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Obama and outsourcing: a guide to the GOP’s charges

at 06:00 AM ET, 07/12/2012


(Susan Walsh/AP)

“Over his four years in office, Obama promised that he would focus on creating "jobs that pay well and can't be outsourced." However, as he racked up trillions in new debt, billions of dollars did go to create jobs that were outsourced or spent overseas. Whether it is electric cars made in Finland or solar panels in Mexico, taxpayers would be astonished to learn that their hard earned money went abroad for jobs that weren't created in the United States.”

— New Republican National Committee Web site , www.obamanomicsoutsourced.com

 “This president has been outsourcing a good deal of American jobs himself by putting money into energy companies, solar and wind energy companies that end up making their products outside the United States. If there is an outsourcer-in-chief, it’s the president of the United States, not the guy who’s running to replace him.”

— Mitt Romney, July 10, 2012

We have written at length about the inaccurate and misleading claims of outsourcing made against presumptive GOP presidential nominee Mitt Romney by the Obama campaign — and surely will again. Now the Republican National Committee has tried to turn the tables on President Obama, and the Romney campaign is jumping aboard.  As The Washington Post reported this week, Obama also has critics on the left for his record on outsourcing.

Some of these claims on the Web site we have seen before, when we awarded Four Pinocchios to a pair of over-the-top television ads attacking Obama. Now the RNC has expanded the list to include examples from more than 20 countries. Are these claims any more valid? We’ve dug deep into the RNC’s documentary evidence so you don’t have to.

Remember: Outsourcing generally means that a company hires another company to do work for them. This is increasingly a common practice. Some of these “outsourced” jobs may be sent overseas.

 

The Facts

 First of all, the Obama quote used by the RNC is from a campaign speech he made on Oct. 30, 2008 — before he became president. The full context of Obama’s statement makes clear that he is referencing jobs in the renewable energy business — “jobs building solar panels and wind turbines and a new electricity grid”— and that he is talking about creating jobs over a 10-year period. His point was that the United States is lagging in those areas. 

Second, most of these examples are the equivalent of throwing spaghetti on the wall and seeing what sticks. Some of it is a bit sticky, but most of the examples are ripped out of context, involve strange leaps of logic or are so minor that it’s barely worth paying attention. Out of the $800 billion stimulus bill, nearly $300 billion was devoted to job creation through spending or loans. There were bound to be some clunkers as the money was quickly disbursed, but the examples here do not support the RNC’s broad-brush assertions.

 Third, just because money went to foreign companies does not mean that all — or even much — of that money went to foreign workers. This is a globalized world, and U.S. companies invest overseas, hiring foreign workers, and foreign companies invest in the United States, hiring American workers. It seems rather strange for Republicans, who claim to be defenders of free enterprise, to be making an argument that foreign companies should not receive federal money even if it is used to hire American workers.

 For instance, a number of the examples claim to rely on reporting by Russ Choma in 2009 and 2010 for American University’s Investigative Reporting Workshop. These reports sparked a bipartisan fuss, but the RNC has cherry-picked claims out of the detailed articles, which make clear that the green energy industry is globalized. Wind turbines could be made overseas, but a good portion of the parts could be made in the United States — or vice versa.

 Foreign outsourcing generally means that an American job was sent overseas, but Choma is writing about jobs that were never in the United States, in part because the United States had fallen so far behind foreign competitors.

 Choma also made clear that some of the data was squishy. “Some of those foreign-owned turbine manufacturers have factories in the United States and some American-owned turbine manufacturers have factories overseas. We simply don't know where all of the parts were made,” he wrote in 2010, when he said that updated numbers showed 54 percent of $4.4 billion in stimulus grants for wind farms went to foreign developers.

 The RNC tries to fudge things by saying “billions of dollars did go to create jobs that were outsourced or spent overseas,” but there is nothing in Choma’s reporting that says the stimulus bill pushed jobs overseas. The RNC further claims that the stimulus “included over $8.5 billion in grants for wind farms that flowed overseas.” But that is a figure for all spending on wind farms, and there has been no update on what percentage went to foreign companies.

