Obama’s new attacks on Romney and outsourcing

at 06:02 AM ET, 07/02/2012

“The Washington Post has just revealed that Romney’s companies were pioneers in shipping U.S. jobs overseas.... Does Iowa really want an outsourcer-in-chief in the White House?”

— one in a series of new Obama campaign ads

“Pioneers! Let me tell you, Tampa, we do not need an outsourcing pioneer in the Oval Office. We need a president who will fight for American jobs and American manufacturing. That’s what my plan will do.”

— President Obama, June 22, 2012

“Offshoring is the shipment of American jobs overseas. And in that Washington Post story, which the president is using now to attack American companies by name, there are no examples of jobs being taken from the United States and shipped overseas. What you have are companies that are expanding into new markets.”

— Romney senior adviser Eric Fehrnstrom on CBS’s “Face the Nation,” June 24, 2012

“Just last week, it was reported that Governor Romney’s old firm owned companies that were ‘pioneers’ — this is not my phrase, but how it was described in the report — ‘pioneers’ in the business of outsourcing American jobs to places like China and India. Yesterday, his advisers tried to clear this up by telling us that there was a difference between ‘outsourcing’ and ‘offshoring.’ Seriously. You can’t make that up.”

— Obama, June 25, 2012

The Obama campaign has seized on a recent front-page article in The Washington Post to argue that former Massachusetts governor Mitt Romney is an “outsourcer-in-chief,” while the Romney campaign has pushed back, asking for a retraction of the article. (The Post has refused and stood by the reporting.)

The Fact Checker does not check the facts in the reporting of Washington Post writers or columnists, despite the many pleas of readers to do so. We even avoid checking most pundits. We generally confine ourselves to checking the rhetoric used by politicians and interest groups.

In this case, both campaigns have seized on a news report in The Post, and both are describing it inaccurately for their own political purposes. The Obama campaign has even made the report the centerpiece of its current ad campaign. This puts us in a bit of a strange position.

So we will try to describe what the report is about, without venturing into the realm of media criticism.

The Facts

The article, by reporter Tom Hamburger, appeared on the Web on the evening on June 21 with a headline that said: “Romney’s Bain Capital invested in companies that moved jobs overseas.” The headline was different in the print edition: “Bain’s firms sent jobs overseas.”

The Obama campaign moved quickly to define what the article meant, with Obama senior adviser David Axelrod releasing a statement declaring that Romney “made a fortune advising companies on how to outsource jobs to China and India.”

The actual article, in fact, does not say that transfers of U.S. jobs took place while Romney ran the private equity firm of Bain Capital. (Since Romney kept an ownership stake in Bain, he may have still benefited from transactions, but “advising” is another matter.)

Instead, the article says that Bain was prescient in identifying an emerging business trend — the movement of back-office, customer service and other functions out of companies that were willing to let third parties handle that business. Several of the companies mentioned in the article grew into major international players in the offshoring field today.

For instance, Stream International was a major client of Microsoft. As Microsoft grew, it decided it would subcontract to Stream some customer service work. Someone might dial a number listed on a Microsoft Web site if they had problems, but they would be connected to someone working at Stream.

This was an important shift in the U.S. business landscape, and Bain Capital caught the wave, investing in companies that, as the article put it, were “pioneers” in the emerging market of handling such tasks for other companies. Originally, much of this work was handled in the United States. But with the installation of the first fiber-optic cable under the Atlantic Ocean in 1988 — and the burst of installation in the 1990s and beyond — it was only a matter of time before those jobs suddenly could be moved overseas.

Stream International, for instance, is now Stream Global Services. This is how its Web site describes its business:

“Originally formed more than 15 years ago as an outgrowth service for a large software reseller, Stream has grown to become a global provider of sales, customer service and technical support services for the Fortune 1000. Since its inception, Stream’s global footprint has expanded to cover 21 countries, with 33,000 employees across 49 locations. Stream currently manages millions of voice, email and chat contacts each year from customers around the globe.”

Romney stopped managing Bain in 1999, so much of this movement overseas took place after he left the firm. But the firms Bain invested in were well-primed to take advantage of this opportunity. Major advantages in computing power also took place in the decade of the 2000s, allowing companies to create global networks that provide 24-hour manufacturing and customer service around the globe.

Similarly, another Bain investment mentioned in the article, GT Bicycles, was a shrewd bet on bicycles being assembled largely from parts overseas. Eventually, domestic manufacturing of bicycles virtually disappeared.

The Romney campaign, for its part, is attacking the article on the basis of how the Obama campaign interpreted it, not what it actually says.

As part of its demand for a retraction, the Romney campaign produced a slide show claiming that many of these companies actually created jobs in the United States. The slide show, however, only shows half of the picture — these are the jobs created at these companies, but they are replacing customer service and manufacturing jobs that had once existed at other companies. Most likely, it’s a wash — no overall job creation one way or the other.

In other words, the same jobs moved from Company A to Company B — and then eventually they moved overseas.

The broader implications of this trend are lost in the tit-for-tat of 30-second ads. As the Post article pointed out, there is an ongoing debate about the merits of the practice.

Economists will argue whether a globalized world is a good thing or a bad thing. A strong middle class in India might become a market for American products, boosting jobs in the United States. Americans may also benefit from lower prices for goods (such as a bicycle). Alternatively, one could say that the transfer of such jobs overseas has hollowed out the U.S. economy, leaving fewer opportunities for American workers.

The Pinocchio Test

The Obama campaign moved quickly to define what the article said, claiming that this transfer of jobs took place while Romney ran Bain. That’s not what the original article said.

Yet the campaign clearly seized on this report because their interpretation fit with a long-term “outsourcing” attack they have waged against Romney. One of their outsourcing ads before the article ran, in fact, earned Four Pinocchios. These new ads would not fare much better; there is little in the Post article that backs up the Obama campaign’s spin.

(Our colleagues at FactCheck.org have also offered their own analysis of the Obama outsourcing ads and the issues raised in The Post’s article, saying “some of the claims in the ads are untrue, and others are thinly supported.” The Obama campaign did not dispute the details of their analysis, except to once again claim that Romney had an active role in Bain after he left to run the Salt Lake City Olympics in 1999--a claim that FactCheck.org quickly debunked. We came to the same conclusion in January. There is no evidence that Romney played a role in Bain decisions after he left to run the Olympics.)

The Romney campaign, meanwhile, has sidestepped the article’s implications — also by acting as if the article says what the Obama campaign claims.

Given that this debate involves an interpretation of a Post article, we are not going to award any Pinocchios. But we urge readers to reread the article without thinking about the spin from both sides.

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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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