The Corner

Obama’s Offshoring Allegations Don’t Stand Up

In a new Obama ad, deputy campaign manager Stephanie Cutter provides a whirlwind tour intended to “call out” Mitt Romney for being a captain of offshoring:

Early on, she claims that “Mitt Romney plans to create a whole new incentive to ship jobs overseas.” This refers to Romney’s proposal for a territorial tax system, which would give American companies the same “incentives to ship jobs overseas” as, well, every other industrialized country already has. Further, while Cutter claims that such a system would “completely eliminate U.S. taxes on foreign profits of U.S. companies,” this simply is not correct: Their corporate income would not be taxed, but either the capital gains accrued or dividends paid out to U.S. stockholders would be (money that usually never finds its way back to the U.S. to be taxed precisely because of the double taxation system Obama wants to keep).

On Romney’s gubernatorial record, Cutter falls flat with her claim that legislation Romney vetoed, which “bans companies from shipping jobs overseas if they did business with the state,” is “just good common sense.” Of course, this discriminatory policy is far from “common sense” — since it would cost the state hundreds of thousands of dollars. So agreed the pro-Obama Boston Globe, which editorialized in favor of his veto.

Further, she claims that Romney “outsourced state jobs to a call center in India.” In reality, the state contracted with Citigroup to run its food-stamp debit cards, and Citigroup happens to have its customer-service agents located in India.

Cutter then shifts to “Romney’s time as CEO” (and, in fact, Romney was a founding partner, but not the CEO, of Bain Capital).

“Other jobs went to Mexico, in the case of Modus Media.” In 2000, Modus Media, in which Bain owned a share, did open a plant in Guadalajara, Mexico, simultaneously with a “North American strategic optimization,” which is indeed Harvard Business School–speak for shutting down its California operations.

However, it doesn’t seem that the “jobs went to Mexico,” since a June 2000 PR Newswire article describes the Guadalajara plant as doing different things than the California business: “expanding relationships with existing OEM clients and pursue opportunities in market sectors such as consumer electronics and telecommunications.” #more#One executive explained that the new facility “complements existing North America operations” — that is, made U.S. operations more profitable. The California office’s work, in “reverse logistics and fulfillment operations,” would “transition to other Solution Centers in Raleigh, North Carolina, Preston, Washington, and Lindon, Utah.” So that may mean more work for the same U.S. workers (though those plants may have hired), but it is not accurate to claim particular “jobs went to Mexico.” Further, three years later, Modus expanded the U.S. operations it had shrunk in California, “reverse logistics and fulfillment,” when it opened a 128,000 square-foot facility in Round Rock, Texas.

Cutter continues: “Then there’s SMTC, a circuit-board manufacturer that closed a plant in Denver, Colorado, and opened a plant in Chihuahua, Mexico,” suggesting Romney offshored jobs from Colorado to Mexico, a complete distortion of what occurred. For one, Romney left Bain as an executive before the acquisition, but he did still profit from it, so is the further characterization fair? In reality, rather than “offshoring” specific jobs, SMTC bought part of a company that had a plant in Mexico, and two years later closed its Denver facility.

In August 1999, SMTC acquired manufacturing facilities in Mexico and Texas from Zenith. As a 1999 article in Electric Buyers’ News explains, “SMTC announced that it has acquired from Zenith Electronics Corp. a manufacturing facility in Chihuahua, Mexico, as well as a logistics center in El Paso, Texas.”

Then, in April 2001, after the loss of two major customers, SMTC closed its Denver plant (one of those customers, notably, picked as a replacement a company based in Singapore). An SMTC vice president explained to Electric Buyers’ News at the time, the remaining contracts for the Denver facility were distributed to more convenient suppliers, with just part of it going to Mexico, with other parts going to Charlotte, N.C., and San Jose, depending on what was convenient for customers.

Finally, Cutter attempts to limn the policy disagreements that make Romney’s corporate record relevant. She argues that Obama is “fighting for tax breaks for companies that bring jobs back to America,” while his opponent is “fighting for tax breaks for companies that ship jobs overseas.” This formulation distorts the facts beyond recognition.

As I explained in an NRO article, Obama proposes removing most standard business-related tax deductions, including things as basic as the deduction of expenses, for U.S. companies operating overseas, subject to U.S. income tax. It’s a serious stretch to call Romney’s preserving those policies “fighting for tax breaks for companies that ship jobs overseas.” The president, meanwhile, would like to use the revenue raised from subjecting U.S. companies to an unfair tax regime to offer a two-year payroll-tax credit for any company that hires a U.S. worker to replace a foreign one — essentially an accounting trick that would be impossible, or all too easy, to prove. Obama wouldn’t (and shouldn’t) provide meaningful tax breaks for companies to onshore jobs, and Romney is fighting to prevent U.S. companies from undue, unfair taxation.

As to the allegations from the Washington Post story which gave rise to this ad, Jim Pethokoukis has a good takedown.

Patrick Brennan — Patrick Brennan is a writer and policy analyst based in Washington, D.C. He was Director of Digital Content for Marco Rubio's presidential campaign, writing op-eds, policy content, and leading the ...

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