Trump, Trade & Immigration

Throughout the summer and fall, I’ve been trying to address the serious economic issues underlying the anxiety and anger dominating this year’s presidential campaign. I’ve gotten through some of these intended essays – you can read them in prior posts like The Future of Work and The Great Realignment. And I have a few more to share with you this week. But I keep getting interrupted by the campaign itself.

I know, we all say we don’t want to see anything more about this campaign – but we say that about all those car wrecks, too, don’t we? As I emailed my editors at US News & World Report last week when Donald Trump amped up his claims that the election was rigged: “I wish this guy would stop saying insane things so I could go back to writing about other subjects.”

In any event, I was impelled to dash off another fairly personal piece, revisiting my earlier days in government and law, fighting real election rigging. My conclusion:

[T]here’s always the threat of election cheating. But in our system (unlike, say, Russia’s), it’s thankfully rare. It’s not voters doing it. It’s not hordes of minorities voting illegally but, most often, large numbers of minorities being denied their right to vote legally. And to affect the presidential election outcome would require either a conspiracy larger than the entire U.S. Army, or a discreet, targeted area and a much closer vote count in a pivotal state than we are likely to see in Pennsylvania or any other state this year.

You can read the full argument in The Sorest Loser.   But fortunately, before that, I was asked by the Aspen Institute to address the real costs and benefits of two of this year’s hot-button issues: trade and immigration. In the shorter, online piece, US economic dilemmas: immigration, inequality, trade and the budget, I argued that “The nationalism, nativism and xenophobia given voice by Donald Trump are understandable reactions to the global changes that are harming many working-class Americans. They are not, however, intelligent responses to them. That’s because they miss the real problems driving employment and wage declines for (essentially) non-college-educated, white males outside the country’s thriving coastal economies.”

[T]he real challenge from global trade comes not so much from the existence of cheaper labor abroad as from US companies moving jobs there to take advantage of it. Both nominees this year offer unsatisfying solutions to this problem. Trump has claimed, to great fanfare, that he will simply prohibit firms from doing so. How? By fiat? By turning the US into a business gulag from which companies are prohibited to escape? Not happening. Clinton starts down the more promising path of tax reform to change incentives and “claw back” some of the advantages in abandoning American workers – but her “exit tax” is unwieldy, limited, and unlikely to help. Instead, there is an older and simpler approach: taxing all revenue earned from Americans and crediting companies for all investments – plant and equipment or wages and benefits – made in Americans.

Read the full piece for the policy details. Meanwhile, the longer piece I wrote for the print journal Aspenia expands on this discussion and also addresses the related subject of immigration. You can read the full piece, Facts and Myths on Immigration, below. But here’s the “money quote,” combining several points I’ve been making the last few months:

[T]he real problem confronting the disenchanted voters flocking to Trump’s anti-immigration banner is not immigration…. These angry voters … are not “conservative” and they’re not anti-government, and that’s why traditional Republican leaders have lost them to Trump (who advocates an activist government that protects entitlements – not, unlike, say, Juan Peron). They want government – just for themselves.

But then how does America pay for these expensive programs as the retired population grows? Well, unlike virtually any other country, we can – and will – grow our workforce, increase the number of young workers supporting each retiree, provide more low-cost caregivers for the aging population, increase the level of economic activity through innovation, and generate higher tax revenues to pay for it. What’s the secret weapon?

Immigrants.

As always, I would love to know your thoughts. Feel free to leave your comments below.

Facts and Myths on Immigration 

by Eric B. Schnurer

(From print journal Aspenia)

Colorado – besides being home to the Aspen Institute, Aspenia’s parent organization – is a beautiful state spread across the high plains that ramp slowly up to mile-high Denver, its capital and largest city, and then into the majestic Rocky Mountains heaving upward and hurtling downward again for hundreds of miles westward. There’s a saying in Colorado politics: A developer is someone who wants to build his mountain cabin this year; an environmentalist is someone who built his mountain cabin last year.

The allure of the American Dream and the desire to close the door behind oneself once attaining it are two sides of the same coin. Americans have long prided themselves on being a country of immigrants – and have for just as long feared immigration and attempted to shut it off for those coming next. Most Americans today would find it surprising to hear that there once was tremendous opposition to, and prejudice against, such newly-arriving supposed-undesirables as (more or less in order) Germans, Irish, Italians, other Southern Europeans, and Slavs. On the West Coast, in particular, an influx of Chinese immigrants to work the railroads and goldmines of California fanned anti-Chinese hostility. Jews, of course, were objects of fear and enmity throughout the great immigrant waves after the 1848 European revolutions and the years leading up to the Russian revolution. In World War II, Japanese-American citizens were herded into concentration camps over misplaced fears about their loyalty.

