Immigration Reform: A Democratic Response

September 21, 2017

In a discussion, I was asked my thoughts on how Sen. Brown D-OH should response to immigration reform.  I have shared my thoughts here.

The Oversupply of the Labor Market

Over the past few decades, the US labor market has been grossly over-supplied.  This market glut of workers is a major cause of income inequity and the decline of the middle class and the rise of working-class poverty.

We must recognize that government has a major impact on the supply of labor in the US market.  This is done chiefly through trade and immigration policy.  Sen. Brown’s criticism of the US’s  “free-trade” agenda, as outlined in his book “The Myths of Free Trade”, suggests that the Senator is fully aware of the impact that the open trade with China (the others) has had on the US labor market.

One way to conceptualize this trading relationship is to understand that trade policy has given Chinese workers access to the American labor market.  Thereby expanding the US labor market by tens if not hundreds of millions of workers.  What I find confessing and troubling is that Sen. Brown does not seem to acknowledge that our current historically high level of immigration both illegal and legal is doing the same, namely expanding the size of the US labor market.

Expanding the number of workers in a market only becomes a problem (high levels of population bring many problems unrelated to the labor markets) when the numbers and quality of jobs cannot keep pace with the growing number of workers.   It is also true that when this balance shifts in favor of employers that the quality of jobs is quickly eroded.

The balance of leverage in the labor market has been shifted too far in the favor of employers.  The evidence of this imbalance is clear in the economic data: income equality, the labor participation rates, the number of workers accessing government subsidies, temp and part-time work, lack of employer-provided healthcare benefits etc..

The labor market is beginning to tighten. This is good for US workers and for the economy overall.  But this rebalancing will put pressure on business.  We must be on guard for business carping about the shortage of workers.  Whenever a business makes a statement about the lack and quality of the available workforce I always add the phrase “at the wage and benefits that I am willing to provide”.  If a business truly cannot survive because that business cannot compete for a workforce, that is the market saying that that business plan is not viable and that its human and financial capital is better directed to another business.  Why, as a community or nation, would we want to prop up businesses that provide sub-standard wages and benefits?

Labor Market Floor

I believe that the concept of a “labor market floor” is not fully accounted for in the economic models regarding the effect of immigration, in particular, illegal immigration (black market labor) and guest worker programs on the labor market.   A criticism of raising the minimum wage is that it would necessitate increases in wages for employees up the employment ladder.  If this is true, which I believe it is, (and not necessarily a bad thing) the inverse is also true.  Access to labor willing to accept extremely low wages and benefits puts downward pressure on all wage earners.  In effect, lowering the floor in which employers can lower their wages and still attract a labor force.  This is also an issue with guest worker programs.

I have not even addressed the possible effect of automation on the labor market.  But illegal immigrants could see a major displacement in the industries and occupations that they occupy.  Bringing large numbers of foreign low-skilled workers (particularly those without basic English skills) into the legal workforce would likely put a burden on the US economy and the US taxpayer for years to come.

I could say a lot more about the myth of a labor shortage, and the role of trade and immigration on the labor markets.  And would be glad to do so if there is an interest, but let’s move onto the political and policy response to immigration and the labor market.   First, trade and immigration policy are linked.   Addressing one without the other leaves the door open to increasing the labor supply on behalf of business.  But for this discussion, we are focused on immigration.

Politics

First, let’s look at the political implications of immigration reform.  It is my strong feeling that Americans (and Ohioans) do not trust the Democratic Party to enforce our immigration laws.  I feel this is one major reason why Clinton lost the election. Hillary Clinton and Sen. Brown refuse to use the phrase “illegal immigration”.   Hillary failed to address enforcement of US immigration laws at all during her campaign.  The constant effort to conflate immigrants with illegal immigrants is particularly galling.  This and the effort to paint anyone concerned about immigration as a racist was counterproductive, pushing middle-class voters away from the Democratic Party.

American workers believe that wage competition from illegal and legal immigration is as real as the negative effects on the tax base.   Voters feel that the Democratic Party is in effect supporting open immigration and many have turned their backs on working families’ financial concerns to pander to a growing voting bloc, which is, in fact, growing because of the Democrats complicit support of illegal immigration.

