Increasing Illegal Immigration = Fiscal Responsibility

Immigrants are great for the federal balance sheet. Why? They don't file for tax returns but have taxes withheld.

Illegal immigrants are paying taxes to Uncle Sam, experts agree. Just how much they pay is hard to determine because the federal government doesn't fully tally it.

But the latest figures available indicate it will amount to billions of dollars in federal income, Social Security and Medicare taxes this year.

One rough estimate puts the amount of Social Security taxes alone at around $9 billion per year.

Paycheck withholding collects much of the federal tax from illegal workers, just as it does for legal workers.

The Internal Revenue Service doesn't track a worker's immigration status, yet many illegal immigrants fearful of deportation won't risk the government attention that will come from filing a return, even if they might qualify for a refund. Economist William Ford of Middle Tennessee State University says there are no firm figures on how many such taxpayers there are.

"The real question is how many of them pay more than they owe. There are undoubtedly hundreds of thousands of people in that situation," Ford said.

Adios, GOP

All the Republican candidates for president (except John McCain) refused to participate in a Univision-sponsored debate en espanol. Probably because all of them (except John McCain, who supports more lax immigration laws) are too cowardly to have to explain -- to their faces -- why they want to keep Spanish-speaking people a chance to lift themselves out of poverty by chasing the American Dream.

The Democrats already had their debate on Univision. The fact that the GOP won't will hurt them politically. Their stance on immigrations ("it's illegal!") has already clipped them ethically. It's pretty disgusting, really, and it could cost the GOP elections for generations.

The Trouble with Constraining Markets

Economists recognize that restricting labor mobility causes market distortions just as restricting capital mobility does. They also recognize that current U.S. immigration policy does just that. There may be proper reasons for limiting the amount of immigrants allowed into the country. These might include social stability, national security, or predatory usage of our welfare system. But limiting access to U.S. labor markets to foreign workers does a disservice not only to them, but also to domestic producers. This, in turn, does a disservice to all Americans. The NY Times has an illustrative article:

Steve Scaroni, a farmer from California, looked across a luxuriant field of lettuce here in central Mexico and liked what he saw: full-strength crews of Mexican farm workers with no immigration problems.

Farming since he was a teenager, Mr. Scaroni, 50, built a $50 million business growing lettuce and broccoli in the fields of California, relying on the hands of immigrant workers, most of them Mexican and many probably in the United States illegally.

But early last year he began shifting part of his operation to rented fields here. Now some 500 Mexicans tend his crops in Mexico, where they run no risk of deportation.

“I’m as American red-blood as it gets,” Mr. Scaroni said, “but I’m tired of fighting the fight on the immigration issue.”

A sense of crisis prevails among American farmers who rely on immigrant laborers, more so since immigration legislation in the United States Senate failed in June and the authorities announced a crackdown on employers of illegal immigrants. An increasing number of farmers have been testing the alternative of raising crops across the border where there is a stable labor supply, growers and lawmakers in the United States and Mexico said.

The gut reactions of ill-informed observers might be to belittle American producers who move across the border. But this would be disingenuous. The producers are responding as one should expect: they are responding to incentives. The government of United States is to blame for not creating a viable immigration policy that provides "liquidity" to labor markets. The resulting frictions are the result of the market distortion... not the other way around.

Another Meme Put to Rest

A common conservative argument against looser immigration or amnesty for workers already here is that they are prone to crime and violence. It's an appealing argument, but it has no basis in reality. In fact, the opposite is true:

In fact, immigrants have much lower institutionalization (incarceration) rates than the native born - on the order of one-fifth the rate of natives. More recently arrived immigrants have the lowest relative incarceration rates, and this difference increased from 1980 to 2000. We examine whether the improvement in immigrants' relative incarceration rates over the last three decades is linked to increased deportation, immigrant self-selection, or deterrence. Our evidence suggests that deportation does not drive the results. Rather, the process of migration selects individuals who either have lower criminal propensities or are more responsive to deterrent effects than the average native.

We should be welcoming these people, and helping them attain some sort of legal status. Not demonizing them, and trying to throw them all out.

An Unsensible Immigration Proposal

Jane Galt (er, Megan McArdle) tries to pull a fast one:

My preferred immigration plan would be to massively increase the number of visas, set a very minimal bar to meet--not a terrorist, not a criminal, not carrying a hideous contagious disease--and then auction off various tranches of visas, classed not by type but by length of stay. Let the visas be transferrable. Then let immigrant communities do enforcement for you, as illegal immigrants suddenly threaten to erode the price of their valuable asset: the right to stay in-country.

This sort of libertarian thinking is why I'm not a libertarian; Just because some immigrants -- those who are capable of winning visas via auction -- have a market advantage over other immigrants -- those who aren't able to obtain visas -- does not necessarily mean that they will "do law enforcement for you". In fact, there is little reason to believe that they will. People do not enjoy ratting out other people, even if they know someone else is doing something illegal, unless their own liberty or safety is at risk. Most people don't call the cops when a fellow driver is speeding, or even if they are swerving and appear to be intoxicated. Most people don't call the cops if they find that one of their friends uses illegal drugs.

