who never worked enough to qualify for unemployment insurance; disability retirees, who increased by over 0.5 million from 2000 to 2002 — many of them really displaced skilled workers; anyone in the underground economy, which doubled to over 10% of the economy from1992-1998 alone; and, tragically, given the cost of prisons and prison conditions, America's incarcerated population, which has grown annually by over 100,000 from 1998 to 2003.

Moreover, the quality of jobs is decreasing dramatically.  Four categories of non-tradable domestic service employment accounted for 78% of all new jobs created in August 2004.  During the Bush Administration, 2.7 million US manufacturing jobs and 200,000 technical jobs were lost.

US disposable income has declined for 30 years, but in the last four years it has plummeted.  A two-paycheck family has less disposable income today than a single paycheck family had 30 years ago.

Not surprisingly, the US poverty rate has steadily increased under Bush.

Bottom line: America's working and middle classes are being squeezed-with no end in sight.

But the Kerry-Edwards team appears either not to understand the desperate plight of their main constituency, working and middle-class Americans, or not to care about them.

Perhaps this is due to sheer embarrassment over Democratic complicity in much of the legislation that has caused the problem — GOP policies that are, in effect, vicious acts of class warfare designed to minimize the cost of labor and increase the wealth of the owners of capital.

An extreme example: The computer industry.  The combination of offshore outsourcing and corporate-sponsored immigration practices forced hundreds of thousands of American tech workers to make career changes in the context of rapidly shrinking opportunities reminiscent of the Great Depression.

.  Job openings, when they occurred, were often filled with H-1B and L-1 guest workers.

Congress, driven largely by campaign donations, had raised the cap on newly issued H-1b guest worker visas (active for up to 6 years) to 195,000 per year — and expanded an even more loosely controlled L-1 guest worker program. Because these temporary visas are extensively used to facilitate long term residence, when a US permanent resident was hired to fill a position, it was often a former guest worker coming back into his old position.

From 1996-1998, 28% of new hiring for programmer jobs went to H-1b workers.  That rose to 50% in 1999 and according to some expert estimates, 90% in 2001.

As a result, by 2002, there were over 463,000 H-1b workers employed in US information technology programming jobs — a job category with fewer than 3 million workers in total.  (And that figure doesn't include people who recently used guest worker programs to obtain green cards and workers using other guest worker visas.)

Between the 17.2 percent decline in information technology jobs and the expansion of guest worker visas, over 1,000,000 American computer professionals were permanently out of work.

And the use of foreign guest workers reduced the salary for Americans in these jobs by over $10,000 per year below what it would otherwise have been.

What, then, is to be done?

The present situation is inherently unstable.  Henry Ford was right: industrial economies that do not pay workers enough to afford their products have limited potential.

Conservatives have correctly observed that "open borders" threaten the very existence of social welfare programs.

Progressives need to take this analysis further.  They should look at how current immigration and trade policy threatens to eliminate the very existence of broad portions of the American "mass market" and its democratic institutions.

The Bush administration, with the active collusion of Alan Greenspan at the Federal Reserve, has been staving off the evil day with a half TRILLION dollar annual operating accounts deficit financed by foreign borrowing.  But the low interest rates that have made it affordable, and the cooperative foreign lenders, are likely to go away over the next few years.

By using immigration, trade and fiscal policies to lower labor costs and concentrate wealth in their hands, America's parasitic elites are committing economic and political suicide — just as the antebellum planters blindly expanded slavery even when it had become obvious that slavery was an extraordinarily bad idea.

The Kerry-Edwards team have every political incentive to bring these issues up. Their promises on employment and the economy are meaningless until immigration, trade and outsourcing are addressed.

But Kerry and Edwards as Senators have acted to exacerbate every one of these attacks on their constituency.  This is particularly perverse because even Hispanics largely support reduced immigration.

My guess: even if Kerry is marginally better than Bush, there is no reason to expect him to reform the current mess until a crisis arises — as it will.

Progressives and thoughtful conservatives must prepare for that crisis together.

Most Americans don't know it but Thomas Jefferson, along with James Madison worked assiduously to have an 11th Amendment included into our nation's original Bill of Rights.  This proposed Amendment would have prohibited "monopolies in commerce." The amendment would have made it illegal for corporations to own other corporations, or to give money to politicians, or to otherwise try to influence elections.  Corporations would be chartered by the states for the primary purpose of "serving the public good."  Corporations would possess the legal status not of natural persons but rather of "artificial persons." This means that they would have only those legal attributes which the state saw fit to grant to them.  They would NOT; and indeed could NOT possess the same bundle of rights which actual flesh and blood persons enjoy.  Under this proposed amendment neither the 14th Amendment of the US Constitution, nor any provision of that document would protect the artificial entities known of as corporations.

Jefferson and Madison were so insistent upon this amendment because the American Revolution was in substantial degree a revolt against the domination of colonial economic and political life by the greatest multinational corporation of its age: the British East India Company.  After all who do you think owned the tea which Sam Adams and friends dumped overboard in Boston Harbor?  Who was responsible for the taxes on commodities and restrictions on trade by the American colonists?  It was the British East India Company, of course.  In the end the amendment was not adopted because a majority in the first Congress believed that already existing state laws governing corporations were adequate for constraining corporate power.  Jefferson worried about the growing influence of corporate power until his dying day in 1826.  Even the more conservative founder John Adams came to harbor deep misgivings about unchecked corporate power.

A few years after Jefferson's unsuccessful attempt to incorporate this amendment into the Bill of Rights, the fourth Chief Justice of the US Supreme Court, John Marshall, unilaterally asserted the Court's right to judicial review in the seminal case of Marbury v. Madison in 1803.  In practice this meant that the Supreme Court would have sole and unchecked power to determine what the Constitution meant.  Jefferson was aghast.  His fear lay in the knowledge that an unelected branch of government, one which is not subject to the will of the citizens, and is effectively immune from check by the two elected branches of government (Only one Supreme Court Justice has ever been impeached — none have ever been convicted and removed) was now solely responsible for determining the meaning of the Constitution.  The meaning of the Constitution, and hence the very nature of our political system, was now in the hands of an un-elected and effectively uncontrollable body.  "The Constitution has become a thing of wax to be molded as the Court sees fit" Jefferson lamented.

In 1886 Jefferson's twin Constitutional nightmares collided in a train wreck which has effectively derailed true democracy in this nation and indeed across the globe as other nations have either copied our unfortunate example, or have fallen under the dominion of our multinational corporations — or both...  The precipitating event was the case of Santa Clara County v.  Southern Pacific Railroad.  This case is cited to the present day as having conferred the status of "natural" as opposed to "artificial" personhood upon American corporations. In fact the Supreme Court declined to rule on the issue.  J.C.  Bancroft Davis, the Clerk of the Court, an attorney, who curiously was also a former railroad company PRESIDENT, used his position to simply write this conclusion into the head notes which summarized the case.  Ever since this fateful event; this sleight-of-hand rewriting of the Constitution, corporations have had the status of "actual" persons whose rights are fully protected by the Constitution.  It was a coup against democracy which succeeded because there were no real external checks and balances on the Court, and because the Court itself chose not to act to repudiate Davis' rewriting of the Constitution.  The thing stood.  Precedent was established.  Jefferson's "thing of wax" nightmare had come to pass.

Consider the implications: Actual flesh and blood persons are indeed all roughly equal in overall attributes.  But a corporation can possess MILLIONS of times greater resources than does any "natural" person, or even a group of such persons.  Neither labor unions, nor any other category of "special interest" group possesses this attribute of personhood and so they too are fundamentally and intrinsically unable to compete against corporate "persons."

To make a long and sad story short: The concentrated power of corporate persons has overwhelmed our democratic system.  The unsound decisions of our unchecked and unbalanced Supreme Court have handed the "keys to the Kingdom" over to our corporate overlords.  An analogy with an AIDS infection is instructive: After 1886, our democratic "immune system" resisted Davis; corporate personhood infection of our national body politic by deploying the Sherman Anti-Trust Act, the Progressive Movement, the Labor Movement, and the New Deal.  All of these bought time.  But now, in the era of global mega-corporations, after a long struggle, our "democratic immune system" is finally being overwhelmed. Democracy, rule of, by, and for the people, is dying in America.

Contemporary America is a nation ever-more under the dominion of plutocratically wealthy, corporate quarterly-profit ber alles overlords.  A seamless web of corporate power connects our multinational corporations with our mass media — now almost wholly owned by a handful of mega-corporations.  This military-industrial-media complex largely determines which politicians will and will not get elected.  Thus they control the government.  They control access to money as well as determine how a candidate will be presented to the viewers.  The very policies that our "elected" officials are "allowed" to espouse are rigorously circumscribed: Remember Clinton's national healthcare proposals?  Our media will never tell us that every other developed nation on Earth has universal health care for their citizens.  With some notable exceptions, our corporate media has seen to it that the average American is woefully uninformed. Our primary role in this atrocious system is simply to consume.  We are to be consumers, corporate subjects, not citizens.  Under this materialistic system our lives are devoid of deep meaning as we are conditioned to work ever harder and go ever deeper in debt to accumulate ever more useless junk as though if we just piled up enough of this crap we would somehow, magically, become happy.

What is to be done?  Let's open our eyes and admit that the emperor has no clothes.  Let's admit that our democratic, constitutional, system has been sidetracked.  Until we return power to the hands of flesh and blood citizens EXCLUSIVELY, until corporations are summarily striped of "personhood," until this legal obscenity is abolished, we flesh and blood citizens can have no real freedom, democracy cannot flourish.  Furthermore, to ensure that the will of the people is respected and reigns supreme, all members of our federal judiciary must face periodic reelection by the citizens — just as is the case for our judiciary here in California.  Until and unless these things come to pass we cannot be a free people.  Because of this our ability to act and to build freely upon our inspirations is constrained by corporate forces beyond our present control, we cannot live up to our full potentials as human beings.  Once these goals are accomplished there shall be such an explosion of innovation in economic and political and scientific entrepreneurship as to make Periclean Athens seem timid.  It's up to each of us to act NOW.  Freedom itself hangs in the balance.

Economic development incentives aren't necessarily a bad idea.  There are plenty of impoverished and distressed communities that need help, and lots of it.  But shouldn't our nation's trade and economic policies ensure that this entire country is an opportunity zone?  Isn't this still the Land of Opportunity?

While the Bush administration is proposing to improve the plight of just a handful of American communities, it's furthering the deterioration of thousands more with harmful trade and economic policies.  Our trade deficit is nearing $600 billion annually, and we've now run a trade deficit for 28 straight years.

Instead of expanding our nation's manufacturing and textile base by opening new markets for products and services, all this administration and its predecessors have accomplished over the past decade is a series of outsourcing agreements. The principal beneficiaries of NAFTA and the World Trade Organization are U.S. multinationals that are exporting American jobs to cheaper labor markets overseas.

These opportunity zones are an admission that our nation's trade and economic policies aren't working.  Zones are hardly a new idea; they're just an extension of the concept of empowerment zones and enterprise communities.  The only real difference: Instead of just poverty levels as a qualification, communities will be eligible if they've lost manufacturing jobs or plants or retail sales.  The president says the zones are needed because of changing times.  I say they're needed because of broken policies.

The affected areas usually have poor infrastructure, high crime, and may be far from a main transportation network, Peters noted.  "The idea that a federal subsidy is going to really change that is just mistaken."

It's time for President Bush, Sen.  Kerry and our elected officials in Congress to start talking straight about the very real crisis we face as a result of our mindless free trade policies.  And please, no more zones.

OK, let's suspend the bashing of President Bush and his Democratic presidential opponent John Kerry for their stupefyingly awful records and platforms on trade policy.  Let's turn instead to how their utter inability to understand America's globalization challenges will sandbag other major policies they're pitching.  To date, there's no better example than Bush's goal of turning America into an "opportunity society."

Anyone who likes free markets and capitalism, will rightly love the concept of an ownership society; and it's no wonder that the Republicans are making it a centerpiece of their economic platform (even if most details remain to be filled in).

Ownership's essence is that the individual knows how to handle resources better and more responsibly than the government.  So the crises America faces in, say, health care costs and retirement security are best dealt with by giving Americans "more control over their lives," in Bush's words.

If the taxes currently financing government's gigantic role in these areas are cut, then individual Americans can take the proceeds and purchase their own medical care, and make the investments they find most promising to pay for their golden years.  Further, not only are individuals more likely to make the choices best for their circumstances, but they also will have overwhelming incentives to use their windfalls as efficiently as possible.  Along with the elimination of costly government bureaucracies, these efficiencies will produce savings for the entire economy.

Ownership society advocates also seek, in the President's words, to enable more Americans to use tax relief to "own their own home or their own small business," as well as to choose their own job training program to keep them competitive in the global marketplace.

These ideas are so innovative and optimistic that only gloom and doom liberals and other economic girlie-men would object, right?  Not by a long shot — at least if you pay any attention to the economy and its major features and trends.

Each of Bush's proposals faces compelling objections on its own terms.  For example, are individual investors really supposed to keep up with the nanosecond-by-nanosecond changes in the financial markets?  Even most finance professionals fail at this task.  Is health care really just like any other good or service, and will consumers really shop for it just like they shop for sneakers or SUVs?

But the biggest obstacle to the ownership society is the steady stripping from Americans of the resources needed to buy control over their lives.  And one of the biggest forces behind this worsening incapacity is a trade policy designed to plunge Americans into competition with much lower-paid third world workers, and drive down domestic wages and salaries in the process.

The facts are beyond dispute — except among Washington's bought and paid for globalization cheerleaders.  Adjusted for inflation, total U.S. private sector wages peaked at $8.62 per hour (measured in 1982 dollars), in April, 1978 — scant years after the great opening of the U.S. economy to imports began in earnest.  Real manufacturing wages peaked at roughly the same time, at $8.97 per hour.  (We won't bother with public sector wages because they're not directly set by the market.)

Since these peaks, real private sector wages have fallen 4.4 percent — a performance previously unheard of in American history.  And manufacturing wages, which are most affected by international competition, have fallen 5.6 percent. Worse, even though the economy has technically been recovering from the last recession for nearly three years, real private sector wages during this period are up only 0.4 percent, and real manufacturing wages are up only 1.4 percent.

More disturbing, signs keep appearing that the link between work and economic viability is growing weaker in America.  Last month's announcement that the official national poverty rate had risen in 2003 for the third straight year, to 12.5 percent, attracted deserved attention.  At least as important, however, is the large and growing number of impoverished Americans who are working Americans.  One in every four working Americans today earns less than $8.70 per hour (in 2004 dollars) — the effective federal poverty-level wage.  As social policy analyst Beth Shulman wrote on Labor Day in the Washington Post, this trend "undermines our most fundamental [national] ideal: that if you work hard, you can support yourself and your family."

