Monday, June 4, 2007

The Economist: Guests v. Gatecrashers

The current issue of The Economist has a particularly sensible treatment of the U.S. immigration question:

In the short term the fiscal burden imposed by illegal immigrants may outweigh the economic gains they bring. In other words, the average native-born American has a higher pre-tax income thanks to the country's “broken” border, but his post-tax income may be slightly lower. All told, Mr Hanson thinks that illegal immigration might cost native-born residents some 0.07% of GDP.

But that net cost, if it exists at all, is clearly less than the price of keeping illegal workers out. Since 2001 Congress has more than doubled the amount of money spent on securing the borders and enforcing immigration laws. Mr Bush's 2008 budget proposes spending $13 billion, or 0.1% of GDP. The senators' plans would be even more expensive. A needlessly cumbersome guest-worker plan and a costly war on gatecrashers are bad ideas—even if you don't give a fig for the welfare of would-be migrants.

I'm glad that even most conservatives have now jettisoned the absurd national security argument with respect to illegal immigration and recognize the issue as primarily economic. We should consider the two main economic features of immigration: the influx of cheap unskilled labor and the burden on government services.

It should be obvious that argument against cheap unskilled labor is nothing more than protectionism. Increased competition in the labor market can only result in a more efficient economy in the long run. In the short term, it may result in higher structural unemployment of American citizens. However, we must realize that the displacement of unskilled American workers has already taken place for the most part--a large and growing population of migrant workers has been a feature of the American economy for many years. As long as a new immigration policy does not significantly disrupt the current equilibrium, we shouldn't suffer any dramatic short-term problems. The only thing that might possibly throw a wrench into the long-run benefits of increased labor competition is the minimum wage, which should be abolished.

Assessing the burden on government services that a quickly multiplying and "chain-migrating" population of immigrants might have on Americans is much trickier. It is frustrating that we wouldn't be facing this problem if we hadn't erected a system just brimming with programs and entitlements. The solution to the fiscal burden of immigratation is to ensure that tax revenues derived from migrant workers offset the government services they and their families consume. At present, illegal immigrants are tax evaders--clearly, new immigration policies must allow for the reliable taxation of the migrant worker population. However, even when working immigrants are fully paying their taxes, it is likely that they and their families remain a net burden on tax-paying American citizens. Perhaps we should levy higher taxes from immigrant workers, restrict their consumption of government services, or both. Nevertheless, as the article points out, this too is likely only a short-term problem, since "these first-generation Americans will likely earn far more than their parents, adding to the pot of taxes in the future."

I certainly don't suggest that I have a complete answer to the current immigration debacle. However, I am confident that it is primarily a question of economics and needs to be addressed as such. It is unfortunate and embarrassing that most of the discourse on the right is chiefly motivated by xenophobia. Am I the only one who cringes when Rush plays "The Star Spanglish Banner"?

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