Not only that, but these sorts of "markets" often beget other (illegal) markets. So if this sort of policy was enacted, I would expect an increase in markets for fake documentation, or communities which clandestinely shelter illegal immigrants. Legal immigrants will often have incentives to disguise illegal immigrants: ethnic identity, familial ties, economic incentives, etc. This sort of thinking belies the (classical) liberal fallacy w/r/t ethnic tensions (which, of course, is really what the immigration hullabaloo is mostly about): markets do not cure all ails. The current immigrant quagmire represents a political market failure, with external effects that affect hundreds of millions of people across two entire continents.

The answer, I would expect the libertarians at Overcoming Bias to say, is for citizens (esp. on the right wing) to move beyond the racial/ethnic dimension of the debate, and encourage truly open labor mobility (if they are in favor of free markets) or truly/mostly closed labor mobility (if they are nationalists). Lip-service to free markets from "conservatives" isn't enough, and neither are scare tactics from ethnic entrepreneurs (i.e. nationalists). True dedication to free markets would entail fully open borders (except to known violent criminals or those carrying contagious diseases).

Ms. Galt (er, McArdle) does have a great point about the immigration debate in another post:

I find the argument that the problem with immigrants is illegal immigration pretty uncompelling. First of all, it's almost (not always) made by people who don't want to let those people (or equivalent numbers of their more law abiding compatriots) in legally, and react against any proposal to do so with exactly the vehemence that they complain about the illegal entry of illegal immigrants. The people making that argument may not be trying to be disingenuous, but ultimately, this is a pointless distraction: their real problem is that they don't want that many immigrants here, regardless of whether they entered legally or not.

...

It is far from clear to me that being an illegal alien is a morally wrong, as opposed to legally wrong, act. It might even be a morally required act, if, say, your income is getting medical care and food for children back in Mexico who would otherwise died. But regardless of your opinion on the matter, you can't simply say "But they're illegal"; given that there is dispute about the moral status of our immigration laws, you first have to prove to your interlocutor's satisfaction that the law ought to exist. None of the people I've talked to who say that their problem is not the immigrants themselves, but their legal status, has even tried to prove that our immigration restrictions are just and right--which is strange, because those people generally want to make them even more draconian.

In other, somewhat related, news... Jane Galt/Megan McArdle has just been deleted from Wikipedia. Apparently, she isn't notable enough.

A Sensible Immigration Proposal

Virgina Postrel points Daniel Drezner to Jonathan Rauch at the National Journal, who has a sensible immigration proposal:

[T]he Senate bill was worse than it needed to be. On the legal side of the immigration equation, there are easy trade-ups to be had. In fact, even a National Journal columnist with no apparent qualifications could write a better bill.

And what might that look like? Glad you asked.

First, raise the number of legal immigrants by about 50 percent, to about 1.8 million a year. That meets the economy's demonstrated demand for workers.

Second, provide pathways to permanence. Bring in these 1.8 million people on temporary visas, say for three to five years, with the promise of permanent legal residency (a green card) if they stay out of trouble, pose no security risk, and work or get a college degree.

Third, don't micromanage who gets in. Allocate visas using a simple three-way formula that gives about equal weight to family, work, and education: 600,000 family visas for close relatives of citizens and green-card holders; 600,000 work visas for people who are sponsored by an employer and have less than a bachelor's degree; 600,000 education visas for people who hold a bachelor's degree or higher, with first call going to those who also have employer sponsorships or family ties.

There is no chance, at the moment, that this plan will be adopted. But there is some chance that making the case for it might help clarify what the country should be shopping for in an immigration reform measure.

The most basic decision any immigration bill needs to make is this: How many immigrants does the country need and want? Bizarrely, this was the one question that the debate over the Senate bill did not seem to concern itself with. Even finding estimates for total immigration under the Senate reform proved dauntingly difficult until the Congressional Budget Office published some projections last week.

I would be in favor of such a plan, if it included some sort of provision -- whether amnesty, or some sort of earned legal status -- for the 12-20 million undocumented immigrants already in the country.

Fact for the Day

An interesting factual tidbit from a recent Bloggingheads. Megan McArdle informs Daniel Drezner -- and me -- that in 1890, ~ 50% of Americans were foreign-born. Now, it's less than 10%. The Republic didn't collapse in 1890, and it won't collapse now if we allow more immigrants, whether skilled or unskilled, to come to the States. In fact, the new immigrants were instrumental in improving the nation's economy in the late 19th- and early 20th-centuries, and building towards American hegemony in the 20th-century. A similar thing could happen in the 21st-century, if only Lou Dobbs would get the hell out of the way.

Shooting Themselves in the Foot

David Frum has a nice post about the new immigration compromise, and how it will effect the GOP in the '08 elections. most of it sounds about right to me.

i haven't had time to really examine the immigration proposal, but at first glimpse it looks like bad policy to me.