Far from encouraging greater responsibility-taking, these trends inevitably are creating greater government dependencies.  One indication: The share of Americans enrolled in government health-care programs such as Medicare and Medicaid stands at a two-decade high of 26 percent.  And as made clear by rising federal budget deficits, the national appetite for public services regardless of the public's willingness or ability to pay just keeps growing.

It should be obvious to everyone why stagnant and falling incomes will doom the opportunity society.  Tax cuts will only marginally help workers who earn increasingly meager wages and, therefore, have less and less taxable income to begin with to cut and transfer to private health and retirement accounts.  The idea that these workers will be able to buy a business or a home after tax cuts is downright moronic.  Tax cuts will be equally pointless for workers deciding among job training programs if the economy keeps losing job opportunities that can pay a living wage.

In other words, tax cuts and privatization can't drive U.S. economic policy unless the United States retains, or rebuilds, a meaningful tax base.  If President Bush knows how to do this without reversing his outsourcing-centered trade policies, now's the time to tell us.  But that's unlikely unless his opponents start asking him.

August was the thirty-fourth month of disappointing job growth.  A mere 120,000 private sector payroll jobs were created in August according to the Bureau of Labor Statistics.

Continuing the third world transformation of the US labor force established by the Bush recovery, the new payroll jobs are concentrated in domestic nontradable services.  Health care and social assistance account for 42,000 of the new jobs. Employment services and temporary help provided work for 18,000, as did financial services.  Construction added 15,000 workers to payrolls.  These four payroll classifications account for 78% of last month's net new jobs.

Manufacturing jobs increased by 22,000, leaving the economy with a net loss of 2.7 million manufacturing jobs since Bush was sworn in as president.

Today's economy has 4,000 fewer jobs in architectural and engineering services and 200,000 fewer jobs in computer systems design and related than in January 2001.

Let's get real: neither employment growth nor growth in consumer income is driving the current recovery.  July's increase in personal spending was financed by a drop in the savings rate to 0.6% of disposable income.

Face it: the current recovery has been driven by the Federal Reserve's low interest rates, which have driven up housing prices, allowing people to refinance their homes and to spend their home equity.  Both households and government alike are loaded with debt.

At least the Census Bureau is not in denial: according to a recent report, the number of Americans living in poverty increased by 1.3 million during 2003.  The number of Americans without health insurance rose by 1.4 million to 45 million.

It's a fact: Americans are not prospering.  When US companies locate manufacturing abroad, where costs are lower, and outsource high value-added jobs to foreigners, who can be hired for less, foreigners, executives and shareholders gain income at the expense of the US labor force.

Stagnant real income growth in the US results from the loss of career occupations to outsourcing, forcing many Americans into less remunerative employment, while executive pay explodes.

Standard & Poor's reports that in 2003 the median earnings growth for the Fortune 500 largest companies was 9.6%, but median pay for Fortune 500 CEOs rose 22%.

Prosperity only for the few undermines Americans' political tolerance for the rich.  This is especially the case when the traditional ladders of upward mobility are lost to outsourcing and offshore production.

According to William McDonough, chairman of the Accounting Oversight Board, in the bad old days of President Reagan's "trickle-down economics," the average Fortune 500 CEO made 40 times more than the average person who worked for him... "By 2000, it was between 400 and 500 times, and last year I believe it was about 530 times.  What will bring executive pay under control?, Financial Times, By Adrian Michaels, August 23 2004

Pity the policymaker who attempts to make a case for across-the-board tax cuts in the face of such politically explosive economic inequality.

Nothing can better revive the American political left than the loss of good American jobs to foreigners while executive pay skyrockets — particularly if the two are closely related.  One might expect that conservative "free market" economists would be alarmed.  Instead, they either turn a deaf ear or shoot the messenger.

Recently, Steve Roach, chief economist at Morgan Stanley, wrote: "Economists, market strategists, and even analysts are all too often becoming identified with a political cause; that is a disturbing development—it has the potential to compromise credibility and leave investors without the security of independent advice."

Mr. Roach could just as well have said that the politicization of economic analysis leaves presidents and legislatures with no awareness of the true consequences of their actions.  "You are with us or against us" means no market for independent thought and no hearing for independent advice.

(CNN) — The loss of millions of manufacturing jobs and hundreds of thousands of service jobs over the past few years, and the threat of the loss of millions more to offshore outsourcing, is a clear call to our business and political leaders that our trade policies simply are not working.  At the least, not in the national interest.

The exporting of U.S. jobs to cheap foreign labor markets has produced nationwide pain from our nation's major cities to our small towns, in urban and suburban America.

Obviously, I'd prefer Corporate America to stop the practice of offshore outsourcing because of the dictates of their consciences and recognition of this country's traditional values and good corporate citizenship.

But if U.S. multinationals instead invoke the code words of competitiveness, efficiency and productivity — when what they really mean is the cheapest possible price for labor — then we must insist on new laws and regulations to stop it.

"The rush to Indian call centers was driven by cost," Rubin said.  "It was a semi-robotic approach that was driven by people doing technical diagnosis...  But the myth and reality are now crossing each other," he said.  "Especially with things that require secure communications or severe risk management, suddenly a worker in India and a worker in Utica [New York] are at parity."

That parity is not only good for the corporate bottom line, but it could mean one more unemployed American back on the job.  Quality and public relations concerns, political backlash and potential lost business already caused a few well-known companies to repatriate their call centers to America's small towns.

It's time to insist that Corporate America find a conscience and demonstrate true innovation to keep jobs at home, or we have no other recourse than to demand new laws and regulations to end the exporting of America.

As has been the case throughout this "recovery," job growth in July was concentrated in nontradable domestic services, with the largest components being "ambulatory health care services" and "employment services."  Gains in these sectors were offset by losses in financial services, retail trade, and transportation equipment manufacture.

Since the recovery began 32 months ago in November 2001, globalism has worked to move US labor away from high value-added jobs in tradable goods and services, reallocating American workers into domestic services.

The list consists of registered and practical nurses, school teachers, managers, sales representatives, truck drivers, executive secretaries, accountants and auditors, electricians, carpenters, mechanics, police officers, management analysts, and computer system analysts.  Only the last occupation has any relation to a high-tech economy, and there is no guarantee that the computer jobs will not be outsourced or filled by foreigners working on H1-B or L-1 visas.

The BLS Career Guide to Manufacturing 2002-2012 projects a continuing wipeout of US manufacturing employment.  Over the decade employment is expected to decline by 18% in aerospace manufacturing, by 12% in computer and electronic products, by 17% in chemical manufacturing, by 20% in the steel industry, by 31% in textile mills and products and by 69% in apparel manufacturing.

We continually hear that "America doesn't graduate enough engineers."  However, where is the need for increased enrollments in aerospace, computer, electrical, chemical, and textile engineering when the industries that employ engineers are shrinking rapidly?

Despite the overwhelming empirical evidence, economists and other spokespersons for global interests continue to maintain that globalism benefits the US work force.  Arithmetic-challenged economists explain away vanishing manufacturing employment in terms of productivity increases that allow more output from fewer workers.

If this is true, why is America's trade deficit in manufacturing goods rising, including advanced technology products?  The US, allegedly a superpower is now dependent on advanced technology products from China, allegedly a third world country.

Those giving assurances that America is benefiting from globalism are missing the big picture.  Globalism is reshaping the US labor force, giving the work force a third world profile.  Thirty-two months of economic recovery has seen job growth only in domestic services, many of which are poorly paid.  Overall, the economy has lost 1.8 million jobs since President Bush's inauguration.

Economists are absurd to pretend that the absence of US job growth in tradable goods and services is unrelated to offshore production and outsourcing.

If the US economy can no longer generate jobs in tradable goods and services, we will find out whether Americans can survive by taking in one another's laundry — and if Americans can pay for imports with domestic nontradable services.

Leading up to what is arguably the most important election since 1980, Bush and Kerry have mostly offered similar policy positions on the most divisive issues of our time.

Both have supported nearly identical plans for winning the war in Iraq.  Bush and Kerry also agree on preserving tax breaks for the middle class, demanding greater accountability from our nation's educators, immigration reform and limiting government spending in an effort to cut the deficit in half by the end of this decade.

But several important differences do in fact separate Bush from Kerry, aside from the hot-button cultural issues such as abortion rights and same-sex marriage that are well beyond the powers of the presidency to change.

For me, costly free trade agreements and the outsourcing of American jobs to cheap foreign labor markets are two principal issues at which voters should take a closer look.

Kerry has said that if elected he would review the free trade agreements signed by Bush.  But Kerry voted for these agreements and even voted to grant the president fast-track authority in negotiating those pacts.  It remains to be seen whether Kerry has really changed his stance on free trade.

Despite his concern about the impact of outsourcing on our economy, Kerry's plan to limit the practice is only a beginning.  His proposal calls for changing the tax code to discourage outsourcing, eliminating special tax breaks on foreign profits and granting more tax credits for companies that create new manufacturing jobs in the United States.

Bush still considers outsourcing to be a new way of trading with other countries and a plus for the economy in the long run, as his chief economic adviser Gregory Mankiw declared in February.

Bush also plans to continue pursuing those costly free trade agreements that have resulted in the loss of countless jobs and a wider trade deficit.  The administration's decision to not move ahead before the election with the Central American Free Trade Agreement has far more to do with politics than the president's preferences.

The issues that will most affect our standard of living and our quality of life are, in my opinion: foreign policy, free trade, corporate outsourcing, education, health care, border and port security and immigration.

Bush and Kerry will have to be far more forthright and forthcoming on those issues to win my vote.

In the current economic recovery, low pay, low skill jobs account for twice the normal amount of job growth reports Stephen Roach, chief economist for Morgan Stanley (New York Times, July 22).

Mr. Roach attributes the low quality of new U.S. jobs to globalization: "Under unrelenting pressure to cut costs, American companies are now replacing high-wage workers here with like quality, low-wage workers abroad.  With new information technologies allowing products and now knowledge-based services to flow more easily cross borders, global labor arbitrage is likely to be an enduring feature of the economy."  "What are we going to do about it?," he asks.

As long as most economists and elected officials remain in total denial, we are unlikely to do anything about it.

Economists don't seem to understand globalization, and that's a puzzle. Referring to low foreign wages, Dartmouth's Mr. Slaughter writes: "Low wages do not necessarily mean low production costs abroad.  This is because low wages are mainly a signal of low worker productivity.  In much of the world, workers are less productive than their American counterparts because they enjoy less access to the training, tools, ideas, and broad market institutions that are the foundations of high productivity."

Once upon a time this was true.  That was when U.S. employees, working with U.S. capital, technology and business know-how, were producing products to compete in import and export markets against products made by foreign workers, who worked with less capital and inferior technology.  Those were the bygone days of international trade.

Today when a U.S. multinational moves a factory from Ohio to China, the Chinese labor works with the same capital and technology that formerly employed Americans in Ohio.  The Chinese workers are no less productive.  Yet, their wage is far lower.

Dartmouth's Mr. Slaughter is wrong to attribute low Chinese wages to low productivity.  The wages are low because of the enormous excess supply of labor that overhangs the Chinese labor market.

Morgan Stanley's Stephen Roach is correct to differentiate between free trade and "global labor arbitrage." U.S. employers are substituting cheaper foreign labor for U.S. labor in the goods and services that they supply to markets at home and abroad.  As a result, the U.S. labor force is being redirected to nontradable services.  Charles McMillion's monthly reports (MBG Information Services) based on the Bureau of Labor Statistics payroll data show that job growth during the current recovery is concentrated in domestic services that cannot be outsourced.

A country whose work force is concentrated in nontradable domestic services is a third world country.  Will economists stay in denial until the U.S. reaches this destination?

One sure way for Kerry to accomplish that goal is to continue focusing on the middle class squeeze millions of Americans are facing.  Kerry already acknowledges the plight of many American families in much of his rhetoric, while his running mate, Sen.  John Edwards, frequently assails the "Two Americas" on the stump.  But the time for talk is over, and now the Democratic ticket must formulate and articulate a clear platform that advances the lives of the working men and women that make this country great.

Since the beginning of the recession in 2001, corporate profits have expanded by 57.5 percent.  But in that same period, total wage and salary income has actually declined by 1.7 percent, according to the Economic Policy Institute.  In fact, real wages are continuing to fall, declining in six of the last seven months, while many of the 1.3 million jobs created since the start of the year are paying workers less than the ones we have lost.

With most family incomes either falling or stagnating, hardworking families are increasingly worried about how to make ends meet, as expenses like education, health care, child care and energy continue to rise, and rise quickly.  Tuition for four-year colleges has increased 40 percent over the last four years, 14 percent in the last year alone.  The average price for a gallon of gasoline recently reached $2 for the first time ever.  Day care centers and nursery schools cost more now than ever before.

Health care premiums are also skyrocketing, rising four times faster than the wages of our workers last year.  What's worse, 44 million Americans are still without health care coverage of any kind, a figure that will increase to 51 million in 2006, according to the National Coalition on Health Care.

In the current economic recovery, low pay, low skill jobs account for twice the normal amount of job growth reports Stephen Roach, chief economist for Morgan Stanley (More Jobs, Worse Work, New York Times, July 22).

Mr. Roach attributes the low quality of new US jobs to globalization:

"Under unrelenting pressure to cut costs, American companies are now replacing high-wage workers here with like quality, low-wage workers abroad.  With new information technologies allowing products and now knowledge-based services to flow more easily cross borders, global labor arbitrage is likely to be an enduring feature of the economy."

"What are we going to do about it?"  he asks.

As long as most economists and elected officials remain in total denial, we are unlikely to do anything about it.

Desirous of demonstrating that globalization is creating more US jobs than it is destroying, normally sound economists are making fundamental analytical and empirical errors.

Economists don't seem to understand globalization, and that's a puzzle. Referring to low foreign wages, Dartmouth's Mr. Slaughter writes:

"Low wages do not necessarily mean low production costs abroad.  This is because low wages are mainly a signal of low worker productivity.  In much of the world, workers are less productive than their American counterparts because they enjoy less access to the training, tools, ideas, and broad market institutions that are the foundations of high productivity."

Once upon a time this was true.  That was when US employees, working with US capital, technology and business know-how, were producing products to compete in import and export markets against products made by foreign workers, who worked with less capital and inferior technology.

Those were the bygone days of international trade.

Today when a US multinational moves a factory from Ohio to China, the Chinese labor works with the same capital and technology that formerly employed Americans in Ohio.

The Chinese workers are no less productive.  Yet, their wage is far lower.

Dartmouth's Mr. Slaughter is wrong to attribute low Chinese wages to low productivity.  The wages are low because of the enormous excess supply of labor that overhangs the Chinese labor market.

Morgan Stanley's Stephen Roach is correct to differentiate between free trade and "global labor arbitrage."  US employers are substituting cheaper foreign labor for US labor in the goods and services that they supply to markets at home and abroad.

