Monthly Archive for July, 2010

Two Arguments In Favor Of Immigration

With the Arizona (anti-)immigration laws coming into affect soon, I have seen a lot of arguments in favor of immigration by those opposed to the Arizona laws. Most of them are either weak on economics, or miss the point completely. As a strong supporter of immigration, I thought I’d give two of my favorite arguments in favor of immigration.

My favorite argument in favor of immigration is that immigration is a huge boom to the immigrants themselves. It is, without a doubt, the strongest poverty alleviation tool in the history of man. Nothing else, no social program, no foreign aid, no economic reform, nothing, can so positively improve the lives of people like the freedom of an immigrant to move from an underdeveloped country to a developed country. The only way immigration is even debatable on humanitarian grounds is for one to assign almost zero importance to the welfare of the immigrants themselves. The argument is made stronger when you consider that immigrants also have a (small) net positive affect on the developed country. But even if you disagree, and believe that immigrants are a net loss to the receiving country, that loss would still have to be weighed against the overwhelming positive gain it gives immigrants themselves, almost always of which consist of the poorest members of the world. An impossible hurdle to overcome.

My second favorite argument in support of immigration, and this one specifically appeals to my libertarian and conservative friends, is that immigration is mutually exclusive from social programs. You have to pick: either an economy with abundant immigrants and low levels of social programs, or an economy with abundant social programs and low levels of immigrants. You can’t have both. Counter intuitive you say?

Not really:

Although poor immigrants are likely to support a bigger welfare state than natives do, the presence of poor immigrants makes natives turn against the welfare state. Why would this be? As a rule, people are happy to vote to “take care of their own”; that’s what the welfare state is all about. So when the poor are culturally very similar to the rich, as they are in places like Denmark and Sweden, support for the welfare state tends to be uniformly strong.

As the poor become more culturally distant from the rich, however, support for the welfare state becomes weaker and less uniform. There is good evidence, for example, that support for the welfare state is weaker in the U.S. than in Europe because our poor are disproportionately black. Since white Americans don’t identify with black Americans to the same degree that rich Danes identify with poor Danes, most Americans are comfortable having a relatively small welfare state.

Thus, even though black Americans are unusually supportive of the welfare state, it is entirely possible that the presence of black Americans has on net made our welfare state smaller by eroding white support for it.

Immigration is likely to have an even stronger counter-balancing effect on natives’ policy preferences because, as far as most Americans are concerned, immigrants from Latin American are much more of an “out-group” than American blacks. Faced with the choice to either cut social services or give “a bunch of foreigners” equal access, natives will lean in the direction of cuts. In fact, I can’t think of anything more likely to make natives turn against the welfare state than forcing them to choose between (a) helping no one, and (b) helping everyone regardless of national origin.

This is not something peculiar to one blogger, this is widely recognized on the left and the right. From Paul Krugman and Matthew Yglesias on the left, to Bryan Caplan, Jeffrey Miron and David Friedman (also here) on the right.

Taking the side of immigration over safety nets doesn’t just make sense economically, it also makes sense on humanitarian grounds. As Bryan Caplan explained:  “…unlike the welfare state, immigration has and continues to help absolutely poor people, not relatively poor Americans who are already at the 90th percentile of the world income distribution. There’s no reason for libertarians to make apologies to social democrats: Libertarian defenders of immigration are the real humanitarians in the world, and the laissez-faire era of open borders without the welfare state was America’s real humanitarian era.”

Quote Of The Day

“When historians look back on this period, they will see it as another progressive era. It is not a liberal era — when government intervenes to seize wealth and power and distribute it to the have-nots. It’s not a conservative era, when the governing class concedes that the world is too complicated to be managed from the center. It’s a progressive era, based on the faith in government experts and their ability to use social science analysis to manage complex systems.” — David Brooks

Its A Spending Problem

The WSJ reports:

Even if all Bush tax cuts are extended and the AMT is patched, tax revenues will rebound to 18.2% of GDP by 2020—slightly above the historical average. They will continue growing afterwards…

CBO figures show spending…which has averaged 20.3% of GDP over the past 50 years… surging to a peacetime record 26.5% of GDP by 2020 and also rising steeply thereafter.