The question the voters are asking is; how can the Democrats hope to enforce immigration law if the Party is not willing to deport an illegal immigrant who has done nothing more than violate our immigration law?!  The voters see a party looking for every excuse possible not to deport anyone.

Saying that you will deport violent criminals is not enough.  To enforce immigration law you need to be willing to deport the most sympathetic illegal immigrants.  All the dilemmas surrounding illegal immigration, sanctuary cities, divided families, dreamers, are all a result of the ineffective ability of the federal government to enforce immigration law through deportation.

An immigration reform that cannot stop the flow of illegal immigration into the US will be a failure.  We simply cannot have a repeat of the 1986 reform.  The reality that we have today; that the best and quickest path to permanent residence and a better life for oneself and one’s family is through illegal immigration has to be put to an end once and for all.   Any reform that permits the reconstitution of the illegal immigration population in the US will be an abject failure.

Make no mistake that the goal of many who are trying to influence immigration reform is to increase the flow of immigration into the US.  This could be done with explicit provisions in the reform to increase legal immigration into the US or liberalizing the refugee flow into the US.  Or this can be done by subterfuge; hamstringing efforts of enforcement, leaving in place policies that incentivize and accommodate illegal immigrants living in the US.  There is a general attitude among pro-illegal immigration advocates that foreign nationals have a moral right to violate our immigration law.

Policy

On the whole, I would say that the Border Security, Economic Opportunity, and Immigration Modernization Act of 2013 is too generous in terms of amnesty for illegal immigrants and too generous for business in terms of access to foreign workers.  Other than the addition of E-Verify it seems to be a rehashing of the Immigration Reform and Control Act of 1986 which was a farce and a complete failure.

One very important issue NOT addressed in the 2013 Senate bill is the dependents still living in the countries of origin of illegal immigrants who will be provided a path to citizenship.  A basic tenet of pro-amnesty groups is family unification.  It seems clear that their position would be that unification should always be on the US side of the border.  If the default policy was to be unification in the US, then millions if not tens of millions of foreign nationals would be eligible for legal immigration to join their family member(s) in the US, referred to as “chain migration”.  This policy of unification would have a massive effect on the CBO scoring of the law.  This is one reason that I feel a finite number of illegal immigrants and their dependents should be the policy.  Ever any discussing of how to deal with dependents that remain in the countries of origin would likely set off a wave on illegal entries into the US.

At this time I would point that CBO scoring does NOT address the effects on the state and local tax base.  The education cost of a unification provision could be a major problem for already underfunded big city school districts.  The other issue with CBO scoring in regards to immigration policy is that the CBO only looks out for ten years.  Immigration policy budget implications have a far longer timeline than 10 years.  In my estimation, many of the negative budget implications are outside of the 10-year estimates provided by the CBO.

Below I will provide a policy agenda that could have a real impact on reducing the oversupply of labor in the US through immigration and restore the voter’s faith that the Democrats party and the US government is serious about immigration reform and enforcement.

I do not believe for a second that Sen. Brown (or any other Democrat or business minded Republican) will adopt this platform.  It would require a paradigm shift in his thinking on immigration policy.  The Senator would be ostracized by his base, his donors, his colleagues, the party leadership and his family members.

