Media ignored Bush administration's machinations on Commerce Dept. outsourcing report


The news story that the Bush administration may have defied a June 2004 deadline and delayed a congressionally directed report on outsourcing until well after the 2004 elections, then edited the final report to generally support the practice, has largely failed to gain any media attention. The circumstances surrounding the scrubbed report were initially reported in an October 12 article in Manufacturing & Technology News (MTN), a trade publication (via blogger David Sirota), and also appeared separately in an article in the October 17 edition of Business Week (according to the online version of the article, the initial story was finished on October 5). According to these reports, the Commerce Department finally released its report on the outsourcing of information technology (IT) and high-tech service jobs to other countries on September 8, more than a year after the June 2004 deadline that was written into the conference committee report of the 2004 consolidated appropriations bill (House Report 108-401) funding the study and six months after MTN had filed a Freedom of Information Act request seeking the report.

Outsourcing was controversial during the 2004 elections, and by not releasing the report upon the deadline directed by Congress, the administration avoided a possible election-year discussion regarding its findings. In addition, MTN and Business Week found that the final report, in contrast to the original government staff's six months of research, had almost entirely edited out the possible disadvantages of outsourcing, often using data from groups that support outsourcing. This entire incident, however, has largely gone unnoticed by the news media, being picked up thus far only in a single segment on CNN and three print media stories since the initial reports.

According to MTN and Business Week, after Commerce Department Technology Administration staff members completed the report -- by the June 2004 deadline -- it was reportedly withheld by the "White House and the Republican-controlled Congress" because of "the controversial nature of the subject." "Political appointees at the Commerce Department and the White House" subsequently rewrote the report to highlight only the benefits of sending IT jobs overseas while downplaying possible concerns:

According to those who have tracked the report's whereabouts, it was completed well before the November 2004 presidential election but was delayed for clearance by the White House and the Republican-controlled Congress due to the controversial nature of the subject. Outsourcing had become a contentious campaign issue, particularly in the swing states.

After the November election, a draft of the report prepared by a "braintrust" of Technology Administration analysts went into a vetting process among political appointees at the Commerce Department and White House. It never resurfaced. The analysts never received any feedback on their work, which is unusual, say those who have written similar reports.


The final report says that government data "can offer only very limited insight into the extent and impact of workforce globalization," and that "it was not possible to determine whether the shift of U.S. work to non-U.S. locations resulted in jobs losses for U.S. workers ..." The report then spends one of its 12 pages describing research conducted by McKinsey Global Institute highlighting "opportunities" for U.S. firms and workers.

But two Technology Administration analysts involved in writing the IT services and software section of the report made a public presentation to the Association for Computing Machinery (ACM) in December 2004 describing their findings. The 43-page PowerPoint presentation, provided to MTN by those attending a meeting of [Association for Computing Machinery]'s Job Migration Task Force, offers a detailed analysis of the trend, including charts on the growth of Indian outsourcing firms and strategies adopted by IBM, Hewlett Packard, Microsoft, Google and Yahoo. It also describes the IT jobs that will likely remain in the United States and notes that most overseas IT companies are not doing research. It states that "knowledge work can move offshore more quickly and cheaply than manufacturing," and notes that "companies are moving up the off-shoring learning curve."

The analysts say that there is a "surplus of low-cost, technically skilled labor in other countries" that is taking advantage of the "digitization of work" and standardization of software platforms such as Oracle, Peoplesoft and SAP. Foreign workers have benefited from the "development and adoption of standard IT training programs and skill certification." A large Indian-American IT business community is "tapping [the] low-wage Indian workforce ... Offshoring destination nations [are] expanding technical workforce skills training." They noted that venture capitalists are encouraging IT start-ups to use offshore software developers to reduce their cash burn rates. And that there is "growing pressure in corporate America to offshore IT work." There is also "political pressure to stem the flow of jobs."

Little of that work made it into the final report.

Business Week reported: "The staff researchers' presentation gave both the pros and cons, comparing factors that favor U.S. high-tech job growth with those that favor offshoring. The official version dispenses with most of the disadvantages. Instead it points to pro-offshoring studies done by McKinsey Global Institute and uncritically cites data from a lobbying group that represents the U.S. subsidiaries of foreign companies."

But the story of this report -- in which it appears that the administration defied, for possible electoral advantage, a deadline of June 2004 directed by Congress in agreeing to appropriate money for the study and then, when later pressed, released a final version of the study that supported the administration's position, often using data from sources with an interest in the report's findings while removing unfavorable analysis produced by the department's staff -- has garnered almost no media attention, even though such skewing of government reports to support Bush administration policies is not an isolated incident. A Media Matters for America search of the Nexis news database* and The Wall Street Journal** revealed only a single television report -- the October 14 edition of CNN's Lou Dobbs Tonight -- and only scant print coverage. Aside from the reports in MTN and Business Week, the only other news reports Media Matters found were an October 10 Cox News Service report by Atlanta Journal-Constitution reporter Tom Walker, reprinted in the October 11 edition of the Atlanta Journal-Constitution, and an October 13 San Jose Mercury News editorial, also reprinted in the October 15 Wilkes-Barre Times Leader.

*Nexis search was "outsourc! or offshor! w/50 commerce w/5 depart! and date aft 10/1/05" on the U.S. Newspapers and Wires, ABC, NBC, CBS, CNN, MSNBC, Fox News, Newsweek, Time, and U.S. News & World Report sources.

**Factiva search was "outsourc* or offshor* near50 commerce near5 depart*" on the Wall Street Journal source database for 10/1/05 to 10/24/05.

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