As a result, the US labor force is being redirected to nontradable services. Charles McMillion's monthly reports (MBG Information Services) based on the Bureau of Labor Statistics payroll data show that job growth during the current recovery is concentrated in domestic services that cannot be outsourced.

A country whose work force is concentrated in nontradable domestic services is a Third World country.

Will economists stay in denial until the US reaches this destination?

(CNN) — California has devised a new plan to help solve its ongoing budget crisis.  But while that plan might save California millions of dollars in the next fiscal year, there's a good chance it will leave some of the state's own residents waving goodbye to their jobs.

California recently signed a contract with a Canadian-owned consulting firm, which could recommend that the state export some taxpayer-financed government jobs to cheap foreign labor markets.

Gov. Arnold Schwarzenegger declared shortly after his inauguration that he would not rest until California was "a competitive job-creating machine."

To be fair, the governor never specified for whom those competitive jobs would be created.  If he meant those jobs would be created for the people of India, then the governor is well on his way to delivering on his jobs promise.

California's latest plan to cut back government spending has put it in business with a rather strange bedfellow.  The state signed a multi-year deal with CGI-AMS, a company that specializes in streamlining purchasing operations.

California spends nearly $5 billion per year buying goods and services, and now a foreign company will be in charge of recommending how the state of California spends all that money.

There is no guarantee that exporting jobs will be a part of CGI-AMS's recommendations.  And the state reserves the right to make any and all final decisions.  But CGI's Web site openly boasts its global delivery centers in Mumbai (Bombay) and Bangalore, India, and with the contract structured so that the company receives a percentage of any savings it recommends, it seems all but likely that California will lose some of its government jobs to overseas labor markets.

Many state legislators are concerned that this deal signals a move towards outsourcing its jobs.  Democratic Assemblywoman Carol Liu believes this development to be an inappropriate way to save state resources.

"I know the governor is looking for ways to reduce spending, but we are very concerned that he is trying to outsource jobs," Liu said.

Before California's recent decision, Liu introduced legislation that would ban state agencies from using government funds to contract for services unless the work is performed in the United States.  And Liu is not alone.

Thirty-five states have introduced legislation aimed at curbing the practice of outsourcing American jobs, according to Justin Marks, policy analyst with the National Conference of State Legislatures.  Unfortunately, many of those bills have failed or are still pending.  Only one state in fact, Tennessee, has enacted such a measure.

Jamie Court, author of "Corporateering," told me that no state should be legitimizing a taxpayer-paid bounty to a company wishing to send jobs abroad.

"I think this is an unprecedented attempt to use power to offer a bounty to an outsourcing firm to downsize Californian taxpayers' jobs, using their own money," Court said.

The exporting of American jobs by state governments is not exactly unprecedented.  At least 40 states have contracts with companies that use overseas workers rather than Americans to staff state call centers, Marks said. But hiring a foreign company to possibly ship government jobs abroad at the expense of the taxpayer is certainly a new strategy.

California said it aims to save hundreds of millions of dollars per year through this partnership.  But the state is most likely failing to account for the lost income tax revenue and higher costs of state services that come with outsourcing jobs.

As Court said, "If you save hundreds of millions of dollars by outsourcing California's jobs, you're also depleting the tax base...  It's sort of a circuitous reasoning."

He added, "I can probably lose a little weight by chopping off my arm, too, but it's probably not the most effective way to lose weight."

As the world's fifth-largest economy, California should be setting a positive example by keeping American jobs at home.

Despite any cost savings that may arise, it is more important for the state to provide good jobs and good wages to its citizens than unemployment benefits and job training.

For the past 20 years, the government's advice to laid-off Americans has been the same: get retrained.  Above all, officials have pointed unemployed Americans in one direction: "Learn computers," they say.  "High-tech is your ticket to a high-wage job."

So what do they have to offer technology workers who now find themselves losing work to downsizing and outsourcing?  More of the same, except that the sentence trails off at the end: "Go back to school and learn, um, something!"

The truth is, training has always been a failed policy.

The most comprehensive evaluation of training programs, conducted by the Department of Labor, followed 20,000 people over a four-year period.  For the vast majority of workers, the study concluded that training made no difference whatsoever — people got the same kind of jobs whether or not they'd been through the program.

Why doesn't training work?  First, there simply are not enough decently paying jobs in the economy for everyone who needs them, and training in itself does not create more jobs.  Second, the problems besetting American workers don't have much to do with skills.  Neither the manufacturing jobs that went to Mexico nor the IT jobs that have gone to India left because employers couldn't find skilled employees in the United States.

The truth is simpler and more disturbing.  The lack of government regulations protecting employees, together with the weakness of the labor movement, has left corporate higher-ups free to treat the rest of us however they want.  And what any company naturally wants is to maximize shareholder profits.

The Bush administration faced a firestorm of criticism earlier this year when the president's chief economic adviser declared that offshoring jobs was good for the economy.  Yet even after that criticism, the administration's response was more of the same: American workers need to retrain for "the economy of the future."

But what exactly are those jobs?  The truth is that no economist can point to a sector of the economy poised to add millions of new well-paying jobs.  And it is clear that the government has no answer to that question either.

Furthermore, it's hard to hope that some new technology will come along to rescue all of us.  Increased globalization has reduced the lag time between the initial development of new technologies and the offshoring of most related jobs. It took more than 50 years between the invention of the automobile and the outsourcing of car production to low-wage countries.  But even if American labs produce breakthroughs in new fields such as nanotechnology, the vast majority of work — both technical and production — will likely be sent abroad in short order.  No amount of schooling will help us when those jobs leave the country.

If politicians know that retraining can't work, why do they continue to promote it?  Simple: It gets the public off their backs.  Instead of blaming the government, or the corporations that have eliminated so many jobs, the logic of retraining is to blame the victim.  If you're out of work, don't complain.  Just buck up and take responsibility for getting the skills you need.

There are any number of things that would work better than retraining.  We could stop giving companies tax incentives to move jobs abroad.  We could insist that technologies developed by taxpayer-funded research (as virtually everything is) can be licensed only to American companies using local labor for, say, 10 years. We could decide that companies with a large percentage of their workforce located overseas no longer qualify for lucrative "American-only" federal contracts.

The Bush administration is doing none of these.  On the contrary, it is pushing to expand trade treaties under terms that will make it even easier for those at the top of the economic food chain to get even richer by shipping more jobs overseas.

In this context, to focus on skills, suggesting that laid-off Americans have themselves to blame for their misfortune, is offensive.  No amount of retraining will solve this problem.

The path toward enabling more Americans to make a decent living lies in exactly the opposite direction — not blaming ourselves, but focusing our collective outrage on the corporate bigwigs who get rich by destroying others' jobs, and the elected officials whose policies threaten to make us the first generation of downwardly mobile Americans.

On Thursday, the House of Representatives approved legislation to alter the corporate tax code, provide $155 billion in tax breaks and add billions in federal spending to special interest groups.  And on Friday, House Democrats failed to block a multibillion-dollar Department of Homeland Security contract for Bermuda-based Accenture.

Rep.  John B.  Larson, D-Connecticut, called the legislation a "special interest giveaway that will drive more American jobs overseas and further expand the deficit."

Congress, Democrats and Republicans alike, should be doing more to prevent government contracts from going to companies that set up headquarters in offshore havens.  More than half of the top 100 contractors doing business with the government also have subsidiaries in tax-haven countries.  It is no wonder that corporations, which paid about 40 percent of U.S. tax revenues in 1943, now pay only about 7 percent of federal revenue.

Fortunately, senators are discussing possible ways to block the Accenture deal when the Department of Homeland Security appropriations bill comes to the Senate floor.

Sen.  Byron Dorgan, D-North Dakota, takes issue with awarding government contracts to companies that create subsidiaries in offshore tax havens.

"These are the kinds of companies that want all the benefits of American citizenship and all the benefits from doing business with the federal government, but they don't want to bare the burden of the responsibilities of paying taxes to our government," Dorgan says.

Dorgan is absolutely right.  These companies should not be rewarded for playing offshore tax shell games.  Nor should taxpayers be forced to pay for an outrageously expensive corporate tax bill filled with wasteful spending.  But as long as voters don't demand more of our elected officials, we'll continue to have a government best suited to serve special interests.

The United States trade deficit exploded to another staggering record last month of more than $48 billion.

New trade data from the Commerce Department also confirmed two alarming trends. This country has lost its edge in technology exports and is rapidly losing its edge in the services sector as well.

The trade report is especially disturbing since technology is one area that the United States has long been thought to have supremacy over other nations. Unfortunately, the data tells another story.

The United States actually ran a $3 billion deficit in April in what the government calls "advanced technology products."

According to the economic theory of competitive advantage, lower wage nations should be the ones specializing in low-tech goods while leaving the high-tech production to higher wage nations.  But as American multinationals shifted operations to low wage nations, like China, they also shipped American technology, production capability and expertise abroad.

Consequently, the share of China's exports consisting of machinery, electronics and transport equipment increased from 18 percent in 1994 to 43 percent by 2003. While the U.S. balance of trade in high-tech products fell from its high of $32 billion in 1997 to a deficit of $27 billion in 2003.

Advocates of free trade at all costs have also argued that the United States does not have to be concerned about the exports of high-tech or low-tech goods, since we are transitioning into a services economy.

Revised trade data released last week, however, illustrates that our nation's surplus in services deteriorated by 21 percent between 2001 and 2003, a much larger decline than was originally estimated.

North America is, in fact, the largest destination for Indian tech services, accounting for 70 percent of the country's $8.9 billion in annual tech service exports.  Official U.S. data, on the other hand, suggests that we only import about $300 million a year in services from India.

While many nations appear to have decreased motivation and need to purchase goods and services from the United States, foreigners continue to be interested in purchasing our assets.  This is, perhaps, the most dangerous aspect of our ballooning trade deficit.

Since the U.S. trade deficit has reached nearly half a trillion dollars, we have no choice but to borrow from other nations in order to finance the debt.  We do this by selling our assets, stocks and bonds to foreigners.  According to the Securities Industry Association, foreign gross activity in U.S. securities grew from $198 billion in 1980 to more than $30 trillion in 2003.

Foreigners and foreign nations have far too much potential leverage against the United States.  We have given away not only our manufacturing base, but also our advantage in technology and services, as well.  And we have left ourselves dangerously dependent on foreign capital to fund our out-of-control trade deficit.  America is, quite simply, losing its advantage.  Comparative or not.

The jobs front is like the Iraqi front.  The worse the situation, the better the news.  As jobs for college graduates disappear from the US economy, pundits tell us how great the jobs outlook is.

The 248,000 new jobs in May looks good as an aggregate number, which is the only number the public got.  Looking at the components of the figure reveals a scary situation.

American job growth is concentrated in low paid domestic services, such as restaurants and bars, temporary help, and health care and social assistance.  Of the 248,000 new jobs, 213,000 are in domestic services and construction.

Something is wrong.  We are told that we live in a global economy, but the jobs that are growing in the US are not part of the global economy.  Advanced technology products are touted as America's manufacturing advantage.  However, the US suffered its first-ever trade deficit in advanced technology products in 2002.  The deficit grew significantly in 2003 and is growing this year.  Charles McMillion at MBG Information Services in Washington DC forecasts the US 2004 deficit in advanced technology products to be $35 billion.

US manufacturing employment peaked in June 1979 at 19,553,000.  In May 2004 US manufacturing employment stands at 14,405,000, a decline of 26%.

We are told not to worry, that this only means US manufacturing has become more productive.  A large percentage of the population once worked in agriculture, but today, thanks to productivity, a tiny percentage of the work force provides our food.

It is true that manufacturing has become more productive.  But it is also true that US manufacturers are increasingly assemblers of foreign made parts.  More and more US brands are made abroad.  Unlike manufacturing, US agricultural employment did not decline historically because of outsourced food production.

Our export future was to be in services.  We would be the world's supplier of high tech services and earn foreign exchange from service exports to pay for our imports of manufactured goods.

The problem with these assurances is that the US trade surplus in services peaked at $91.1 billion in 1997.  It has since fallen to $59.2 billion, a drop of 35%.  Our surplus in services is only about 10% of our trade deficit in goods.

Because the US dollar is the world's reserve currency, we can get away with this extraordinary imbalance for long enough to dig ourselves into a deep hole.

Perhaps US employers have been saving up high value-added jobs for June graduates and we will get good news the first Friday in July when the June jobs numbers are announced.

But don't hold your breath.  In the past 40 months (three previous graduating classes), the US economy lost 376,000 jobs in professional and business services and 220,000 jobs in professional and technical services.

If job disappearance of this magnitude continues, textile engineers, mechanical engineers, chemical engineers, electrical engineers, and computer engineers will disappear as American occupations.

Few trends, including decline, move in a straight line.  However, with massive trade deficits in manufactured goods including advanced technology products, with shrinking trade surpluses in services, with US job growth concentrated in low-pay domestic services, and with the Bureau of Labor Statistics predicting the majority of US job growth over the next decade to be in low-skilled domestic services, the US work force is taking on a Third World complexion.

American delusion about the job outlook and the future of the US economy is second only to delusion about American success in Iraq.

According to Dr. Charles W. McMillion, president of MBG Information Services, the latest trade report from the Census Bureau shows that the US consumed $51.2 billion more goods than it produced in March.  The trade deficit is running $1.65 billion per day.  The first quarter trade deficit worsened by another 8%, and the deficit in manufacturing goods worsened by 10%.

Looking for US trade muscle in the 82 individual items is even more discouraging.  The US has surpluses in only 28 (34%) of the 82 trade categories.

Twelve (43%) of these surplus categories consist of agricultural products, scrap metal, and pulp and waste paper.

There is no prospect of trade closing the gap.  Once only energy-dependent, the US is now dependent on foreign countries for its clothes, shoes, electrical machinery, general industrial machinery, metal manufacturing, iron & steel mill products, vehicles, office machines, TVs & VCRs, and so on and on.

Apologists for the destruction of American industrial power said not to worry; "knowledge jobs" in the "new economy" would provide employment in the future, and exports of high-tech services would pay for our imported consumption of "old economy" manufactures.  They were wrong.  The outsourcing of knowledge jobs is proceeding even more rapidly than the outsourcing of manufacturing.

The last two years have seen startling declines in American higher education enrollments in electrical and computer engineering as American youth looks to nontradable domestic services for employment stability.

The more the payroll jobs numbers show US employment growth to be restricted to nontradable domestic services, and the more the Bureau of Labor Statistics restricts its forecasts of future occupational growth to nontradable domestic services, the more ideologues and hirelings of global corporations preach that Americans are benefiting from outsourcing.