  • A limit amnesty at a fitted a specific number of individuals. Say 5 million (including Dreamers). There is the possibility that there are far more than 11 million illegal immigrations current in the US.  Also, a large number of deportations would be necessary to convince all sides that the US government is serious about immigration enforcement.   And it would prevent new arrivals from trying to qualify for amnesty current or future.
  • The numbers of immigrates receiving amnesty would be back out of all future legal immigration.
  • The year total of legal immigration would be limited to 500k/per. This means that total new immigration other than the amnesty program would be zero for 10years.
  • The adoption of E-Verity employment verification
  • Ending all guest worker programs.
  • The end of birthright citizenship. The 14th amendment was never intended to allow foreign nationals to control our immigration policy
  • Apportionment and distribution of federal funds will be based on the total of legal residents (NOT on the total number of people present in the US.)
  • Electronic tracking of visas.
  • Increased internal and workplace enforcement. (This is key illegal immigrates most by quickly be identified and processed for removal (or otherwise adjudicated) before the moral dilemmas relating to legal immigration can arise.)
  • More funding of border checkpoints to prevent illegal activities at the border illegal immigration, illegal working in the US by people crossing the border daily, drug smuggling etc.. (Build a border wall across the whole US/Mexican border would be a colossal waste of money and better diverted to other initiative on the list above.)
  • Enforcement Enforcement Enforcement- All federal agencies (including the IRS and Social Security Administration) must provide any information that could identify or locate illegal immigrants to ICE.  All Federal, state or local laws and programs that make it easier for illegal immigrants to remain in the US should be eliminated; sanctuary cities, drivers licenses, etc..  No space or location in the US should be off-limits to immigration enforcement.
  • Recipients of amnesty must renounce foreign citizenship.  This initiative is directed specifically at Mexico who collects taxes on Mexican citizens living legally and illegally in the US (for which they provide no services).  This would disincentivize Mexico from encouraging its people to immigrate illegally (or legally) to the US

Of course, I am not able to address all of the issues and counterpoints surrounding issues of immigration in this short format.  Please contact me at any time so that I can address any questions, concerns and clarify any faults in my reasoning that may have been found.

 

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Needless Regulation Is Killing Wind Power In OHIO

August 1, 2017

Three years ago the Ohio legislature passed a needless, onerous, burdensome regulation that denied rural property owner’s real economic opportunity.  This regulation stymies an industry that would bring 4 billion dollars of investment, hundreds of good paying high tech jobs and millions of dollars in income for rural land owners, as well as millions more in desperately needed tax revenue for rural Ohio communities and schools.

I am, of course, talking about the increased government restrictions on the siting of wind turbines.  There are professional anti-wind activists with questionable ties to powerful special interests that feel threatened by wind power in Ohio.  I urge you not to fall for the disinformation of the people and industries whose profit would be adversely affected by the presence of wind power in Ohio.  If we are serious about economic development and energy independence, then we must admit there is plenty of room in the market and in the electrical power grid for locally generated wind energy.

Wind power is safe, clean and highly cost effective.  It should be part of the electrical generation mix in Ohio.

But the real issue is not the merits of wind power. The real issue is property rights.  Who will decide how rural land owners can use their private properties to earn a living for themselves and their families for generations to come?

Ohio Senator Hite is working hard to fight against powerful outside interest groups that would rob rural Ohio land owners of their rights.  If you support wind power; stand up for the rights of land owners.  If you are a rural land owner; ask yourself who should decide the future use of your property – special interest groups or you, the owner. Please contact your local legislators to urge them to return the property rights of rural land owners.


A Thirteen Year Old’s Take on Net Neutrality

July 13, 2017

My son Jack, wrote and sent this letter to his members of Congress.

Hello. I may be only 13 years old, but Net Neutrality is a major issue for all of us in Findlay, OH, and the millions of Ohioans who use the internet every day. We use the internet every day in our lives, and ending Net Neutrality would only cause prices to hike, bringing down important services (Google, Wikipedia, educational websites like Khan Academy) for many low and middle-class children. Not only that, but the amount of companies and people that rely on Net Neutrality to cost-effectively transmit information is beyond count. By raising internet prices, you are damaging the economy, not fixing it.

Please be aware that Net Neutrality is a major issue for us! Once I am old enough to vote, I am surely not voting for any representative or senator against Net Neutrality. And I am sure that in the “Internet Age”, the vast majority of my classmates that use websites to research, socialize, and connect with their peers will be none too happy with internet prices rising and censorship reigning in the new digital industry.

Not only that, but the absence Net Neutrality could easily lead to censorship. If a cable provider deems a website “against its cause”, and cable providers are famously some of the least trustworthy companies in America, they could simply raise the prices on that website. Creating bundles, like on television, would raise the bar extremely high for new startups, and as we all know internet startups are one of the most important and lucrative new industries. Abandoning them is a fool’s errand.

