Monday, March 27, 2006

The Need for Real Immigration Reform

For a series of short summaries of the U.S. Chamber of Commerce’s positions on immigration issues, see here. The Chamber believes that Congress needs to pass significant reforms. They point out that the current system not only is inadequate to meet the nation’s needs, but it also actually has the perverse effect of encouraging illegal immigration.

Though the Republican Party is generally considered to be more “pro-business” than the Democrats, the Chamber’s position that immigration laws should be streamlined so that needed workers can enter the country is at odds with the positions of many Republicans. Indeed, this is not an issue that divides neatly along party lines. The hard right wing of the Republican Party and the labor union faction of the Democrats stand together against this sort of immigration reform. Locally, Nathan Moore’s advocacy of comprehensive immigration reform got him labeled a liberal. Mr. Moore responded that he is a liberal in the classical sense. That neither Mr. Moore, the U.S. Chamber, nor the Monroe Doctrine blog are typically referenced as raving left-wingers makes evident that this issue does not necessarily follow ideological lines.

However, there remains a question of whether there are enough principled Democrats in Congress to help pass legislation favored by the President but opposed by many Republicans. In a similar position in 1996, Republican congressmen helped President Clinton pass his welfare reform measure.

Throughout American history there has been an ironic undercurrent of opposition to the movement of immigrants into the country. In the 1800’s, this took the form of opposition to the entry of Irish Catholics (because they weren’t Protestants) and people from eastern Europe (who frequently weren’t Protestants and didn’t speak English). In parts of the United States in the late 1800’s, volunteer fire departments were formed by each ethnic group. Hostilities were significant enough that, for example, a Slavic fire department might refuse to help put out a Welsh fire. In the 21st century, most of the opposition relates to Hispanic immigrants, who have brown skin and don’t speak English. I don’t normally make race a central issue in debates, but I remain unconvinced that the opposition would be as intense if a few million white Canadians were slipping into the country.

This opposition has historically been shortsighted. While the entry of non-English speaking people into the country creates a number of social and educational burdens in the short term, historically the children of those immigrants have quickly learned the language. That should continue to be the case unless current travesties in counterproductive bi-lingual education programs undermine it. In the long term, those who came to the United States in search of freedom and opportunity have contributed to enriching both the American economy and culture.

Demographic changes in the United States are creating a need for immigrants. A healthy demographic diagram will take the form of a pyramid, with a large population of pre-schoolers at the base and a small number of centenarians at the top. Over the next 50 years, given present birth rates, the United States will have a demographic chart that looks more like a rectangle narrowing at the top, and in many western nations, the chart will actually widen near the top. Nations with declining and aging populations that require extra services will have declining economies. Already, industries such as construction, restaurants, hotels, and agriculture have a hard time finding employees and are heavily dependent on immigrants who are willing to do the work. In addition, some specialized fields such as mathematics and engineering are dependent on foreign workers due to the lack of qualified American applicants.

The inscription on the Statue of Liberty invites the tired, the poor, and the huddled masses to come to our shores. It is gratifying to live in a country with such opportunity as to inspire people around the world to leave their homes behind in order to come here. While we do not need to allow unfettered immigration, there is a need for a policy that will accommodate both those seeking freedom and the economic needs of the United States.

1 comment:

Juan said...

The Anti-Immigration debate is raging hard these days. Some would like to create a Guest Worker Program, others would like to maintain the Status Quo and yet others would like to banish all Illegal Immigrants. So, here is an interesting question.... what would happen if Illegal Immigrants could be magically removed from the U.S.?

Even by the most conservative estimates, we can assume that the average Illegal spends at least $500 a month. Overnight, the U.S. Economy would shrink by $72 Billion a Year (12MM People * $500 a Month * 12 Months per Year) ... a sizeable amount of money.

Now, you may be aware of the Economic Multiplier. Those that aren't, the Economic Multiplier is the idea of that every new dollar in the economy leads to many more.... and likewise taking a dollar out of the economy.... leads to many less dollars. For example, an Illegal Immigrant stops paying Rent... if the Landlord can't fill it...then he/she will have less money to spend or invest... then the Vendors that depended on the Landlord's money would likewise be affect...etc.,

Even by conservative estimates...the U.S. Multiplier is about 7.... so the $72 Billion per Year would eventually become $504 Billion about 3.8% of the total U.S. Economy. This alone would represent a far worse Recession than Post 9/11 or even Pre-Gulf War.

To this we add the Inflationary impact of the loss of cheap labor. In places like California where there is about 4 Million Illegal Immigrants.... the impact on Cost of Living there would be significant. The cost of Goods and Services typically rendered by Illegal Immigrants (Harvest, Food Prep, Retail, Housekeeping, Janitorial, Landscaping & Manufacturing) would probably increase by 25% (assume Cost of Goods / Services approximately 50% of Sales...and Wages would double to meet demand). Overall, it would probably increase inflation in California by at least a few percentage points. This inflation would of course be exported to other states in the country.

Next, there is also the impact on Mexico. Mexico currently gets a boost of $10 to $25 Billion per Year from transfers by Illegal Immigrants.... greater than all Sources of Foreign Investment Combined and assuming a Multiplier of 10.... that is an impact of $100 to $250 Billion on the Mexican Economy...or 10 to 25% of Total GDP. Mexico would go into a Depression outright. Given that Mexico is one of the U.S. biggest Trading Partners.... and one of the few Big Partners that the U.S. has actually had a positive Trade Balance with... it would be disastrous on the U.S:

> U.S. Companies would lose anywhere from $20 to $50 Billion in Export Revenues. If we include the multiplier effect...we are talking $140 to $350 Billion effect on the economy or 1 to 2.7% of GDP

> The U.S. would lose a key source of Currency & Interest Rate strength...the Dollar would devaluate relative to the Euro and Yen, forcing interest rates higher... and forcing greater borrowing from China and other countries (because of the increased Trade & Current Account deficits).

So far... we have:

> Immediate GDP Contraction almost 4%
> Inflationary Impact of a couple %
> Additional GDP Contraction due to lost Export to Mexico of 1 to 2.7%
> Undetermined increase of Interest Rates (increased Trade & Current Account deficits)

It is not hard to project what this scenario would mean.... Stagflation or Depression.