On May 13 a Federal Reserve economist, a graphic designer and an economics writer teamed up to produce a chart in the New York Times.  Supposedly, the graphically designed chart shows that as the US economy loses its goods-producing jobs and export capability, it is moving from an outmoded muscle-power, manual-dexterity, routine work economy into a new age economy characterized by analytic reasoning, imagination, creativity and emotional intelligence.

The authors of this propagandistic chart do not realize the joke they have played on themselves.  Their chart shows that the greatest job growth in the last decade was in "financial services sales," followed by "legal assistants," and "actors and directors."

Is the US going to balance its enormous trade deficit by exporting Hollywood's sex and violence, tort lawyers' law suits, and US financial products?

The chart's authors tout the "rise of employment for hair stylists and cosmetologists" as the future for American "imagination and creativity."

The cumulative evidence of the past several years is unambiguous:  US job growth is concentrated in low-pay, hands-on domestic services.

Will the ideologues ever see the writing on the wall?

Free-market reassurances that the US is winning from free trade will come back to haunt those who so cavalierly ignore the facts, no less than the neocon promise of an Iraqi "cakewalk" to freedom and democracy is haunting the Bush administration.

In the end, as the powerful Communist Party of the Soviet Union learned, reality, not ideological commitment, carries the day.

There is no good news in the April payroll data released last Friday by the Bureau of Labor Statistics.  Disaster lurks in the jobs numbers:  the US labor market is becoming Third World in character.

The April jobs data show a continuation of the troubling pattern established in recent years.  Despite a massive trade deficit that pours $500 billion annually into foreign hands, the US economy cannot create jobs in the export or import-competitive sectors of the economy.  The US economy can only create jobs in non-tradable domestic services — jobs that cannot be located offshore or performed by foreigners via the Internet.

The 280,000 private sector jobs created in April break out as follows:  104,000 were hired as temps and in administrative and waste services, 34,000 were hired as waitresses and bartenders, 30,000 were hired in health care and social assistance, 29,000 in wholesale and retail trade, 21,000 in manufacturing (half of which are in fabricated metal products), 20,000 plumbers, electricians and specialty contractors, 10,000 hired by membership associations, 10,000 in legal, architectural and engineering services, 8,000 in management and technical consulting, and 4,000 in real estate.

The vast majority of these jobs do not require a college degree.  One can only wonder what will become of the June graduating class.

Once free trade was a reasoned policy based in sound analysis.  Today it is an ideology that hides labor arbitrage.  Because of the low cost of foreign labor, US firms produce offshore for their US customers.  The high speed Internet permits people from all over the world to compete against Americans for knowledge jobs in the US.  Consequently, the "new economy" is being outsourced even faster than the old manufacturing economy.

Where does this leave Americans?  It leaves them in low-pay domestic services.  As the BLS 10-year job forecast made clear, 7 of the 10 areas that are forecast to create the most jobs do not require any university education—definitely not the picture of a high-tech economy.

Why then will Americans attend universities?  Will Wal-Mart require an MBA to stock its shelves?  Will nursing homes want its patients bathed by engineers?

Obviously, education and retraining are not answers to job loss from US employers substituting foreign labor for American labor.

One does not have to be an economic genius to understand what is happening. Capital is most productive where labor is most abundant, and labor is most productive where capital is most abundant.

Thus, we see US capital flowing to Asia where labor is cheapest, and Asian labor flowing via the Internet to the US where capital is abundant.

U.S. labor loses both ways.  Products Americans used to make are now made offshore, and the Internet lets foreigners compete against Americans in the US labor market.

An engineer in Boston, Seattle, Atlanta, or Los Angeles cannot compete with an Internet hire in India, China, or Eastern Europe, because the cost of living in the US is much higher.  The Boston engineer cannot work for the Indian salary, because his mortgage debt and grocery prices will not adjust downward with the salary.

The man in the street has no difficulty comprehending this simple fact, but for ideologues free trade is a virtue regardless of the harm done to American labor and the US economy.

DOES OFFSHORE outsourcing hurt the U.S. economy by draining away jobs and investment, or does it ultimately make the U.S. stronger?  Is it a cost-cutting tactic that should be encouraged, or should it be punished in some way?  The issue has become a hot button this election year.

Framing the debate in economic terms can be tricky, because while economic theory offers tidy equations that lead to win-win situations, there are losers in the real world.  Workers who see their jobs shipped overseas are hurt, even while companies and the economy as a whole may see benefits, such as lower prices for consumers.

MR. ROBERTS:  From the perspective of trade theory and economic-development theory, it is hard to see the benefit to the country whose firms outsource.  With domestic capital and technology reallocated to the employment of foreign labor, there is less to employ domestic labor.  Either unemployment results or the remaining capital is spread more thinly with a decline in labor productivity and real incomes.  As industries move offshore, suppliers are forced to follow.  The domestic economy becomes a less-efficient place to produce as concentrations of skills are diluted by movement offshore.

If outsourcing were a limited phenomenon driven, for example, by domestic scarcity of a few specific skills, it is possible to imagine scenarios under which a country gains from outsourcing.  But even here caution is appropriate. For example, if technology jobs are outsourced because of domestic supply constraints, the mechanism for expanding domestic supply is short-circuited.  If a shortage of nurses is met by importing foreign nurses under a visa work program, domestic nursing schools are unlikely to increase their enrollments.

Outsourcing is a problem for the U.S. and First World in general, because all tradable goods production and service jobs can be outsourced.  The higher the value added, the greater the incentive to outsource the work to India or China where enormous excess supplies of labor guarantee relatively low wages for years to come.  Faith that new industries and occupations will rise to replace lost ones is problematical, because the same incentive will encourage replacement industries to be outsourced as well.

.    .    .    .    .

MR. ROBERTS:  To get to the "solution" stage, we have to pass through the "identification of the problem" stage.  Jagdish says that there is no problem, but I am concerned that comparative advantage [theory] might be broken.  [The theory says countries should specialize in goods they're better at producing than other countries and then trade for things in which they don't have the edge.] One virtue of comparative advantage is that a country doesn't need a trade strategy, because comparative advantage causes all free-trade outcomes to be beneficial.  But if comparative advantage is broken and cannot be fixed by restoring its premises, the U.S. needs to develop a trade strategy.

A successful trade strategy would require careful thought from many, and require economists first to get their minds around the problem.  Perhaps this exchange will lead in that direction.

I am calling for a policy of thought to examine whether real-world conditions still support the case for free trade.  If real-world conditions differ from the premises of the free-trade case, we must learn to think differently and to develop a strategy based on recognition of synergies between industries and occupations and geared toward retaining high-productivity industries.

MR. ROBERTS:  I agree that government policy is capable of worsening any situation.  At the same time, I am aware that economists, long accustomed to shouting down "protectionist impulses," can fail to carefully examine whether changed real-world conditions or new developments in theory undermine the assumption that every act of free trade is beneficial.  All I am asking is that economists seriously re-examine the case for free trade and verify that the conditions necessary for the case still hold.

MR. ROBERTS:  Jagdish, retraining programs are a misplaced hope.  As all tradable goods and services production can be outsourced today, retraining is limited to domestic services, an increasingly crowded field, and even here foreign labor is brought in under various work-visa programs.

I appreciate your optimism, but it needs to be tempered with realism.  According to economist Charles McMillion's report in the April 2 Manufacturing & Technology News, the U.S. has lost its lead in advanced-technology products and now runs a deficit in advanced technology with China (supposedly a low-tech producer of clothes and shoes) that is almost five times larger than the U.S. technology deficit with Japan.  It is not clear how a country benefits from losing its superiority in advanced-technology products.

Neither is it clear how a country benefits from declining incomes.  Occupations where jobs are growing pay considerably less than occupations that are contracting.  Americans are heavily in debt, and their debts are not indexed to their incomes.  With any luck, perhaps our discussion will prevent economists and policy makers from being caught off guard in the event there is a deterioration in U.S. economic welfare.

The issue of whether U.S. multinationals will continue to export American jobs to cheap overseas labor markets is critical to the well-being of millions of working Americans and, I believe, the future health of our economy and society.  Advocates of unbridled free trade first defended the practice of shipping American jobs offshore by saying the practice wasn't widespread and few jobs were lost to outsourcing abroad.  Then the University of California-Berkeley last fall revealed that as many as 14 million American jobs are potentially at risk over the next decade.  Then the advocates of exporting America claimed that outsourced jobs would be replaced by high-value jobs.  Instead, the economy has lost millions of jobs.

The Bush administration, corporate America, business groups, and their surrogate think tanks contend America must be able to kill U.S. jobs and move them to cheap foreign labor markets in order to be more productive, more competitive, and even more innovative.  How competitive are our great American multinationals in the global marketplace?  We now have a half-trillion-dollar trade deficit, and our surplus in services is falling like an anvil (one most likely not manufactured in the United States).  We're exporting jobs senselessly and importing debt held by foreigners that amounts to $3 trillion — and is rising fast.

Smoke and mirrors.

Outsourcing advocates, including many in the Bush administration, are now trying to change the language of the debate, and they've introduced a new term:  "insourcing."  They claim that the jobs created here by foreign companies counterbalance those outsourced to cheap foreign labor markets by U.S. corporations.

Former Assistant Treasury Secretary Paul Craig Roberts says, "This notion of insourcing is a propaganda device."  And, Roberts says, "What they're calling insourcing is nothing but just standard foreign investment."  Outsourcing, on the other hand, is the practice of utilizing cheap foreign labor to manufacture goods or provide services only to sell them back into the domestic marketplace.

Foreign automakers are among the largest so-called insourcers.  Many non-U.S. auto manufacturers have plants employing workers here in America.  These plants, however, were simply a way around import quotas set up by the Reagan administration.  Rather than accept restrictions on the number of vehicles that they could import into the U.S. market, automakers like Toyota and Honda opened plants in America to ensure access to American consumers.  The investment was certainly worthwhile. The United States has an enormous $11 trillion economy.  And Toyota now makes a third of its profits from U.S. car sales.

Foreign investment into all aspects of the U.S. economy is on the rise. Nearly half of U.S. treasury bonds are now owned in Asia.  We are quite simply, as never before, dependent on foreign capital to sustain our appetite for imports and our exploding private national and trade debt.

Outsourcing definitely robs Americans of jobs, but it also compounds this already out-of-control imbalance of trade.  Foreign companies with operations in America generally sell products manufactured here to American consumers.  But U.S. companies, which outsource jobs to cheap overseas labor markets, then re-enter the goods they produce into the U.S. market.  As a result of these disturbing trends, the U.S. current account deficit hit a new record of more than half a trillion dollars.

Someone has to take the jobs that, as President Bush (news — web sites) and others say, "Americans don't want."  There appear to be a large number of these jobs.  In fact, it seems that our fastest-growing business segment is the creation of more and more jobs that Americans don't want.  Often, American companies will lay people off, only to train newcomers to replace them.

The sinister nature of offshoring jobs has corrupted the highest levels of our nation.  Hillary Rodham Clinton (news - web sites), for example, is directly involved with one of the big body shops, Mumbai-based Tata Consultancy Services.  Bush is actively promoting the replacement of American workers.  Colin Powell (news — web sites) recently promised India that the administration would continue to promote offshoring.  Which country does he represent, anyway?

In an economic argument that is floating around, people cook numbers to show that every job lost to offshoring is a ridiculously large net benefit to the U.S. economy; we are making money on the deal.  One math genius claimed that although we export around $10 billion in outsourcing fees, the economy somehow recovers over $300 billion in savings.  It's a bonanza.  Taking this logic to an extreme, if we offshored all American jobs and nobody here worked, we'd be filthy rich.  Let's just do that!  Where do I get my check?

I hear all the time that coders in India are cheaper and better.  What makes them better?  Have there been some blockbuster Indian software programs that I somehow missed?  Maybe they are good at patching spaghetti code or doing well-defined C++ modules, but who knows?  You'd think that some killer apps would have come out of India by now, as they have from Europe, the U.S., Japan, and even Russia.

Even more irksome than this notion of "better" is the fact that companies are trying to hide their offshoring operations, a deceptive practice at best.  Help desks, bill collectors, and telemarketers are in India.  All the AT&T staffers I have talked to seem to be in India, but ask them where they are and they won't say.  They are trained to fake American accents.  They say their name is Bill or Dave or Patty; it is clearly not.  They never tell you where they are, because Americans don't like having their American Express records (yes, AmEx uses India) in Bangalore, where our privacy laws aren't in force.

Although I appreciate some aspects of globalization, I can't excuse the cavalier attitude toward fellow Americans that we see among large corporations who benefit from the free-enterprise system and American infrastructure.  It will come back to haunt them all.

A starting point is to realize there are solutions to the outsourcing problem that America now faces.

1.  Require companies that off-source any personal data of U.S. citizens to get their signed consent.

2.  Require that all publicly held companies inform the public through their quarterly filings with the Securities and Exchange Commission:

• The portion of the corporate assets investment in each nation where the company operates.
• The type of work performed in each of those facilities.
• The number of employees in each foreign nation and their general characteristic, such as manufacturing worker, executive, research and development.
• Future plans to shift operations to other nations and the specific nature of what will be shifted.
• Identify what part of the work shifted outside the United States is financed by U.S. government.
• Identify what part of the work shifted outside the United States is to satisfy local of domestic U.S. markets.

3.  Impose an equalizing tariff on outsourced service work.

4.  Require that any work shifted overseas be done by people meeting the professional qualifications required in the United States and be so certified.

5.  Prohibit outsourcing contracts going to those nations that deny the U.S. and other nations the right to operate in the same manner in their home market.

6.  Require the U.S. Department of Labor to report monthly on the number of jobs or job equivalent outsourced, the average U.S. wages paid in that particular labor classification, and to where the jobs are going.

They are calling it "the jobs issue."  For 43 straight months, manufacturing jobs have disappeared.  One in six has vanished since Bush took his oath.  Now Americans are alarmed over reports of the outsourcing of white-collar jobs.  It is an issue on which the presidential election could turn.

Both candidates and both parties seem clueless about what is going on and what to do about it.  For Bush Republicans and Kerry Democrats both backed NAFTA, GATT, the WTO, and MFN for China.

There is this difference, however.  Republicans are principled free traders, while the Democratic Party, as a wag put it a while ago, is simply a gathering of warring tribes that have come together in the anticipation of common plunder.

Democrats worship power.  They will do what they must to get it.  Thus they have begun to drop the free-trade mantra and play to the populism of the people.

An opportunist is to be preferred to an ideologue who will not entertain the idea he may be wrong and that the philosophy in which he was schooled and devoutly believes may be irrelevant to the new era.  Like companies that continue to make products no one wants to buy anymore, parties that persist in policies that are visibly failing — like LBJ in Vietnam — end up being abandoned.

If the GOP persists in this free-trade fanaticism, it is courting suicide.  For the policy is not working in the eyes of the people.  And if Republicans insist the returns from global free trade — a disintegrating dollar and a merchandise trade deficit of $550 billion a year and rising — are good for America, folks are going to conclude that Republicans are too out of it to govern.

