Small groups, big influence

The Houston Realty Business Coalition hosts monthly breakfast meetings featuring some of the most influential figures in state and local politics. Founded in 1967, the HRBC, formerly called the Houston Realty Breakfast Club, is an institutional hub for Houston’s business conservatives.

Breakfast with the HRBC offers an opportunity to meet, hear or button-hole ambitious political figures at every stage of their career. If you are considering a run for office in the Houston area, particularly on the Republican ballot, the HRBC is a room you will probably have to work successfully to win. If you have a political issue you want to bring to the attention of someone in charge, or someone who might one day be in charge, a table at the HRBC is an excellent place to get yourself heard.

Speakers invited to address a meeting get a valuable free forum to promote their campaign or explain a policy agenda. The real action, though, is around the tables. Breakfast at the HRBC is a chance to meet tomorrow’s Congressional candidates as they campaign for the courts, school board, county executive offices or other local positions. It is an opportunity to learn what these people are like in person before placing them in a position to impact your life.

What makes the HRBC and groups like it particularly powerful is their multifunctional nature. The HRBC is not a political party. It is closely tied to the GOP, but it often features Democratic speakers and guests. Activism is its primary function. It is officially registered as a PAC and makes open political endorsements. The real power of the group, though, is its deep roots that extend beyond politics.

HRBC is also a business club. The members and leadership may share a core of political ideas, but they must also work together in the real estate community on a day to day basis. Wielding influence inside the HRBC requires more than showing up, paying a fee and spouting an opinion. Relationships formed outside the meeting and beyond the scope of politics can increase or decrease one’s political sway at the breakfast table. And pig-headed political incivility at breakfast can impact one’s bottom line in business.

In short, this overlap between politics and extra-political interests helps to keep a lid on the most extreme impulses of the group’s individual members. There is only so much irrational, uncivil behavior one can afford to indulge before it begins to create pressure on one’s day job. The members maintain a complex accountability to one another that inspires at least some modicum of moderation.

Organizations like the HRBC have a clear financial dimension to them. It costs money to attend, roughly $50 a head on a per-meeting basis or an annual fee of $350. That means that access to the breakfast table is relatively open and within the reach of most people. That’s true of most similar organizations across the spectrum. Money is not the most important qualifier for membership and influence.

Groups like the HRBC are built on personal networks. Nothing stops the random yahoo off the street from laying down $50 and showing up, but that doesn’t happen a lot. Very few people outside of real estate or Houston politics even know about it. They do not advertise or actively promote themselves. Most members first learned about the organization through an invitation from a friend or colleague.

For Houston residents who can spare a few early morning hours once a month and can absorb the modest cost, the HRBC offers a chance to participate in their government in a uniquely powerful way. Similar opportunities exist all over the spectrum, from partisan political organizations to PTA’s, service clubs and business groups.

Our political system is not built on elections. It is not built on money. It is built on the hundreds of thousands of institutions that tie us together in bonds of common interest and accountability. These institutions are where the real work of politics gets done. Political influence rises from the careful, strategic investment of time and effort in these organizations.

The health of those institutions determines how much influence can be purchased at what price. It also determines how much is really at stake on Election Day.

If money is a problem in our political system, and it is, that’s because the amount and quality of our direct involvement has declined below a critical level. Righting that imbalance requires us to put our shoulders behind our convictions and play a greater personal role in our communities. The good news is that there is a fix. The bad news is that it costs us something we are loath to part with – our time.

Tagged with: , ,
Posted in Political Theory, Social Capital

Peaches, chips and immigration

Two stories caught my eye this week for their potential impact on labor markets, immigration policy and wider issues. The first involves a new computer chip being introduced by IBM based on the neural architecture of the human brain. From the MIT Technology Review:

The new chip is not yet a product, but it is powerful enough to work on real-world problems. In a demonstration at IBM’s Almaden research center, MIT Technology Review saw one recognize cars, people, and bicycles in video of a road intersection. A nearby laptop that had been programed to do the same task processed the footage 100 times slower than real time, and it consumed 100,000 times as much power as the IBM chip. IBM researchers are now experimenting with connecting multiple SyNapse chips together, and they hope to build a supercomputer using thousands.

Spatial recognition is one of the great frustrating limitations of robotic technology. It is extremely difficult to teach automated systems how to recognize context from what they see around them. IBM may have found an opening, by mimicking mammalian brain architecture, which could in time radically increase the range of robotic capabilities.

The other story relates to agriculture. UC Davis researchers are closing in on the development of new peach and nectarine trees that can produce at lower heights, perhaps as low as 7-8 feet.

Conventional peach and nectarine trees grow about 13 feet tall. Setting up, climbing and moving ladders to prune the trees and harvest fruit consumes about half the workday. Ladders are dangerous, too, which is why peach and nectarine growers pay about 40 percent more for workers’ compensation insurance than growers who work with more low-lying commodities, like grapes.

Developed by breeders at UC Davis, the new rootstocks will produce trees that grow about 7 or 8 feet tall and can be pruned and harvested from the ground. With the right orchard management — which Day and DeJong will test at their plots at the UC Kearney Agricultural Research and Extension Center, near Fresno — the shorter trees could produce just as much high-quality fruit as their lofty kin.

