What is the Purpose of Immigration Policy?

June 19, 2012

Though there’s scarcely been any mention of immigration policy in the 3-1/2 years since President Obama took office, all of that changed on Friday when he announced that he would halt enforcement action on illegal immigrants who were brought to this country by their parents as young children – growing up knowing no other country than the U.S.  Now the news seems to be about nothing else.  Was the president right?  What would Romney have done?  Will he reverse this decision when (not if) he takes office?  There was also talk of the need for “comprehensive immigration reform.”  Perhaps the most incisive question I heard in the wake of Obama’s decision was “How can immigration policy be made to work for us?” 

How indeed, if it can be made to work for us at all?  It begs another question:  what is the purpose of even having an immigration policy?  I think the answer is that immigration serves three purposes:

  1. It fulfills our obligation as a member of the global community to reciprocate when other nations are willing to accept migrants from the United States.
  2. It fulfills our obligation to accept our fair share of refugees fleeing war and persecution. 
  3. Once the above two obligations have been met, additional immigration serves only one other purpose – to grow our population. 

Others may suggest some unquantifiable reasons and purposes – to enrich the diversity of our people, as an example, or to uphold our tradition as a nation built by immigrants.  All such sentiments are rooted in a deeper concern for immigrants than for what’s best for our country.  The fact is this:  that once we have met our obligations to admit as many immigrants as other countries are willing to accept from us – including refugees – the ultimate question is whether it makes sense to grow our population by admitting more.  Here are some critieria that should be applied:

  1. Are we short on labor?  With 18 million Americans unemployed, does it make any sense to import more workers?
  2. Do we have sufficient resources to support a larger population, including food, energy, metals, minerals and lumber and others?  For example, does it make any sense to import more oil consumers when we already must import the majority of oil that we consume?
  3. Is our impact on the environment below a sustainable level, and have we met all of our obligations to reduce our impact?  For example, given that we have committed to an 80% reduction in greenhouse gas emissions by 2040, does it make sense to import more emitters? 
  4. Given that, beyond a critical level, a rising population density dooms an ever-growing percentage of Americans to unemployment and poverty, does it make any sense to increase our population density with more immigrants?

If the answers to the above questions are “yes,” then by all means, let’s welcome more immigrants.  But can anyone answer yes to even one of those questions with a straight face? 

Every year, America welcomes another 1.5 million immigrants only because that’s what we’ve always done.  No one ever stops to ask whether it makes any sense whatsoever.  We just do it.  We stoke the unemployment lines with unneeded workers.  We drive up the demand for imported oil.  We worsen our impact on the environment and we make life incrementally more miserable for every American. 

Shame on President Obama, not for his action on Friday but for squandering 3-1/2 years of opportunity to inject some common sense into immigration policy.


America’s 20 Worst Trade Partners

June 11, 2012

Who were America’s 20 worst trade partners in 2011?  First, we have to define “worst.”  By “worst” I mean those nations with whom the U.S. has its biggest trade deficits in manufactured goods.  By that simple measure alone, China is, hands-down, our worst trade partner by far.  But China is also a very large country with one fifth of the world’s population.  So we need to factor out the sheer size of nations to avoid having this list degenerate into nothing more than a list of nations by size.  A more appropriate definition of “worst trade partner” factors out size by expressing the trade deficit in per capita terms – that is, divided by the population of each nation in question. 

Now the results might surprise you.  Using that criteria, here’s a list of America’s 20 worst trading partners:  Top 20 Deficits, 2011

The following are some key take-aways from this list:

  • Of these twenty worst per capita trade deficits in manufactured goods, eighteen are nations more densely populated than the U.S.  (U.S. population density is 85 people per square mile.)  The average population density of these twenty nations is 491 people per square mile – almost six times as densely populated as the U.S.
  • Of these twenty nations, the average purchasing power parity (PPP) is $33,700 per person.  Only six have PPP less than $20,000 per person.  (Only one of the top ten has PPP less than $20,000.)  This tends to debunk the myth that trade deficits are caused by low wages.
  • Ireland is far and away America’s worst trading partner.  That tiny nation of only 4.7 million people (0.07% of the world’s population) accounts for 7% of our total trade deficit in manufactured goods.  On a per capita basis, our trade deficit with Ireland is 28 times worse than our per capita deficit with China.  Ireland’s trade surplus with the U.S. accounts for 16% of their PPP.  Our per capita trade deficit with Ireland in 2011 worsened by 18% from 2010.  Though Ireland is twice as densely populated as the U.S., that doesn’t account for such a gross imbalance of trade.  Ireland is the world’s champ when it comes to employing unfair trade practices, particulary in the form of subsidizing foreign manufacturers with a free tax ride.  Ireland, in turn, is subsidized by the European Union, being one of the first to require a bailout of their banking system. 
  • Of our top ten worst trade partners, five are EU members.
  • China (four times as densely populated as the U.S.) ranks 16th on the list, the same as their 2010 ranking. 
  • South Korea (15 times as densely populated as the U.S.), with whom the U.S. entered into a new free trade agreement early this year, is America’s 13th worst trade partner, the same ranking as in 2010.