The problem with the columnists and think-tank scribblers who make up the intelligentsia of the GOP is not that they believe in free markets but that they worship them.  They believe that if NAFTA, GATT, the WTO, and MFN for China mean production goes overseas, the market is telling us where production ought to be. And the voice of the market is to be obeyed, because that is the voice of their god.

Americans believe that the interests of U.S. workers and their families come ahead of what may be good or best for the Global Economy.  For years they have seen industrial jobs disappear.  Now white-collar jobs are being outsourced.  They want to know what Bush and the Republicans are going to do about it.

If the president's answer is to echo his father and denounce opponents as "isolationists and protectionists," he risks ending up like his father, a one-term president.

Indeed, if the issue is jobs, Republicans ought to be thrown out.  For not only are they not creating them, they have no idea how to stop exporting them.  In their hearts, some of them think it a good thing.  They are like the doctors of old who sincerely believed bleeding the patient was the way to get rid of the disease because that is what their textbooks and wise men told them.

DOBBS:  My guest says globalization is dead.  He's the author of an essay laying out a powerful argument on what he sighs as the collapse of globalism and the rebirth of nationalism.  The eminent John Ralston Saul in this month's "Harper's" magazine argues the ideology of globalization, like most other grand economic theories has run its course.  Saul offers dozens of examples how globalization has failed to live up to its bold promises leading to, in some part, the rebirth of nationalism.  He points to the perfectly held almost religious belief that free markets would create economic and social equality and worldwide democracy is one example of the broken promises of globalization.

DOBBS:  The idea that globalization is dead particularly in the concept of these times in which we're dealing with the issues of outsourcing, immense trade deficit, a difficult world given terrorist threat, what do you mean by that?

SAUL:  Well, you know, economic ideologue, you know, it's an ideologue when people say it's inevitable and there's no way back, you know you'r into dream lands.  The more you hear that it's inevitable the more you know you're near end. And they usually last 25 to 50 years.  The Soviet Union had a little longer run, but they had a secret service.  They had a lot of guns.  But most — you know, even Keynesian lasted about half a century.  And the last time we did deregulated markets from 1890 to 1929, so really this is really sort of a technocrat's version of what ended in 1929, and, you know, basically if you try to look at the world through the prism of economics, things like families, life, democracy, gets pushed to the edge and you get into a greater and greater instability and eventually it sort of kills itself.  I guess that's sort of where — we're near that edge now.

DOBBS:  That edge, and some might even say we've crossed that edge for it strikes me now in this campaign year here, this country, the idea that there is an issue of free trade versus economic isolationism creating polar extremes, neither is true.  But perfectly labeled.  The idea that the inevitability about free trade and globalization.  You don't hear people talking about any other part that the markets will take care of it, that free trade is the panacea for every ill.  How do we get to that point?

SAUL:  I think after 9/11 when the world started dropping into the most terrible depression.  And the people who were supposed to save the day, which was the marketplace, the natural balance, the leaders of the trans-national corporations sort of disappeared because they had to look at their own bacon.  We were pulled out of that basically by the governments of the nation states.  So suddenly the nation states rediscovered themselves.

And actually quite successfully stopped us from going into this depression.  I suppose we're at a stage now where the effects of a certain kind of deregulation and of trying to see the world almost entirely through trade, is leading to things like cheap money, chasing cheap jobs or money chasing jobs, jobs chasing money.  And it leads to the return of kind of boom and bust cycles but there are new kinds of boom and bust cycles and one of them is instability of communities because jobs move around so fast.  They're going to move but not so fast.

DOBBS:  As you point out in your article, these laissez-faire wonderful free market solutions, quote, unquote, these aren't exactly new.  Going back to the 20s, much of the same thinking was at hand?

SAUL:  Yes.  There has never been a successful civilization in the West that didn't have a healthy free market.  The free market is absolutely essential to a healthy stable society.  On the other hand, the free market really only works in a kind of calm situation, it's as if it is jumping up and down on a spring bed. Well, the mattress is a solid civilization, it's a proper regulation, it's things which mean that you're not going to get a company's racing about looking for a better place.  Look at northern Mexico, you know, it looked like everything was going to northern Mexico.  As soon as northern Mexico standards started to rise, because things were going there, something moved on somewhere else.

DOBBS:  A suggestion that, for example, citizens of this country or any other are more than just consumers or investors or workers, they are actually citizens who have lives, families, needs that are to be met by the nation state as well as the economy.

SAUL:  We just, you know, I do think that the heart of democracy is the citizen. That's where legitimacy lies.  If the citizen can't find some kind of stability inside their community, then democracy can't work.  Remember that Argentina, up until about 1930 had a higher per capita standard of living than places like Canada and Australia.  It was a dream.  What went wrong?  What went wrong in many ways was it lost that sense of the power of the small citizen.  That sense of stability.

DOBBS:  That citizen in this country is generally referred to as the middle class, working men and women in this country which has always been the pride, the foundation of both our society as well as our economy.  The middle class in this country is under an assault that it hasn't seen since certainly the 1930s. What would be your thoughts about the future for both the middle class, the relevance of the middle class, the success of this country and it's future?

SAUL:  You know, the 20 Western democracies, their stability is all based on success and size of middle class.  That's how you get out of the kind of Marxist versus fascist argument.  If you have a big solid middle class.  They are actually under threat in all 20 countries.  That is what is so fascinating.  I think what we have to do is really quite simple.  For 25 years we put in place at the international level very successful binding regulations relating to trade.  Very difficult to do.  But what we didn't do was put in place at the international level regulations to do with taxation, to do with labor conditions, do with the environment, et cetera.

In other words, the nation state is based on a balance between the marketplace, internal trade labor conditions, taxation, so on.  That balance which is — an election is really about you want it to move a bit this way or that way.  We took one big piece out and put it at the international level.  If we want that trade to work we have to take...

DOBBS:  You're talking about the World Trade Organization?

SAUL:  Generally the trade agreements.  They are very brilliant but you have to take taxation or labor at the international level or else it backfires.

If a third-party populist were to run in 2004 on Ross Perot's signature issues of unfair trade and mammoth deficits, George W. Bush would suffer the fate of his father.  He would be a one-term president, fortunate to get 40 percent of the vote.  For the combined budget and trade deficits George W. has run up dwarf anything his father produced.

Even before the cost of war is factored in, the fiscal deficit for 2004 is $521 billion.  But the trade deficit, five times as large as any his father ran, is a graver matter.  The second American Century may be aborted.

Why are China and Japan subsidizing our consumption?  For the same reason a drug dealer hands out samples of crack cocaine to school kids.  To get them hooked.

By keeping the value of their currencies low, Japan and China not only keep their factories humming, as ours shut down, they are effecting the steady transfer of the factors of production from America to Asia.  They are making this once self-sufficient Republic a future dependency of Asia, as we ship them our industrial base, our technology, factories, plants, and skilled jobs.

In classical liberal economics, free trade is win-win.  But that is not true of power politics, where, as one nation rises, another recedes.  As China knows and we have forgotten, trade is foremost among the means nations use to advance in industrial and military power at the expense of rivals.  Great powers that run chronic trade deficits, with declining currencies, are invariably fading powers.

As it rushed to the rescue of Gregory Mankiw, the Bush adviser who celebrated outsourcing as good for America, the WSJ tutored us:

"If country X does or makes something with relatively low cost compared to country Y, then country X should make it.  Country Y is thus released to earn higher returns on something else."

Fine as theory.  But if country X is the Germany of Kaiser Bill and Admiral von Tirpitz and country Y is the Britain of Lord Salisbury, one indulges such drivel at the risk of national survival.

China is becoming the factory floor of the world.  And as her leaders force her people to sacrifice for the future, America, where the consumer is king, indulges herself in the present.  In the free-trade catechism, what's good for me now is good for America.  Yet not only does this contradict common sense, history reveals it to be the folly of every declining great power from Holland to Spain to Britain.

From the Britain of the Acts of Navigation to the America of Lincoln and Theodore Roosevelt, to Bismarck's Germany and China today, big nations that treat trade as a matter of paramount importance are the rising powers that come to dominate the world.

Our trading problem is an externality

An externality exists in economics any time there is a separation of costs and benefits, and the decision maker does not have to incur the full cost but receives the full benefits of the decision.  The fact is, there is no economic force, no supply and demand equilibrium, no rational decision process of either business or consumer, that will make an externality go away.  Classic examples of externalities are when a business dumps toxic waste into a nearby river and the downstream residents incur the costs of cancer.  The business is able to lower its costs and pass those lower costs on to its customers, and never pay for the treatment of the cancer patients.  We have laws in this country against dumping and pollution because they are externalities — they require a legislative solution.

The costs of the decision to outsource are not borne by the decision maker.  As a society and as a country, we experience many costs from outsourcing, including the loss of jobs, social costs, higher costs of raw materials and loss of national sovereignty.  Loss of jobs reduces the tax base, creates high unemployment benefit costs, and raises the cost of government retraining programs.  Displaced, unemployed workers have higher rates of child and spousal abuse, alcoholism, bankruptcy, divorce, etc.  As China and India and other large populations grow, they demand huge quantities of oil, gas, steel and other basic raw materials.  These costs are born by all of us — every time we fill our gas tanks, for example.  And as a nation, we lose our ability to make independent decisions that are in our best interest when we are dependent on foreign debt and foreign manufacturing.  This is a classic externality.

Last week's jobs report, with hundreds of thousands giving up the search for work, and manufacturing jobs disappearing for the 43rd straight month, jolted the White House.  What is going on?

They're calling it a jobless recovery.  Wrong.  Millions of jobs are being created.  They're just not being created here in the United States.

The reasons can be traced to these four acronyms:  NAFTA, GATT, WTO, PNTR.  These are the trade treaties and global institutions that have permitted the historic substitution of foreign labor for American labor, to the enrichment of the transnational companies that look upon the Congress as a wholly owned subsidiary.

The U.S. trade deficit is the greatest foreign aid and wealth transfer program in history, and our workers are paying for it by the loss to their families of the American Dream.

Consider China.  With some $150 billion in imports from China last year, we supported 3 million jobs there.  But as China's wages are a tenth of U.S. wages, or less, we are probably talking about 30 million or 40 million jobs in China that are tied to exports to the United States.

When the Soviet Union collapsed in 1991, and India abandoned state socialism, and China threw open its doors, a billion workers were thrown onto a global job market to compete against Americans who earn 10 and 20 times their wages.

The trade deals the U.S. government then negotiated, at the behest of U.S. corporations, were not really trade deals at all, but enabling acts.  U.S. corporations were told:  You can now shut your U.S. factories, shed your U.S. workers, build your new plants in Mexico, China and India, and bring your finished goods back to the United States, free of charge.  Go for it!

Republican free-trade dogma inhibits action to protect U.S. jobs.  The GOP is hogtied and hamstrung by its ideology in dealing with the crisis.  Its only response is to mutter with Dr.  Pangloss that it is all for the best.

The GOP is fortunate its opponent in 2004 is John F. Kerry, who is as clueless as they are on the new world economy that has been designed, and is operating, to loot America of her patrimony.

NEW YORK (CNN) — You may have noticed recently that I'm being attacked for my views on the exporting of American jobs and my calls for a balanced U.S. trade policy.

Gerard Baker of the Financial Times called me the "high priest of demotic sensationalism."

An editorial in the Economist magazine accused me of embarking "on a rabidly anti-trade editorial agenda" and "greeting every announcement of lost jobs as akin to a terrorist assault."

Daniel Henninger of the Wall Street Journal excoriated me, I must say, in high style for my troglodyte views on outsourcing by saying, "It's as if whatever made Linda Blair's head spin around in 'The Exorcist' had invaded the body of Lou Dobbs and left him with the brain of Dennis Kucinich."

Washington Post columnist James Glassman has simply accused me of being a "table-thumping protectionist."

Those quotes are from some of the most respected news organizations, and there have been dozens of other articles critical of my view that outsourcing American jobs is neither sound, smart, humane nor in the national interest.

I will tell you it does make a fellow think when attacked so energetically and so personally.  But in none of the attacks on my position on outsourcing has a single columnist or news organization seen fit to deal with the facts.

Number one: We're not creating jobs in the private sector, and that's never happened before in our history.  Our economists and politicians need to be coming up with answers, not dogma.

Number two: We haven't had a trade surplus in this country in more than two decades, and our trade deficit continues to soar.

Number three: We've lost three million jobs in this country over the last three years, and millions more American jobs are at risk of being outsourced to cheap overseas labor markets.

That seems to me, at least, to be more than sufficient evidence for all of us, Republicans and Democrats alike, to question critically the policies of both parties that have led us to this critical juncture in our economy and our history.

Frankly, I would love to be proved wrong in my views, and I would gladly change my position, if only my critics would answer a few questions factually, empirically and straightforwardly.

One: How many more jobs must we lose before they become concerned about our middle class and our strength as a consumer market? Two: When will the U.S. have to quit borrowing foreign capital to buy foreign goods that support European and Asian economies while driving us deeper into debt? Three: What jobs will our currently 15 million unemployed workers fill, where and when?

My critics and proponents of free trade and outsourcing suggest I'm a protectionist because I want to curtail the export of American jobs to cheap foreign labor markets just to reduce wage levels, and to eliminate our trade deficit and to pursue balanced trade policies.

Our principal trading partners, Canada, China, Japan and the European Union, all typically maintain annual trade surpluses and pursue balanced trade.  Why don't my critics call them protectionists?  Why not call them economic isolationists?

My critics, and proponents of the status quo, are offering false choices.  They say we must decide between protectionism, or economic isolationism as the president said today, and free trade.  I'm sure they believe those choices are the only ones available.

But maybe they also fear our policymakers may discover a middle ground for a desperately needed new U.S. trade policy:  a balanced trade policy in the national interest.

PARIS  The jobless recovery in the American economy, weakly echoed in Europe, reinforces complaints in all the Western industrial countries that employers and stockholders enrich themselves while workers' wages fall or remain static. Defenders of free trade irritably reply that outsourced jobs will be replaced by those demanding higher skills, and that workers should go out and retrain themselves.

The contrary argument is summarized in a recent article by Senator Charles Schumer and a former Treasury official, Paul Craig Roberts

The argument is that capital, technology, ideas and jobs now all enjoy unprecedented mobility.  It's workers that lack mobility.  Nearly all the work performed in modern industry can be outsourced globally.

Actually, this is free trade.  It is free trade as theoretically envisaged by the 18th century economist David Ricardo, stripped of the economic, social and political constraints that for two centuries kept trade from functioning the way Ricardo expected.

He said that states should exploit their comparative advantages in resources or manufacturing.  Trading in those complementary advantages would produce reciprocal gain.  It's win-win — as Ricardo would not have said.