Both stories are interesting for their immigration and labor implications. On the one hand, native born populations in the US and everywhere else in the developed world have been in decline for years. Globally, humans may experience our peak in the number of births this year. Absent immigration (which is also declining in the US, contrary to popular belief), there would be virtually no population growth in the developed world.

Conventional wisdom assumes that this is a problem because young workers are necessary to maintain support for an aging population, but these two stories illustrate why that might be wrong. They also illustrate what a decline in immigration might mean for our economy.

Labor may not be as important for maintaining an aging population as capital. It’s capital that fuels the development of technical and scientific advancement that steadily undercut the need for labor. Advances like these deliver and economy that requires fewer and fewer laborers to support production.

Declining immigration with its accompanying impact on population would create some significant local disruptions, but with capital investment and time innovation would fill most of those gaps. Shorter peach trees offer labor savings and food for thought.

Tagged with: , ,
Posted in Economics, Immigration, The Second Machine Age

Evangelicals and the Amish Option

amishA close friend and fellow Texas ex-pat is looking to escape the godless Gomorrah of their affluent East Coast city. They want to move to the countryside, but the effort isn’t going so well. Their dilemma is emblematic of wider challenges faced by religious conservatives in a nation they are no longer able to dominate.

America has largely shed the authoritarian religious values that once imposed a kind of artificial uniformity on our national culture. Not everyone is thrilled with this development. Particularly in the South, where this dynamic was slowed in the 20th century by poverty and lingering battles over race, evangelicals and fundamentalists are accustomed to a degree of cultural sway that long ago disappeared elsewhere.

Christianity as portrayed in the Bible was a distinctly counter-cultural phenomenon, but Southern religious conservatives do not see themselves in that light. For those who imagine they live in a Christian nation, a wealthy, secular, globally-connected America is producing some hard choices.

Constantly pressured by a community that neither shares nor respects their religious values, life in the Northeast is a challenge for a Southern-fried Biblical literalist. Christmas is a materialistic show and Easter is a holiday about bunnies. Schools start teaching evolution very early. Kids as young as junior high have practically unfiltered, handheld access to the Internet, a cesspool of filth and religious doubts that reaches their children through their peers.

They feel that their community celebrates same-sex families, vilifies gun owners, undermines religious faith, and encourages government dependency. They want to be free from the clutches of this dangerous culture, but there’s a problem. This dangerous culture produces the wealth that keeps them affluent.

Their solution is to retreat to the countryside, but in the Northeast that doesn’t work quite the same way it would in East Texas. Property in a rural setting within an hour from work is actually more expensive than living in town. Commuting is difficult. Those rural spaces in the Northeast aren’t under-developed parcels of farmland. They are mostly weekend retreats for the affluent. Even if they could find a suitable property, the other practical and financial realities around living so far from the rest of their life are sinking in.

So why not just go back to Texas? It isn’t that simple. First, the same dynamic comes increasingly into play in Texas, Georgia or anyplace else you might go. To have a quality career you need to be close to a city. Houston may be more conservative than Philadelphia or Baltimore, but by a steadily decreasing margin.

Look hard enough and it is possible to get a well-paid STEM or financial services job in some patch of flyover country where you’ll be surrounded by people who think the universe is 6000 years old. However, your boss and all of the organization’s decision-makers will be somewhere else. To join them in a senior position you will probably have to leave. Choosing a “family friendly” setting means choosing financial instability over affluence and achievement. Religious conservatives increasingly find themselves forced to choose between their careers and their values.

Social conservatives have begun to paint this is an issue of tolerance, but that is a misconception. Lots of unique cultures survive and thrive in a globalized, urban America. Mainstream culture is perfectly willing to tolerate religious conservatives. Tolerance is not what they are looking for.

There are two unique characteristics of Christian religious fundamentalism in the US that create special problems. First, fundamentalists expect the wider culture to embrace, not merely tolerate their beliefs. The second problem is related to the first. This brand of Christianity is not merely a faith, but also a rigid matrix of factual beliefs in tension with reality. Being surrounded by a community of coreligionists is not merely a comfort. The uniformity that comes from a believing community is a practical necessity.

Tolerance isn’t enough. The fact that the wider culture is unwilling to transform itself in conformity with their demands is an affront. They imagine themselves as the last remnant of an authentic American identity. They are the “pro- American” bloc of Sarah Palin’s America. To be surrounded by a successful, prosperous culture that does not embrace their values is to pass every waking hour in a smothering swamp of cognitive dissonance.

The pain of cognitive dissonance is complicated by the need to shelter a brittle collection of factual beliefs. Free flow of information is the blood supply of global capitalism. For believers in Biblical literalism, information itself is dangerous. Controlling access to information is critical to maintaining the worldview at the center of their culture. It is extremely difficult, if not impossible, to control information in an urban capitalist setting.

Participating in that economic system means swimming in a sea of data and converting it into reliable insights. That critical/analytic process on which so much of the wider economy is built is inherently corrosive to religious fundamentalism. Conflict is inevitable.

Fewer Americans under thirty are embracing fundamentalism than in the past but, those who remain will likely be far more militantly committed. They will have to be.

As that commitment to a denialist religious agenda increases, their attachment to the rest of the culture will have to decline. A more explicitly counter-cultural wave of religious fundamentalism will likely pull back from the kinds of direct political engagement that marked the last twenty years. This is not the positive development that some people might expect. Less Moral Majority will likely mean more Bundy Ranch.

