A Plan.

Ezra writes:

"I have a plan that will raise wages, lower prices, increase the nation's stock of scientists and engineers, and maybe even create the next Google. Better yet, this plan won't cost the government a dime. In fact, it'll save money. A lot of money. But few politicians are going to want to touch it.


Here's the plan: More immigration. A pathway to legal status for undocumented immigrants. And a recognition that immigration policy is economic policy and needs to be thought of as such."

Ah, yes, something I have written about many times. Many many many many times.

Terrorist Babies Attack, ctd.

Clearly, there is much more to be said on immigration. Right after finishing up my article on the topic, I check Matthew Yglesias' blog and he points me to a cool study about the effects of immigration on the labor market:

"Data show that, on net, immigrants expand the U.S. economy’s productive capacity, stimulate investment, and promote specialization that in the long run boosts productivity. Consistent with previous research, there is no evidence that these effects take place at the expense of jobs for workers born in the United States."

In a subsequent post, he theorizes that allowing more immigrants in the US would be good for the housing market. Makes sense to me, although I can already see the hysterical headlines:

Foreigner Demand for Houses Pushes Out Americans!

Terrorist Babies Attack!

While last summer US Democrats were conspiring to kill off sick seniors, this summer, flocks of pregnant foreign females are flying all over the US and dropping babies, which upon touchdown start sucking up public resources and multiplying at an astonishing pace! Depending on who you believe, these offspring are either created to eventually provide US citizenship for their parents, or they are being planted as terrorist sleeper cells only to blow up when they reach the age of 18 or when they are fed after midnight, whichever comes first. It’s August in America and everything is possible!!

"People come here to have babies. They come here to drop a child. It's called “drop and leave.” To have a child in America, they cross the border, they go to the emergency room, have a child, and that child's automatically an American citizen. That shouldn't be the case." These were the words of Lindsey Graham, the Republican Senator from South Carolina, who at the end of July suggested that Americans should rethink the 14th Amendment of the Constitution which grants US citizenship to anyone born in the US. And thus the principle of birthright was brought into the spotlight, creating much ado during these hot summer months.

This debate is as inconsequential as it is unsurprising. It’s lack of consequence is twofold: procedurally, it is impossible in the present political climate to amend the US constitution, so any suggestion to do so is unlikely to go anywhere; substantively, the number of children born to two foreign parents on the US soil - let alone to parents who come here specifically for the purposes of giving birth - is so comically small that the amount of attention it receives is wildly disproportionate. In other words, the debate is a ridiculous waste of time and attention span for everyone involved.

And yet no one should be surprised that it surfaced now. Ever since the state of Arizona passed a stringent immigration law in April, immigration has gone from being just another big national problem (next to health care, financial crisis, climate change, national debt, etc) to being a hotly debated issue. And any time a major complex issue comes to the forefront of collective consciousness, someone, somewhere manages to cut out a tiny sliver of the problem and completely blow it out of proportion - often reducing the entire complex issue into this one pseudo-controversial bit.

Those who paid attention to the health care reform debate last year will recognize a pattern. Back then, after months of committee hearings and negotiations on various aspects of the health care overhaul, some opponents of the proposed bill picked up on a paragraph which called for paying physicians for end-of-life counseling. This provision was distorted and portrayed as a “death panel” which will decide whether or not we should “pull the plug on grandma.” Very quickly, the hysteria over death panels became the defining element of the debate, and almost killed the nascent reform entirely. Anchor babies are the new death panels.

The amount of attention that the narrow issue of birthright receives is unfortunate because it takes away from other critical aspects of the immigration debate, namely: what should be done with roughly 11 million illegal immigrants already in the US? And how should the law governing immigration be revamped and modernized to reflect the realities and needs of the country? For a nation of immigrants, the US has a fairly spotty record in the its treatment of foreigners, and for every wave of immigrants, there is a corresponding wave of anti-immigrant backlash - anti-Chinese laws in the late nineteenth century and depression-era deportations of Mexicans are just a few examples.

But no matter which way the winds blow at any given time, immigrants are a vital component of the US, not just conceptually, but also economically: according to a landmark study by the National Research Council, the average immigrant and her immediate descendants contribute $80,000 more in taxes than they receive in benefits. The reason for this is twofold: even though they are not eligible to use benefits due to their status, most illegal immigrants actually pay income and social security taxes - the tax authorities have smartly figured out that there is no harm in collecting money from them and don’t ask too many questions of those using fake documentation. Legal immigrants, on the other hand, have to earn above-average incomes in order to be eligible for work visas or permanent residency (so as not to compete with natives on the basis of lower pay), so by design they actually end up on the top end of the income scale, paying a disproportionate amount of taxes relative to the rest of the population.