This is a relatively simple-minded theory, but in practice it has generally worked out, if not to the advantage of all concerned.

Ricardo, however, had a second theory, which he called the "iron law of wages." You do not hear much about the iron law, in part because you wouldn't want to hear about it, and also because experience has seemed to prove it untrue.  But times are changing.

The iron law of wages is also simple and logical.  It says that wages will tend to stabilize at or about subsistence level.  That seemed inevitable to Ricardo, since while workers are necessary, and so have to be kept alive, they have no hope of any better treatment since they are infinitely available, replaceable, and generally interchangeable.

Ricardo's wage theory has seemed untrue.  The supply of competent workers in a given place is not unlimited; neither workers nor industry are perfectly mobile, and labor demonstrated in the 19th and 20th centuries that it could mobilize and defend itself.  The iron law of wages would seem to function only if the supply of labor is infinite and totally mobile.

Unfortunately that day, for practical purposes, has now arrived, thanks to globalization.

Globalization is removing the constraints imposed in the past by societies possessing institutions, legislation, and the political will to protect workers.

Free trade doctrine is hostile to unions, social legislation, and legal restriction on industry's labor practices, all of which deprive poor countries of their comparative advantage, which is poverty.

Many arguments have been offered by economists as to why the comparative advantages of poverty and non-regulated industry would eventually and automatically do away with themselves, so that in the end we will all be high-wage societies — if not with advanced social protections.

This, I fear, is utopianism.  David Ricardo, in propounding his iron law of wages, was just as right as when he was in putting forward his rule of comparative national advantage.  In the case of wages, he was merely ahead of his time.

In a typical newspaper article or op-ed, politicians or union leaders who criticize agreements such as NAFTA or the WTO are described as "protectionist" or against "free trade."  Those who support such commercial agreements are called "free-traders."

But this is completely inaccurate.  The proponents of "free trade" are only in favor of international competition that drives down the wages of ordinary workers.  They do not support similar measures to reduce the salaries of doctors, for example.  Quite the opposite, in fact:  current law makes it difficult for foreign professionals to practice in the United States, and the government has limited the number of foreign residents in U.S.  medical schools so as not to depress doctors' salaries.

As a result of this selective application of "free trade," a cardiologist earning $500,000 a year can go to the local Wal-Mart and get a DVD player made in Malaysia for less than $100.  He has gained both from "free trade" and the international out-sourcing of our manufacturing sector. 

The "free-trader" will respond:  yes, but so has the janitor, the security guard, and on up the ladder.  But if we add up their gains in the form of cheaper consumer goods, and subtract what they have lost due to the downward pressure on their wages, most workers have suffered a net loss from America's global economic experiment of the last 30 years.

The better-off professionals — doctors, lawyers, economists — have all the protection they need from foreign competition.  Neither immigration nor outsourcing can lower the cost of their services.

The picture changes drastically as we move below the 27 percent of Americans who have a college degree.  The protected professionals who write the rules of global commerce have been eager to expose as many people below them as possible to the rigors of international competition.

The result has contributed significantly to the most massive upward re-distribution of income in U.S.  history.  While income per person has risen more than 85 percent over the last 30 years, the median wage has risen by only about 7 percent.

Third, most of our well-off professionals are doing well not just because they have skills or work hard — the same can be said of many mechanics, carpenters, or skilled factory workers.  The main difference is that these professionals benefit from protectionism that keeps their salaries from being driven down by international competition.

The dollar keeps going down, and the trade deficit keeps going up.

Economists and reporters explain this in terms of American appetite for foreign goods outstripping overseas demand for U.S.  goods.

There is another explanation, one perhaps closer to the truth.  Americans are buying the same goods as in the past made by the same U.S. multinational corporations-only the goods are no longer made in the United States.  Their production has been outsourced or offshored to Asia.  The same goods now count as imports, because they are produced offshore.

A country cannot close its trade deficit if its economy is being moved offshore.

Offshore production hits the trade deficit from both ends:  goods once produced domestically become imports, and as production moves offshore the ability to export declines.  When a U.S. business moves a factory to China, that factory's products cease to be potential exports and become imports.

Offshore production is a new development.  It is not your father's traditional foreign trade.  Goods are not being traded.  Offshore production is not a case of the United States making good X and trading it to China for good Y.  It is a case of the United States ceasing to make good X in the United States and making it in China instead.

There are those who argue that the numbers involved are too small to worry about.  What do a few thousand engineering jobs matter?  These people simply don't know how thin the engineering talent is in many companies.  Take 100 programmers out of any software company short of Microsoft or IBM, and you've crippled some program and maybe the whole company.  And the same is true for most of these other critical industries where big work is typically done by small teams.

Who wants this?  The government of the United States doesn't want it, at least not in principle.  The various state governments absolutely don't want it.  The employees don't want it.  The only groups who really want this are investors and top management — two groups that have the shortest time perspective, thinking no further ahead usually than the next financial quarter.

Shiping work overseas saves money that drops to the bottom line as profit.  Stock prices are today keyed to earnings-per-share as is, to a certain extent, executive compensation.  Now look at the average time that an institutional investor actually holds a given stock.  This can be measured in months, sometimes in weeks, but hardly ever in years.  So the investor timeline is short and the CEO timeline — with average tenancies in those positions at less than five years — is not much longer.  So offshoring works great for these two groups.  The stock goes up and along with it, the CEO's bonus and stock options.  By the time the long-term effects of this policy are felt, both the investors and the CEO are long gone.  And even if the CEO is still around, it is with a golden parachute negotiated long before that often pays him more to go away than he might have got to stay.

Rethinking protectionism

NEW YORK  "I was brought up, like most Englishmen, to respect free trade not only as an economic doctrine which a rational and instructed person could not doubt but almost as a part of the moral law," wrote John Maynard Keynes in 1933.  And indeed, to this day, nothing gets an economist's blood boiling more quickly than a challenge to the doctrine of free trade.

Yet in that essay of 70 years ago, Keynes himself was beginning to question some of the assumptions supporting free trade.  The question today is whether the case for free trade made two centuries ago is undermined by the changes now evident in the modern, global economy.

These anecdotes suggest a seismic shift in the world economy brought on by three major developments.  First, new political stability is allowing capital and technology to flow far more freely around the world.  Second, strong educational systems are producing tens of millions of intelligent, motivated workers in the developing world, particularly in India and China, who are as capable as the most highly educated workers in the developed world but available to work at a tiny fraction of the cost.  Last, inexpensive, high-bandwidth communications make it feasible for large work forces to be located and effectively managed anywhere.

We are concerned that the United States may be entering a new economic era in which American workers will face direct global competition at almost every job level — from the machinist to the software engineer to the Wall Street analyst.

Any worker whose job does not require daily face-to-face interaction is now in jeopardy of being replaced by a lower-paid, equally skilled worker thousands of miles away.  American jobs are being lost not to competition from foreign companies, but to multinational corporations, often with American roots, that are cutting costs by shifting operations to low-wage countries.

Most economists want to view these changes through the classic prism of "free trade," and they label any challenge as protectionism.  But these new developments call into question some of the key assumptions supporting the doctrine of free trade.

The case for free trade is based on the British economist David Ricardo's principle of "comparative advantage" — the idea that each nation should specialize in what it does best and trade with others for other needs.  If each country focused on its comparative advantage, productivity would be highest and every nation would share part of a bigger global economic pie.

However, when Ricardo said that free trade would produce shared gains for all nations, he assumed that the resources used to produce goods — what he called the "factors of production" — would not be easily moved over international borders.

Comparative advantage is undermined if the factors of production can relocate to wherever they are most productive:  in today's case, to a relatively few countries with abundant cheap labor.  In this situation, there are no longer shared gains — some countries win and others lose.

When Ricardo proposed his theory in the early 1800's, major factors of production — soil, climate, geography and even most workers — could not be moved to other countries.  But today's vital factors of production — capital, technology and ideas — can be moved around the world at the push of a button. They are as easy to export as cars.

This is a very different world than Ricardo envisioned.  When American companies replace domestic employees with lower-cost foreign workers in order to sell more cheaply in home markets, it seems hard to argue that this is the way free trade is supposed to work.  To call America's economic recovery "jobless" is inaccurate.  Lots of new jobs are being created, just not in the United States.

In the past, we have supported free trade policies.  But if the case for free trade is undermined by changes in the global economy, American policies should reflect the new realities.

America's trade agreements need to reflect the new reality.  The first step is to begin an honest debate about where the American economy really is and where the United States is headed as a nation.

Old-fashioned protectionist measures are not the answer, but the new era will demand new thinking and new solutions.  And one thing is certain:  real and effective solutions will emerge only when economists and policymakers end the confusion between the free flow of goods and the free flow of factors of production.

Ya wanna know how to resolve this problem of outsourcing and exportation of jobs?  Simple: Fix immigration law, rewrite the tax code, reform trade policies, modify the schools and change the attitudes of corporate executives, workers, consumers and politicians.

There.  My work is done.  I'll leave it to you to work out the minor details.

No doubt you've been given an assignment to carry out that is heavy on the expected outcomes ("create a perpetual motion machine") and light on the details of how those outcomes are to be accomplished.

So it is with this issue we've been kicking around, the exportation of American jobs and technology and the long-term effect that will have on national income and our ability to generate new technologies and jobs.

As this issue gets more national attention — and it will — you will hear countless cries that "we must do something," answered by assurances that "we are doing something."  And it's just as certain those cries and assurances will be noticeably light on the details of what that something is.

One good reason: Many of the proposed solutions are lacking in effectiveness, are easily evaded or threaten to cause more problems than they purport to solve.

For example: Lots of the people who have written about this issue are going to scan the discussion below and say, "Hey!  There's nothing in there about H1B or L1 visas."

They're right.  There isn't.  It's not that there's not a problem of American high-tech workers being replaced with cheaper imported labor (and in many odious cases being made to train their replacements).  Nor am I ignoring the fact that the technology industry has zero credibility on this issue, especially when it claims to be unable to find enough trained Americans to fill positions.  But I have yet to read or figure out a way to deal with this issue that a tech company or outsourcing firm couldn't get around in five minutes — or less.

These ideas alone aren't going to dam the flood of American job exports.  But they might have some effect.  And they're a start:

• Make the Chinese float their currency.  Almost alone among major trading countries, the Chinese peg their currency to a specific dollar value; some argue that keeps the value of the yuan (or renminbi) artificially low against the dollar, thus artificially depressing the price of Chinese exports (be it products or labor) and creating an artificial incentive to move jobs and production there.

If the Chinese want to play in the grown-up game, it's time for them to play by the grown-up rules.  Tell them no more access to world trading markets until their currency floats.

As an adjunct, I would make it U.S. government policy to pursue a weak-dollar strategy.  Everyone else intervenes to drive down the value of their currency vs. the dollar.  Why should we be excluded from the fun?

So a weaker dollar makes overseas travel more expensive for Americans?  So be it. So a weaker dollar makes imports more expensive?  That's really the point — and instead of "more expensive," I'd use the term "more properly priced."

• Every chief executive of every publicly traded company in America should be asked the following questions at the next annual shareholders meeting: How much overseas outsourcing has your company done?  How much do you plan to do?  How many jobs have been or will be affected?  What functions and operations?  How do you plan to protect your technology and processes?  How do you plan to secure data and sensitive information?  What do you plan to do if you lose control of proprietary technology?  What will be the effect on your business from diminished national income that results from the loss of jobs in this country?

But that's just jawboning, you say.  Indeed it is jawboning, but that's not to say it can't be effective.  It lets CEOs know that their investors and customers are aware of the issue and thinking about the long-term costs and ramifications, and maybe they'd better be, too.  Believe it or not, even CEOs are capable of being shamed, and perhaps the public embarrassment of being asked these questions might be enough of a prod them to change their behavior.

But it's more than jawboning.  When companies are pressured to answer these questions, it gives those investors and customers some valuable information to evaluate whom they want to do business with.  Which gets us to the next point...

• If I were running a business whose competitor had sent overseas much of its operations, I could follow suit.  Or I could think about the competitive marketing opportunity that had just opened up.

Consider, for example, the health care concern that has shipped billing work to India.  An effective countermarketing campaign might be: "You think it's hard getting a straight answer on an insurance claim now?  Try doing it with an operator in another hemisphere.  And by the way, how do you like having your medical data bouncing around Bangalore?"

Has the U.S. economy lost the ability to create middle class jobs?

In November the U.S. economy was able to create only 50,000 private sector jobs-almost all in low-paying services: temporary help, accommodations and food services (hotels, restaurants and bars), and hospitals and ambulatory health care services.  This pattern has held throughout the second year of the "economic recovery" that began in November 2001.

Such jobs cannot support families and most might be filled by recent legal and illegal immigrants.

During the course of the last year (11/02-11/03), the U.S. economy has created pitifully few reasonably paying jobs: 94,000 jobs in specialty trade contractors (electricians and plumbers), 1,000 jobs in heavy & civil engineering construction (roads and bridges), 1,600 jobs in architecture and engineering services, 9,000 jobs in legal services, and 11,000 jobs in managerial and technical consulting (possibly laid-off managers and engineers).  Many of these jobs are for support staff.  [Bureau of Labor Statistics,The Employment Situation: November 2003, December 5, 2003]

Together that makes at most 116,600 reasonably paying jobs created during the second year of economic recovery.  In addition some of the 62,000 jobs in finance and insurance, 18,000 in real estate, and 303,000 in education and health services provide a middle class income.

But all of the incomes from these 500,000 jobs is offset by the loss of 549,000 manufacturing jobs in the last 12 months.  During its second year of "recovery," the overall economy experienced a net loss of 183,000 private jobs!

Looking at the job numbers by category is sobering.  Currently the U.S. is running a $500 billion trade deficit.  Where among the growth sectors of the economy-temporary help, restaurants and bars, hospitals and ambulatory health care services, real estate, electricians and plumbers, depository credit intermediation and commercial banking-are there any potential exports to close the massive gap in our balance of trade?

Substituting ideology for thought, free market pundits pretend that the massive U.S. trade deficit is caused by an inflow of foreign investment.

However, if these pundits were to examine the actual figures, they would discover that this "foreign investment" actually represents foreign acquisition of existing U.S. assets, not construction of new businesses.  As Warren Buffett recently made clear in Fortune magazine, we are paying for our excess consumption by giving our wealth to foreigners.

As Buffett puts it, the U.S. has ceased to be Thriftville and has become Squanderville.

During the past 12 months, the U.S. economy lost 148,000 jobs in trade, transportation, and utilities, including 47,000 in wholesale trade and 27,000 in retail trade.

The information sector lost 117,000 jobs, including 53,000 in telecommunications.

Looking for something to extol, pundits have seized on the high productivity numbers.  Pundits tend to associate "productivity" with factories and assume the high number means manufacturing is prospering.  But, alas, the high productivity number means something very different.

