The Income Gap
Is globalization to blame? Only in part
Big financial institutions pay David Smick a lot of money to find out what issues are on the minds of Washington's policymakers.
So what is he telling them now as the Democrats take over both houses of Congress? "Globalization is the sleeper issue for 2008," is the answer given by Smick, a onetime aide to Republican Congressman Jack Kemp.
Indeed, "globalization pushback" is the new talking point on Capitol Hill, among K Street lobbyists, and on newspaper op-ed pages. Democrats have seized on the issues of rising inequality of incomes and jobs lost to overseas outsourcing, targeting globalization as the culprit. James Webb, the newly elected U.S. senator from Virginia, summed up his party's attitude in a November Wall Street Journal piece. "In the age of globalization and outsourcing," Webb wrote, "... the average American worker is seeing a different life and a troubling future." Fellow Senate Democratic newbie Sherrod Brown of Ohio, along with Sen. Byron Dorgan, a North Dakota Democrat, declared in the Washington Post that globalization has caused "downward pressure on income and benefits for American workers."
Smick's "sleeper issue" may have already awakened. When Congress passed the North American Free Trade Agreement in 1993, Senate Democrats were split 28 to 27 against, while House Democrats voted 156 to 102 against. But when the Dominican Republic-Central American Free Trade Agreement came up in 2005, Senate Democrats-including potential 2008 hopefuls Hillary Rodham Clinton and Barack Obama-voted against the bill 33 to 10, while their House counterparts were a lopsided 187 to 15 opposed. And that was before the 2006 midterm election ushered in a legion of new Democrats, including Webb and Brown, noted for their hostility to free trade.
Since the election, House Democrats have voted against normalizing trade relations with Vietnam. And the odds of Congress voting to renew presidential fast-track trade authority look long. No wonder Morgan Stanley economist Stephen Roach-who blames the $800 billion U.S. trade deficit more on Americans' failure to save than China's trading practices-warned his clients last week that "an intensification of protectionist pressures [in Congress] is a distinct possibility ... a lose-lose response to ... growing frustrations with the win-win rubric of the globalization debate."
The Democrats' turn is a rejection of the position the party held the last time it occupied the White House. "Clearly, Democrats have moved away from the Bill Clinton position on trade toward the Dick Gephardt position," says political analyst Stuart Rothenberg, referring to the former Missouri congressman and would-be president known for favoring trade unions more than trade agreements. Ex-Iowa governor and 2008 White House aspirant Tom Vilsack, who says his trade views combine the best of Gephardt's and Clinton's, says Americans believe the country has "not benefited as much from trade as we should have," and he fears the nation risks "closing the door on trade."
In November, 59 percent of voters who rated the economy as an "extremely important" issue pulled the Democratic lever. Tough talk on trade and outsourcing is where the votes are right now, as the midterm results vividly confirm. Outside the Capital Beltway, "the pushback against globalization is real," says political scientist Daniel Drezner at Tufts University's Fletcher School. A recent Pew Research Center poll found that 44 percent of respondents thought globalization led to lower wages; just 11 percent thought free trade boosted wages. Likewise, 48 percent thought globalization resulted in job losses for Americans; just 12 percent considered it a job creator.
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