Topic: Trade and Immigration

Rebuttal of Senator Sessions’ Anti-Immigration Talking Points

On Tuesday, Senator Jeff Sessions (R-AL) sent out an email memo with talking points for opponents of immigration reform.  Most of the points are based on misinterpretations of government reports, cherry-picked findings by organizations that engage in statistical chicanery, or just flat-out incorrect.  These anti-immigration arguments do not advance a logical argument against immigration.  Here is a point by point rebuttal of the major claims of this memo:

Claim:  No immigration reform proposals will halt unauthorized immigration.

Fact:  Guest worker visas are the most effective way of halting unauthorized immigration because it provides a lawful pathway for low-skilled immigrants to enter instead of overstaying a visa, running across a desert, or being smuggled in.  Providing a lawful immigration pathway will funnel peaceful migrant workers into the legal system leaving immigration enforcement to deal with a much smaller pool of unlawful immigrants.  Italian immigrants in 1910 did not crash boats in to the Jersey Shore to avoid Border Patrol.  They entered legally through Ellis Island because there was a legal way to enter.  Let’s reopen that pathway – at least partly.      

Congress did open it a little bit in the 1950s which ended up cutting unauthorized immigration by over 90 percent by creating a low-skilled guest worker visa called the Bracero Program.  That program later ended due to union pressure, causing unauthorized immigration to immediately skyrocket. The program was shut down after domestic unions, especially Cesar Chavez’s United Farm Workers, mounted a national campaign against it.

According to Stuart Anderson of the National Foundation for American Policy, a February 1958 Border Patrol document from the El Centro, California district states, “Should Public Law 78 [Bracero Program) be repealed or a restriction placed on the number of braceros allowed to enter the United States, we can look forward to a large increase in the number of illegal alien entrants into the United States.”  That is exactly what happened.

The government cannot regulate immigration if much of it is illegal.  Legalizing the flow of workers into the United States is a simple and cost-effective way to control the border.

  

Sources: United States Citizenship and Immigration Services

Further reading:

How to Make a Guest Worker Visa Work

Immigration Reform Should Boost All Skill Levels

Claim:  Immigration reform will increase the budget deficit.

Fact:  Immigration has a very small impact on the size of budget deficits. For what it’s worth, a Congressional Budget Office’s dynamic score of the Senate immigration reform plan found that it would reduce federal government budget deficits by about $1.2 trillion over the next 20 years. Extra growth to the economy and tax revenue from more legal immigrants more than offsets the additional cost of government benefits.  Poor immigrants consume government benefits at a lower rate than poor natives and they also pay taxes.  Highly skilled immigrants make a more positive contribution to government budgets.  According to a survey of countries, the impact is rarely more than plus or minus 1 percent of GDP.  In the U.S. case it is generally positive over the long run but the numbers are very small.  In short, according to economist Robert Rowthorn, “[t]he desirability of large-scale immigration should be decided on other grounds.”

Further readings:

Poor Immigrants Use Public Benefits at a Lower Rate than Poor Native-Born Citizens

CBO Dynamically Scores Immigration Bill

The Fiscal Impact of Immigration on the Advanced Economies 

Cato Scholars Respond to the 2014 State of the Union

Cato Institute scholars Alex Nowrasteh, Aaron Ross Powell, Trevor Burrus, Benjamin H. Friedman, Simon Lester, Neal McCluskey, Mark Calabria, Dan Mitchell, Justin Logan, Patrick J. Michaels, Walter Olson and Jim Harper respond to President Obama’s 2014 State of the Union Address.

Video produced by Caleb O. Brown, Austin Bragg and Lester Romero.

Post-World War II Migration and Lessons for Studying Liberalized Immigration

Introduction 

This post is about two issues that are closely related.  The first are some facts and history that help explain why internal migration in post-World War II America was an important component of that economic expansion and likely to be as important in future growth.  Some of this data has applications for future research into the role migration plays as a stimulus to and reaction of economic growth.  The second is how studying this period of American migration could inform the academic literature on the probable effects of removing all or most of America’s immigration restrictions – an admittedly radical policy but one that should be understood.