The loss of 74,000 jobs in wholesale and retail trade during a year of economic recovery reflects the inroads made by merchandising giants such as Wal-Mart and Home Depot.  The ratio of labor hours to sales in these stores is much lower than in the businesses Wal-Mart and Home Depot have displaced.  The higher sales to labor ratio boosts the productivity number.

Other aspects of a service economy result in artificially higher productivity numbers.  Cell phones, computers, home offices and the pressure "to make our numbers" result in a divergence between hours worked and hours paid for many service employees.  Sales representatives, programmers, managers, and bookkeepers, for example, put in many hours at home for which they are not paid. The effect is to overstate productivity.

September 11 and the "War on Terror" have set off much chest-thumping on the part of pundits anxious to display their patriotism.  The same chest-thumping that led to a miscalculated invasion of Iraq can produce incorrect expectations about the economy.

What happens to engineering and architectural graduates when the economy during a year of economic recovery can create at most only 1,600 places for them?

What will happen to engineering enrollments and to innovation if the things that engineers produce are not made in America?

What will become of engineering schools?

Can a country without engineers, scientists, and manufacturing be a superpower?

The nation, in short, faces a manufacturing emergency.  Unless drastic measures are taken quickly, this emergency will turn the United States into a second-class manufacturing power, greatly diminishing its own future economic prospects.  Further, national security and flexibility in foreign affairs will be severely compromised.  Finally, the international imbalances being created by the manufacturing crisis will likely push the world into a major dollar crisis and could cause a protracted depression.

NO TIME TO LOSE

The most serious global macroeconomic dangers stemming from the continued flight of American manufacturing overseas have to date been avoided and may be postponed still further by continued financial policy legerdemain — though the faster America's international debts keep rising, the more difficult the challenge of correcting the imbalances.  But regardless of when the crunch actually comes, the weakening of domestic manufacturing is already undermining the material foundations of American national success.

In addition, the manufacturing crisis raises serious questions about the U.S. economy's ability to maintain a high-tech, world-leading military without worrisome dependence on foreign products and technologies.  Although it is true that defense-related imports come overwhelmingly from long-time allies or traditionally friendly countries, it is just as true that they are growing rapidly at a time when major disagreements increasingly mark the relationships between the United States and these countries.

Further, the massive loss of tax revenue — both corporate and personal — directly attributable to a disappearing industrial base will undoubtedly constrain America's ability to sustain military operations in both peacetime and wartime at levels that U.S. policymakers have come to take for granted.  Thus the country faces a future in which the ability to project power and thereby affect events and outcomes the world over will be much more limited than anytime in the last century and a quarter.

Most worrisome, the decline of American manufacturing is quickly feeding on itself and gaining unstoppable momentum.  Washington's continuing failure to secure equitable terms of trade forces more and more U.S. firms to compensate by outsourcing.  These moves create powerful pressure for growing numbers of the remaining hold-out companies to follow suit.

LESSONS OF THE RECENT PAST

The following action plan for saving and reviving U.S. industry incorporates recent policy lessons that Americans simply can no longer afford to ignore.

First, although America's regulatory and tax systems have unnecessarily raised domestic business costs in many instances, the manufacturing crisis springs from far deeper roots.  No regulatory, health care, or tax reform schemes that would produce acceptable economic, social, or political results can overcome the damage being done to American manufacturing by today's globalization policy failures.  Improved industrial competitiveness cannot and should not be based on gutting the basics of a just, humane, and inclusive society.  Fundamentally new globalization policies are the sine qua non for saving and reviving American manufacturing.

Second, the United States will always have more control over its own actions than over the actions of other countries.  Therefore, the keys to reversing American manufacturing's decline lie neither in more market-opening trade agreements nor in efforts to micro-manage economic and social conditions overseas.  Despite decades of so-called free trade agreements, too many foreign markets still remain too closed to U.S. exports.  The main reason: Most of the world's countries view trade as a zero sum game, with a piece of the American domestic market as the prize.  The handful of economies wealthy enough to consume American-made goods can erect new trade barriers faster than U.S. negotiators can even identify them.  The U.S. government, moreover, has too much trouble enforcing its own laws and regulations here at home to imagine that enforcing foreign laws and regulations, even those imposed by future trade agreements, will be successful.

Instead, to achieve the necessary results, the United States must focus on controlling its own behavior and controlling access to its own market, unilaterally conditioning that access on acceptable practices by its trade partners.  In addition, the United States must rely mainly on its own power and leverage to achieve satisfactory terms of trade.  As the record unmistakably shows, one-country-one-vote international organizations like the World Trade Organization too readily turn into mechanisms for undermining American sovereignty, diluting American power, and maintaining global economic free-riding.

Finally, Washington must recognize that simply promoting economic growth and higher incomes abroad will not alone cure U.S. manufacturing's ills and rebalance America's trade accounts.  Too many countries refuse to trust their economic fates to market forces.  Too many refuse to permit higher growth to draw in proportionate volumes of imports.  In short, too little commerce around the world is free enough to allow potential future growth to serve as a U.S. trade and manufacturing cure-all.

EMERGENCY MEASURES

1. The president must declare that the United States faces a manufacturing, R&D, and outsourcing emergency no less threatening to America's long-term future than even the Great Depression.  He must also make clear that the crisis stems mainly from the manipulation of world trading system by mercantilist countries and to the encouragement of offshoring by U.S. trade policy.

2. The president should create an Apollo Program-type task force in the federal government to oversee Washington's response to the manufacturing crisis.  Its mission should be to restore domestic U.S. manufacturing to global preeminence and to boost domestic manufacturing employment and wages.  The program should involve all agencies of U.S. government.

3. Federal R&D spending should be tripled and Washington should offer matching grants to industry.  Special emphasis should be placed on tasking the national labs with helping to develop commercially viable, high-tech products to be manufactured in the United States.

4. The U.S. trade deficit should be quickly and dramatically reduced by imposing a "variable trade equalization tariff" on imports from countries running a trade surplus ten percent or greater of total bilateral trade.  These tariffs should be increased each year until bilateral surpluses fall below the threshold level, at which time they would be removed.  Tariffs should be imposed on U.S. trading partners as soon as surpluses reach the 10 percent threshold.  Washington should offer a partial exemption for the world's poorest countries, but only if concrete, measurable trade breaks from the other OECD countries follow suit and only if the developing country seeking the exemption demonstrates a commitment to democracy and the economic advancement of all its people.  Exemptions are not intended to enrich corrupt, dictatorial elites.

5. Washington should declare a moratorium on all current and future free trade talks pending development of new national trade strategy.  The United States government clearly has lost the ability to negotiate trade agreements that enrich the great majority of Americans and strengthen the domestic manufacturing base on net.  U.S. leaders should not engage in trade negotiations until this ability is regained.

6. Washington should declare a moratorium on U.S. compliance with WTO panel decisions pending dramatic reform of organization to reflect America's position in world economy.  The UN Security Council veto and the IMF/World Bank weighted voting systems are possible models of international organization structures appropriate to America's geopolitical and economic superpower status.  If appropriate reform is not completed by the end of 2005, the United States should declare its intention to withdraw from the organization as soon as legally permissible.

7. Washington should declare a moratorium on U.S. compliance with NAFTA panel decisions pending reform of NAFTA's dispute-resolution process to reflect U.S. predominance in the North American economy.  In addition, NAFTA's rules of origin and external tariffs should be revised to offer meaningful trade preferences to goods with much higher levels of North American content.

8. The United States should expedite procedures for anti-dumping and countervailing duty suits.  Threshholds for standing, actionability, and remedies should all be eased.  In addition, remedies should be extended to companies up and downstream from immediately affected industries to ensure protection for suppliers and consumers, and prevent foreign economic interests from using divide and conquer tactics against domestic industries.

14. The president should declare a moratorium on foreign acquisitions of U.S. defense-related companies pending completion of comprehensive study of the status of the roughly 1,500 such companies acquired since 1988 under the current policy framework and government screening system.

15. Strict, detailed country-of-origin labeling should be required on all food and agricultural imports.

16. Legal immigration into the United States should be limited to 500,000 annually.  The H-1B visa program for technology workers should be abolished.  A new federal commission comprised both of U.S. technology worker interests and tech industry interests should conduct a study to determine labor needs in technology industries and how they should be met.

LONGER-TERM MEASURES

1. Washington must insist that any future trade agreements be strictly reciprocal and strongly enforceable by the U.S. government, unilaterally if necessary.

5. Congress should enact strict foreign lobbying reform covering all federal officials, including lifetime bans on working for foreign interests for former senior Executive and Legislative branch officials.

8. The federal government must publish more complete and timely foreign trade and investment data.  This data should include detailed information on the importing, sourcing, and employment trends of all multinational companies and in fact all companies that do business in the United States.  The provision of the data to the appropriate government agencies must be made mandatory.

9. The president should launch a comprehensive review of all U.S. defense alliances to determine which remain relevant to 21st century U.S. interests.  The president should explicitly state that foreign policy and defense considerations will no longer automatically trump the economic interests of the United States and the American people.

STRONG - BUT ESSENTIAL - MEDICINE

No one should assume that implementing this manufacturing revival plan will be pain-free.  All economic adjustments and transitions exact costs as well as create benefits.  Those necessary to improve the long-run fundamentals of American manufacturing and strengthen the foundations of the U.S. and world economies as a whole will be that much more difficult because of the national and global economic excesses that were fostered since the completion of the "Tokyo Round" of international trade talks, but especially during the 1990s.

Specifically, some temporary slowdown in U.S. and global growth rates seems unavoidable.  And thanks to the power of recklessly expanded international trade and investment, pushed unceasingly by economic ideologues and short-sighted multinational companies, achieving this slowdown will require serious restrictions on trade and investment flows.

Yet the only alternatives proposed to date are policies that are already proven failures, or that are surrenders to wishful thinking.  Moreover, these responses can only postpone the day of reckoning, not prevent it.  And just as permitting a disease to fester usually ensures that the needed treatment will be that much stronger, more painful, and less certain to work, permitting the manufacturing crisis to fester and inflating the global economic bubble further will only increase, not decrease the economic dangers facing America and the world.

The implementation of restorative measurers cannot be left to the good sense of Washington policymakers and elected officials. As a group, they have demonstrated convincingly time and again that they do not grasp the magnitude of the problems they have created and that they are bereft of comprehensive solutions.  Instead, they prefer cosmetic changes, designed to relieve political pressure and ensure reelection.

If the necessary policy reorientation is to be accomplished, the impetus must come from the remaining domestic manufacturers, their employees, their communities, and local and state governments, which are experiencing first-hand the budget crises caused in large part by globalization policies — whether the movement of plants overseas, company bankruptcies due to unfair foreign practices, high-tech and other services outsourcing, uncontrolled immigration with the resulting disproportionate consumption of social services, etc.  In short, grass roots efforts must reach critical mass to force Washington to change two generations of misguided policies.

If any political leaders or economic experts know how to solve the manufacturing and trade crises without the significant trade restrictions featured in our action plan, the U.S. Business and Industry Council would welcome their ideas with open arms.  But we would also be wondering what they've been waiting for. The time for comprehensive action to save American manufacturing has long since passed.  Very soon there will be little left to save.

There is a widespread feeling among American voters that something is fundamentally wrong with — well with America itself.  There are many opinions voiced as to just what it is that is wrong and even more pertaining to WHO is at fault and what we must do to "fix things."  You can't fool all of the people all of the time as Lincoln famously observed.  Given the pervasiveness of these sentiments, and their persistence, and considering that they transcend political affiliations, something truly fundamental must indeed be "wrong" — but what?

The actual deep source of our national anxieties lies in the growing mismatch between our economy and our political system.  As any glance at a map or globe will tell us nations are geographically bounded.  Politics is localized.  However, our economy is increasingly global in scope. Large corporations ("multi-nationals") can treat the entire world as a seamless whole for business purposes.  The sway of national governments, by contrast ends at their borders. In fact nations such as ours are no longer fully sovereign even within their own borders.  As a result of international trade agreements such as the WTO Treaty, to which the US is a signatory, national laws can now be overturned almost at will by multinational firms if they can be shown, to the satisfaction of a WTO selected arbitration panel, to be an "unfair restraint on trade."  To make a long story brutally short, the net effect of this mismatch between growing multinational entities with their ever growing wealth and ever harder pressed national governments is that the multinational firms' money has captured and subordinated national governments across the planet — including ours.  Across the world national governments are less and less in control of their own policy-making decisions.  Multinationals, many far richer than most nations; are increasingly in the driver's seat.  More and more governments are becoming tools of this multinational juggernaut.  It should be noted that these giant firms use their control of markets as well as their control of the regulatory functions of national governments to ensure that no competitors can emerge to challenge their economic fiefdoms.  At the level of the multinational firm business is oligopolistic: For each market sector only a few big firms dominate.  Coke and Pepsi are examples.  More to the point: the "seven sisters" in the oil and energy field.  Adam Smithian, Econ.  101 notions of free enterprise capitalism have no explanatory utility here.

In the USA the capture and effective subordination of our national government was appallingly easy.  Money has always spoken in this country.  But until recently the political buying power of big business was more or less checked and balanced by that of big labor.  However with the rise of multinational firms and the consequent deindustrialization of America as high paying manufacturing jobs were exported to low wage nations, this check is ever less effective.  The industry centered labor union movement has been gutted by these lost high wage unionized jobs.  Consequentially, American national policy is ever more written by and for multinational firms.  A fundamental check became increasingly less and less effective.

Since our Supreme Court ruled in Buckley v.  Vallejo (1976) that injecting essentially unlimited outside money into political campaigns is protected by First Amendment free speech rights, our political system has become almost wholly beholden to the highest bidder.  And no one has anywhere near as much money as the giant multi-nationals.  Statistics show that in Congressional races the candidate that spends the most money wins about 96 percent of the time.  It's a case of "who has the gold makes the rules."  American government no longer serves the interests of its citizens.  It has become an appendage of a coalescing global corporate oligarchy. Expect wages for American workers to continue to decline - when they can find employment at all.  A non-unionized, low wage, no-benefits, Wall Mart economy awaits us.

Multinational firms have no interest whatsoever in anything except the corporate bottom line: Maximizing short-term (usually quarterly) profits to facilitate the enrichment of their owners and major stockholders.  The Enron accounting scandal in conjunction with dozens of other recent corporate scandals, including the cold-blooded manipulation of the California energy market and consequent and continuing robbery of every ratepayer in California of countless billions of hard earned treasure, all testify eloquently to the naked truth of this proposition.  If American is de-industrialized in pursuit of lower wages and a docile workforce, if the polar ice caps are melted and costal populations are flooded, due to global warming, multinational firms and their bought and paid for lackeys currently residing in the White House and the US Congress could care less so long as there is money to be made and to be distributed!  Government in a nation such as ours was designed to be a "res publica" a "thing of the people" (from which we derive the word "Republic").  Not long ago we were advancing fitfully along the road towards the creation of a true Republic "of, for, and by the people."  No more.  Our res publica is being rapidly looted by these avaricious parasites.  Soon, only an empty, bankrupt, police state shell shall remain - unless we the people rise up to put a stop to this.