Despite these contributions, when the economy goes south and millions of Americans lose their jobs, immigrants are almost inevitably portrayed as an existential threat. The current recession is no exception. It is one of the great ironies of this debate that while rising unemployment seems to inflate the anxiety about foreigners, immigration - legal and illegal - has actually been on the decline: according to the Department of Homeland Security, the number of illegal immigrants dropped almost 1 million in 2009, the second consecutive annual drop and the largest such drop in three decades. And it is not just illegal immigration that has been on the decline - the demand for work visas for foreign workers has dropped so much when the current recession began that in 2009 the quota for visa applications was unfilled - for the first time since 2004. So, while the opponents of immigration reform often talk as if the country was bursting at the seams with an ever-growing influx of foreigners, the recent experience - largely due to the weak economy - has been quite to the contrary.

An ever greater irony is that the US not only benefits from immigrants - it needs them desperately. The population is aging due to the generation of baby boomers growing older and reaching retirement age. What that means is that the number of people who qualify for benefits like Medicare and social security is rising dramatically - and much faster that the number of young productive people who pay for these benefits with taxes. The situation is getting even grimmer with the birth rate is dropping to the lowest level in US history in 2009, according to recently released statistics from National Center for Health Statistics. What these trends add up to is roughly $100 trillion (as in, $100,000,000,000,000) in unfunded liabilities - the difference between projected payments to beneficiaries and projected tax payments by working adults. Of course, the situation could be remedied by cutting benefits or raising taxes. But neither one of those seems possible or likely. Benefit cuts are a political suicide in a country with such a large - and politically active - senior population. Tax increases are not a slam dunk either - with one party opposing them religiously and the other party scared to do anything that might hurt the economy. In fact, it seems like replenishing the population with productive immigrants who can support the burgeoning geriatric class is the most viable option.

So while Americans are passionately debating the pros and cons of birthright citizenship, they are entirely misguided: the challenge is not how to reduce immigration - something which is happening on its own - but rather how to bring in immigrants as fast as possible. The steps taken in Congress so far demonstrate this confusion: earlier this month, Democrats in the Congress passed a bill which finances $600 million in border security funding through substantially higher visa fees for companies that hire foreign workers. Because border security is a big concern for Republicans, these anti-immigrant measures are being interpreted by some as a negotiating tactic by the Democrats to facilitate broader reform down the line. That would make sense, but only if I had been asleep during the year-long health care reform negotiation: time and time again, we saw such strategic concessions by the Democrats yield no results except to move the debate further to the right. So while it might be unwise to write off immigration reform at this point, I worry that given the direction in which this debate is going the final reform - if it ever happens - will totally miss the point.

Closing In.

I was wondering when we're going to start hearing more about the H1B restrictions that were placed on institutions getting TARP money (that I wrote about here) and today I saw this deeply troubling article.    Few interesting bits:

The legislation doesn't apply to current employees of Wells [Fargo] and other TARP recipients who need to have their existing H-1B visas renewed. However, Wells is letting those visas expire anyway, according to a copy of an internal email sent to some of its foreign employees on March 20 from the bank's human resources department.

This contrasts with Goldman Sachs, another TARP recipient, which is renewing existing H-1B visas and continues to offer jobs to foreign workers who need new temporary visas to join the investment bank. "We will make offers to the best people regardless of where they live," said Ed Canaday, a Goldman spokesman.

Bank of America pulled job offers for more than 50 foreign students who would have needed H-1B visas to join the bank.

First of all, go Goldman.  As evil banking empires go, they are right up there along with everyone else and I always viewed their "emphasis on people" with heavy doses of skepticism.  But I guess they mean it, and how rightly so.  The Bank of America case is so disturbing and I can't imagine what I would do if after years of studying and multiple rounds of interviewing I would have my offer rescinded so that someone else, who was considered a worse applicant in the first place, can fill my spot.  Granted, the next best 50 are probably not complete idiots.  And one could (and many would) argue that a first year analyst in banking is a generic commodity.  What college graduate with some amount of training can't crunch some numbers and do a decent job?  

Indeed, the problem is not that this will lead to a massive deterioration of the talent pool in our investment banks (if only because the best of the best can still get an offer from Goldman).  The real problem is twofold:  first, there are areas where the foreign talent is much more irreplaceable (I'd like to say IT, but that could only be because I don't know anything about IT and I'm stereotyping .. and besides, maybe smart IT is what got us into this mess in the first place? Though the dude in question was American, so there!  But I digress ..).  

Second, bringing highly qualified immigrants to this (or any) country by means of employment is by far the easiest and most natural way to replenish the diversity of this country and anything to close that path, as tempting as it may be during a recession, is just not desirable.  I realize that I am making an assertion here that deserves a bit more argumentation; but if you need one, here's a pragmatic argument in favor of immigration.  

