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Sunday, July 25, 2004

Protection at the state level?

There is a proposal to amend the Colorado State Constitution to make it illegal for state funds to be spent on services that are performed off-shore by non U.S. citizens or green card holders.

Here's the language:
Colorado initiative 139 - Protection of American Workers is a proposed amendment to the constitution of the state of Colorado stating:

(1) The people of the state of Colorado hereby find and declare that state funds should be used to employ people permanently residing in the United States and to prevent the loss of jobs to foreign countries and temporary foreign workers with non-immigrant visas.

(2) Every state contract for the performance of services shall contain provisions that specify that only citizens of the United States and permanent legal resident aliens in the United States shall be employed in performance of services under the contract or any subcontract awarded under the contract.

I think I understand the emotional attractiveness of proposals such as this, but will the voters in Colorado be excited when their taxes have to increase when state help desk employees cost $40,000 and are unionized rather than being outsourced to another location for less money?

I heard a Mr. Alexander of (www.hireamericans.org) justify this type of protectionist language on the Lars Larson show. He had two primary reasons:
  1. State funds spent on off-shore hiring lose the multiplier effect locally.
  2. State contracts that have off-shore employees are not cheaper than those that hire local employees - the difference is pocketed by the employers
Multiplier effects are almost always overestimated and are a sad remnant of the Keynesian Theory. Perhaps there is a bit of profit taking when Leviathan is paying the bill rather than when there is more competition for customers, but erecting barriers to trade is not the answer to the "outsourcing problem."

I wonder if this state constitution amendment would violate Article I of the Constitution if the state of Colorado hires a firm from, say, California.

In Ayn Rand's Atlas Shrugged, Colorado is the state that remains true to the old-school liberal, classical economics, model that is her utopia. Sadly, it may not be the case in the real world.

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