We asked Choma to review the Web site and how it used his data, and here’s what he said:

“The RNC's website does correctly cite some of the data we uncovered in the course of our investigation, however most of that reporting is over two years old and the RNC site presents just a snippet of what we found. The focus of our reporting was whether or not the Obama administration created as many jobs domestically as they promised they would — not on the question of whether there was "outsourcing" of jobs. I don't think we saw anything that indicated the Obama administration pushed jobs overseas. What we found is that a large portion of the money from that program was given to foreign-owned companies to build wind farms here in the United States. We found those projects did create jobs here in the United States in construction and operation of those windfarms, but in many instances, the farms used turbines that may have been manufactured overseas. In many cases, manufacturers told us that domestically manufactured turbines were not available. When we last reported on the issue, we found that more and more domestic companies were getting involved, but I can't say what the situation is today.”

 Now let’s look at the examples cited, by country, on the RNC Web site. Forgive us, this is long — but so is the RNC Web site. We will deal with each country in the order it was listed.

 Switzerland: This is a silly example concerning the fact that an administration official held stock in a Swiss manufacturer that stood to benefit from building a more efficient electrical grid. The article cited showed she had recused herself on any decision that involved the company.

 China: Without evidence, the RNC tries to link the two facts — that Cree Inc. in 2010 received a $39 million tax credit to expand a factory in North Carolina and that it opened a factory in China later the same year. One has nothing to do with the other. The deal to buy the Chinese factory was reached in 2009, before any tax credit was received. Company officials made it clear that the Chinese factory was aimed at the Chinese market.

 The other China examples have little to do with Obama, but reflect business decisions made by independent companies about their suppliers.

 Finland: This concerns a loan guarantee to Fisker Automotive, which The Washington Post has identified as troubled. But the company disputes the RNC’s claim that $500 billion in U.S. money (via two loans) is being spent to produce cars overseas. Instead, the company says the money has been spent on design and engineering activities in the United States, and the expenditures have been reviewed by PricewaterhouseCoopers. Ultimately, the company plans to build a lower-priced version of its car in Delaware, using a $359 million loan, but less than $25 million that has been disbursed so far.

Denmark: The RNC offers three examples, none of which support its claims. One concerns a company called Vestas that received a tax credit but is now laying people off, mostly overseas; the article cited by the RNC makes clear that U.S. workers may lose their jobs if the tax credit expires at the end of the year. But there is bipartisan support to renew the credit. Another example concerned a Danish company’s plans to build a pilot plant in Iowa, and a third involved a company that used wind turbines assembled in Denmark because U.S. manufacturers could not meet its requirements.  

South Korea: The RNC cites complaints from union workers that foreign workers have been involved in the building of plants — supported by stimulus funds — in Michigan to make electric vehicle batteries.

One of the companies, Dow Kokam, said it “purchased highly sophisticated, proprietary manufacturing equipment from Korean vendors. An element of the purchase agreement is for the vendors, who developed the equipment, to provide personnel with the unique experience and expertise to install and test it.” But, the company said,  “more than 90 percent of the construction work on the Dow Kokam Midland Battery Park has been done by Michigan residents. Additionally, we have hired 95 full-time employees; approximately one-third of the 320 personnel the facility expects to employ at full capacity.” 

The other company, LG Chem Ltd., made a similar comment to the Wall Street Journal.

 Australia: This concerns a $162,000 (!) grant to the Melanoma Institute of Australia to supply tumor samples to the National Cancer Center. The amount involved is so puny as to be laughable, but Australia certainly looks big on the RNC’s map.

 Mexico: For this claim, the RNC without irony cites a FactCheck.org report debunking a claim that stimulus money is building a plant in Mexico — “this strings together two largely unrelated facts to create a misleading impression” — because the article quotes a spokeswoman saying that “some of the solar panels” being installed in California will come from Mexico. The RNC must have missed the rest of her statement:

The overwhelming majority of solar panels will come from SunPower’s nearby plant in Milpitas, Calif. Moreover, the solar facility is being built in California, employing some 350 American construction workers for several years.

The other example cites a 92-word newspaper article to make the claim that another company used a tax credit to ship jobs to Mexico, but there is no apparent connection.

