How Will Obama's Presidency Affect Outsourcing to India?

Although Obama has characterized outsourcing as taking jobs away from the US worker, his opinion won't be enough to affect a very basic business principal: companies that lower costs are healthier and more competitive.

It's no secret that the Democratic Party has an intense dislike for offshore outsourcing and has been quite vocal on this position during the last 8 years of Republican reign. The perception is that each job allowed to 'escape' outside the US is another job lost for a US citizen. The party contends that offshore outsourcing is largely unregulated and the GOP's 'hands off' approach actually encourages US companies to send their jobs overseas.

In light of Obama's upcoming tenure, one must wonder if the day of reckoning has come, given his past statements on this topic. Obama's rhetoric is reminiscent of the "only buy American" cries of US auto makers in the 1970s and 1980s. During the Democratic Debate between Obama and Hillary Clinton in February of this year, Obama stated, "We have to stop providing tax breaks for companies that are shipping jobs overseas and give those tax breaks to companies that are investing here in the United States of America." (NY Times 2/26/2008).

Obama has positioned himself as somewhat of an 'anti-outsourcing' poster boy, supporting the Patriot Employer Act of 2007 which would, according to his own website, www.obama.com, "...provide a tax credit to companies that maintain or increase the number of full-time workers in America relative to those outside the US.".

Rather expectedly, the Republican Party holds a somewhat opposite view in that the party has always held the position of 'let business be business". In effect the GOP sees off-shoring as another form of trickle-down economics - let the companies reap the cost advantages of off-shoring such that their success will provide a positive effect for the broader business population.

No doubt both parties have the ability to influence and affect offshore contracts through their House and Senate voting power and clearly Obama himself has the almighty power of the Presidential veto. However, real cost savings are a powerful incentive and may prove to be a formidable match as US companies will give relentless pursuit to any methods that yield lower costs and a better bottom line.

Certainly Obama can offer tax incentives but such a strategy may not prove to be sufficient motivation given the latest economic downturn. Just as water seeks its own level, businesses will seek out the most cost effective means to deliver their product to market. Cooperating foreign and domestic enterprises may find that, in the long run, tax incentives may only be temporary whereas good trade and commerce can withstand many administrations.

The Democratic Party must realize that the restriction of good commerce is an antiquated model and that companies will always wish to do what is best for their bottom line. If that includes commerce across the boundaries of their countries then so be it. More often than not, the positive effects of open commerce are paid back in a competitive advantage and market agility.

As the self-proclaimed candidate of change, perhaps Obama's first order will be to change his mind and accept the inevitable future of outsourcing in today's global economy.