In short, repealing Net Neutrality will benefit no one aside from a few cable company CEOs, and would be by far the worst choice economically and societally. Not only that, but the vast majority of Americans are against this greedy act. We must do what we can to resist Chairman Pai and protect digital freedom.


The Business Argument for Legalization

April 20, 2017

Politicians are loathed to take on controversial issues even when the resulting upside could be game changing. But no one has the power to move policy makers off of a long standing bad idea like business.  Business has an outsized power over policy making (for good and bad).  Profit is a power motivator, add to that any policy that promotes job growth and what you have is a power engine for change.

In Ohio, a major roadblock in the path to legalize marijuana is the business community and the perceptive harm to business interests. But is the business community accounting for the upside of potentially legalizing marijuana and overstating the downside?

We have a real world allegory for the war on marijuana; prohibition.  If alcohol was illegal, hypothetically the cost and risk of alcohol in the workplace would be greatly reduced.  But we know how prohibition worked out, it was not enforceable and the cost to business was not mitigated.  The benefit to society and business simply did not outweigh the unintended consequences of enforcement.

It’s time for business to ask if the same is true for marijuana.

When you compare the impact of alcohol and marijuana use on society and individuals, the evidence clearly shows that alcohol use is far more damaging.

Marijuana as a gateway drug is overstated and may have more to do with the fact that recreational users buy their marijuana from the same dealers that provide other illegal drugs, like heroin.

The availability of heroin could be greatly reduced by the legalization of marijuana.  For the drug cartels, the illegal trade in marijuana is the bulk of their business and profits.  Legalization of marijuana would have a major negative impact on the viability of the illegal drug trade and disincentivize operations in Ohio.  Also, law enforcement could refocus their efforts on heroin and other highly dangerous and destructive drugs.

Is the war on marijuana a form of institutionalized racism and ageism?  For many younger people, marijuana is the drug of choice.  While the use of marijuana across racial lines is equal, minorities are far more likely to be arrested on marijuana charges.  The drug trade also creates an economic incentive for participation of the economically disadvantaged, further increasing minority arrests and incarceration.

This why decriminalization of marijuana is wrong headed half measure, it would leave the illegal drug trade wholly intact and only further the negative racial impact of the war on marijuana.

So let’s look at the direct benefits of legalization to business.  First the war on marijuana is very expensive; the cost of Ohio’s criminal justice system is spiraling upwards. If we could eliminate the money spent on marijuana enforcement, those resources could be better employed in an effort that would have positive impacts on business like, infrastructure spending, job training, education, the list goes on.

A legal marijuana market would mean increased tax revenue.  The money spent on marijuana grown in Ohio would be funneled back into the local economy, not to international drug cartels.

While you may not understand and even find it reprehensible that potential employees would prefer to use marijuana over joining your workforce, you might want to ask yourself; who is the prohibition on marijuana hurting the most?  I am not going to promise you that there is no downside to ending drug screens for recreational marijuana use on personal time.  I am not suggesting that drug use in the workplace should be tolerated.  I am asking; does a reconciliation with marijuana similar to our reconciliation with alcohol just make more economic sense?  There is a trade-off here that is worth thoughtful consideration.

The other factor to consider is your customers.  Denying economic opportunity to young people over a personal choice is undercuts your own customer base.  Diverting young people into the criminal justice system will have a lifelong negative economic impact.  The end result is a consumer base with less discretionary income to spend on the goods and services that business provides.

I am not asking business to endorse the use of marijuana anymore that I would ask business to endorse the use of alcohol.  I am asking business leaders to reexamine their bias and preconceived notion of what marijuana legalization would look like and rethink the effect on our communities and the business environment in Ohio.  The business community’s opinion on this issue could be the deciding factor on legalization in Ohio.


Can the Democratic Party Come Back?

January 12, 2017

A tectonic shift in the political landscape is taking place and the Democrats are in danger of being left out in the cold.  Just as the civil rights movement in the 60’s completely rearranged and upended what it meant to be a Democrat and Republican, a new alignment is taking place over America’s place in the global economy and in global affairs.