 Dominican Republic: The state of Ohio received an $11 million stimulus grant to provide rebates to people who buy energy efficient appliances for their homes. Then, it gave the contract to the lowest bidder, but failed to check whether the jobs would be in the United States. The subcontractor hired workers in El Salvador and the Dominican Republic, but we fail to see why this is Obama’s fault — especially since the Democratic governor of Ohio at the time said the state needed to do a better job of vetting contracts.

New Zealand: Here, again, the connection to Obama is virtually nonexistent. The City of Santa Clarita awarded a contract using stimulus money to a New Zealand company because it submitted a lower bid that met the requirement to buy American-made parts. The city said the money would still go to “local employees and is spent at local businesses.”  

Thailand: General Motors expanded facilities in Thailand. So what? It’s a global company. This did not involve stimulus funds at all.

Vietnam: This makes the RNC’s list because General Electric, an international company, opened a factory in Haiphong, and Chief Executive Jeffrey Immelt heads Obama’s Jobs Council. But the connection is highly tenuous.  

Italy: Italian wind turbine companies did well in winning cash grants through the stimulus, but one company failed to follow through in ambitious hiring plans in Indiana. 

Russia: This is an interesting story of $118 million in stimulus funding going to a U.S. company to produce cutting-edge battery technology. The company later was purchased by a Russian businessman. We’re not sure if the RNC is saying that foreign companies should never make investments in the United States, but Russia certainly dominates the map on the Web site.

Germany: German companies — especially their American subsidiaries — won wind turbine contracts. One company, Nordex, had no U.S. manufacturing but built a $100 million facility in Arkansas that would create 700 full-time jobs by 2014. That sounds like insourcing, not outsourcing.

Luxembourg: Who knew that this tiny country was such an economic threat? This is yet another U.S. subsidiary (based in Chicago) getting a stimulus grant.

El Salvador: This is a repeat of the Dominican Republic tale.

Great Britain: Two examples here. One concerns a company that will build electric battery-powered commercial trucks in the United States, but the first batch will come from England. The other is about another U.S. company, later bought by British investors, receiving funds.

India: Another winner in the wind turbine business.

Spain: Spanish companies were also big winners in the turbine business, but have recently cut back on employees.

Indonesia: The Environmental Protection Agency is spending $1.5 million over five years to discourage air pollution in smoggy Jakarta. Another relatively minor payment for a country that looks big on the map.

Japan: Yet again wind turbines — and again another $100 million facility was built in Arkansas, this time by Mitsubishi.

France: A French company got funds for a wind project in Indiana.

“It is a factual statement that stimulus money went overseas and did support jobs overseas, which is the overall point of the Web site,” said Joe Pounder, the RNC’s research director and deputy communications director.  

 

 

The Pinocchio Test

 We understand what the RNC is trying to do. The Obama campaign has made unsupported charges about Romney’s record on outsourcing while at Bain Capital, and now Republicans want to try to argue that the stimulus law is, in effect, Obama’s Bain Capital — and that Obama did even worse things than he is accusing Romney of.

 But this is a slippery slope into the silly season. The Obama campaign has raised irrelevant issues about outsourcing, and now the RNC has responded in kind. But that is no excuse.

 Most of these claims are ridiculous, especially for an organization that claims it supports free enterprise. If a foreign company gets stimulus funds, but spends the money in the United States and hires U.S. workers at its U.S. subsidiary, we fail to see how that is money being “sent overseas.” As the account above shows, some companies built new factories in the United States after getting stimulus funds.

 Still, the strongest case of money and jobs flowing overseas concerns the wind farm contracts that were initially awarded. In 2010, the Energy Department found that 60 percent of the 40 largest wind farms then financed by the stimulus relied on foreign manufacturers for their central components, including turbines. But, again, the U.S. domestic industry was not capable of meeting the demand at the time.

We wavered between four and three Pinocchios on this. On a broad-brush basis, the RNC’s central claim has a bit of truth in it — some jobs were likely created overseas and some money went overseas — but the details on the Web site are pretty farcical. It is probably more like 3 ½, but we don’t give ½ Pinocchios. 

 Three Pinocchios

 


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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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