Lawmakers in Congress and in more than 30 state legislatures have targeted foreign outsourcing as a threat to U.S. employment and prosperity. Along with certain critics in the news media, such as CNN’s Lou Dobbs, they charge that U.S. companies are firing American workers in significant numbers and replacing them with foreign service workers in low-wage countries such as India. Legislative proposals in Michigan and elsewhere have focused on barring federal or state contracts with companies that would “offshore” the work to call centers or information technology providers abroad.

Foreign outsourcing has become a lightning rod for controversy. At a press conference in February, the chairman of President Bush’s Council of Economic Advisors, Professor Gregory Mankiw of Harvard, found out just how controversial outsourcing has become. The president’s economic advisor described foreign outsourcing as “something that we should realize is probably a plus for the economy in the long run.” Far from being a new and unique threat to employment, he noted, “Outsourcing is just a new way of doing international trade. We’re very used to goods being produced abroad and being shipped here on ships or planes. What we’re not used to is services being produced abroad and being sent here over the Internet or telephone wires.” Mankiw concluded, “I don’t think [foreign outsourcing] is the primary thing driving the recent business cycle developments.”[1] Republican and Democratic politicians alike criticized Mankiw for favoring “economic theory” over displaced workers.