Wednesday, February 24, 2010

Kill Bill and Save Jobs

The "jobs bill" that was recently passed in the Sennate, with the help of a few Rebpublicans, will probably not do much of anything. But it does contain some good elements. Among other things, it aims to stimulate employment by removing payroll taxes. Payroll taxes (aka Social Security, Medicare-Medicaid taxes) are the worst taxes we have. They hurt low income earners most. Removing them could be a great boost to jobs. It reduces the cost of employment.

Of course, since the removal is only temporary, it is doubtful that it will have any permanent effect. Its impending reversal will inhibit even a short-run response. But its a great idea. Problem - how would we pay social security if we abolished the tax. Only one way. We'd have to reduce government expenditure elsewhere sufficiently to do so. A simple 10% cut accross the board would do it. Don't hold your breath.

You have to admire Obama's perseverance and tennacity. He refuses to allow his health bill to die. One may wonder: is there is any way to finally Kill Bill? The latest round, while tossing a lot of back-dealing baggage, maintains the universal insurance mandate and introduces a new doozy. Price controls on insurance premiums! Insurance premium prices will now be suject to government fiat - like a price board during war-time.

Economics 101 - lesson 2 or 3 - price controls cause shortages or surpluses and a lot of pain and often corruption and other things. They are the crudest, most primative types of interventionist economic policy. I know that some law-students do take elementary economics courses. Evidently this one didn't. So why should we suffer?

Saturday, February 20, 2010

Illegal Immigration - Ivry Man (IM) asks Dr. Know (DK) for Guidance

         At the appointed time Ivry finds Dr. Know seated on his usual park bench. Ivry extends his hand.

IM.    Greetings Dr. Know. So nice of you to take time out of your busy ego-boosting schedule to talk to me.
DK.   [Warm smile] Oh it’s my absolute pleasure. How can I help you?
IM.    Well, I see the immigration question is on the agenda again.
DK.   Really, I hadn’t noticed.
IM.    Angry eyes] So I am wondering what the debate is about. Surely its straight-forward. These people break the law to come here and then they take away American jobs. We just need to plug the holes – step up enforcement, stop the buggers from coming in. Right?
DK.    [Looking thoughtful] Maybe we should look at this a little more carefully. Why do you     suppose they break the law to come here?
IM.     To get work obviously, our work.
DK.    Yes, but why not simply stay home, in Mexico say, and work there?
IM.    The jobs in the U.S. pay more.
DK.    Indeed, probably a lot more. Else it would not be worthwhile to go to the trouble – the     time and effort – and undertake the risk of an illegal immigration, right?
IM.    I suppose so.
DK.  Well that is what the evidence (and the logic) suggests. As menial and low-paying as these jobs are, they pay a multiple of what the illegal migrants could earn at home. They are very low wages in the U.S. context but much higher than the alternative for them. It’s all relative.

This being the case, there is evidently a very strong economic pull fueling the flow of illegal immigration. It’s like two connected water tanks, in which the level of water in one is higher than the other. There is an inexorable tendency for the water in the tank with the higher water level to flow into the other tank until the water levels are equal. The only way to stop this is to sever the link between the tanks. With water tanks this may be easy (inexpensive). With labor flows it is likely to be prohibitively expensive – to plug the holes, as you say. Every dollar spent chasing illegal immigrants is a dollar that could be spent somewhere else. And even if we doubled, or tripled, the money, people and equipment devoted to it, we could probably not stop it completely. Our borders are too long and too porous.
IM.    So what are we to do? There are an estimated 13 million illegals in the country and although the flow has slowed now during the recession, it is bound to pick up when our economy does. We have to do something.
DK.   Maybe. Consider, however, the costs and benefits of immigration in general. Immigration is a kind of trade and trade is invariably mutually beneficial. The immigrant adds value to the product she produces and receives a part of that value in a wage that is attractive to her. The employer receives the other part of the added-value. Both parties gain. What is the problem?
IM.    [Looking peeved] Of for goodness sake, have you gone soft in the head.? The problem is that the immigrant is taking away a job that a good American citizen could be doing for a higher wage.
DK.  [Looking earnest] Are you sure about that? The evidence, both scientific and anecdotal, suggests otherwise. It suggests that illegals overwhelmingly do jobs that Americans will not – do not have to – do.
         But let’s assume you are correct, just for a moment. Am I to understand that the job lost by a good-citizen-American worker is self-evidently more important than the job gained by the immigrant? Change the terms in the previous sentence from “American” to “white” and “the immigrant” to “a black worker” and what do we have? Good old-fashioned racism. Hullo! I thought that immigrants were also human beings. Their alternative is often extreme deprivation or starvation. But its self-evident that we ought to send them back in pursuit of saving low-paying jobs for Americans who frequently have other alternatives?
         And let’s not forget the interests of the employers. Is it self-evident that their decreased cost of labor is not worth the alleged loss to the American workers? And consumers also gain because of reduced product prices.
IM.    [Indignant] Now wait a minute! Are you suggesting that we should be the economic savior of poor workers of the world. Why is it our problem? If they are going to starve it’s the fault of their government and it's bad economic policies.
DK.  How convenient. So whatever happens to them our conscience is clear?
         It’s not a question of being the savior of the world. It’s a question of trying to carefully weigh all the aspects of the issue, all of the costs and benefits broadly understood. Do we really want to put such a high weight on protecting domestic jobs that most Americans probably would not want anyway when the human cost to the immigrants is so great? Immigrant workers want to work. Employers want to employ them. The harm to third parties is dubious to say the least. The value-added exceeds the value-lost. This country was, and continues to be, built by immigrants – legal and illegal.
         It seems to me that increased enforcement is a solution in search of a problem.
IM.    [Incredulous] So we don’t have a problem with immigration?
DK.   Not really, no. We have an opportunity.
IM.    How so?
DK.  Immigration is selective. For the prospective immigrant immigration is a form of investment. It takes initiative, courage, persistence and motivation to succeed at it. Immigrants often have these characteristics. They are mostly young, family-oriented, hard-working people. They are prepared to do what it takes to provide their children with opportunities they did not have. They do the jobs that established Americans will not do. They save, they have babies, and they contribute to our social security and Medicare-Medicaid.
IM.    [Red in the face] Oh no, excuse me. That’s another problem you are neglecting. Isn’t it true that these illegals come here and use our social services – our public schools, our hospitals – at the taxpayer’s expense and, because they are illegal, they don’t contribute anything? They become expensive free riders. Also, they add to the crime rate.
DK.    [Sad, concerned] Another set of myths, harmful myths I am afraid.
         I really doubt that the evidence can support this conclusion. It is likely that immigrants are law abiding in general – being immigrants they are more careful to obey the law for fear of being deported.
        On the question of social services, many illegal immigrants have fake IDs. So they pay social security and income tax, etc. but will never collect a dime of social security. The potential problem of genuine free riders is worse in states, like California, who have extensive welfare systems, than in states like Texas, who do not. It seems to me the problem there is the bankrupt welfare system not the illegal immigration. It is more logical to reform welfare than to attempt to close the immigration hole.
         Californians know they have to reform their state’s finances. If you offer something for nothing you invariably attract free riders, legal and illegal. You produce dependency. That is the problem and that is what needs to be fixed.
         In any case, if we could resolve the illegal status of these workers we could fix this problem.
IM.    [Eyes light up] Aha! So how on earth do we do that? We are dealing here with criminals by definition – people who broke the law. Are you suggesting that we simply forgive them with some sort of amnesty? Is this not unfair to those millions of legal immigrants who got in line and followed the law, rather than trying to evade the line. Now the illegals will reap the reward of their criminality.
DK.   [Somewhat exasperated] So dramatic. Why do you want to call them criminals? If they are guilty, they are guilty of a victimless crime. I tried to explain this to you.
         Not all laws are good laws. There are many examples of laws in history that are bad laws (by my morality and I suggest by yours). I am not advocating breaking the law – though some laws are clearly worth breaking – like some of the laws that existed in Nazi Germany or Apartheid South Africa. But, we could remove this bad law and forgive its violators. Maybe we could specify that in order to receive amnesty, proof of gainful employment is required or at least one-year’s residence. We needn’t give them an automatic passage to citizenship, we could provide (what is now being provided to Haitians) immediate permanent residence – like guest workers. Though I personally see no harm in allowing them on to the citizen track. What’s the big deal? The right to vote?
         And yes, those who went the legal route may feel cheated. They are cheated by a bad law that some people disobeyed. Their outrage is worth the benefits of the reform.
IM.    [Horror and disgust] Ugh. This just gets worse. Don’t you realize that if we do what you suggest there will be a lot of new Hispanic, and other foreign, voters? It will upset the balance of power and over time threaten domination of the American culture by foreigners. Even the status of English as an official language is threatened.
DK.  [Disguised disgust] Hmm. Forgive me but do I see racism in another form here? What makes you think these new Americans will be any less committed to the American culture (and our Constitution) than the old Americans. This is and has always been the strength and the uniqueness of America. To be an American is, more than anything, to embrace the ideal of universal individual freedom. These people understand that better than many Americans by birth. They have often lived in oppressive police states. They understand the source of the opportunities they are pursuing. Their children will speak English and they will be Americans in every sense. Paranoid ethnocentrism is an unworthy and baseless norm on which to base any American policy. We should embrace the diversity of cultures that embrace us – as we always have.
IM.    You are breaking my heart Dr. Know. What about the terrorists? And the Moslem extremists? Are we not sending an open invitation?
DK.  I suppose a reformed, streamlined, more liberal immigration policy might make it easier for potential terrorists to come here. I am not sure about this though. With less resources devoted to the general apprehension of illegal immigrants more resources could be targeted to terrorists in particular.
IM.   So what exactly are you advocating.
DK.  I am advocating amnesty for illegals – immediately – and a reform of immigration law that pretty much moves us to more open borders. I think the EU has it right in this respect. I also think we should look carefully at the highly skilled end of the spectrum. Most of our software engineers, many of the academics, doctors, paramedics, nurses, etc. are immigrants. We should open this door wider. We need their human capital. If politically necessary we could ask them to pay for their Green Cards. But, this seems to me a no-brainer.
         However, let me be clear about one thing. In suggesting that we welcome diverse cultures and ethnicities to America to participate in the “American dream” I am absolutely not suggesting that we tolerate cultures that are by their nature intolerant of or inimical to American values. On the contrary that is another aspect of our legal environment that needs to be reformed. We need to be less tolerant of intolerance. Those groups that advocate an overthrow of Western civil society and the imposition of one true religion, in America and in the world, ought to be able to use the first amendment right of free speech. But they ought not to receive any government, taxpayer funds, and they ought not to receive any protection against the free speech of others to expose their noxious message. Right now we are so sensitively politically correct that we provide these people all manner of funds and protections that ought to be withdrawn immediately. We have to fight darkness with light, searing light. And when they are exposed and we see them for what they are, we can challenge them, we can shun them, we can monitor them and defend ourselves against them.
        But this has very little to do with the immigration question in general.
IM.   [Frustrated resignation] OK, OK, but listen, what about drugs? Don’t narcotic traffickers produce some of the illegal immigrants. How would you handle the drug problem.
DK.  I am glad you asked. I would decriminalize drugs of course. But that is a matter for another discussion another day. Have to go.
        He rises and ambles off in the direction of … .

Tuesday, February 16, 2010

Only some things considered.

NPR's All Things Considered read a letter today about a story they ran in which an economist suggested that creating jobs in the government costs about $200,000. The letter writer disputed the number quoting a rival economic study saying it was "only" $92,000. The NPR anchor opined, "it all depends which economist you listen to."

Could they really have missed the point so badly? Lets assume the lower number is right. Do you think the average employee in these "created jobs" is going to be paid $92,000? Is that what the jobs are worth? Or just what they cost? If they are worth less than what they cost, who is paying the difference? Taxpayers right? How many jobs does this extra tax burden destroy?

And of course, since the government seldom really produces anything, whose jobs are paying for these new ones? Would we not have been better off if we required these employees to get a real job?

I guess they don't pay radio reporters to think.