I am a non-ideological (registered independent) fiscal conservative and social moderate. I was not very excited about either presidential candidate last fall but finally decided to vote for Clinton because of Trump’s sleaziness.
As it turned out Mr.Trump was elected because of his strong support from the white working class, especially in the upper Midwestern states of Wisconsin, Michigan and Pennsylvania. Interestingly, the Democrats are responding by proposing legislation to try to appeal more strongly to blue-collar workers.
Of course I disapprove of Donald Trump’s poor handling of the Charlottesville tragedy but I try to avoid being distracted by all of the drama and rather stay focused on his policies and actions. In this respect there are both plusses and minuses.
On the positive side:
North Korea. He is handling this crisis well simply by working through the UN to condemn North Korea’s provocative testing of ballistic missiles. Also his Administration has clearly stated that the goal of U.S. policy is to denuclearize the Korean peninsula, not to achieve regime change in North Korea.
The economy is still chugging along at 2% annual growth. On the deregulation front, the annualized pace of new regulations for 2017 is 61,000 pages, down from 97,000 in 2016. This is the lowest level since the 1970s and has the potential to speed up growth.
On the negative side:
NAFTA renegotiation is just getting started. Any shrinkage of U.S. exports will badly hurt the economy, especially in states like Nebraska which depend so much on agricultural exports.
Immigration. Mr. Trump proposes to dramatically decrease annual legal immigration quotas, especially for low-skilled workers. This is a very poor idea which will hurt the economy, especially in states like Nebraska which have low unemployment rates.
Conclusion. President Trump’s record at this point is mixed, all the more so since the two very important issues of the 2018 budget and tax reform have yet to be resolved in Congress. Mr. Trump’s election may or may not be good for progress in America. We simply don’t know yet.
Our economy is chugging along at 2% annual growth of GDP, not spectacular but not awful either. The unemployment rate has dropped to 4.3%, and low-wage earners are beginning to see decent pay raises. Furthermore there are good indications that GDP growth may rise in the near future to at least 2.5%, see here and here.
As growth increases, unemployment continues to drop, and wages increase more quickly, severe labor shortages in certain job categories are likely to develop. As the New York Times economics reporter, Eduardo Porter, points out, “The Danger from Low-Skilled Immigrants: Not Having Them.”
Eight of the fifteen occupations expected to experience the fastest growth – personal care and home health aides, food preparation workers, janitors and the like – require no schooling at all.
Low-skilled immigration does not just knock less-educated Americans out of their jobs, it often leads to the creation of new jobs – at better wages.
The strawberry crop in California owes its existence to cheap immigrant pickers. They are sustaining better paid American workers in the strawberry patch to market chain who would have to find other employment if the U.S. imported the strawberries directly from Mexico.
The benefits of immigration come from occupational specialization. Immigrants concentrated in more manual jobs free up natives to specialize in more communication-intensive (English speaking) jobs.
The average American worker is more likely to lose than to gain from immigration restrictions. Halting immigration completely would reduce annual economic growth by .3%.
The Pew Research Center estimates that about 30,000 unauthorized immigrants work in Nebraska, 3.2% of Nebraska’s total labor force. They are heavily represented in a handful of industries, making up 18% of Nebraska’s construction workers, 9% of production workers, and 5% of farm laborers. With an unemployment rate hovering around 3%, the Nebraska economy would be severely stressed without these immigrant workers.
Conclusion. Both in Nebraska and nationwide, the U.S. economy has a strong need for immigrant workers. An adequate guest worker visa program is badly needed to provide legal status to these workers who are so critical to the success of the U.S. economy.
My last five posts have discussed several different aspects of the question, “Can the U.S. Economy Do Better?” Our economy has been doing especially poorly since the end of the Great Recession seven years ago (see the chart below). Many people claim that the President doesn’t really have all that much control over the economy. Here is what the2016 presidential candidates are saying on economic policy so far:
Hillary Clinton. She wants national paid family leave, a national minimum wage increase and more government spending on infrastructure projects. She would raise taxes by about $100 billion per year to pay for these initiatives. She is opposed to the Trans Pacific Partnership to expand trade with 11 other Pacific Rim countries.
Donald Trump. His top priorities are trade and immigration policy. Would he be able to successfully address China’s currency manipulation without starting a trade war? How would he be able to round up and deport millions of illegal immigrants without destroying millions of jobs and thereby crippling many businesses? His plan to slash tax rates would boost the economy but also add trillions of dollars to the debt.
As I have discussed over and over again on this blog, see, for example, here and here, there are several fundamental policy changes needed to make our economy grow faster and create more and better paying jobs. We need to:
Make it easier to start a small business by simplifying regulations at all levels.
Lower tax rates and simplify the tax code, paid for by shrinking deductions and closing loopholes.
