Outsourcing labor is a serious danger to America's economy and needs to be dealt with.

As agreed with you, this is in fact about offshoring, rather than outsourcing. True, these terms often get mixed up these days, but there is a difference. -= Outsourcing and Offshoring: What? =- Outsourcing is a company that gives out of hand parts of its business to subcontractors. (note that those perfectly can be located in the same country) Offshoring is a company, moving parts of its business to foreign countries. (note that the company doesn't have to give it to subcontractors over there) Also note that you make it appear as if offshoring means only keeping top tier in the original country. That may be sometimes the case, but it certainly isn't the rule. To give an example, here in Belgium, we used to have huge car industry. Lots of it got offshored, but the assembling process still happens here. An extensive look at the phenomena now, to point out that it goes totally different than you claim. -= Offshoring: Effects? =- Note, this is based on basic macro-economic principles, the problem with it is that it is a cyclus, so you can go on and on and there won't be any ending point to find. So i'll elaborate until the trends are made clear. Also, i'll try to stick to macro-economics level, since that is the relevant one in this debate. So, what happens due to outsourcing? =First effects= - The costs for the companies drop. (there is no other incentive for this) - Part of the employed people in the original country lose their jobs. - People in a foreign country get a job or move to an other one. =Second effects= (result of first ones mainly) The prices of goods and services go down. (no, there won't be only more benefits for the company, the increased benefits will attract new competitors, which will press prices down) This means that purchasing power increases. In the foreign country, either the employment level got up, which means more purchasing power or the wages got up, which would result in the same. (otherwise there would be no reason to move to the new job) Note that both effects take place, China is a good example. (source: businessweek 'How Rising Wages Are Changing The Game In China') Offshored means moving goods and services. This increases the demand for transport. (sensu lato: internet and similar connections too) So that sector would get a boost, meaning increased employment. So a part of the increased unemployment gets fixed here. Second, the increased purchasing power will result in more consumption, this will result in a boost of the economy, which in turn means an increased demand for labour: unemployment drops further. (here we get a cyclus: this means further increased purchasing power, resulting again in more employment and so on, every cycle the effect gets smaller of course) Also, the increased benefits from the companies will result in more investments. (the companies invest it in projects or the stockholders invest it partially in companies by buying stocks, even if they consume a part, that just means more consumption -> more demand) This is another boost to economy and hence employment. So, most of unemployment from stage 1 gets fixed in stage 2, maybe it is even lower in stage 2 than it was before it all started. Empiric data supports this statement: unemployment is more or less constant. (source: bureau of labor statistics) Also note that the increased purchasing power of the foreign workers count: there is no reason to assume that they won't spend part of their extra income on foreign goods. Now, these foreign workers will be paid in local currency, this means there will be an increased demand for that currency, making it more expensive. At the same time, the increased offer of dollars will decrease the dollar's exchange rate. So buying from the foreign country gets more expensive, from the original country, cheaper. (this includes labor costs) =No wage drop= Indeed, no wage drop. One of the causes is that there is that the economic boost (explained above) creates new jobs, hence keeps the demand up, the offer of labor doesn't change, hence the wages stay the same. Why isn't all of it moved to foreign countries? They are at the moment demand a lower wage, right? Well, that is because you didn't take into account other real factors: Main one is productivity: foreign labor has a low productivity compared to the Western countries. And quality has a great deal of effect on price. (of labor in this case) An other one is distance: the transport needed is a cost, it only pays off when that cost doesn't grow bigger than the labor cost reduction. And there are many other costs involved: building new facilities, building up local reputation, searching for employees, paying compensations to dismissed workers, higher complexity of the supply chain... Those are all costs that come in too, reducing the effects of offshoring on cost structure. Also, as mentioned earlier too, the increased demand for labor does push up wages their too. And let's not forget the currency exchange rate, who'll make the offshoring more expensive too. Again, the real-world has proven this right (wages didn't go down in US), i'd like to refer to my already cited sources for this. Also, that it is still to come in the long run also is proved wrong by reality: offshoring kicked in early on in the eighties (Hong Kong for example), that is already 20-30 years ago. If you want an example further down in history: Japan. US investments (which can be seen as outsourcing sensu lato, since what Americans invested in Japan, wasn't invested in the US) were a great drive in the post-war comeback. And see where the country is now. Then there is the point about national debt. National debt is caused by _government_ spending more than it has. That has nothing to do with the private sector. Well, it does on one point: the better the American economy is doing, the more money there is to tax. But since we're in a scenario of an economic boost, there is more money to tax, so a positive effect on national debt evolution. -= Offshoring: ban effects =- To finish, i'll have a short look at what is likely to happen when you ban offshoring. First of all, how can you possibly ban this? You could - in pure theory - ban offshoring without outsourcing: not allowing companies to go multinational. But this means a serious restraint on growth of many companies. (hence less benefits, hence less money flowing towards the American company) + They would simply offshore by outsourcing: a foreign company gets paid for the job. How would you ban that? Since that is the same as banning international trade! But let us assume we do, just for this moment, what would happen? -> increasing prices -> economic reprisals by other countries: they will make life hard for your export if you hamper theirs so seriously. -> economic downfall, yes seriously: you can't import goods and services from a foreign region that was better at them, so you'll have to do it yourselves, this mean labor has to be assigned to it, labor that can't be used any longer for something it was far better at. So less domestic/national product. -> war. again, no joke. since only few countries have all their resource needs fulfilled by their own country. and because those resources can't be obtained any longer by trade, other means will be necessary. History has proven this, good example is Japan in WW2. And if those many claiming the war in Iraq to be about oil are right (i'll leave this open), it is a recent and good example. (yes, it was available already, but the supply was far from assured) International trade has been a strong motivation for nations to maintain peace. To conclude my argumentation, my two main points in the debate: - It supports economic growth, including less unemployment and decent wages. - Banning it is de facto banning international trade and would have an extremely negative impact.