In time, religious fundamentalists in the 20th century mold may embrace the Amish Option. They might be found mostly in quiet redoubts away from centers of national power and wealth. Folks there may not be riding horse carts and building furniture, but they would develop a culture, economy, and identity decidedly separate from mainstream American life. Oklahoma and Alabama may develop into Utah’s poorer cousins.

In the meantime, my friends will probably stay in the Northeast, abandon their country dreams, and do their best to adapt. Like most traditional evangelicals, they aren’t so doggedly committed to their worldview that they’ll turn their backs on career, education, and ambition to escape from pluralism. They’ll chafe at city values while their kids grow up at peace with the wider culture.

A new, more hardened generation of religious extremists may take a more strident stand. Expect to see many adopt a version of the Amish Option, bypassing the advantages of wealth, education and influence available in mainstream culture in order to opt-out and protect their fragile beliefs. It is unlikely that this will unfold quietly. We could be in for a bumpy ride.

Tagged with: , , ,
Posted in Religious Right

Where the inflation may be hiding

When reality persistently challenges a deeply held belief, believers can get a little weird. Conservative economist Amity Shlaes, never the steadiest of heads in the best of times, recently joined the frustrated ranks of the inflation cranks with a bizarre rant in the National Review.

Shlaes is now convinced that the inflation which her models predict is being hidden somehow. Her evidence? Movie tickets, among other items, now cost more than they used to. Since data has abandoned her and rest of the true believers in right-wing economics, she has fled to the hills of anecdote where she can be safe from cognitive dissonance. Inflation is invisible to all but the pure at heart.

This development highlights the wider dilemma facing Economics as a discipline. Though it claims to be a science and sometimes pretends to be engineering, Economics at this stage of development is no more than a philosophy dressed up in equations. It may be possible to explain the mystery of the “missing inflation,” but only by stepping outside the quasi-religious boundaries of economists’ favorite models.

Since the Nineties, western governments have embraced monetary policies designed to stimulate their economies without the political complication and inflation risks of direct economic stimulus. By toggling the costs and availability of financial institutions’ access to wholesale lending, governments could influence the economy by adjusting access to capital rather than directly placing more currency in citizens’ pockets.

Funny enough it was conservative economists, particularly Milton Friedman, who pioneered this model. Since the financial crash we’ve seen the most aggressive use of monetary policy ever deployed in an effort to halt our terrifying deflationary cycle. In fairness to conservatives like Shlaes, it is perfectly reasonable to worry about how such an unprecedented and massive new intervention might impact the economy. No one really knows the implications of having the Federal Reserve purchase trillions of dollars of mortgage backed securities and Treasury Bonds. In theory, the Fed can simply hold them permanently with no economic impact, but that sounds a lot like simply printing money. Why wouldn’t that create inflationary pressure?

One explanation for the absence of inflation in response to the Fed’s loose money strategy is that the deflationary damage of the financial collapse was so severe that we haven’t fully “re-inflated” the economy yet. That is more or less the consensus view. However, there may be another explanation.

Perhaps the method chosen by Western governments to reinflate their economies has had a perverse effect. By pouring stimulus directly into financial institutions rather than into the hands of consumers those resources are fueling a different kind of inflation, inflated asset or capital values. Perhaps changes in the way our financial markets function over the past generation mean that this form of stimulus is becoming less and less effective as an economic tool. In other words, facts on the ground have broken the theoretical model. Again.

In theory, “capital inflation” should be impossible. Money made available to capital markets should flow directly into productive investment, creating new value in the economy. What if the funds being disbursed by the Federal Reserve are not going into productive investment in the way that we might expect? Once upon a time, banks made money lending to people who invested that money in capital improvements. If that model no longer exists, or is no longer the dominant explanation of how banks make money, then perhaps money poured into the banking system will not flow into productive investment. Maybe all we’ve done is put more chips on a casino table.

After juicing the system with trillions of dollars of Fed leverage, we are seeing no evidence of looming inflation or any accompanying boom in economic growth. We are however seeing a boom in asset prices. The economy has limped along for seven years, with sluggish employment growth and consistently weak GDP numbers. Weak economic indicators have been accompanied by a historic bull market in stocks, accompanied by booming values in a wide variety of asset classes. Even investment in Treasury bonds, which should sag in an equity boom, is high.

Just as in the last decade, an economist who opens a window and sees what’s happening anecdotally on “Main Street” might find some helpful clues. In my suburban Chicago neighborhood the housing market looks eerily like the nosebleed highs of 2006. Houses flip in days with offers exceeding asking prices. Rentals are tough to find.

Meanwhile just a few miles away lower income neighborhoods continue to slog through the long tail of the foreclosure crisis. Markets in DC, Northern California, Chicago, and the NYC suburbs have returned to boom conditions while elsewhere they remain largely stagnant.

Nearly anyone with good credit and/or significant exposure to capital markets is experiencing an economy completely removed from the experience of Americans who used to live in what we once called a Middle Class. Whoever had enough money to weather the financial collapse is now seeing boom conditions float them away to a better future. Those whose boats were wrecked are drowning on this rising tide.