It’s China that draws all of the attention in discussions about America’s trade deficit.  But, when you look at this list, it becomes clear that our trade results with China are no different than our trade results with many other nations.  The fault lies not with China’s trade policies, but with our own – a trade policy that fails to account for the role of population density in driving global trade imbalances.  Actually, the fault lies with the field of economics and its stubborn refusal to give any consideration to the potential consequences of population growth. 


April Exports Lag Obama’s Goal by Record Margin

June 8, 2012

In January of 2011, President Obama unveiled his plan to revive U.S. manufacturing.  Instead of cutting imports to bring American manufacturing jobs back home, the president instead turned his focus to exports, vowing to make America into a Germany-like net exporter by doubling exports over the next five years.

Predictably (since the U.S. has no control over exports), the U.S. is failing to meet this goal.  The Bureau of Economic Analysis released trade data for the month of April this morning.  Exports fell to $182.9 billion in April, falling short of the goal by $13.34 billion.  This marked the 9th consecutive shortfall – and the largest. 

That’s total exports.  Obviously, if the goal was to breathe life into manufacturing by doubling exports, then the real goal is to double exports in that category of products.  There, the president’s failure is even worse.  The shortfall in manufactured exports in April was $16.46 billion – the 13th consecutive shortfall and the worst since the goal of doubling exports was set. 

Though the overall trade deficit improved slightly in April to -$50.1 billion from -$52.6 billion in March, the overall trend remains decidedly negative.  Here’s a chart:  Balance of Trade.  And here’s a chart of total imports and exports vs. the president’s goal:  Obamas Goal to Double Exports.  And here’s a chart of imports and exports vs. the president’s goal in the critical category of manufactured products:  Manf’d Goods Balance

To put the president’s failure on the manufacturing front of the economy in perspective, consider this:  in May, the U.S. added 12,000 manufacturing jobs.  If the U.S. were to bring home over a period of five years the approximately 6 million manufacturing jobs lost through stupid trade policy (dating back decades, but continued under the Obama presidency), we should be adding 100,000 manufacturing jobs per month.  We’re lagging the president’s goal by an order of magnitude. 

 


May Marks 36th Consecutive Month of Unemployment Above 10%

June 5, 2012

http://www.bls.gov/news.release/empsit.nr0.htm

The Bureau of Labor Statistics reported on Friday that a measly 69,000 jobs were added in May, while the unemployment rate rose by 0.1% to 8.2%.  The report was a huge disappointment and sent stock markets reeling. 

Beyond those two headline figures, there was actually some good news in the report.  While the establishment survey yielded only 69,000 new jobs, the household survey reported that the employment level rose by 422,000 – the biggest increase since April of 2010.  And, while the unemployment rate rose slightly, it was only because 642,000 workers re-entered the work force. 

Still, the report was just another data point confirming that the economy is mired in a “new normal” of high unemployment.  And, it marked a sad milestone.  If unemployment is calculated by holding the labor force at a fixed percentage of the population – a much more accurate measure that removes all the variation caused by claims that workers simply drop out of the labor force in bad times – then the unemployment rate for May came in at 10.7%, the 36th consecutive month that that figure topped 10%.  (In November, 2007, it was 4.7%.)  Here’s the calculation:  Unemployment Calculation

President Obama can’t be held responsible for the first time it topped 10% in June, 2009.  After all, he’d only been president for five months and was struggling to cope with the economic collapse he inherited.  But he is responsible for the fact that it remains well above 10% exactly three years later, with little hope of it falling below 10% any time soon.  He’s broken every campaign promise made to correct our trade situation and bring manufacturing jobs back home.  He’s been soft on trade policy.  Continued high unemployment is the inescapable, predicted result.  In November, he’ll pay the price. 

* * * * *

Those 69,000 jobs reported in the establishment survey break down as follows:

  • Health care:  + 33,000
  • Transportation & warehousing:  + 36,000
  • Wholesale trade:  + 16,000
  • Manufacturing:  + 12,000
  • Professional & business services:  unchanged
  • Mining & logging:  unchanged
  • retail trade:  unchanged
  • information:  unchanged
  • financial activities:  unchanged
  • leisure & hospitality:  unchanged
  • government:  unchanged
  • Construction:  -28,000