The two victories by Barack Obama obscured a party that was dying on the vine.  We all (now) know the numbers.  The oval office, both houses of congress, governorships, state legislators; the Democratic Party is in full retreat.  It is a party so desperately clinging to the past and past leadership that we need to ask if this party can right itself before it becomes irrelevant and obsolete.

The Democratic Party is psychologically wounded, lashing out at everyone and everything that they feel is to blame for the horrible injustice that has befallen Hillary Clinton, denying America the benefit of her obvious superior leadership, it was Trump the demigod, the GOP, sexism, racism, the media, the electoral college, the Comey letter, the Russians, the list goes on and on.  All of this thrashing about on the ground in a pile of tear-filled rage is pointless and ultimately harmful. We look like fools and sore losers, most importantly it makes us incapable of seeing our own faults that has led to this debacle.

Democratic vs. Republican has been usurped by globalization vs. populism. This realignment is occurring in the US and around the world.  Globalization has been uncovered as a cruel hoax.  Free trade, the global banking system, capital-friendly tax systems and mass immigration are doing real harm to the middle class.  The system is designed to drive down the cost of labor while exacting profits that flow to the 1%.  It is a system that is of course, unsustainable but the donor class is not interested in introspection on the society that is being created, or should we say being destroyed, and neither it seems is the leadership of the Democratic Party.

It is a bigger and much more dangerous mortgage lending crisis being played out over the course of decades.  When Bill Clinton took up the cause of NAFTA as a way to raise money for his presidential bid, the Democratic Party bought into free trade hook, line, and sinker.  Globalization became the defining economic policy of both parties right through to today.

Barack Obama missed this realignment, continued pressing forward with trade deals and wars when the voters were begging for relief.  This is the problem when you take your cues from the donor class whose interests are not in line with the voters.  The undercurrent of populism has been building for a long time but the donor class and the media manage to keep it from the light of day.  By playing to a system where it is verboten by the donor class to offer any alternative to globalization, the Democratic Party became a tool of the 1%.  Corporate Democrats may be more right on social issues but are really no different from corporate Republicans on the fundamental operating principles of our economy.

Obama/Clinton made no effort to address the concerns of the middle class.  They talked about the income inequality but refused to define a cause because that would have led to the only real conclusion; globalization is exactly the wrong policy to build broad-based middle-class prosperity in a developed nation.

The rise of Bernie and Trump was a direct result of the fact that they were operating outside the normal system of campaign finance and were free to tap the populist mood that lay dormant and unaddressed, the sleeping Giant of American policies.  The Democratic establishment just did a better job killing off the candidate of real change.  Whether Bernie could have won is missing the point, Bernie was the only Democratic alternative that broke through the donor class blockade. The Democrats are just as responsible, if not more responsible, for the Trump Presidency because we turned our back on the working families of America.

Democrats if you want to know why we lost it’s time to stop crying, passing the blame and look in the mirror.  Hillary lost because she was a product of the corporate establishment elitist globalist party system and Trump was not!!

The Democratic Party faces an existential crisis, can we break free from the clutches of the globalist donor class and if so where do we get the money to rebuild?  If the Democratic Party cannot come to terms with its failed and rejected policies and make real change in its’ policies and leadership, (and so far it seems wholly unwilling to do either), it is in danger of being a non-entity in American politics.  Without real substantive charge in the Democratic Party, the battle for power in American politics will be waged between the globalists and populists of the Republican Party.

 


Low Growth the Normal Normal

November 3, 2016

Why Trump’s and Clinton’s Economic Plans Will Fail

Economic growth showed some signs of life last quarter.  But since the great depression of 2008, GDP growth has been below what is considered normal despite historical low-interest rates and continued deficit spending.

Some have suggested that low GDP growth is the new normal.  But two recent well-received books by economics professors ask if low growth is not the new normal but the normal normal.

In Thomas Piketty book Capital in the Twenty-first Century, the French professor takes a long view of economic history, mining data from before the France Revolution.  Mr. Piketty concluded that the GDP over the long term rises at what we would consider the low rate of 1 percent per capita.