Respond to globalization and new technology by helping its victims rather than blocking progress.
Our two presidential candidates are appealing to the fears of the voters rather than to their hopes and aspirations. Neither of them is espousing policies which will help the economy really grow in a healthy way.
A Wall or a Path? We need to solve our illegal immigration problem and the key is to set up a viable guest worker program. The fact is that our economy needs foreign workers for many jobs which require hard physical labor such as in agriculture, meatpacking and construction trades. If businesses are able to bring in immigrants when sufficient domestic labor is not available, then other issues such as border security and verifying legal status can easily be resolved.
The U.S. Place in the World. U.S. leadership makes the world a safer place. This means we need a strong military presence all around the world as well as active alliances, trade and military, with many other countries.
Of Banks, Bailouts and Blame. The cause of the financial crisis was the bursting of the housing bubble, in turn caused by an unrealistic government housing policy as well as lax enforcement of existing regulations. Blaming greedy bankers is a copout. The Dodd-Frank Law is overkill which creates a drag on the economy by hampering smaller financial institutions and community banks. The best way to control large banks is to increase their capital requirements.
Who Should Get Tax Cuts? The main purpose of tax reform should be to boost the economy without increasing deficit spending. The way to do this is with across the board cuts in tax rates, paid for by closing loopholes and shrinking deductions. Here are some details. The 64% of taxpayers who do not itemize deductions will get an immediate tax cut and income inequality will be greatly reduced.
Getting the answers to these issues correct will have a large effect on the future wellbeing of our country. The Republican presidential candidates should be commended for grappling with them in a productive manner.
Several months ago the Omaha World Herald reported that Nebraska has approximately 45,000 illegal immigrants, or about 2.5% of the state’s population. Nebraska’s unemployment rate has now dropped to 3.4%, the third lowest in the nation behind only North Dakota and South Dakota. Such a low unemployment rate represents a labor shortage. There simply aren’t enough Nebraskans to perform all of the physically demanding, low skill work needed in the agriculture, meatpacking and construction industries. It is this labor shortage which is attracting such a large number of illegal immigrants to Nebraska. According to the New York Times, the Tea Party has recently changed its focus from “curtailing the reach of the federal government, cutting the deficit and countering the Wall Street wing of the Republican Party to becoming largely an anti-immigration overhaul movement.” This is a very unfortunate development.
Why would it be so difficult to solve our illegal immigration problem in the following manner:
Give all businesses a limited period of time, perhaps six months, to present a list of current employees who are illegal. Everyone on this list without a criminal record would receive a guest worker visa.
Going forward, businesses would be authorized to hire additional foreign workers as needed with guest worker visas issued in their home country. This would eliminate the need for illegal entry into the U.S.
As of a certain date in the near future, all businesses would be required to periodically demonstrate the legal status of all workers on their payroll.
Guest workers would be eligible to apply for citizenship after a lengthy period of time, perhaps ten years.
Once an adequate guest worker visa program has been set up and is operating efficiently, security on our southern border with Mexico would hardly be more of a problem than is security on our northern border with Canada. Illegal immigration should be considered as an economic problem, not a law-enforcement problem.
If it were handled correctly in this way, the problem would disappear in short order!
The sight of thousands of children from Central America sitting in camps at the U.S. border should knock some sense into those members of Congress who are dragging their feet on comprehensive immigration reform. Overall, illegal border crossings are at their lowest level in many years (see chart below). Now is the time to get things straightened out before the illegal traffic starts building up again. When the New York Times, “The Border Crisis,” and the Wall Street Journal, “A Better Border Solution,” agree on an issue, I tend to agree with them. Both newspapers say that the current crisis is the result of illegal immigrants in the U.S. trying to rescue their children from deplorable conditions back home. If they had legal status they would go home themselves and bring their children back to the U.S. but they can’t risk doing this without a visa.
As I pointed out in a recent blog, “Immigration Reform Will Benefit Nebraska,” it shouldn’t be that hard to achieve a comprehensive solution as follows:
All businesses would compile a list of their current employees who are illegal. Everyone on this list, without a criminal record, would receive a guest worker visa as of a certain date. Visas would be transferable from one employer to another.
Companies would be authorized to hire additional foreign workers in their home countries who would then receive a guest worker visa to enter the U.S.
Once the system was set up and operational, all businesses would be required to periodically demonstrate the legal status of all workers.
Guest workers would be eligible to apply for citizenship after a relatively lengthy period of time.
America needs immigrant labor to do the hard low skilled physical work such as in agriculture, meatpacking, and construction, which most Americans don’t want to do. An adequate guest worker system would virtually eliminate illegal immigration, thereby solving a huge current law enforcement problem. It would also give the U.S. economy a big boost by providing all businesses with an adequate source of labor.
We have got to get beyond our hang-up about amnesty to solve this incredibly serious problem!