The Bear’s Lair: Finally, an immigration proposal that makes sense

Ever since Senator Edward Kennedy’s 1965 immigration legislation, both Republican and Democrat efforts to reform immigration policy have been marked by sentimentality and bad faith with American workers. This column pointed this out in January 2004, when President George W. Bush’s proposed reform promised to immiserate further workers who had already gained nothing from the preceding 30 years. Now after two further failed attempts to make the problem worse in 2007 and 2013, we have a bill from Senators Cotton (R.-AR) and Purdue (R.-GA), the RAISE Bill, that could improve the position. It deserves our wholehearted support.

Twenty years ago, Milton Friedman, a moderate supporter of open borders, told the fanatically open-borders Wall Street Journal “It’s just obvious you can’t have free immigration and a welfare state.” The subsequent twenty years have proved the validity of Friedman’s argument, as the welfare costs of around 11 million illegal immigrants have drained both Federal and state treasuries.

However, Friedman’s assumption, that without a welfare state you could welcome immigrants ad infinitum, does not stand up to closer examination either. Transportation costs and times have plummeted since the halcyon pre-1914 world in which immigration was truly free, so the dangers of a flood that overwhelms the recipient country is much greater – we have only to look at the number of “refugees” seeking to better their lot in Europe.

Then Friedman’s assumption that an immigrant looking at a country without a welfare state will take a rational view of his potential earning capacity and living standards is also flawed. People are naturally optimistic, and the grass on the other side is always greener. The number of Bosnian and Serbian doctors working in New York as janitors, an appalling waste of human capacity, is sufficient indication that, when it comes to immigration, migrants suffer from irrational optimism. Thus, even without a welfare state, a rich country with good PR, such as the United States, is always likely to suffer an excess of immigration.

Before 1914, the economic balance of advantage was tilted towards higher immigration. Industrialization had made some countries much richer than others, yet those industries required an almost unlimited supply of relatively unskilled labor to expand. If you could put immigrants straight off the boat to work in Henry Ford’s Highland Park assembly line to make Model T’s, everybody benefited. As Friedman noted, welfare provision was minimal, so the immigrants would not cost the country significant sums in social security and Medicare, even if they arrived here relatively late in life. At that point, immigration was genuinely a win-win proposition.

However, the cost of travel, the industrial structure of the United States and the world in general, and the global population are entirely different to their pre-1914 situation. The last point is perhaps the most important; in 1914 the world’s population was only 1.8 billion, compared to four times that level today. U.S. population was under 100 million, also a fraction of the 320 million today. With travel being relatively much more expensive, it was impossible for even the relative level of immigration to reach the heights it could easily attain today. In absolute terms, it would have been completely impossible for the U.S. to suffer the kind of population pressure from immigration that is all too likely today.

From this consideration, the best long-term solution to immigration, as to environmental and other problems, is population control. The global population in 1800, at the start of the Industrial revolution, was a mere 1 billion. Even by 1914, it had not quite doubled, to 1.8 billion. Had it simply kept the moderate 19th Century growth rate to today, it would be only around 3.2 billion. In those circumstances, it is likely that the entire globe would now enjoy at least a middle-income Malaysian level of wealth, with environmental and immigration problems correspondingly reduced. World poverty and the excessive immigration pressure on Western societies is thus entirely due to 20th Century profligacy.

What a pity! Over the very long run, a global population diminution program is needed to return the population, ideally to 1 billion but at least to the 3.2 billion we could be enjoying today. If such a program is attempted and is successful, the global problems of poverty, environmental decay and immigration go away. We are unlikely to lose any supreme geniuses by such fertility forbearance; it must be remembered that Shakespeare and Newton, the two pre-eminent figures of the last millennium, both arose within a century of each other in a country of 5 million people.

Without such population control, as the troubles of southern Europe are attesting, the pressure for immigration into wealthy countries is grossly excessive. Wealthy countries have no obligation to give in to this pressure; their governments are responsible to their own citizens, not to outsiders who may wish to enter. It is clear above all that a heavy influx of low-skill immigrants puts intolerable strain on the wages of low-skill domestic citizens, as well as on the welfare and policing budgets. Domestic citizens have a right to expect that their wages will not be forced downwards by their government, and that their old age will be protected in terms of social security and Medicare. The citizenry has repeatedly voted to create and perpetuate those programs, and hence they must be protected.

Low-skill immigration thus needs to be restricted as far as possible. The Trump administration’s discouragement of illegal immigration and proposals to build further fencing along the southern border will restrict the illegal portion of this, as will the mandatory adoption of e-verify and some high-profile arrests of employers who flout immigration laws. “Sanctuary cities” as well, need to be conquered through the law courts and through cutting off funding. Their approach is nullification just as was Senator John C. Calhoun’s (D.-S.C.) attempt to resist the 1828 “Tariff of Abominations” – and with a much less clear moral case than Calhoun’s. The RAISE bill’s abolition of the infamous 1990 lottery of 55,000 random entry permits (signed into law by the bleeding-heart leftist President George H. W. Bush) and its restriction of chain migration to spouses and minor children will be a great help in this respect.

There are however two programs which the RAISE bill does not touch: the H1B and H2B visa programs. These are essentially indentured servitude contracts, by which foreign workers, either skilled (H1B) or unskilled (H2B) can be imported into the country at lower than market wages to displace domestic workers and reduce employers’ labor costs. For the low-skill workers of H2B, complete abolition is a no-brainer; if farm crops cannot be grown in the U.S. using domestic labor, then they should be grown overseas in countries with lower wage rates. David Ricardo’s 1817 Doctrine of Comparative Advantage will tell you this; to legislate otherwise is pure crony capitalism, immiserating American workers and efficient foreign producers alike.

The RAISE bill uses a points system like that used in Canada and Australia to select high-skill immigrants into the United States, while reducing the overall total by about a half, to its level in the 1980s. This should allow employers to get additional labor when they need it, without driving down wages in the way the H1B visa does. Under the RAISE bill the immigrant worker is hired on the same terms and with the same freedoms as the domestic worker, rather than being an indentured servant as are the unfortunate H1B victims.

With this immigration system, there would be no need for H1B visas, and no effect of driving down domestic wage rates in high-skill areas. (It is notable that starting salaries for top lawyers, who face no effective foreign competition are more than double starting salaries for computer programmers with masters’ degrees, even though computer programmers are far more useful to the economy.) Since H1B visas have a pernicious effect on the U.S. labor market, and are troubling in that they import workers with no bargaining power against their employers (because they cannot get another job within the United States without re-applying) they should go. The RAISE bill system, doubtless after a few teething troubles, can fully satisfy the legitimate needs of the tech sector.

Any Republican who thinks corporate tax reform will take the place of Obamacare repeal in convincing Trump voters not to desert in 2018 is delusional. Passing the RAISE bill, on the other hand, hated as it is by multinationals, leftist elites and the media, will show blue-collar voters as well as the more thoughtful intelligentsia that Trump and the Republican party finally “get it” in serving their interests.

There is no question that the RAISE bill immigration system is best for the living standards of both low-skill and high-skill U.S. workers. With modern global sourcing techniques, lower-wage jobs can easily be outsourced to emerging markets, providing employment there. Emerging markets will not become wealthy, as they should, until their population pressures have been alleviated; that, rather than free immigration, should be the prime objective of all those concerned for the welfare of the world.

(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)