On one level global problems require global solutions.  The spontaneous rise of the worldwide anti-globalization movement in instinctive response to the multinational takeover of national governments across the planet is a beginning. Global problems require globally organized solutions.  Given a level playing field provided by common standards based upon the principle of reciprocity ("do unto others as you would have them do unto you") international trade can indeed be made to work for the benefit of all.  A rising tide does indeed lift all boats.  But to achieve this desirable result, citizens of nations across the planet must act resolutely to reclaim control of their own national governments. The solution to the threat of runaway multinational firms lies in citizens in nations across the world reclaiming control over their national governments. Here in America instituting mandatory, loophole free, public financing of elections would sever the coupling between corporate cash and winning elections. As a start to our reclaiming our Republic from its usurpers, we must demand that this be done now.

The American Revolution began as an uprising against the world's first multi-national corporation the British East India Company — after all just who do you think owned all of that tea that Sam Adams and friends dumped into Boston Harbor?  Whose monopoly on goods and trade do you think that all of those royally-imposed taxes actually benefited?  The second American Revolution, this time a peaceful but determined citizens' movement to take back control of our Republic from our newly self-enthroned corporate barons, is now inevitable if we are to retain and reclaim our freedoms.  The 2004 elections will be the most crucial in our nation's history at least since the Civil War.  Ask yourself: "Do I want to be a free and prosperous citizen of a Constitutional Republic, or would I rather be a police state suppressed, impoverished, subject of a global, corporate oligarchy?"  Act accordingly.  Act now.

Are the job losses that are everywhere in the news and the decline in U.S. manufacturing the result of competition in the markets for tradable goods and services and, thus, reflect the benevolent workings of free trade, or are they manifestations of David Ricardo's case of internationally mobile factors of production flowing to countries with the greatest absolute advantage where their productivity is highest?

It is easy to take free trade for granted and to forget the conditions on which its case rests.  To briefly review: David Ricardo discovered the principle of comparative advantage, the basis for free trade.  Instead of striving for self-sufficiency, countries should focus on what they can do best and trade with one another for other wants.  Ricardo showed that shared gains from trade would result from each country specializing in areas where it had comparative advantage.

For comparative advantage to reign, factors of production must be mobile within each country so that they can move to the uses where they have comparative advantage.  The principle does not work, however, if factors of production are internationally mobile and can leave the country.  If factors are internationally mobile, they will flow to countries that have the greatest absolute advantage where their productivity is highest.  The countries with greatest absolute advantage will capture the gains.

Historically, there have been barriers to the international mobility of factors of production.  In Ricardo's time, GDP was largely determined by climate and geography, neither of which can migrate.  In our own time, world socialism served to constrain capital and technology within the first world of North America, Western Europe and Japan.  Multinational corporations would have felt unsafe investing in China even if they had been permitted.

The collapse of world socialism has made vast pools of cheap and willing labor in Asia and Mexico available to U.S. capital and technology.  The Internet has made the physical location of employees unimportant for many knowledge and information technology jobs.  The Internet, outsourcing and offshore production for the home market allow U.S. firms to substitute cheap foreign labor for expensive U.S. labor in their production functions.

The question I ask is Ricardo's: Are internationally mobile factors of production flowing to where their productivity is highest?

Does the ease with which foreign labor can be substituted for U.S. labor in the production functions of U.S. firms make foreign labor internationally mobile to the United States, where its productivity is highest?  Alternatively, does the international mobility of U.S. capital and technology allow these factors of production to flow to countries where their productivity is highest — countries with abundant and cheap labor?

Until recently, First World capital and technology were confined to the first world, no area of which had a massive labor cost advantage that would convey an absolute advantage and suck in capital and technology from other First World areas.  The Internet, changes in Asian receptivity to foreign investment and the willingness of First World corporations to make high-tech investments in Third World countries are new developments.  It is irresponsible to assume that the United States will not be affected by these new developments or to assume without careful thought that the impact on the United States will be beneficial.

Some people feel so threatened by the questions posed that they deny the obvious job loss and decline in U.S. manufacturing.  Space is lacking to expose their many mistakes with data and its interpretation.  Generally speaking, it helps to keep in mind that historical data report the past, not new developments.

Without doubt, some U.S. job losses are due to the recession.  But the decline in manufacturing's share of U.S. GDP from 19.2 percent in 1988 to 14.1 percent in 2001, a decline of 27 percent, is inaccurately described by Griswold as "the passing pain of a recession."

Commentators should stop hiding behind bogus data and address the questions.

The big argument for the tax cut just signed by President Bush is that it will create much-needed jobs.  But one big question remains:  will those jobs be created for Americans, or will corporations simply hire more job-seekers from India and China?  s time for Congress to call a halt to the scandal of the way big corporations hire foreigners at the same time they are laying off their American employees.  The hiring of hundreds of thousands of foreigners is why this year's college graduates face the worst job market in recent memory.

The Scam of H-1B Visas

This is not free-market economics.  It is collusion between corporations that pour big money into politics and Congress that passes legislation enabling the corporations to replace American workers with foreign substitutes, thereby keeping all wages artificially low to enhance corporate profits.  This is not a "natives vs.  immigrants" issue because it impacts negatively on naturalized Americans and legal permanent residents as well as on native-born citizens.

The congressional-corporate attack on engineers and computer specialists started when Section 1706 was slipped into the Tax Reform Act of 1986.  This uniquely discriminatory section required anyone who is an "engineer, designer, computer programmer, systems analyst or other similarly skilled worker" to be classified by Internal Revenue as an employee rather than as an independent contractor, which hundreds of thousands were at that time.

This change in the law, plus aggressive enforcement by the Internal Revenue Service, resulted in the creation of large consulting or contracting firms that hire such persons as their own employees and then contract to sell computer services to big corporations.  These "gatekeeper" firms expanded rapidly because they took over the management of personnel for corporations and then found how easy it is to exploit H-1B and L-1 visas to hire foreigners to replace American engineers and programmers.

The Scam of L-1 Visas

L-1 visas were created to allow intracompany transfers of key managers, executives or persons with "specialized knowledge" from a foreign office to a U.S. office of the same company.  There are no numerical limits and no safeguards against abuse.  After the "gatekeeper" consulting firms became widespread, they made L-1 visas a gold mine of profits.  L-1 visas also enable foreign workers to bring in their spouses and children on L-2 visas.

The Scam of Outsourcing

Not only is the corporations' claim that we suffer a shortage of computer programmers and engineers a fraud, but so is their claim that the aliens they import have specialized knowledge that is needed to retain the industry's technological edge.  Most H-1Bers and L-1ers are very ordinary workers making very ordinary salaries, and often they do not even have the qualifications claimed by their employer sponsors.  The vast majority of computer-related H-1Bers are paid less than $58,000.

Until recent years, America had a commitment to a middle-class society, the economic system that built American greatness and prosperity.  Employees used to be viewed as an investment, but more and more they are looked upon as replaceable commodities.  The movement toward an increasing percentage of underclass cheap laborers is a formula to make us like Latin America and other countries from which immigrants are trying to escape.  Cheap labor ends up being subsidized by the taxpayers, who pay the health, welfare and crime costs that employers are able to escape.

What to do?

Congress should:

1. Reject all attempts to extend the current high number of H-1B visas and allow the limit to revert to 65,000;
2. Require that corporate applications for H-1B visas first demonstrate good-faith efforts to hire or retain American citizens;
3. Require employers to lay off non-citizens before laying off American citizens;
4. Restrict L-1 visas to a company's own employees earning at least $100,000 a year;
5. Forbid all government agencies from hiring non-citizens or from contracting with outside firms that hire non-citizens; and
6. Repeal the 1986 law that prevents computer engineers from working as independent contractors.

Tell your Congressman that importing alien workers to replace American citizens is economically absurd, morally indefensible, and politically foolish.

Corporations are created by humans to further the goal of making money.  As Buckminster Fuller said in his brilliant essay 'The Grunch of Giants', "Corporations are neither physical nor metaphysical phenomena.  They are socioeconomic ploys — legally enacted game-playing..."

Corporations are non-living, non-breathing, legal fictions.  They feel no pain. They don't need clean water to drink, fresh air to breathe, or healthy food to consume.  They can live forever.  They can't be put in prison.  They can change their identity or appearance in a day, change their citizenship in an hour, rip off parts of themselves and create entirely new entities.  Some have compared corporations with robots, in that they are human creations that can outlive individual humans, performing their assigned tasks forever.

Isaac Asimov, when considering a world where robots had become as functional, intelligent, and more powerful than their human creators, posited three fundamental laws that would determine the behavior of such potentially dangerous human-made creations.  His Three Laws of Robotics stipulated that non-living human creations must obey humans yet never behave in a way that would harm humans.

Asimov's thinking wasn't altogether original:  Thomas Jefferson and James Madison beat him to it by about 200 years.

Jefferson and Madison proposed an 11th Amendment to the Constitution that would "ban monopolies in commerce," making it illegal for corporations to own other corporations, banning them from giving money to politicians or trying to influence elections in any way, restricting corporations to a single business purpose, limiting the lifetime of a corporation to something roughly similar to that of productive humans (20 to 40 years back then), and requiring that the first purpose for which all corporations were created be "to serve the public good."

The amendment didn't pass because many argued it was unnecessary:  Virtually all states already had such laws on the books from the founding of this nation until the Age of the Robber Barons.

Wisconsin, for example, had a law that stated:  "No corporation doing business in this state shall pay or contribute, or offer consent or agree to pay or contribute, directly or indirectly, any money, property, free service of its officers or employees or thing of value to any political party, organization, committee or individual for any political purpose whatsoever, or for the purpose of influencing legislation of any kind, or to promote or defeat the candidacy of any person for nomination, appointment or election to any political office."  The penalty for any corporate official violating that law and getting cozy with politicians on behalf of a corporation was five years in prison and a substantial fine.

Like Asimov's Three Laws of Robotics, these laws prevented corporations from harming humans, while still allowing people to create their robots (corporations) and use them to make money.  Everybody won.

But after the Civil War, things began to change.  In the last year of the war, on November 21, 1864, President Abraham Lincoln looked back on the growing power of the war-enriched corporations, and wrote the following thoughtful letter to his friend Colonel William F. Elkins:

"We may congratulate ourselves that this cruel war is nearing its end.  It has cost a vast amount of treasure and blood.  The best blood of the flower of American youth has been freely offered upon our country's altar that the nation might live.  It has indeed been a trying hour for the Republic; but I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country.

"As a result of the war, corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.  I feel at this moment more anxiety than ever before, even in the midst of war.  God grant that my suspicions may prove groundless."

The relentless expansion of corporate control over our political economy has proven nearly immune to daily reporting by the mainstream media.  Corporate crime, fraud and abuse have become like the weather; everyone is talking about the storm but no one seems able to do anything about it.  This is largely because expected accountability mechanisms — including boards of directors, outside accounting and law firms, bankers and brokers, state and federal regulatory agencies and legislatures — are inert or complicit.

When, year after year, the established corporate watchdogs receive their profits or compensation directly or indirectly from the companies they are supposed to be watching, independent judgment fails, corruption increases and conflicts of interest grow among major CEOs and their cliques.  Over time, these institutions, unwilling to reform themselves, strive to transfer the costs of their misdeeds and recklessness onto the larger citizenry.  In so doing, big business is in the process of destroying the very capitalism that has provided it with a formidable ideological cover.

Consider the following assumptions of a capitalistic system:

1)  Owners are supposed to control what they own.  For a century, big business has split ownership (shareholders) from control, which is in the hands of the officers of the corporation and its rubber-stamp board of directors.  Investors have been disenfranchised and told to sell their shares if they don't like the way management is running their business.  Nowadays, with crooked accounting, inflated profits and self-dealing, it has proven difficult for even large investors to know the truth about their officious managers.

2)  Under capitalism, businesses are supposed to sink or swim, which is still very true for small business.  But larger industries and companies often have become "too big to fail" and demand that Uncle Sam serve as their all-purpose protector, providing a variety of public guarantees and emergency bailouts.  Yes, some wildly looted companies that are expendable, such as Enron, cannot avail themselves of governmental salvation and do go bankrupt or are bought.  By and large, however, in industry after industry where two or three companies dominate or presage a domino effect, Washington becomes their backstop.

3)  Capitalism is supposed to exhibit a consensual freedom of contract — a distinct advance over a feudal society.  Yet the great majority of contracts for credit, insurance, software, housing, health, employment, products, repairs and other services are standard-form, printed contracts, presented on a take-it-or-leave-it basis.  Going across the proverbial street to a competitor gets you the same contract.  Every decade, these "contracts of adhesion," as the lawyers call them, become more intrusive and more insistent on taking away the buyers' constitutional rights to access to courts in favor of binding arbitration or stipulate outright surrender of basic rights and remedies.  The courts are of little help in invalidating these impositions by what are essentially private corporate legislatures regulating millions of Americans.

4)  Capitalism requires a framework of law and order: The rules of the economic game are to be conceived and enforced on the merits against mayhem, fraud, deception and predatory practices.  Easily the most powerful influence over most government departments and agencies are the industries that receive the privileges and immunities, regulatory passes, exemptions, deductions and varied escapes from responsibility that regularly fill the business pages.  Only those caught in positions of extreme dereliction ever have reason to expect more than a slap on the wrist for violating legal mandates.

5)  Capitalist enterprises are expected to compete on an even playing field. Corporate lobbyists, starting with their abundant cash for political campaigns, have developed a "corporate state" where government lavishes subsidies, inflated contracts, guarantees and research and development and natural resources giveaways on big business — while denying comparable benefits to individuals and family businesses.  We have a government of big business, by big business and for big business, even if more of these businesses are nominally moving their state charters to Bermuda-like tax escapes.

"Corporate socialism" — the privatization of profit and the socialization of risks and misconduct — is displacing capitalist canons.  This condition prevents an adaptable capitalism, served by equal justice under law, from delivering higher standards of living and enlarging its absorptive capacity for broader community and environmental values.  Civic and political movements must call for a decent separation of corporation and state.

In 1938, in the midst of the Great Depression, Congress created the Temporary National Economic Committee to hold hearings around the country, recommend ways to deal with the concentration of economic power and promote a more just economy.  World War II stopped this corporate reform momentum.  We should not have to wait for a further deterioration from today's gross inequalities of wealth and income to launch a similar commission on the rampant corporatization of our country.  At stake is whether civic values of our democratic society will prevail over invasive commercial values.