Some of our top journalists don't grasp the basics of how a market economy functions. Case in point: Pulitzer prize winners Donald Barlett and James Steele of the Philadelphia Inquirer. Their 10-part series, "America: Who Stole the Dream?" was widely cited last year. Yet it is plainly, painfully wrong—and the proof is easy.
Barlett and Steele assume that trade and immigration lead to mass joblessness. Their reasoning: Since there are only so many jobs to go around, every import or immigrant causes someone to lose a job. They even reduced this to a formula: "(I)f $1 billion in exports creates 20,000 jobs, then $1 billion in imports eliminates a like number."
It's easy to test the Barlett-Steele thesis. If trade deficits and immigrants cost American jobs, then bigger deficits and more immigrants should lead to fewer jobs.
At the start of 1995, there were 123 million jobs in America. If every $1 billion in net imports cost America 20,000 jobs, then the $105 billion trade deficit in 1995 should have meant 2.1 million fewer jobs. Combined with 720,000 immigrants that year, that should have meant U.S employment declined by 2.8 million in 1995.
In reality, the number of jobs grew in '95 by nearly 2 million, reports the Bureau of Labor Statistics. Barlett and Steele's "logic" is thus off by almost five million jobs.
The farther back you step, the more ridiculous Barlett and Steele look. Both the trade deficit and immigration have grown since 1976. But America does not have fewer jobs today, as Barlett and Steele's series would lead us to believe.
In the past 20 years, total U.S. employment had increased by 59%, surpassing 126 million jobs, while the unemployment rate has dropped from 7.7% to 5.2%. Even the total number of unemployed people in the country has dropped.
Here's some of what Barlett and Steele missed. First, while immigrants do increase the supply of labor in the country, they also increase the demand for labor. By starting businesses and spending their money on products made by both natives and other immigrants, they create at least as many jobs as they fill. That's why immigrants have a minimal impact on the labor market.
Barlett and Steele want to reduce the number of immigrants, particularly the employment-based immigrants, who help companies grow in Silicon Valley and elsewhere. The reporters fail to grasp that immigrants are employed in addition to, not instead of, native-born Americans.
Second, trade deficits are only a problem if one believes, as Barlett and Steele do, that imports are bad and exports are good. As Adam Smith wrote in 1776, "Nothing ... can be more absurd than this whole doctrine of the balance of trade."
In fact, we engage in trade in order to get imports. They raise our standard of living by furnishing a greater variety of goods and providing needed competition to domestic producers.
In part 10, Barlett and Steele laid out their own agenda for reform. Most interesting is their take on regulation. They admit this adds to the price of U.S. goods, relative to foreign-made products. But, rather than call for less red tape here, they suggest a tariff on imports "equal to the amount U.S. businesses must spend to comply with government regulations."
Businesses now spend $500 billion a year on regulatory compliance. That translates to a 55% tariff on all imports—far higher than the 33% Smoot-Hawley tariffs that helped bring on the Great Depression.
Moreover, raising tariffs would boost prices on everything from food to clothing and thus hurt the very low income and middle-class families for whom the reporters profess sympathy.
Newsweek columnist Robert Samuelson called the Philadelphia Inquirer's series an example of "junk journalism" and "sanctioned stupidity." But the problem runs deeper and goes to the heart of America's place in a changing world.
The vision of Barlett and Steele is of an America where we produce all our own goods, where individuals seeking opportunity are shut out, where success is punished, and where contact with the outside world is limited. It is a bleak vision that would give rise to an even bleaker reality if it ever came to pass.
If the World Worked As Barlett and Steele See It
|1976 Number of Jobs in America||79.3 million|
|minus Jobs Lost to Immigrants/Trade Deficits||- 48.4 million|
|1996 Number of U.S. Jobs Left||30.9 million|
|1996 Number of U.S. Unemployed||103.2 million|
|1996 U.S. Unemployment Rate||77 percent|
|Source: Philadelphia Inquirer. Note: Barlett and Steele
assume each immigrant takes the job of a native and that
every $1 billion in net imports eliminates 20,000 jobs.
How the World Really Works: The Real Numbers
|1996 Number of U.S. Jobs today||126.8 million|
|1996 Number of U.S. Unemployed||7.3 million|
|1996 U.S. Unemployment Rate||5.4 percent|
|Source: Department of Labor, Bureau of Labor Statistics|