The facts and history surrounding the post-World War II boom are somewhat controversial.  Some critics of immigration argue that post World War II economic growth occurred with relatively little immigration so therefore immigration is unnecessary for economic growth today.  Those critics are mistaken for many reasons, but fundamentally they misunderstand the role that national migration played in feeding economic growth during the 1950s and 1960s.  Ironically, economic growth at the 1950s and 1960s rate would be exceedingly difficult or impossible to achieve without immigration.    

The economic growth of the 1950s and 1960s with relatively closed borders can likely not be repeated today because there are fewer underutilized Southerners, Puerto Ricans, and women who could enter the workforce as substitutes for immigrants.  Growth during that time was partly fueled by the great migrations (migration is internal movement, immigration is international movement) of Americans from much poorer parts of the country, namely the South and Puerto Rico, to wealthier locations.  After the government began to severely restrict low-skilled immigration in 1921, migrants from the South and Puerto Rico moved in larger numbers to fill the economic gap left by the curtailment of low-skilled immigration, some migrants moved from rural areas to urban ones, and women began to enter the workforce in greater numbers.  Without the great migrations that brought tens of millions of black southerners, white southerners, and smaller numbers of Puerto Ricans to Northern and Western cities, American economic growth during those boom years would probably have been much smaller. 

Furthermore, American internal migration during the 1950s and 1960s was a one-time event due to unique historical, demographic, and economic circumstances that would not repeat today if immigration were similarly restricted.  Migrants and immigrants together as a percentage of the U.S. population move similarly with the average annual hours worked per worker and, thus, the labor component of production.  Lawful immigration is essential to recapturing the labor force growth necessary for approaching the economic growth rates of the 1950s and 1960s.         

The Great Migration

The growth of the post-war American labor force was dramatic.  From 1948 to 1982, the size of the U.S. labor force grew from 60 million to 111 million.  Over the same time, the number of people employed in the U.S. labor market increased from 58 million to 99 million.  The Labor Force Participation Rate (LFPR) increased from 58.6 percent to 64.1 percent and the total number of hours worked per worker decreased by 9.3 percent from 898 hours a year to 814 hours a year – likely because wealthier American workers opted to “purchase” more leisure time – meaning that they can afford not to work so many hours.  Here are the history and economics behind the post-World War II great migrations organized by group.

New Farm Bill Much Larger Than Last One

Congress is gearing up to pass the first big farm bill since 2008. The logrolling between farm interests is nearing completion, the Republicans have given up on making substantial food stamp cuts, and the Treasury stands ready to borrow another $1 trillion. We are all set to go.

It looks like the final farm bill will be expected to cost about $950 billion over 10 years. CRS has details on bill versions from the Fall, but I adjusted those numbers based on the reported GOP cave-in on food stamps.

If the final number is $950 billion, the 2014 farm bill will cost 48 percent more than the $640 billion farm bill passed in 2008. Farm bill supporters claim that the new bill includes “savings” and “cuts,” but that is a myth created by the rising CBO baseline. The reality is that Congress is set to impose a huge, damaging, and unaffordable burden on taxpayers and the economy.

Should Free Traders Support Free Trade Agreements?

With the Trans-Pacific Partnership negotiations allegedly near completion, the transatlantic talks kicking into higher gear, and debate in Congress over U.S. trade policy objectives about to intensify, 2014 is shaping up to be the most consequential year for the trade agenda in a long time. Whether real free traders should rejoice over these developments depends on the emerging details, as well as the ability to avoid making the perfect the enemy of the good.

Real free traders abhor domestic trade barriers and want them removed regardless of whether other governments remove their own barriers. The benefits of trade are the imports we obtain, not the exports we give up. The immediate benefits are measured by the value of imports that can be purchased for a given unit of exports – the more, the better – and domestic barriers reduce those terms of trade. Of course, there are also the secondary benefits of imports, which include greater variety, lower prices, more competition, better quality, and the innovation spawned by those and other factors.