Money flowing into capital markets does not seem to be fueling productive investment. It looks very much like we responded to the damage of the last market bubble by simply creating another one. The inflation that far right economists like Shlaes insist on finding does exist in a sense. They will not recognize it because it defies their models and leads to implications that they do not wish to acknowledge.

Fed stimulus has limited deflation only by propping up speculative markets in assets like oil, real estate and food which might otherwise have dropped even further and remained even lower. This intervention seems to have benefited the owners and speculators in those assets while accomplishing very little for people who have to earn a living from wages.

If this approach isn’t creating inflation, then what is the harm? Frankly, no one seems to know. Unprecedented acquisition of assets by the Fed and massive new money loaned into the banking system is an experiment and we haven’t yet seen the results.

We can predict that prolonged asset inflation will lead to asset crashes. We have been seeing these with increasing frequency over the past generation. Sometimes these crashes can have broad destabilizing effects, as in 2007. Other times, as with smaller collapses recently in gold, or cocoa, copper the impacts are more localized. The overall effect though, so long as this kind of economic juicing remains in effect, is a steady exacerbation of structural inequality and the occasional evaporation of accumulated wealth. Not exactly the kind of thing Amity Shlaes wants to talk about.

With repeated use, monetary policy may be losing some of its effectiveness. It seems to be generating unintended consequences which the economic models currently in vogue may be missing. That happens. Hopefully we won’t need another economic catastrophe to jolt economists into rethinking their models, but there is little sign of a major rethink on the horizon.

Tagged with: , , ,
Posted in Economics

Obama is ruining Rand Paul’s Presidential ambitions

How do you think Republican primary voters feel about a President who proposes to soften America’s support for Israel, allow the Russians to operate without resistance in Eastern Europe, offer concession after concession to Iran on their nuclear program, and refrain from using US power abroad to preserve American interests? Obama may be complicating Rand Paul’s potential run for the Republican nomination by putting Paul’s least-crazy foreign policy ideas into practice. Rand Paul will be starting the 2016 nominating race with Obama as his running-mate and Alex Jones as his Secretary of State.

Obama’s relatively hands-off approach to global affairs, coupled with an effort to mend our relations with the Arab world may have been broadly welcome in 2009 after the misery of the Bush years, but it didn’t take long for chaos to fill the gap left by receding US engagement. When that happened, there was no plan in place to cope. In time, Obama has settled on a template of foreign policy options that ranges all the way from smiling handshakes to finger-wagging.

No one outside the reinforced concrete walls of Cheney’s ideological bunker wants a return to the Bush years, but a consensus is emerging that there must be some policy space available between hair-trigger roaming regime change and isolationism. We are not alone on the planet. Events in Syria and Liberia and Honduras affect us. They do not require the same level of engagement as a similar problem in Kansas, but they are not isolated from us. Chaos ignored will suppurate. It is better to deal with serious foreign problems early rather than let them reach our borders.

It is possible to wield power using a minimum of direct military force to contain the worst consequences of violent opportunism around the world. We can build alliances with countries that share our values. We can use our vast economic power to influence and punish. We can deploy military force where necessary with minimal risk.

These options work when they are coordinated with a clear set of principles and backed up by credible leadership. With principles and leadership, it then becomes easier to build and maintain alliances that not only help us wield power, but help us check the potential excesses of our power, preventing the kind of disastrous unilateral action that we experienced in the last Administration.

In our Constitutional system, that combination of leadership and principles comes from the Oval Office. Under Obama, we have lacked leadership and clear principles in foreign policy. That vacancy may still be preferable to what we experienced under Bush II, but it will not likely help Rand Paul in 2016.

If Paul runs for President as just about everyone expects, he will be in the unenviable position of explaining why Americans should embrace not merely a continuation, but an intensification of Obama’s approach to foreign affairs. That is likely to be a tough sell to a Republican audience.

Tagged with: , , , , ,
Posted in Election 2016, Foreign Policy

Sex, Drugs and Liberty

Last week the New York Times endorsed the legalization of marijuana. Jeffrey Miron in The Week follows that with a persuasive case for some form of legalization of all recreational drugs. The walls are coming down.

Beyond the drug war, state bans on same sex marriage are collapsing all over the country. Apart from a high profile initiative under the Bush Administration that netted only two indictments, the Justice Department has completely abandoned the prosecution of consensual obscenity. The concept of “public morality” as policy goal to be implemented by state action is disappearing. This is a breath of fresh air.

We are approaching the final collapse of the culture war. Voters under fifty have solidly abandoned the philosophy that government should dictate personal choices in matters that do not materially affect other people. At the same time, as our nation grows more solidly urban and each of us is more intimately connected to one another, we seem to be developing a greater tolerance for government interference in matters where our decisions do affect our neighbors.

Miron’s article on drug legalization sums up the philosophy behind this shift fairly well:

Perhaps the best reason to legalize hard drugs is that people who wish to consume them have the same liberty to determine their own well-being as those who consume alcohol, or marijuana, or anything else. In a free society, the presumption must always be that individuals, not government, get to decide what is in their own best interest.

This is a dramatic departure from the assumptions shaped the lives of Americans over fifty. Not so long ago it was accepted that “public morality” was a value to be cultivated and protected by state action. People could only be expected to be “good” if some external state authority, aided by the religiously devout, curbed the range of choices available to the public.