Mr. Piketty’s thesis is that the higher growth that we see is a result of GDP growth pumped by population growth that does not increase per capita standard of living, the effects of booms and bust in markets and the catch-up effect.  This catch-up effect occurs after a major disruption in the economy; like World War I and II.  Note the high rates of growth in the US, Germany, and France in the post-war years.

Japan’s high rate of growth in the 70’s was a function of taking a long time to recover from the war.  In China, we have recently seen astonishing rates of growth as it recovers from the Cultural Revolution and failed economic policies of the Maoists.  But once these disruptions are overcome and over the longer reach of time, the GDP settles in and holds steady at 1 percent of per capita.

Professor Robert J. Gordon’s book; The Rise and Fall of American Growth puts forward a different theory on why growth is slowing down. In its simplest form, he states that you literally cannot reinvent the light bulb.  Gordon believes that the major driver of growth and increases in our quality of life (not always captured in the economic date) are the innovations that have occurred in the time period beginning just before the civil war and accelerating though World War II.  Mr. Gordon suggests that this unprecedented run of human advancement slows down dramatically in the 70’s and will not be repeated.

While Professor Piketty and Professor Gordon have differing views on why growth is slowing down they are not mutually exclusive.  They could, in fact, both be right. If they are right and low growth is the normal normal, this would have broad implications for policy makers in government and business.

First and foremost, Jack Kemp’s assertion that you can outgrow the national debt is no longer operable.  Outrunning debt in government and business is a time-honored strategy.  But in a long-term low-growth scenario continued deficit spending  will increase the interest payment on the national debt consume more and more of revenue.

Second; effects to prime growth put forward by both Presidential candidates could make matters worse.  Both candidates believe that increasing growth is the magic elixir to an ailing economy. Traditional policies of cutting taxes put forth by Trump and increases in government programs/spending by Clinton may not increase growth enough to generate the taxes needed to offset the cost, only increasing the national debt.

Any stimulus package designed to jump-start the U. S. economy needs to have an impact that lasts long after the initial investment is spent.  Otherwise, you will have only increased the national debt making it just that more difficult to cope with a long-term low growth economy.

Coming Soon: Part 2, What is to be done in a low growth environment.


Loss Carried Forward and Phony Outrage of the Left Explained in Five Minutes

October 2, 2016

Loss Carried Forward is a long standing provision in the US (and other countries) tax code and is really quite easy to understand.

Let’s say you invest a hundred thousand dollars in a new business that you start on January 1.  In the first 90 days or first quarter of business you lose 10 thousand dollars.  New businesses often lose money at start up.  So, in the second quarter you manage to break even.  You have no loss but also no profit.  For the 3rd and 4th you make 5 thousand dollars in each quarter.  This would mean you finish the year with zero net profit or loss and your taxable income for your first year in business would be zero; simple right?

To understand Loss Carried Forward simply change the time frame in the above story from quarters to years.  In the first year you lose 10 grand, in the second year you break even and in the third and fourth years you make 5 thousand dollars each.   For the total four years you have been in business you have managed to break even.  Yet, without the Loss Carried Forward provision in the tax code you would have a taxable income in years 3 and year 4 of five thousand dollars for each year.

The Loss Carried Forward provision of the tax code insures that a business pays income tax on the total profits of a business regardless of what year those profits were earned.

This provision of the tax code is available to businesses both large and small, including farms.

If the New York Times or the Clinton campaign would back up their outrage with a policy statement that the Loss Carried Forward provision in the tax code should be removed that would at least be intellectually and morally honest.  But neither the New York Times nor the Clinton campaign are going to do that because they know that the outcry from the business community would be loud and clear.

I am not defending Mr. Trump or his application of tax law to his businesses.  But to suggest that the use of a Loss Carried Forward in and of itself is exploiting the tax code or is somehow immoral is a blatant misrepresentation of the facts.  The New York Times failed in their journalistic responsibility to put some context to this story, like listing all the other companies that have used this provision of the tax code.  And the Clinton campaign is exploiting the public’s basic misunderstanding of tax policy and fairness in the tax code for a cheap political gain.  It is this type of fundamental misunderstanding and misrepresentation of real world policy that makes me ashamed to say I am a Democrat.


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