Penny wise and dollar foolish.

The Administration's top economists now claim that the outsourcing of America's service jobs is good for the U.S. economy. They say that consumers benefit when low paid foreign workers, operating overseas, provide America its software, engineering, architectural, data management, finance, and radiological services.

In the 2004 Economic Report of the President, the Council of Economic Advisors also maintains that consumers benefit when lower-priced foreign made imports replace domestically manufactured goods. The Council projects that the U.S. economy will create an additional 2.6 million new jobs this year.

We think the Council is wildly wrong in its trade positions, even in its numbers.

Specifically, the Council's economists predicted that the United States economy would gain 3 million jobs in 2002. But it lost 400,000. They predicted the U.S. would create an additional 1.7 million jobs in 2003. It lost 147,000.

America's job problem is linked not with the competitiveness of U.S. business and workers, but with U.S. trade policies that actually encourage the export of U.S. jobs and production.

The linkage between jobs and trade is clear. Lower paid foreign workers are now doing the work once done by Americans. That work is reflected in the excess of U.S. imports over U.S. exports. This is the root of America's job losses.

The U.S. Department of Commerce, for example, has long reported that each $1 billion of traded goods represents 10,000 or more jobs. Is it surprising, therefore, that the U.S. lost almost 3 million manufacturing jobs over the past three and a half years, as its goods trade deficit rose to more than $480 billion annually?

The loss of manufacturing jobs, moreover, rips through the economy like a tidal wave. Specifically, the Commerce Department's Bureau of Economic Analysis reports that each dollar created by manufacturing multiples itself 2.2 times as it flows through the economy.

Among the beneficiaries are workers and companies in finance, insurance, and real estate services. Construction, transportation, communications, and utilities also benefit, as does mining and agriculture.

But multipliers also work in reverse. Goods made in foreign factories by penny-wage workers generate little U.S-based construction, create no demands for worker housing, need few utilities and communications, and most often carry their own finance and insurance.

The Council on Economic Advisors is correct in that low-cost foreign imports save consumers a little money. But those savings are coming at the cost of the larger economy--the loss of the U.S. manufacturing sector and all else that it supports. If ever the U.S. had an economic policy that was penny wise and dollar foolish, U.S. trade policy today is it.

We think keeping manufacturing and service jobs in America matters.

What do you think?