The process of U.S. trade policy formulation has never been particularly accommodating of free traders’ perspectives. Free trade views have been marginalized by their being subsumed within a broader category of views labelled “pro-trade,” which is dominated by business lobbies and other “pro-export” mercantilists. As the definition of free trade has been expanded to mean pro-trade, the definition of protectionism has been narrowed to exclude views, such as: “I’m not a protectionist; I just want a level playing field,” or; “I’m for free trade, as long as it’s fair trade.” Those are the clichés of protectionists, who are now popularly grouped under the pro-trade umbrella.

So, today’s trade debate (framed as it is by media, lobbyists, and politicians) does not feature free-traders on one side and protectionists on the other. Instead, one is either pro-trade or anti-trade, supports corporations or their workers, and believes free trade agreements are either good or evil. In a world with these binary choices, nuance gets squeezed out. Where do you fit if you support the tariff reductions in a trade agreement, but are unhappy with the corporate welfare it bestows on particular industries? What if you know that trade liberalization is good for both corporations and their workers alike? What if you’re pro-market, but not pro-business?

Given these and other ambiguities, should free traders support free trade agreements? Let me lay down a marker for free trade – “real” free trade, that is.

Free markets are essential to our prosperity, and free trade is the extension of free markets across political borders. Making markets freer and expanding them to integrate more buyers, sellers, investors, and workers deepens and broadens that prosperity. When goods, services, capital, and labor flow freely across borders, Americans can take full advantage of the opportunities of the international marketplace. Free trade provides benefits to consumers and taxpayers in the form of lower prices, greater variety, and better quality. And, it enables businesses and workers to reap the benefits of innovation, specialization, and economies of scale that larger markets afford. Countless studies have shown that economies that are more open grow faster and achieve higher incomes than those that are relatively closed.

Damning Trade with Faint Praise

A Washington Post editorial today pushes back against the argument that a Trans-Pacific Partnership agreement would exacerbate income inequality. Amen, I suppose. But in making its case, the editorial burns the village to save it by conceding as fact certain destructive myths that undergird broad skepticism about trade and unify its opponents.

“All else being equal,” the editorial reads, “firms move where labor is cheapest.”  Presumably, by “all else being equal,” the editorial board means: if the quality of the factors of production were the same; if skill sets were identical; if workers were endowed with the same capital; if all production locations had equal access to ports and rail; if the proximity of large markets and other nodes in the supply chain were the same; if institutions supporting the rule of law were comparably rigorous or lax; if the risks of asset expropriation were the same; if regulations and taxes were identical; and so on, the final determinant in the production location decision would be the cost of labor. Fair enough. That untestable premise may be correct.

But back in reality, none of those conditions is equal. And what do we see? We see investment flowing (sometimes in the form of “firms mov[ing],” but more often in the form of firms supplementing domestic activities) to rich countries, not poor. In this recent study, I reported statistics from the Bureau of Economic Analysis revealing that:

Nearly three quarters of the $5.2 trillion stock of U.S.-owned direct investment abroad is concentrated in Europe, Canada, Japan, Australia, and Singapore. Contrary to persistent rumors, only 1.3 percent of the value of U.S.-outward FDI [foreign direct investment] was in China at the end of 2011.

Cato FOIA Request Reveals E-Verify Delays Hurt Workers

Proponents of E-Verify, the Internet-based system to verify that a person is eligible to work in the United States, often tout its supposed speed and reliability. A recent Freedom of Information Act (FOIA) request from Cato has shed some light on how long it takes for the government to resolve contested tentative non-confirmations (TNC). The data should temper some enthusiasm for the system.

Our FOIA revealed that in 2012, the most recent year for which data are available, there were 68,775 contested TNCs through E-Verify. A TNC is an initial E-Verify determination that a worker is unlawful. Of those, 21,007 were handled by the Social Security Administration, with an average turnaround of 3.42 business days after the TNC was contested.  

The Department of Homeland Security handled the other 47,768 contested TNCs, with an average turnaround of 6.01 business days. SSA deals with a lower volume of cases and deals with them in almost half the time that it takes DHS.

The information received as part of the FOIA included further breakdowns of resolution time: