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July 12, 2010

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The immigration debate, summarized:

http://www.youtube.com/watch?v=KLni3wbndls

"They shouldn't be a burden. You don't have a right to be a non-resident of this state and take advantage of the taxpayers of this state."

-- Russell Pearce.

Illegal immigrants ARE taxpayers. Their payroll taxes are deducted automatically by employers. Most of them are renters and their landlords, who own the apartment buildings they (and others) live in, pay property taxes; and they pass those costs on to all tenants as part of their rent. So, illegal immigrants also pay property taxes. They also pay sales taxes (including the recent 1 cent increase, two-thirds of which is going to support public schools). They also pay excise taxes (e.g., on liquor and tobacco) since these are included in the price.

The illegals don't have ANY choice whether to pay or not to pay those taxes, just as citizens don't.

They don't generally make enough to owe federal income taxes, but in that they are no different from about half the citizens in the United States.

In other words, they pay about the same taxes that they would if they were legal citizens in the same economic class.

And not only do they pay taxes, they don't qualify for most "welfare" programs and tend to avoid applying since it attracts unwanted attention from the government. So, they are paying taxes but not collecting services, and thus THEY are actually subsidizing US.

Only a minority of illegal immigrants outside the farm sector are paid in cash. Most illegal immigrants are not paid off the books and in cash, because most jobs occupied by illegal immigrants involve regular businesses, not day labor.

All of the regular businesses (e.g., fast-food joints, hotels, etc.) have a regular payroll, and payroll taxes are automatically withheld by employers because this is required by federal tax law.

To do otherwise (paying a large fraction of the employees off the books) would constitute prima facie evidence of criminal behavior by employers, and would be obvious to other employees and management, some of whom, if they ever had an axe to grind (or didn't like illegal immigrants) would report it to the IRS.

These businesses pay at least minimum wage, too (as they must). Where they get sneaky is in extracting large amounts of unpaid overtime. So, their effective wage may be considerably lower than their nominal wage, perhaps even less than minimum wage.

To some extent this is also a problem with low-wage citizen workers, but theoretically citizens have a legal avenue for complaints and redress of lost wages (though many are intimidated out of complaining by the prospect of losing their job, getting a bad reference, and facing a protracted court battle against a well-financed and defended company). Illegals haven't even got that.

Judith Gans, Manager of the Immigration Policy Program at the Udall Center for Public Policy Studies at University of Arizona, authored a 2007 study, "The Economic Impacts of Immigrants in Arizona", in which she found that immigrants pay more in Arizona taxes than Arizona pays out in public services to them: $224 million more, in fact. (See especially tables 19 and 20, pp.44-45.) While this lumps together legal and illegal immigrants, most of Arizona's immigrants are undocumented. (It may still be somewhat misleading, since legal immigrants tend to earn higher wages. Caveat emptor, and analyze the detailed data.)

She also found that immigrants are 14 percent of Arizona's workforce; and more to the point, she found that if all undocumented workers were removed from Arizona's workforce, economic output would drop annually by at least $29 billion (8.2 percent of the state's economy for the period dealt with in the study).

http://portal.sre.gob.mx/tucson/pdf/immigrants_in_arizona.judith_gans.july2007.pdf

Every year there are 24 million legal visits from Mexico to Arizona and $2.69 billion spent by Mexican tourists in Arizona, according to a report for the Arizona Office of Tourism prepared by the Eller College of Management at the University of Arizona.

http://ebr.eller.arizona.edu/research/mexican_visitors_to_arizona_2007_08.pdf

At least, there WERE before SB 1070. Who knows how that will work out, if the law stands, given a few outrageous abuses by the MCSO or other parties.

Absent a fraud-proof ID card which all U.S. job applicants would be required to carry and use when applying for work, Mexican immigrants are going to get in, either legally (e.g., as tourists, who then overstay their visas) or illegally, and in numbers determined largely by economic factors.

A fraud proof ID (with biometric data such as fingerprints digitally encoded) is a great idea on paper but the details must be ironed out before it can work as advertised in actual practice. One fundamental issue is the chicken-and-egg problem: in order to work you need the ID, but in applying to obtain the ID itself you have to prove your residency status by some other means, since you don't have the card yet: means such as Social Security numbers, birth certificates, and green cards (since legal foreign residents cannot be excluded): but as we all know, those are far from fraud proof and can be forged or stolen. So, how secure is the "fraud proof" ID? What does it matter that "fingerprints don't lie" when the card containing them has been issued to someone who doesn't qualify for it?

So, for the time being at least, the actual choice is not whether to accomodate them, but how.

Are we better off if those workers are legal, instead of fearful, easily exploited shadows? Legal workers can join unions, file complaints with the NLRB and OSHA, and in general are free to indulge their ambition to share the standard of living of the majority around them.

Are we better off if those immigrants can be made to attend English learning classes, educated in the country's institutions and traditions, and placed in a probationary program for an initial period where they can be supervised, required to meet certain basic goals, and given a chance to demonstrate good behavior before granting them full citizenship?

Are we better if there is no longer a need for identity theft by millions of immigrants and hundreds of thousands more each year? Are we better with more young, working age individuals at a time when citizens reaching retirement age will soon be doing so at a rate twice that of working age adults?

If immigrants are going to get in regardless, better that they are legal and made to obtain work visas that allow screening, supervision, tracking, and data collection so that major economic and social issues involving immigrants can be resolved academically and reliably. Note that most illegal immigrants would much rather be legal workers, so increasing the number of available work visas is bound to decrease illegal immigration, as immigrants prefer to take advantage of legal channels if available. This will also reduce turmoil at the border since immigrants will cross at specified ports of entry rather than across deserts and private land (e.g., ranches). It will also eliminate the violent criminals (professional human smugglers) who commit the lion's share of criminal activities associated with illegal immigration.

P.S. For those who argue that a recession, high unemployment, and a jobless recovery have changed circumstances vis a vis the immigration question, there's this:

* * *

During the Great Depression between 1929 and about 1939, there was enormous public outcry that Mexican immigrants were taking jobs unemployed Americans needed.

"That caused a huge backlash with people who felt that Mexicans were overrunning their neighborhoods. . . . They were scapegoated as occupying jobs," Texas Tech University history professor Miguel Levario said.

The response was a joint local and federal effort called the Mexican Repatriation, which lasted throughout the 1930s. It included raids, roundups and the denial of jobs to Mexicans. As with Arizona's SB 1070, the goal was two-pronged: to enforce the laws and use them as a deterrent to persuade immigrants to leave on their own.

Either forcibly or on their own, hundreds of thousands of immigrants from Michigan to California returned to Mexico. Some who were forced out were U.S. citizens, though the exact number is unknown. "It didn't do anything to alleviate unemployment," Levario said.

He said the effort ended when farmers, employers and housewives began complaining that they were losing workers.

http://www.azcentral.com/arizonarepublic/news/articles/2010/07/03/20100703immigration-cycle-united-states.html

I'm sure that the immigration hate/fear factor has been much discussed here on Mr. Talton's blog. In addition to understanding the economic impact of SB 1070, I have to wonder if promoting understanding of Hispanic History and culture would help douse some of the flames.

Yes, I have enjoyed the Phoenix 101 series of posts.

National Immigration law from a fifth-generation Arizona immigrant's perspective:

Video: http://ctcfilms.typepad.com/arizona_centennial_minute/

Text:
"In 1907, American National Immigration law was passed revoking women's ability to remain citizens after they were married. Arizona was five years from becoming a state and many third, even fourth generation women born in Arizona Territory were required to reapply for citizenship."

For better or worse, the media play a huge role in shaping public perception. Since AZ's main 1070 boosters don't televise well, our state doesn't look too polished, does it? We have an unelected and under-educated Gov. with a Fright Night visage. We have Russell Pearce, who comes across as a mush mouthed scowl-meister. It would be an understatement to say that they don't represent Arizona well.

"...help or hurt?"

Both, certainly. When a community has no vision, no imagination, and no aspirations other than to maintain a dead-end status quo, the only solace that remains is to lick its own festering, self-inflicted wounds.

That's as gently as I can put it.

I woke up this morning to news that heat waves will be so commonplace 30 years hence that much of this country could lose its agricultural capacity. http://www.huffingtonpost.com/2010/07/13/heat-waves-could-be-commo_n_644189.html

The accompanying graph shows Mexico faring even worse. Along with all the other man-made disaster afflcting it, this one will cause unprecedented migratory pressure. Flee or die.

Rapid change, be it from overpopulation, technology, or global warming, is resisted fiercely by most people. SB 1070 scapegoats Mexicans but the fear is real. We know the center is no longer "vital". The consensus is gone.

Arizona will suffer regardless. We can complain about the know-nothingism and toxic xenophobia but the coming decades will exterminate our better angels. I'll most likely stick it out here since I'm old and useless. The show should be amazing.

"the fear is real"

The fear of what?: People of a different nation, skin color or culture?

The fear of small-minded bullies that promote a culture of mindless fears should be our real phobia.

Fear not.

You know, folks, when they finally put the final nail in the coffin of "The Empire of the United States of America", many may think to themselves "Ya know, we probably should have tried that "think outside of the box" thingy a little bit more. It might have saved us" I really dislike people who can't think outside the box, all 306,000,000 of them.

"Information broker." Christ.

FYI, the doo-dads are called "nontraditional storytelling."

Mr. Talton's criticisms can't be dismissed as sour grapes. This Arizona Republic article was fundamentally flawed and misleading.

The biggest flaw was the failure to mention loss of tax revenue when evaluating whether an exodus of illegal immigrants would save or cost the state money. The section dealing with education (public schools K-12) was typical.

"Public education, the state government's largest budget expense, may be where the law has its most direct financial impact," reads the first paragraph of that section.

But how does the article measure the difference? Simply by multiplying Arizona's per pupil cost by the number of illegal immigrants who leave with their parents. NOT ONE WORD is written about the fact that those parents pay sales and property taxes, and other state and local taxes and fees, some of which directly fund public schooling.

Surely no cost/benefit analysis is complete which mentions the cost of government services without mentioning government revenue income! Yet, that's exactly the problem with this article, not only in that critical section but throughout.

The erroneous presumption of the journalist, sanctioned by the newspaper's editors and passed on to mislead an unsuspecting readership, is that illegal immigrants are a drain on taxpayers but are not themselves taxpayers. But as Mr. Talton pointed out, "those aliens pay a disproportionate share of their incomes to Arizona's regressive tax system".

Another serious problem was the failure to weight sources for readers. It's one thing to present various perspectives, and quite another to treat them with equal gravity. All too often, the Arizona Republic seems to subscribe to a pseudo-sophisticated model of journalism wherein stories are only regarded as "professional" when all sides are given equal weight and the facts are portrayed as unknowable.

For example, the main body of the article, discussing the "economic impact" of illegal immigrants, cites a congressional meta-study, an "economic analysis company" called The Perryman Group, and the Federation for American Immigration Reform (FAIR) with equal seriousness. Not surprisingly, alone among these, FAIR claims that illegal immigrants are a huge net cost both federally and locally.

What the Arizona Republic fails to tell its readers is that FAIR is a partisan and xenophobic hate group. Here's part of what the Southern Poverty Law Center has to say in its "Hatewatch" entry about this radical right organization:

"Day in and day out, FAIR is taken seriously as a mainstream commentator on the immigration debate. It shouldn’t be. The founder, chief ideologue and long-time funder of FAIR is a racist. Key staff members have ties to white supremacist groups, some are members, and some have spoken at hate group functions...It spreads racist conspiracy theories. Its political ads have caused numerous politicians, Democratic and Republican, to denounce it."

http://www.splcenter.org/blog/2007/12/11/fair-crossing-the-rubicon-of-hate/

Another recent example of the same ridiculous equivocation, on the same topic, was a July 6th article by Arizona Republic journalist J.J. Hensley, "Migrants' Activity In Drug Trade Uncertain", with a subheading "Governor has claimed majority are smugglers". Hensley wrote:

"There is little in the way of reliable data that indicate what crimes immigrants may commit after crossing the border illegally. That uncertainty makes it easy for politicians and advocates to make bold statements that are nearly impossible to confirm or refute.

"Brewer's statement that "we all know that the majority of the people that are coming to Arizona and trespassing are now (becoming) drug mules" fits neatly into a category of claims that are hard to verify."

http://www.azcentral.com/news/articles/2010/07/06/20100706illegal-immigration-drug-trade.html

Not so: Brewer's claim is easy to refute. Those caught crossing the border by the U.S. Border Patrol are detained. Detainees are searched for weapons and drugs. Those caught smuggling drugs are referred to federal prosecutors. Remember, we aren't talking about individuals caught with, say, personal amounts of marijuana for personal use: we're talking about individuals smuggling wholesale amounts for the cartels. Nobody who does that gets treated with kid gloves when caught.

"Tucson Sector spokesmen could not say Friday how many arrests agents make for drug crimes. However, there have been 170,873 apprehensions of illegal immigrants in the Tucson Sector so far this fiscal year, which began Oct. 1, and federal prosecutors in Arizona have filed 1,107 drug prosecutions in the same period."

http://azstarnet.com/news/local/border/article_debfe208-b825-591b-85d2-d85d3db52094.html

That's only six-tenths of one percent, and not all of those drug prosecutions involve illegal aliens. Nowhere in the article does Hensley point this out.

Not content with prevarication, Hensley goes on to muddy the waters more actively, noting that among state prison inmates, the percentage of illegal alien inmates serving time for drug offenses, is higher than the percentage of legal resident inmates serving time for drug offenses.

Of course, that's highly misleading. It's true that most drug cartel members are foreign nationals from places like Mexico, Guatemala, and Columbia: so we would expect the prison inmate population of illegals to be skewed in this fashion. The question is not how many cartel members are illegal immigrants, but how many illegal immigrants are smuggling drugs for the cartels. That question has already been answered definitively above. Hensley's inmate statistics prove only that many of the professional smugglers bringing drugs into the state are here illegally, not that most illegal immigrants smuggle for the cartels.

Incidentally, I just wanted to add that Mr. Talton's list of nine progressive measures to address the problem is outstandingly good. The strength of his list transcends that of his individual suggestions, because taken as a whole it addresses certain weaknesses to which isolated ideas (though meritorious) would be vulnerable.

I especially like the minimum national income idea for full-time workers. Conventional economic stimulus, of the Obama variety, is, I fear, both temporary and inadequate to the task at hand.

Here's a comment I posted to The Economist some time ago detailing my ideas and reasoning:

Consumer spending accounts for about 70 percent of U.S. GDP. Much of the remaining portion (e.g., business capital investment) depends indirectly on levels of consumer spending also: businesses expand, increase hires, and are created in response to market opportunities (consumer demand).

From this we can infer an obvious premise: domestic economic growth requires increased consumer spending; specifically, consumer discretionary spending (the portion of household income after rent, heating and cooling, and other basics are taken care of).

Note that it is not disposable income per se that is important, since that may be invested as well as spent on consumption of goods and services, but rather, consumer discretionary spending. This leads to a refinement of the premise: the key to domestic economic growth is an increase in disposable income used for consumption.

In order to gauge the scope of the problem, here is a list of a dozen or so major factors tending to decrease consumer discretionary spending:

(1) An aging (retiring) baby-boom generation leaving their peak-spending years behind.

(2) Rising healthcare costs.

(3) Rising energy costs over time (?)

(4) Globalization of the workforce, leading to...

(5) ...Stagnant or declining real incomes for most U.S. households; consequently...

(6) ...the largest inequity in income distribution since before the Great Depression.

(7) High-levels of household debt (something like 125 percent of GDP even after recent foreclosures and bankruptcies), thus requiring the diversion of a portion of household income to reducing debt.

(8) Lower spending to rebuild nest-eggs lost/damaged in the recent market crash.

(9) Housing bubble crash means mortgage borrowing no longer available to finance credit card debt, and new construction no longer the engine for growth it once was.

(10) The commercial real-estate market slump/crash.

(11) Higher-unemployment.

(12) Increased taxes to pay for Social Security costs as the baby-boomers retire; or else increased personal costs to working families to support their elders' basic needs if Social Security benefits are cut.

(13) Tight credit.

Continuing the previous line of reasoning, if consumer discretionary spending must be increased, then disposable income must be increased in households tending to use that income for consumption rather than saving/investment/speculation. The bottom third of households by income (comprising what might be called the working class) fits the bill better than any other, since many of these households live check to check and have numerous unfulfilled consumer cravings.

The question then becomes one of funding: where do the funds to increase the disposable income for the bottom third of U.S. households come from?

Taking funds from businesses may affect business investment and viability. On the other hand, households in the top 10 percent (by household income) have generally met their consumer needs with a fraction of their income, and use the remainder to increase their paper wealth through speculation. (A significant portion of this paper wealth has just disappeared during the recent market crash.)

The solution proposed is to institute a progressive hypertax on this top 10 percent, getting larger the higher in the income pyramid one goes, and directly redistributing this to households in the bottom third by income (an employment requirement could be part of this). (I propose a comprehensive definition of "income" with respect to this tax, i.e., that it be applied to total income from all sources.)

The idea is to take funds that are currrently used for speculation and to non-productively enrich paper wealth, and give them to households which will instead spend the funds on goods and services. The increased demand will produce a commensurate response from businesses, as they expand and hire, and new businesses spring up to get a portion of the enlarged demand pie. This will also ease lending since businesses will be able to point to an increased revenue flow as justification for expansion of their operations and the creation of new companies. The tax will be regular rather than one-time and thus produce a constant revenue stream. Redistribution can be metered to avoid dumping large amounts of cash on the consumer market faster than the market can productively absorb, thus checking inflationary pressures.

One possible objection is that the money used by the wealthy for "speculation" does in fact fund productive investment by those borrowing the funds. The answer to this objection is that the redistributed money does not disappear from the economy, but goes into the deposit accounts of the businesses whose goods and services are being purchased. It therefore remains in the banking system and remains available for productive investment and loans.

Unlike conventional government stimulus spending, direct redistribution will maintain market links and feedback between consumers (who retain choice in how their new funds are spent) and the businesses trying to appeal to them.

Of course, this is political anathema, since the overclass which is to be the source of funds is the same one financing most political campaigns. But it should be noted that marginal personal income tax rates for the top bracket are far below their historical norms: from the end of WW II to 1963 (ranging the Truman, Eisenhower, and Kennedy administrations) the top marginal tax rate never dropped below 82 percent and ranged as high as 92 percent. From 1964 to 1981 it never dropped below 70 percent.

The idea here isn't to punish luxury consumption, but simply to tax an unused portion of upper-earner income which, at present, underwrites speculation in order to increase personal paper wealth, and instead use the funds to underwrite personal consumption at the bottom end of the income scale (where the funds are most likely to be used for this).

Speaking of the socialist Obama never was, and the liberal we all wish he would be (but isn't), Mr. Talton recently posted a Front Page link to the text of the GOP Platform of 1956, showing just how far to the right the "Center" (and the center of debate) has shifted. (This is still available in the Best of the Front Page section.)

I sent the following short excerpt and bantering remarks to one of the local conservative columnists (I won't say which one because it was private correspondence):

My, how times change!

"...We are proud of and shall continue our far-reaching and sound advances in matters of basic human needs; expansion of social security-broadened coverage in unemployment insurance; improved housing; and better health protection for all our people. We are determined that our government remain warmly responsive to the urgent social and economic problems of our people..."

All this (and much more) seems so different, somehow, from the "party of NO" which the GOP has become.

He wrote back:

"And we all should wish they had been more serious about the "no" thing. Not counting our new health-care entitlement, U.S. unfunded entitlement mandates will cost at least $40 trillion more than what's allocated over then next several decades. Since 1956, both parties have done their bit to increase the costs of Washington's business while doing precious little to attend seriously to any of those "basic
human needs." Pity."

My reply:

The two federal mandates expected to account for the vast bulk of rising expenditures are Social Security and Medicare: the former because our population is aging, and the worker to retiree ratio is decreasing; the second because private healthcare costs have been skyrocketing and are expected to continue to do so absent real healthcare reform (i.e., something that includes cost controls). I don't think either of those factors can be blamed on either party, though the failure to address these factors with real reforms certainly can be blamed on both.

That "$40 trillion" figure seems to include all kinds of things that aren't properly classified as "debt to the public" (i.e., outstanding Treasury securities previously sold to individuals and institutions). Once you start including such things as Social Security and Medicare "trust fund" balances/interest/shortages and so forth you've become lost in a wilderness of mirrors, because these are only internal government accounts in which the government is both the loaner and the loanee, as well as the sole legal owner/controller of the "trust". It's accounting magic but it isn't debt in any fiscal or legal sense, because it isn't something the government is obligated to pay to entities outside itself.

The only thing that really counts is the size of debt to the public as a percentage of GDP and whether that debt is increasing faster than GDP, and if so, by how much and for how long.

The reason this is what counts is that nobody expects federal debt to the public to ever be repaid in full, any more than you would expect a business operating a revolving debt account to pay off its suppliers in full and close the account. Whether a business or the U.S. government, what counts is the cost of maintaining the account, i.e., interest payments on that debt. As long as the outstanding debt isn't growing faster than the business is for too long a time, or by too much, and interest rates on borrowing are locked in (as they are with Treasury securities sold at auction to finance debt) then the revolving account will stay open. The net level of outstanding debt won't shrink over time, but on the contrary, will grow as the business grows and its needs for credit grow with it. The debt is simply refinanced as it comes due. Now, substitute "the economy" for business and you'll have a handle on federal debt.

The real problem remains: healthcare costs are growing faster than GDP; and the worker to retiree ratio is projected to continue to fall.

Obviously, the only way to get medical costs (including pharmaceutical costs) under control is to control them; not to ask big medicine to please play nice, because it's their moral duty: private business considers that its one real duty is to maximize profits for its shareholders, and wheedling will only get empty promises.

As for Social Security, either taxes will have to be raised, or benefits cut. One immediate possibility is to eliminate the cap on taxable income. Currently, those earning more than $106,800 a year pay no payroll tax on that income. That's crazy. Another possibility is to broaden the definition of "income" for purposes of Social Security to include not merely payroll income, but income from capital gains, rent collections, dividends, receipt of interest, and in fact all income in general, especially for those whose total income places them in the top 5 percent of earners.

The very fact that NOBODY is talking about this, even among the so called Democratic Leadership, shows you that the notion of "liberal" politics is just so much nonsense.

When an end is lawful and obligatory, the indispensable means to is are also lawful and obligatory .Do you understand?

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