All prior waves of immigration, which made the US what it is today, were met by strident political reactions. In the 1850s, an expressly anti-immigrant party was formed, calling itself the American Party, but it is better known to history as “the Know Nothings”: Party members were instructed to say they “know nothing” about the secretive group when asked – leaving a legacy of “Know-Nothingism” that serves as a recurrent and apt epithet in the US to this day for those with similar views. It has been reflected throughout the nation’s history in immigration restrictions aimed at arrivals of particular ethnicities and nationalities, based on assertions that their religious and cultural differences made them a threat to the nation’s values and precluded assimilation, or that they were taking jobs from “real Americans.”

Obviously, such attitudes continue today. A poll just before the Republican convention this past summer found that most white Americans were skeptical of immigration – as were Hispanic Americans, the longer they had been in the US: the same urge to close the open door behind oneself.

Nevertheless, the US today is the greatest nation of immigrants in the world, with 47 million – roughly 20 percent of the world’s immigrant population. (The US immigrant population roughly doubles if you include birthright citizens – immigrants’ children, lawful or not, born on US soil – a status that the US and Canada, alone in the developed world, recognize.) Similarly-large, continental nations like India (2.3 percent), Brazil (0.8) and China (0.4) lag far behind – as do such countries in the news for their relative immigrant-friendliness as Germany (#2 in the world at 4.9 percent) and Canada (3.1). Most Americans learn as children the lines from the poem, The New Colossus, by Emma Lazarus – “Give me your tired, your poor/ Your huddled masses yearning to breathe free” – inscribed on the base of the Statute of Liberty in 1903, at the height of the country’s greatest immigration wave: It is a national point of pride.

And yet the argument persists in every generation: Are immigrants destroying America?

Like all ideological arguments, each side believes the statistics support the position they already hold. The data are fairly clear-cut, however, if a bit more nuanced than the usual black-and-white debate allows. Virtually all studies show that immigration boosts the economy, at least in the aggregate; in fact, the Congressional Budget Office found that the failed attempt at immigration reform a decade ago would have increased Gross Domestic Product by 1 percent per year and created an additional 3 million jobs by now.

But that’s in the aggregate. The argument about whether immigration undercuts wages for “real Americans” turns out to be more complicated: A Federal Reserve Bank economist found a slight increase in wages for professionals – but a slight decline (less than 1 percent) for manual workers. Another economist similarly found a decrease in wages among low-skilled workers – an effect that was stronger in cities where there were more immigrants and amongst workers with lower skills – but increased wages for high-skilled workers. Yet another study concluded that immigration raised wages of native-born Americans but reduced those of existing immigrants, because these new immigrants take the places of their predecessors.

In sum, immigration is a major driver of the US economy overall, and particularly in the vital technology start-up field: Immigrants found start-ups in America at a higher rate than the native born – although the percentage of Silicon Valley start-ups due to immigrants has declined markedly from a majority (52%) in the decade through 2005, to “only” 44% since then due to immigration restrictions. But the benefits – as with everything – are not uniform: The top of the pyramid benefits greatly; low-skilled workers – including other immigrants – suffer, however.

As for the largely non-economic arguments against immigration, though, there is scant evidence to support them. Do immigrants cause crime? The answer is a resounding “no,” at least as to violent crime; there is some evidence that immigration can be associated with a small amount of property crime – largely related to poverty – but its costs, at less than $1 billion annually, are dwarfed by the economic benefits. How about the specter of Islamic terrorism and the imposition of sharia law that haunts so many on the right? Muslims appear, in fact, to be more assimilation-oriented than most – with 70 percent becoming US citizens, compared with only 50 percent of other immigrants. A 2011 study by the Pew Foundation found Muslims to be “highly assimilated into American society,” with 80 percent expressing satisfaction with their adoptive country. The FBI says that it gets most of its tips about radical Muslims from … other Muslims.

In fact, it’s the exception that proves the rule: One community – a neighborhood in Minneapolis, Minnesota, known as “Little Mogadishu” – has produced one-quarter of all American recruits to ISIS; it is noteworthy for its poverty. On the whole, however, the Muslim community in America is quite comfortable: The Center for Immigration Studies – a non-partisan think tank whose board includes leading conservatives – reports that “Muslim immigrants of recent years boast exceptionally high levels of education” and that “Muslim Americans proudly say that theirs is ‘the richest Muslim society on Earth,’ and they are right; more than that, it may be the most accomplished.” In short, in the US Muslims are far more assimilated than in Europe – and have produced far fewer terror attacks and markedly fewer ISIS recruits, as a result. America’s assimilationist ideology in fact helps it.

