By Judith Stein

The political tsunami in Massachusetts has concentrated the Democratic mind on the economy and employment. President Obama had thought he could turn his attention to health care while banking on the trinity of finance, retail, and housing for jobs and revenue. Massachusetts was proof that the old recipe is bankrupt.

Obama's State of the Union proposals to ease some of the anxieties of retirement, education, and child care will help at the margins, but they skirt the job question. And although his deficit reduction measures will do nothing to address long-term red ink, they will surely reduce employment in the short run.

Where are the jobs?

Democrats initially defended their poor jobs record with the refrain that employment is a lagging indicator. As unemployment continued to rise, they promised "green" jobs, which have the political benefit of marrying the desires of the working class with those of environmentally sensitive professionals.

Green jobs are surely needed. But green Democrats simply echo the Atari Democrats of the 1980s, who concluded that traditional manufacturing was disposable and high technology was the wave of the future. During this era, the young Barack Obama attempted - and failed - to find jobs for displaced steelworkers in Chicago.

China's approach

As it turned out, high-tech industries prospered or faltered on a nation's trade and industrial policy, just as autos and steel did. And the United States came up short in the new as well as the old industries. By 2004, China was exporting more information and communications technology than this country.

Whether a company was state-owned or private, domestic or foreign, the Chinese government offered a wide variety of financial incentives, subsidies, low-interest loans, manipulated currency - as well as its fabled low wages - to get results. China put green jobs in the same incubator, contrasting sharply with the American approach.

The U.S. government has invested millions in photovoltaics research, yet the country accounted for only 5.6 percent of global production in 2008, down from 30 percent in 1999. Despite the government's investment, the only leading American company in the field does its manufacturing abroad.

Chinese production in the sector during the same period grew from 1 percent to 32 percent of the global total. China has built the world's largest solar-panel manufacturing industry, requiring at least 80 percent of the equipment to be made in China.

East wind

The Chinese government also rigged the bids for large contracts to supply wind turbines by creating technical requirements that disqualified multinational companies. By contrast, when American stimulus funds subsidized a joint U.S.-China wind-power farm in West Texas, it turned out that Texas stood to get 30 permanent jobs to China's 3,000. After Sen. Charles Schumer (D., N.Y.) protested, the Chinese agreed to build a wind-turbine factory in Texas.

That story had a happy ending, but Washington's default position was to award the contract without thinking about American jobs. This explains why the country's wind-power capacity increased in 2009, but its wind-power equipment manufacturing fell.

Meanwhile, the Chinese government offers huge subsidies to encourage green-technology manufacturers in the United States to move their production to China. And when manufacturing leaves, research and development operations follow. That's how China attracted battery and fuel-cell research formerly conducted in America.

For too long, outsourcing has been accepted policy in the United States. The government has sent a message that it does not care if jobs are created here or abroad.

The Obama administration needs to do more than simply throw money at research or offer tax credits. If it wants green jobs not simply to please environmentalists, but to provide work for Americans, it will have to make aid contingent upon domestic job creation. This means altering decades-old policies built on free trade, financial deregulation, and tax cuts.