Lastly, one technical note on the article, specifically regarding this pearl of wisdom:

With unemployment surging, there's no need for companies to hire foreign guest workers through the H-1B program when there are plenty of qualified Americans looking for jobs, Sen. Chuck Grassley, R-Iowa, said in February. Grassley sponsored the amendment to the stimulus bill that made it harder for TARP recipients to hire overseas workers on H-1B visas. "Our common-sense amendment simply ensures that recipients of American taxpayer money make American workers their first priority," he added.

This common-sense only makes any sense if you believe that American taxpayor money is only money paid by American workers.  However, seeing that some 50% of my income gets rerouted biweekly to the United States trasury, New York State and New York City, I beg to differ.  Yes, foreigners pay taxes, too, and by design (they have to earn more than the going market rate to justify their H1B status)  they actually pay more in taxes that the average American.  So unless someone wants to exempt me from contributing to the $1 trillion bailout of the US banking industry and to the $800 billion stimulus ($11,000 per person, thank you very much) or exempt me from paying Federal taxes (a much much higher amount), don't tell me that I am somehow a lesser priority than a US citizen.  

The Unbearable Stupidity of Populist Protectionism.

First the House version of the stimulus bill included a "buy American" provision. Then the Senate voted to limit bailout-supported firms' ability to hire H1B workers. At this rate, I may soon be deported from the country to make room for a US citizen to take my job.

For those of you that don't know, H1B is a work visa program for skilled foreign workers. It is the visa I - and any of your foreign friends in the US (unless they are students, illegal or have a Greencard) - live and work on in the US.

Apart from the obvious personal discomfort that seeing something like that creates – not that I am working at a bailed-out bank, but it is a troubling trend for anyone on an H1B visa - there are two big mistakes in a step limiting H1B visas or immigration to protect the US economy.

The first problem is well outlined and discussed in today’s column by Friedman. Given that intellectual capital is the greatest competitive advantage of the US, putting protective measures on it’s inflow is counter-productive. There is something terribly non-sensical about collecting some of the brightest minds from around the globe, bringing them to US universities, and then not allowing them to participate in the US labor market. On previous occasions I took that a step further and argued that immigration is necessary not just to sustain America’s competitive advantage but also to bring it back to fiscal soundness, given the rapidly deteriorating demographic profile of the country.

The second problem I have with the logic of labor protectionism is that I think it’s a symptom of a broader flaw in thinking about recession and unemployment and specifically about the obsession about unemployment common in the public debate about the economy. Surely, increasing unemployment is not a good thing. And understandably, it is the most poignant way to describe a recession. It is personal, it is sad, it has troubling consequences. I think it is for those reasons that when it comes to debates like the one right now about the stimulus package the language used is more often about jobs than it is about output or production. However, as the economy is concerned, unemployment is a symptom or a proxy of a recession, not the equivalent of a recession. Higher unemployment is a result of a contraction in economic activity. And yes, it feeds on itself, but it is primarily caused by shrinking demand.

Bringing this back to my point about foreign workers: I think this obsession about jobs (as opposed to output) leads to the understandable yet mistaken belief that employing more Americans is good given the swelling ranks of the unemployed. Or, to use the words of Charles Grassley, the Senate Finance Committee ranking member:

"With the unemployment rate at 7.6 percent, there is no need for companies to hire foreign guest workers through the H1-B program when there are plenty of qualified Americans looking for jobs."

And yet, hiring Americans in place of foreigners still does not create a job. As economic activity goes, the nationality or immigration status of the worker makes no difference. If I were to be fired today and some US citizen were to replace me, it would do nothing to unemployment or the economy. Even though an unemployed American was hired, no job was created, nothing was added to the economy. And as secondary economic effects go, my income is as likely to be spent – and generate economic activity – as anyone else’s. So nothing has changed there either.

That's why the whole idea of labor protectionism doesn’t make sense to me: it doesn’t matter who gets the job. What matters is that a job is created – which can only happen when the economy expands. Of course, the only reason why the idea makes sense is political: Americans vote for American senators, so if it otherwise doesn’t make a difference who gets a job, they would prefer to favor their constituents. This, however, should not be confused with being beneficial for the economy.

Or, viewed as irrelevant to its long term prospects.

Follow Ups.

It's turning out to be a rich day on a variety of fronts, for many issues that I have written about in the past, so why not simply round it all up in one post?

Immigration:  How timely that there is a new study out from NCPA about the $52 trillion in government program liabilities from Medicare and Social Security.  Their conclusion?  "Social Security and Medicare can be reformed so that each worker saves and invests funds for his own post-retirement pension and health care benefits. The burden for the current generation of workers would be substantial: saving for their own benefits while at the same time paying taxes to fund the benefits of current retirees. However, over time Social Security and Medicare would be transformed from pay-as-you-go programs in which each generation is dependent on the next generation of workers/taxpayers into funded programs in which each generation pays its own way."  Or, as I suggested, you could also expand the pool of young bright attractive (kidding) workers by importing them.  

Gay right and useless NY democrats:  Via JMG, we're hearing that we will be, after all, shafted by the Democrats in NY state senate.  "And thus ends our hope for marriage equality in New York in the near future. In 2010 there will be a redistricting in New York state, a process that the Democrats will at least now be able to control. Therein may lie our hope for marriage equality in 2011."  Really, no comment at all except to say that I pray every night for the Republicans to magically transform into a decent party and kill the Democrats in the next election.  

Healthcare: Ezra Klein and Andrew Sullivan have spent the last 2 days exchanging jabs on the topic, and it's delightfully full of clashes: progressive vs libertarian, personal vs theoretical, American vs British.  One of the ironies in the exchange is that Klein, an American, defends the UK system of healthcare, while Sullivan, a Brit, likes it Americana style.  It started with this post by Klein about rationing, and it quickly got personal when Sullivan responded: "I prefer freedom and the market to rationalism and the collective. That's why I live here."  Klein comes back saying the Brits are more satisfied with their system than Americans are with theirs, ergo it must be better, to which Sullivan goes all metaphysical: "there is a cultural aspect here - Brits simply believe suffering is an important part of life, especially through ill health. Going to the doctor is often viewed as a moral failure, a sign of weakness.. It was one of my first epiphanies about most Americans: they believe in demanding and expecting the best from healthcare, not enduring and surviving the worst, because it is their collective obligation. Ah, I thought. This is how free people think and act. Which, for much of the left, is, of course, the problem." Of course it doesn't stop there and it goes on and on.  The beauty is that while Klein tries to argue with data, Sullivan operates with ideology, personal anecdote and cultural relativism - and yet Klein continues to humor him - with reason and data - for which he deserves some props.

Veganism:  OK that one has been completely neglected here for a long time, but there's a nice article over at the American Prospect about the environmental benefits of eating less meat - and the unpalatability of the argument: "Why are environmental groups and even politicians willing to tell Americans to drive smaller cars or take the bus to work but unwilling to tell them to eat less meat?" 

Homeland, Part 3, Where I Get All Wonkish.

As a follow up to the previous posts (1, 2) about Homeland Security, it may be helpful to explain why I care so much about immigration reform in the US, or more precisely, why Americans should care more about immigration reform in the US.

To put it bluntly:  because this country needs more young people to survive.  Yes, seriously.  Bear with me.

Medicare, the health care program for people over 65, is a good case in point.  The vast majority of the funding for the benefit that covers hospitalization (known as Part A), comes from payroll taxes.  You may know know this, but every month a small percentage of your paycheck goes to the Medicare trust fund.  As a rational prudent person you may live happily thinking that all the money you're putting aside for Medicare is sitting somewhere - in that Trust - waiting for you to turn 65.  Except that is not the case at all.  The money you're paying now is being used to pay for Medicare expenses of your grandparents (which makes sense if you think about the fact that when the program was established they didn't want to wait around for a generation of people to earn their Medicare bucks before turning 65, but I digress).  That wouldn't necessarily be a problem, if it wasn't for the baby boomers - the massive generation born after WW2, which is about to go all senile on us any minute now and in the process planning to deplete the Medicare Trust fund by 2019.  In short:  forget about ever seeing any of that money back and be prepared to pay for hospital bills on your own!  Or, in the slightly more sophisticated language of the KFF:

Over the longer term, an aging population, a decline in the number of workers per beneficiary, and increasing life expectancy will present fiscal challenges for Medicare. From 2010 to 2030, the number of people on Medicare is projected to rise from 46 million to 78 million, while the number of workers to support beneficiaries is projected to decline from 3.7 workers per beneficiary to 2.4 workers per beneficiary.

And Medicare is just one example.  Social security is another headache or, in government budget speak, unfunded liability.  Combined and rounded up, all these babies add up to about $57 trillion, a figure so large that the only thing you can do about it is pray that you never have to worry about it, or that you die before you do.  

Or, as I suggest, start taking steps to systematically replenish what one might euphemistically call the deteriorating demographic profile of the country, ie, import young smart labor (alternatively we could start adopting massive quantities of babies from around the world, but seriously, how many Brangelinas are there out there?).  

I hope that helps put a slightly less self-serving spin on my interest in immigration reform.  This country needs it, desparately.

Homeland, part 2.

It turns out that the ultra psychedelic left is also worried about Napolitano, or that seems to be the bottom line of this highly contrived and confusing report from Democracy Now!  The only person that seems to like her is McCain, which leaves me a bit confused about what she means for immigration reform, and by immigration reform, I mean my greencard prospects.

Homeland.

Lou Dobbs contrarian indicator alert: he doesn't like the Napolitano pick for homeland security, which means there's hope for immigration reform. I actually think she's more of a hawk than he gives her credit for, but whatever.