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Unions Slam Deficit Panel Proposal As Gateway To Outsourcing

First Posted: 12/02/10 12:09 PM ET Updated: 05/25/11 07:15 PM ET

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WASHINGTON -- Hoping to trip up or, at the very least, change the language of the president's deficit commission proposal, labor leaders claim that specific recommendations could accelerate the outsourcing of U.S. jobs overseas.

In multiple forums and venues in recent days, some of the top union officials in the country have begun airing deep concerns about the Bowles-Simpson proposal to shift to a "competitive territorial tax system" -- a tax structure that effectively exempts foreign profits from domestic tax laws.

"There is no question that this incentivizes outsourcing, and that's the opposite direction from the one we want to be going in," AFL-CIO Deputy Chief of Staff Thea Lee argued, during an interview with The Huffington Post. "It's directly contrary to how we should change our tax system. We need to change our tax code to remove incentives for offshoring. This changes the tax code to greatly enhance the corporate tax incentive."

"Every member of the commission needs to take this into account," Lee added. "We don't think that it's gotten enough attention. We didn't give it enough attention in our initial press statement because it took a little while to drill down."

Leo Gerard, president of the United Steelworkers (USW), was a bit blunter, calling the idea "absolute financial insanity" during an appearing on MSNBC's "The Ed Show" on Wednesday evening.

Andy Stern, the former president of the SEIU and a member of the deficit commission himself, took a slightly more diplomatic tact -- though one that still exhibited his concerns about the potential for outsourcing. On Thursday morning, he released his own deficit reduction recommendations, with a specific alteration to the tax structure that Simpson and Bowles proposed.

"There is concern of tremendous leakage possibilities in revenue and jobs in a shift to Territorial taxation," Stern's proposal reads, "and, therefore, a failsafe revenue mechanism needs to be developed, and a review and certification by the Treasury Dept. that the system designed does not accelerate job loss."

That Big Labor would launch a late-stage campaign to shine a spotlight on the outsourcing potential of the president's deficit commission is not in and of itself surprising. Unions have emphatically opposed the commission's proposals, going back to when the two chairs put out an early draft several weeks back; though that doesn't necessarily explain Lee and Gerard's outspokenness. Fighting outsourcing has always been a labor priority.

The deficit commission tries to offset these concerns by reducing corporate tax rates in the United States -- an incentive, of sorts, to get companies to keep jobs based domestically. But Lee scoffed at the idea that this was a fair trade-off. "It could [keep jobs here]," she said, "but there's never been any evidence that it's been effective."

How these union officials came to home in on the territorial tax system provision is however a bit interesting. The angle didn't come from inside their policy shops or from labor economists. Rather, it appears to have come from Rep. Brad Sherman (D-Calif.), a senior member of the House Committee on Financial Services. The California Democrat has been sounding the alarm about that specific tax policy for days, both in print and television. And according to both Lee and Stern, he brought the concern to their attention as well.

Sherman's office confirmed this account. "[He] has spoken to labor leaders about his concerns," a spokesman said.

The fact that members of Congress are already making the case that the deficit commission would be a gateway for outsourcing suggests that the wheels are in motion to stop the proposal in its track. Outsourcing, among deficit reduction and job creation, was one of the biggest motivators in the 2010 elections (see: Sen. Blanche Lincoln's primary win). And members are acutely aware of that heading into 2012.

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