Fifty years ago contraceptives were illegal across wide swaths of the country. You couldn’t get a divorce without proving that your spouse was “at fault.”* The state was deeply involved in the regulation of nearly every aspect of sexuality and personal choices. Even today, laws banning gay sex are still on the books in Texas even after the Supreme Court declared them unenforceable. The relics of that age are still around us (sometimes holding public office).

At the same time, public policy fifty years ago had little to say about behavior that impacted those around us outside the realm of family or sexuality. Fifty years ago there was no Environmental Protection Agency. There was no OSHA for workplace safety, no ERISA to guard against pension and insurance fraud, no Voting Rights Act. Race and sex discrimination was still legal in employment and housing. There was no Medicare.

Fifty years ago your government at virtually every level let you get away with an extremely broad range of behaviors harmful to your fellow man from dumping industrial waste in your town pond to pension fraud to sexual harassment. Meanwhile it tightly regulated almost every matter related to sex under the auspices of “public morality.”

We are steadily retreating from government regulation of personal choices that affect no one else while accepting more and more government authority to limit social harm. This is a healthy development that promises to give us a smarter, less intrusive government that better serves its best aims. The faster this process can advance, the better.

 

*On an interesting side note – The country’s first no-fault divorce scheme was signed into law by California Governor Ronald Reagan in 1969.

Tagged with: , , , , , , ,
Posted in Drug War, Libertarian, Religious Right

Paul Ryan inches toward a basic income

Rep. Paul Ryan unveiled the latest stage in his personal evolution on poverty and welfare Wednesday in a speech at the American Enterprise Institute. Like Sen. Marco Rubio, Ryan is part of a small Republican minority still trying to engage on substantive policy issues. Ryan is also like Rubio in that the pursuit is dragging him deeper and deeper into ideologically uncomfortable ground on which he is reluctant to plant a flag.

In his speech he endorsed the same extension of earned income tax credits that President Obama has been advocating without making overt reference to He Who Must Not Be Named. Ryan’s proposal is in some respects even more aggressive than Obama’s. Instead of providing the EITC subsidy in the annual tax return process, Ryan is endorsing Milton Friedman’s old idea of using the EITC as a monthly income floor. The proposal would only affect people who are working and would be relatively small, but this represents the first solid Republican minimum income plan to emerge since the Sixties.

Ryan’s approach to poverty relief offers the benefit of reducing the bureaucratic burden of our social welfare system. In an age of rising complexity, anything that streamlines government without sacrificing essential services should be welcome.

Its flaw is that it is too small to make a difference and only offers relief to people who have a job. That’s a bigger problem than it might sound like and it reflects an ideological misconception common all over the political spectrum.

Our economy is changing at a faster pace than ever, destroying an older category of entry-level jobs that used to be the gateway to a career. The disappearance of these jobs is feeding structural unemployment, which is driving down wages, but that’s not all.

New business models are emerging in this climate to feed off declining wages and rising unemployment. Those business models actually depend for their survival on government subsidies to working families in order to perpetuate a cycle of downward pressure on wages.

The idea that any job no matter how menial or dead-end is a gateway to independence is an almost universally accepted fallacy. No one actually believes it enough to try it on their own kids.

Affluent kids are not competing with each other for positions driving a forklift at Home Depot. They are, however, competing for unpaid internships. They are traveling. They are spending time at summer camps. They are taking the time they need to prepare for careers that might take them somewhere. They can do this because they have the money it takes to sustain these pursuits into their twenties.

Kids in nice neighborhoods might take a job to make some extra money, but their parents are working very hard to make sure that they never have to take a menial job to support themselves or their family. Why? Because taking a job too early will cut them off from opportunities to develop the complex skills and connections required to access to fulfilling careers. Research is starting to back them up, demonstrating that those who fall into these jobs tend to underperform economically for a lifetime.

For those who cannot afford these opportunities, new predatory business models await. The real winners from our assumption that a low-wage job is the cure for what ails the poor are companies like WalMart, McDonalds and Dollar General.

A solid majority of the families on food stamps are working. That statistic is the key to understanding what’s wrong with our approach to poverty, mobility, and the social safety net. The EITC, as currently structured, takes money from taxpayers to subsidize business models that depend on declining wages and desperate workers.

Our welfare system is evolving into a gigantic public subsidy to low-wage employers. WalMart employees alone cost taxpayers more than $6bn a year. McDonalds accounts for $1.2bn. Our belief that that poor people need a job more than they need anything else is leading us to block off avenues to improve their lives. Meanwhile we are spending tax money in an effort to keep them stuck in pointless jobs that will never lift them out of poverty.

For Ryan to embrace the idea of extending the EITC and converting it into a wage floor is a healthy step toward something that might someday matter. In the meantime it doubles down on a system that traps low income families in a cycle of futility while subsidizing business plans built on American desperation. Ryan’s sincere interests in improving opportunity for low income Americans and trimming our bloated bureaucracy are dragging, slowly and irrevocably toward the solution that would accomplish those goals. Let’s hope he someday makes peace with the idea of a minimum income.