Putting this together, the budget deficit, historically 2.3% of GDP, is projected to leap to 8.3% of GDP by 2020 under current policies. This will result from Washington taxing at 0.2% of GDP above the historical average but spending 6.2% above its historical average.

Link via Goodman.

Greenwald vs Frum

I am admittedly weak on foreign policy and as of late I have been trying to catch up. I just finished Noam Chomsky’s book, Failed States and have tried to get my hands on as many debates as possible. So you can imagine my excitement when I found out that two of my favorite bloggers, David Frum and Glenn Greenwald, were doing a bloggingheads together. Both represent intelligently opposite sides of the political spectrum.

On my bicycle ride home today I was able to listen to the full discussion. Though it wasn’t as disagreeable as I expected, the ending of it does touch on important civil-liberty issues and gets to alot of the heart of the disagreement.

The full discussion is worth your time but if you could only listen to one section, I recommend the last ten minutes which I have cut below.

The Threat Of Iran

Israel Prime Minister Netanyahu lays it out:

I think to fully translate understanding into actions, we must address the question of whether the world can live with a nuclear Iran. For a lot of influential people, and I suppose for some of the people here today, a nuclear-armed Iran would certainly be a danger, but perhaps I think it wouldn’t be a new danger. After all, the Soviets had nuclear weapons. They were contained. So, too, it is argued, a nuclear-armed Iran could be also contained.

But the Soviet Union is far different and was far different from what we see today in Iran. The Soviets certainly had global, ideological ambitions, but in international affairs, they acted with supreme rationality. Every time the Soviets were faced with a choice between their ideology and their survival, they chose survival: in Berlin, in Cuba and elsewhere. And to the best of my knowledge, there were not many Soviet suicide bombers.

The Iranian regime is different. They’re driven by a militant ideology that is based on an entirely different set of values, a value system that may seem entirely irrational to us but is pervasive, very powerful, among those competing for leadership among the Islamic militants.

Look at what happened nearly a decade ago in another part of this militant world. The Taliban allowed al Qaeda, operating on its soil, to dispatch terrorists to bomb New York, this city, and to bomb Washington. Now, what were they thinking? Did they think that the greatest power in the world would simply ignore mass destruction in its cities? Did they think that the United States of America would ignore an attack on its financial center, on its military headquarters, on its capital city? Were they that stupid? Or were they instead driven not by cool reason but by a fiery fanaticism that overcomes normal logics?

Iran sends children into mine fields. Iran denies the Holocaust. Iran openly calls for Israel’s destruction. Iran empowers Hezbollah with rockets and has overtaken half of Lebanon. Iran empowers Hamas with rockets, has overtaken Gaza and half of the Palestinian polity. Iran has sent saboteurs and terrorist squads into Egypt. Iran sends tentacles into the Yemen and threatens directly Saudi Arabia. Iran sends weapons into South America. This is what they do today when they don’t have nuclear weapons. Think of what they will do tomorrow when they do have them.

It is very hard for modern men and women to come to terms with the role of irrationality in human affairs. We tend to think that people and states are driven solely by interests, by a sober calculation of cost and benefit. We must recognize that those who glorify death and those who dispatch hordes of suicide bombers are not driven by grievances which can be addressed or by a despair which can be alleviated.

We must recognize that there are wide-eyed true believers, even mad believers in the world. There are fanatics who subscribe to a twisted creed and they are willing to pay any price of its realization. And they are driven by a fervent hope that they will succeed at any price.

