It is amazing. The American economy is growing strongly, consumers are confident, unemployment is at a 5-year low, wages are climbing, and the stock market is at a record high.

Yet the Democrats have convinced Americans that something is amiss. One of their rallying cries is that we are losing jobs overseas. What they really mean is that we are losing union jobs. And they are right. Since 1983, when comparable data were first collected, union membership has dropped from 20.1% of all age and salary workers to 12.5% last year.

The outsourcing of manufacturing jobs and shift toward a service economy has meant losses in one of the main power centers of the Democratic Party. The National Institute of Labor Relations Research estimated that labor unions spent $925 million in the 2004 elections. Over 95% of funds spent on the presidential race went to John Kerry (though 38% of union members voted for George Bush, according to exit polls.) These are big numbers, and they carry a lot of influence. No wonder the Dems favor protectionism.

At last week’s Forbes CEO Forum in New York, the issue of free trade was hotly debated by Lou Dobbs and Steve Forbes. Their views could be viewed as proxies for their respective parties and may presage arguments we will hear in coming months.

Mr. Dobbs, anchor and managing editor of “Lou Dobbs Tonight,” says he “agrees with the impulses of free trade,” but argues that “what is being practiced isn’t an approximation of free trade.” He maintains that our various agreements with our trading partners have always been to our detriment, and that “greedy CEOs” have “put the middle class in direct competition with cheap foreign labor, without regard to the social consequences.”

Mr. Dobbs cited as proof of the destructive impact of our imbalanced trade policies the current account deficit, which he claims has collectively accrued a $5 trillion claim against America, and which has been rising steadily. He said it now approaches 7% of GDP.

Mr. Forbes, president and CEO of Forbes Inc., had a different take. He concluded that throughout American history, protectionism has fostered recession while trade growth has been critical to the success of the country.

He pointed out that the American economy has increased in real terms 25% since September 11, 2001, and that the expansion of the American economy over that time is bigger than the Chinese economy in total. He added that America’s share of the world economy is larger than it was 25 years ago, and that median household net wealth is up 43% in the past 10 years.

Mr. Forbes argued that having a trade deficit is often erroneously equated with losing money, and said that the figure is simply one economic indicator. He also said that America has run a deficit in 350 out of the past 400 years, and has nonetheless been arguably the most successful country on the planet. He pointed out that Japan consistently produces a current account surplus, and has yet been in a profound long-term recession.

In hearing these two debate, one has some sympathy for the American voter. How can the same economy engender such different views?

Mr. Forbes said that much of the angst among American citizens stems from the disturbing effects of change. It is understandable, and not unprecedented. He cited the revolt by farmers in the late 19th century against mechanization, which similarly caused alarm. There is certainly concern about further job losses in the manufacturing industries, and there is real fear that promised pensions and benefits will evaporate.

As the new Congress sets its agenda, some will push the Democrats to address the issue of outsourcing and the subsequent loss of jobs to overseas competitors. Make no mistake, however. Mr. Dobbs and his compadres are not so concerned about jobs as they are about union jobs.

The fact is that unemployment is currently 4.4% — a level low enough that real wages rose 2.4% in the past 12 months. In manufacturing, hourly compensation rose at an annual rate of 5.1% for the most recent month. Since August 2003 more than 6.8 million jobs have been created — more than for all the other major industrialized countries combined.

So, it is not that people do not have jobs, or that wages are stuck in the mud. It is the fact that union jobs have been and are expected to continue to decline. The Bureau of Labor Statistics has forecast that between 2004 and 2014, employment gains will be highest amongst professional, management, and service workers while production will show the second-largest drop, after farming.

The other problem for unions is that workers with decent jobs and prospects are less likely to want to unionize. In the next 10 years, according to the BLS, the civilian labor force should increase to 162.1 million, while employment is forecast to expand to 164.5 million. This gap reflects the reality of Boomer retirement, and may be exaggerated. It is likely that Boomers may work longer than expected, given changing life expectancies. Still, the underlying demographics suggest tight labor markets going forward, which is bad news for union recruiting. Is it any wonder that “card check” organizing is suddenly a hot topic?

And is it any wonder that the fastestgrowing professional services segment is expected to be employment services?

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