Tagged with: , , , ,
Posted in Economics, Welfare State

Immigration, wages and the future of ‘dirty jobs’

fishCrab fishing in Alaska can be a six-figure job. Workers in fish processing factories there earn solid middle class wages. Processing workers who work on a ship often get the opportunity to earn a share in the profits of the voyage, occasionally taking earnings much higher.

Fish processing at a catfish farm in Alabama seldom earns a worker more than minimum wage. The work is long, dangerous, and miserable. All across the south, agriculture and food processing are a big business, but hard work earns lousy money, abusive treatment, and minimal benefits.

We could end illegal immigration with a simple market solution – impose a premium on immigrant labor. The reason we are not going to adopt this simple solution becomes evident by comparing labor conditions in Alaska to the economics of work in the Deep South.

Debates over immigration often pivot on the belief that Americans are not willing to do dirty jobs. The reality is that Americans commonly perform harsh, dirty, dangerous work. They just insist on getting reasonable compensation and decent treatment. They are not sufficiently desperate and powerless to submit to the kind of abusive, semi-slave employment terms endured by illegal immigrant laborers.

In the Mississippi Delta, employers have ready access to a pool of politically powerless illegal migrants willing to endure almost any form of abuse. Employers in Alaska have relatively little access to desperate foreign labor. Until recently, they were able to use a limited supply of “student workers” on J-1 visas. That sham was shut down by the Administration as part of the wider crackdown on immigration abuses. Getting from Latin America to Alaska means crossing three international boundaries and thousands of miles. Alaska is not a realistic option for mass illegal immigration.

To further complicate the picture for employers in Alaska, permanent residents there also benefit from a modest minimum income derived from their share of the state’s massive oil and gas revenues. People there have enough power over their own lives to resist enduring terrible treatment and exploitation. Ask them to do a dirty job and they may do it, but they will insist on getting paid.

The situation in Alaska has an impact on consumers. How much does catfish cost at the grocery store? How much will you pay for king crab or Alaskan salmon? We can and should fix our problem with illegal labor. We should realize, though, that ending this problem will mean changing the shape of our economy in important ways that will cost us money. Finding a reasonable solution requires us to recognize the true scope of the effort.

Across vast segments of the economy, the availability of exploitable illegal immigrant labor is a fundamental assumption of many business models. These laborers are reviled, tormented, and harassed. Ugly cynics build successful political careers stirring up hostility against them. Their children are locked out of access to education and basic community resources wherever possible. They are kept poor, powerless and – most importantly of all – available.

No solution to this problem is waiting on the border. “Border security” is a cynical ploy, a way to score political points without having to change anything. America’s illegal immigration problem is just like its drug problem. It has nothing to do with security or law enforcement and everything to do with economics and demand.

The solution is simple, immediate, and final. Change the economic incentives and the problem becomes an opportunity. Open access for people to come here and work, but make their labor relatively expensive. It is a simple solution, easy to implement, and it would work.

Politicians are not even considering this approach because solving the problem of illegal immigration would upset powerful interests all over our economic system. The kind of simple, minimum-wage based solution that would end the problem of illegal immigration would also radically shift the balance of power in our economy. Imagine how our lives would change if dirty, dangerous, miserable jobs commanded the wages it would take to hire American workers?

Ending the flow of semi-slave labor into our dirtiest, most miserable industries will impose some hefty costs on consumers in the short run that will probably flatten out or drop in time. Along the way, that shift will open new opportunities in higher-wage careers and revive the fortunes of our disappearing working class.

In the short run, some products might disappear completely from stores. Many mass growers might stop planting strawberries or other fruits and vegetables altogether. Apples, blueberries, oranges and other foods might become much more expensive. A large number of restaurants would see their business models become immediately unsustainable and close. Labor shortages for work like roofing, janitorial services and other labor that is currently very cheap would have serious effects on consumers.

What might emerge in the wake of this shift are different business models for food processing, agriculture, construction and restaurants that pay workers much more than in the past while employing fewer people. There would probably be many more restaurants in which you clear your own table while a traditional high-end restaurant experience might become far less common. Smaller scale urban farms might find themselves facing much more favorable economics as the mass farming of certain crops dependent on underpaid labor disappears. Home building and maintenance would require new innovations to remain affordable.

Workers who perform dirty, dangerous, difficult work not easily automated would probably begin earning much higher incomes and enjoy a great deal more power over their own lives. Some products would cost more. Some products would disappear. Some new types of work and new innovations would emerge that we cannot readily anticipate. Ordinary Americans who struggle to earn a living today would make a lot more money. In short, we could move on to face new, better problems.

We could accomplish all of this by harnessing market forces to work their magic. Mandate a higher minimum wage across the board, an even higher wage for non-citizen labor, and place easy, enhanced wage enforcement power in the hands of the workers themselves, legal or illegal. Such measures would, for the most part, price illegal workers out of the job market and make labor exploitation too risky for the market to bear. Illegal labor would still exist around the extreme margins but it would cease to be a mass phenomenon.

Don’t expect to see anyone proposing this approach anytime soon. Decisively shifting power toward workers would change the relative power and rights of low income, low skilled workers all over our economy.

Preventing Mexicans from coming to America is a policy that appeals to Tea Party fanatics. Giving workers, regardless of where they come from, more power over their own economic futures absolutely does not. That’s why Rick Perry is posing in front of machine guns instead of proposing solutions that would end illegal immigration.