So are Donald Trump’s angry supporters wrong to be angry? No – but their anger against immigrants is misplaced. Trump’s vote is heavily concentrated amongst older white men, particularly those with lower educational levels. This demographic feels itself under assault: Whites no longer dominate the country (although, in reality, they remain a majority and, even after slipping below majority status in another decade or so, will still make up by far the largest racial group in the country). Christians feel persecuted (although 83% of Americans self-identify as Christians and Americans are well-known as the most church-going population in the developed world). Men are losing out in the workplace (even though the top positions at the largest corporations are still overwhelmingly held by men).

Meanwhile, however, the economic position of these voters has stagnated and declined – and most rapidly in the last eight years since the advent of the Great Recession. So it is easy to see how the correlation of this decline with larger demographic and cultural changes – most obviously of all, the first black president, potentially to be succeeded by the first woman, book-ending the Supreme Court decision last year declaring gay marriage a constitutional right – provides an easy leap to causation. The fear these cultural changes are engendering are hardly unfathomable – or new: In his speech at the 1968 Republican Convention nominating Richard Nixon – upon whose campaign Trump is explicitly modeling his own – Nixon’s vice president, Spiro Agnew, declared, “We are a nation in crisis. Right now change rules America. It’s time for America to rule change.” But all these changes are themselves part of a larger tectonic global shift, of which non-Caucasians, immigrants, foreigners and even liberals are not the cause.

The angry working class is right to be angry about jobs and wages: Their jobs have been – and continue to be – threatened. But it’s not because a bunch of immigrants have come over here and taken those high-paying manufacturing jobs. It’s because those jobs, to the extent they still exist, have been shipped overseas. Yes, US jobs are threatened by lower-paid foreigners – but those abroad, not in the US. Trump even hinted at this in his apocalyptic acceptance speech at the Republican convention in July, when he declared that he not only would restrict immigration and renegotiate trade deals, but also would stop US companies from moving their operations abroad. Of course, it’s not entirely clear how he could do that – or what major corporate leaders, most of them Republicans, would say about such a thing.

American workers deserve a platform that combats their real problems. But the real problem confronting the disenchanted voters flocking to Trump’s anti-immigration banner is not immigration – after all, while relatively downscale, these are not the workers at the bottom whom the studies find losing out to low-paid immigrants – or even trade. It is the hemorrhaging of the former manufacturing jobs that paid relatively low-skilled and lightly-educated workers relatively well. Yes, renewed trade restrictions would drive back up some of the wages in these areas, at least in the short term – but they would hurt long-term demand for their products by reducing US access to foreign markets, and would increase the cost-of-living for Americans across the board. Again, trade benefits America in the aggregate; it nonetheless hurts many individual Americans. These workers would – and increasingly will – be coming out on the short end of the economic stick anyway, however, as the value of manufacturing jobs decays relative to other fields requiring newer skills and higher levels of education, and as businesses find themselves more able to substitute capital (in the form of technology and robotics), more cheaply, for workers.

So the world’s direction – as Trump portrays it – is indeed grim for these voters. But there’s one further challenge that the economically-threatened Americans drawn to Trump’s rhetoric face; fortunately, it’s one that America is uniquely positioned to overcome: As in all developed countries, the US faces a burgeoning fiscal problem over the next three decades as the older generation – the core of the Trump vote – enters its final, and extremely expensive, years. Conservatives generally call for meeting this challenge by cutting their expensive “entitlement” programs – mainly Social Security and Medicare. Good luck with that: It’s their own constituency now that depends on these programs – hence the Tea Party’s simultaneous demands for the federal government both to repeal Obamacare (which expanded health benefits to the poor and young) and to “keep its hands off” their Medicare: These angry voters – both in the US and in Europe – are not “conservative” and they’re not anti-government, and that’s why traditional Republican leaders have lost them to Trump (who advocates an activist government that protects entitlements – not, unlike, say, Juan Peron). They want government – just for themselves.

But then how does America pay for these expensive programs as the retired population grows? Well, unlike virtually any other country, we can – and will – grow our workforce, increase the number of young workers supporting each retiree, provide more low-cost caregivers for the aging population, increase the level of economic activity through innovation, and generate higher tax revenues to pay for it. What’s the secret weapon?

Immigrants.