Shakespeare advises to see the method in the madness. But facing today’s militants in the Greater Middle East, we should be well-advised to see the madness in the method — to recognize that not everyone is constrained by the calculus of cost and benefit that has been associated with nuclear weapons; to recognize that some people, organizations and regimes might act in ways that no one has acted since the advent of the era of nuclear peace that has followed Hiroshima and Nagasaki. We must not allow the world’s most dangerous regimes to possess the world’s most dangerous weapons. This is the single greatest challenge of our time, and we must not fail to address it.

Full interview here.

The Face Of The Teachers Union

Many of my friends still innocently assume that the teachers union is really out to help the students, they have no real self interest in their own personal gain over those of students. Articles like this should remove them of such naive beliefs.

Quote Of The Day

“Wading through the online debates, I note that opinions on stimulus are nearly 100% correlated with the composition of that stimulus, and the opinionator’s prior view of that activity.  So when Democrats are in power and stimulus is mostly spending, liberals think that the stimulus is an issue of fierce moral urgency stymied by venal greed and rank idiocy, while conservatives develop deep qualms about budget deficits.  When Republicans are in power, and stimulus consists mostly of tax cuts, Democrats get all vaporish about deficits and the income deficit, while Republicans suddenly realize that the normal rules don’t apply in an emergency.  When out of power, both sides will grudgingly concede that some small amount of highly temporary stimulus might be all right, but note (correctly) that the other side seems to be trying to make permanent as much of this “stimulus” as possible.” — Megan McArdle

The Next Fiscal Stimulus

Harvard economist Ed Glaeser gives his recommendation:

But if America does embrace another stimulus round, we should limit the government’s role to being the big borrower rather than the big spender. Cutting payroll taxes for lower-income workers who have just been unemployed is an example of stimulus through borrowing, rather than spending. The government isn’t actually spending money on government services; it’s just borrowing the money and giving it to newly employed workers.

The most orthodox models, derived from the logic of  David Ricardo, suggest that this kind of inter-temporal shuffling of taxes has limited downside risk, as long as the government isn’t at risk of default. Consumers can prepare for expected future taxes by saving today’s tax cuts. Moreover, reducing the payroll tax has the added advantage of increasing the incentives to work during a downturn.

The case for more complicated tax tweaks that affect other behavior is weaker….

The case for more government spending on tangible government products is most problematic.

While it is easy to get all misty-eyed about the  Tennessee Valley Authority, public spending on roads or  high-speed rail can be enormously wasteful. At the extreme, spending a billion dollars on a bridge to nowhere may temporarily increase employment and gross domestic product, but it does so by burning a billion dollars on something no one wants. Infrastructure is serious business, and it is impossible to spend quickly and wisely.

While wading in ignorance, it’s best to avoid the paths near the most dangerous depths.

There is little downside to giving a tax break to previously unemployed low-income workers. Those dollars are being given to people who value them. Building a bunch of unneeded highways, conversely, is a road to waste. The political and economic case for a second stimulus is strongest if that stimulus means a temporary tax reduction and weakest if the package is yet another increase in the size of the public sector.

Full post can be found here.

Quote Of The Day

“First, the Environmental Protection Agency can relax restrictions on the amount of oil in discharged water, currently limited to 15 parts per million. In normal times, this rule sensibly controls the amount of pollution that can be added to relatively clean ocean water. But this is not a normal time. Various skimmers and tankers (some of them very large) are available that could eliminate most of the oil from seawater, discharging the mostly clean water while storing the oil onboard. While this would clean vast amounts of water efficiently, the EPA is unwilling to grant a temporary waiver of its regulations.” — Paul Rubin, via David Henderson

Quote Of The Day

For 2010, the #1 American-made car is the Toyota Camry for the second year in  a row, followed by the Honda Accord.  Toyota has two other models in this year’s top ten, the Tundra at #7 and the Sienna at #10; and Honda has the Odyssey at #6.  So the two “foreign car companies” – Toyota and Honda – captured half of the top ten spots for American-made cars in 2010, just like last year.  ” — Mark Perry