Real solutions are available that would bring substantial benefits to accompany their costs. If we are ready to pay $1 per strawberry or buy them from a local grower only available in season, we could have a very different labor market and a very different, more prosperous country. Demogoguery is cheap. Solutions are expensive.

Tagged with: , , , ,
Posted in Economics, Immigration

A market solution for illegal immigration

We could dry up the flow of illegal immigrants into America fairly quickly, without drama, mass deportation, or Governors posing in front of machine guns, merely by changing the economics of the matter. There are easy market solutions that would dampen the demand for illegal labor overnight while slashing our enforcement costs.

We aren’t going to implement them.

Illegal immigration would cease to be a meaningful political problem if we took simple steps to make the hiring of legal or illegal immigrants much more expensive. The reason we will not be implementing such a plan is that we don’t really care that much about illegal immigration, not enough to write a check to end it.

Serious, intelligent immigration reform would offer hefty benefits along with the hefty price tag. A freer immigration system, greater access to a talented global labor pool, and the reduced burden on schools and hospitals in marginal areas would be just a few of the advantages. In the short run though, the cost of ending the era of cheap semi-slave labor would be a shock to the system, radically increasing the cost of some items like a restaurant dinner or a carton of strawberries, while other goods and services might disappear from the market more or less permanently.

Here’s what a practical solution might look like.

– Raise the minimum wage to $10. In economic terms, the presence of a mass pool of exploitable illegal immigrant workers has more or less the same effect as a mass of exploitable domestic labor. When labor prices sag, innovation stagnates and aggregate demand stagnates with it. Our illegal worker problem is to a very large extent a cheap labor problem.

– Set a higher minimum wage for green card holders, say, $12.50. Why should the wage be higher for migrants than for citizens? First, to eliminate the incentives to exploit foreign labor. Migrant labor isn’t merely cheap, it is also weak. At comparable prices many employers would still prefer illegal migrants because they are too desperate to resist terrible working conditions. A wage premium will dampen the urge to lure vulnerable and exploitable workers from abroad.

Won’t contractors and companies simply ignore the rules, leading to a larger black market? Not if the enforcement incentives are set intelligently.

– Enforcement is where this plan gets its relevance. Give workers, even illegal workers, the right to sue an employer in state court to enforce the higher wage, including triple damages and attorney’s fees. Illegal or migrant laborers may be generally reluctant to get near a courtroom. That’s why illegals who have a pending wage suit prior to initiation of deportation proceedings can stay deportation until the suit is completed. Attorney’s fee awards mean that there will be a pool of lawyers ready to serve this community.

– Employers found liable for more than $50,000 in back wages over a one year period can be subject to criminal prosecution and the loss of their corporate status – in other words, responsible individuals within the corporation can be subject to personal liability. The use of fraudulent documents by the worker in question would be a defense. These enforcement provisions would only apply to offenses committed after the law was passed.

– Optionally, some similar provision could apply to higher-earning green-card holders. Perhaps an across-the-board 5% income-premium for green card workers based on a comparison to similar job titles in the same company. These provisions are probably less important at the higher end of the wage scale as those workers are usually better positioned to represent their own interests, but such a provision might make it politically easier to loosen immigration rules.

– Make it relatively easy to obtain a work visa with a biometric ID at a US Consulate. Charge a significant, but not punitive annual fee for the visa, perhaps $500. Instead of admitting 140,000 new work visas each year as we do now, raise that number to at least 2m, if not more. Let the market decide who stays. How much enforcement and new infrastructure could we develop from $1bn a year in visa fees?

– Open access to annual work visas to immigrants already present illegally in the US if they pay a substantial fine, perhaps $3,000, and have no arrest history. Yes, “amnesty.”

– Create an option for green card holders who have been here for a significant length of time, perhaps five years, to transition onto a track toward full citizenship.

The key to this approach is the way it would handle enforcement. Everyone who uses “cheap” migrant labor would not only have to watch the horizon for ICE agents, they would also be subject to an expensive, potentially ruinous lawsuit from every worker they deal with. Immigration enforcement would become every business’s business.

Would there be a flood of new lawsuits? Probably not. Illegals are generally reluctant to get involved in court cases. However, there wouldn’t need to be a lot of lawsuits to radically change the way many businesses operate. Merely by changing the balance of power between workers and the people who hire them we would make the crime of hiring an illegal worker too expensive to commit. The risk of enforcement actions could not be easily mitigated.

Won’t millions of impoverished people from all over the world flood into America to soak up the largesse of our welfare system? Er, no. That’s one of the most bizarre fantasies afflicting America’s immigration reform debate.

Illegal immigrants are not entitled to welfare. Illegal immigrations feed themselves and their families by working, taking whatever jobs they can get no matter how dangerous, dirty, or demeaning. They struggle to get access to schools. According to well-known Communist agitator Sen. Marco Rubio, even legal migrants with immigration status are locked out of access to most of our social welfare benefits. Immigrants admitted under this program should have access to health insurance coverage, but none of the rest of the social safety net.

This approach could effectively end our immigration “problem” in its present form without a border fence, thousands of new border patrol agents, or any other border security measures. It would generate new revenue from visa fees while easing the strain on schools and public hospitals in border areas.

We will not adopt this approach because we do not want to pay the price. It turns out that shutting off the tide of cheap, desperate labor is much more expensive than the political alternative – border security theater and anti-migrant hysteria. Better to have them here, cleaning our restaurants and our kitchens while we publicly revile them then pay the price a post-illegal migrant economy.

What would that price be? It would effect nearly every household in America, forcing us to begin paying the actual, legitimate costs of hundreds of common goods and services rather than shifting those costs on the backs of people fleeing the developing world. More on that to come.

Posted in Uncategorized

Which immigration problem do we want to solve?

Finally, a leader with the courage to protect you from children.

Finally, a leader with the courage to protect you from children.

Answers are only helpful if you know the question. That’s the problem with our efforts to build a sane, reasonable immigration scheme. Markets could provide us with solutions to our immigration challenges, but not until we decide exactly what problem we want those markets to solve.

Is the mere presence of a large number of migrants from Latin America a problem, or are we trying to address the broader problem of illegal immigration? The reason we haven’t settled on an immigration reform scheme that we still aren’t being honest about our priorities.

There are good reasons why illegal immigration should be discouraged. Having a large pool of people who exist beyond the reach of basic legal protections – essentially outside of the social contract – is harmful. Even if it created no economic costs, and in reality illegal immigration probably benefits us far more economically than anyone wants to admit, there are social and moral consequences to this situation that we should not be willing to bear.

That said, when we debate immigration issues it can be difficult to separate authentic problems from cultural biases. Chicago, for example, has a very large population of illegal migrants from Latin America. It also has many from Poland. Guess which population gets the most attention from law enforcement and the public?

When someone says that we should address our immigration problems by first “securing the border” they tipping their hand. It’s gentle way of saying that their main concern is not whether people can come here but who is coming.

We have the most militarized, secured border in the free world. The West has seen nothing that compares to it since the Berlin Wall collapsed. We don’t need a single additional customs agent to address illegal immigration. In fact, with a decent proposal we could send a lot of them home. The solution to the problem of a massive illegal workforce neither starts nor ends at the border.

Securing our physical border in the context of the immigration debate means stopping people from coming here. It means that the problem we are trying to solve is not illegal immigration, but Latin American immigration. If that’s our problem then we are in trouble.

The East Germans had their hands full guarding 800 miles of border stretching across well-settled, easily guarded territory. Our border with Mexico stretches across more than 2000 miles of hell and we are not a monolithic totalitarian state. We want to be able to trade across that border. We want trucks and trains passing through on a consistent basis loaded down with mangoes and strawberries and Volkswagens and computers.

Our campaign to stop illegal immigration so far costs about $25,000 per detainee. That cost will go significantly higher as we seek to achieve even tighter enforcement. The size of the border patrol has increased by more than 500% since 2003. All the while, immigration traffic across our Mexican border has been falling. Estimates of the cost of increased border security range between $28-40bn, a little more than half of what we spend on the entire food stamp program.

That doesn’t begin to account for the billions in lost economic output incurred by the unnecessary delays at border crossings. A universal forced deportation scheme being pressed by the far right would cost roughly $250bn, just shy of what we spend on Medicaid. “Border security” is an extremely expensive solution in search of a problem.

There is no small irony in the fact that the same people moaning about government spending, liberty, and Federal power happily embrace the exploding economic and political cost of a militarized border. It’s almost as if their concerns about government spending were little more than rhetorical cover for some other, deeper concern. What might that be?

On the bright side, if our real concern is the impact of illegal immigration then we have some very powerful options. Many, if not all of the problems presented by mass illegal immigration would be eliminated or at least mitigated if these people had legally protected status and the accompanying responsibilities. We could potentially reform our immigration system to open realistic, practical options for people to immigrate here by choice.

It is virtually impossible to immigrate legally to the US now without existing family ties and even then it is an extremely complex, lengthy and expensive process. Practically none of the Latin American migrants we see in the news have any realistic option for immigrating through official channels.

If we made that kind of immigration possible in numbers more in line with actual demand we could address many of the problems that rise from illegal immigration. Market mechanisms could help cope with some of the problems of mass migration.

The biggest problem with mass immigration is the way it would depress wages at the low end of the labor market. Over time immigration is an economic bonanza, but it has to be understood in much the same context as a capital investment. Immigration does not produce a massive social return on day one. It takes time for new migrants to become established. Some of them, as in any speculative venture, will fail. Opening the floodgates to mass migration of people with little or no modern work skills might produce fantastic returns over time – after all that’s how we built this country. The near term costs could be very painful, though.

What if we could structure labor market incentives in a way that encouraged the outcomes we want while pricing away the outcomes we do not want? Maybe, if we tuned down the rhetoric just slightly, we could build an immigration law structure that made it relatively easy to come to America if you are skilled and prepared to contribute now. Maybe we could also keep the door open for lower skilled labor, but require them meet a higher standard of productivity. Maybe we could make the crime of hiring an illegal migrant or abusing a green card holder, too dangerous for anyone to risk – without having to impose a draconian regulatory scheme.

Best of all, the most powerful mechanisms could come from markets and private action rather than a bigger government. But that would depend on building an intelligent structure. More to come.

Once you know what problem you want to solve, the solutions become clearer.

Tagged with: , , , ,
Posted in Economics, Immigration
Goodreads

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 448 other subscribers