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.
I want to emphasize that I voted for Hillary Clinton on Tuesday because Donald Trump has such a sleazy and mercurial personality. But Mr. Trump was clearly the change candidate and we need change big time. His strongest base of support is the white working class which has not really recovered from the Great Recession of 2008-2009 and he will surely try to help out these people.
Here are the changes we need in order of importance:
Grow the economy faster. Tax reform, individual and corporate, and regulatory reform are what are most needed. Mr. Trump and the House Republicans are in rough agreement on both of these major initiatives and hopefully the new Republican led Senate will go along. The best kind of tax reform means to lower tax rates and shrink deductions enough to avoid losing tax revenue. This can be accomplished if a real effort is made to do it this way.
Begin to shrink our massive debt. This can only be done by major entitlement reform, meaning to control the costs of Social Security, Medicare and Medicaid. Medicare should be transitioned over from a single payer system to a premium support system, consistent with a reformed Affordable Care Act. Healthcare costs can only be contained by giving consumers more skin in the game, meaning higher deductibles supplemented with health savings accounts.
More assertive foreign policy. Worldwide peace and stability depend on our own economic and military strength. Right now China, Russia and Iran think they can push us around. President Trump will not let this happen.
Trade and immigration policy. Most knowledgeable people agree that international trade is generally beneficial. We simply have to do a better job of retraining American workers who lose their jobs to foreign competition. The key to immigration reform is tougher border security plus an effective guest worker visa program.
Conclusion. The Republican House of Representatives has an excellent plan, “A Better Way,” for American economic, fiscal and social renewal and Mr. Trump is largely supportive of it. This augers well for fundamental progress in the next four years.
In my last post, “Donald Trump’s Best Chance to Win in November,” I said that the best way for Mr. Trump to broaden his appeal beyond working-class whites and to have any chance of winning the presidential election is for him to endorse the reform plan, “A Better Way,” recently developed by the Republican House of Representatives. Here is a brief and positive summary of the Trump platform so far:
His tax plan is highly pro-growth and will not cost nearly as much as the previously advertised $10 trillion over a decade.
He supports legal immigration and simply wants to solve the illegal immigration problem, one way or another.
He is not opposed to foreign trade per se but wants to negotiate, from a position of strength, with countries that manipulate their currencies, steal intellectual property or compel companies to disclose trade secrets as a condition of entering their markets.
His policy proposals so described are completely compatible with the House’s “A Better Way” reform plan whose planks are:
Poverty. Reward work. Tailor benefits to people’s needs. Improve skills and schools. Demand results.
National Security. Defeat the terrorists. Protect the homeland. Defend freedom.
The economy. Regulate smarter. End bailouts and cronyism. Put students and workers first.
The constitution. Make government more accountable and more representative. Restore constitutional checks on spending.
Health Care. More choices and lower costs. Real protections and peace of mind. Cutting edge cures and treatments. A stronger Medicare.
Tax reform. Simplicity and fairness. Jobs and growth.
These guiding principles are being fleshed out into complete policy documents. They do indeed represent a better way forward for our national government. Donald Trump could do far worse than to endorse this comprehensive reform plan developed by the House Republicans. It would show that he is serious about “Making America Great Again.”
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.
The unemployment rate in Nebraska is now down to 2.9% and even in Omaha, a relatively large metropolitan area of 850,000, it is only 3.2%. As reported by the Omaha World Herald today, such a low unemployment rate creates big problems for employers at all levels. For example:
In fast foods, beginning salaries are up to $10 or more per hour, well above Nebraska’s new minimum wage of $8 per hour, and raises for responsible employees are frequent. Manager’s salaries are increasing rapidly. Benefits are being expanded into such areas as tuition reimbursement.
For the predominantly minority residential area of North Omaha, with a traditional unemployment rate of up to 20%, local manufacturers are beginning to provide transportation vans to pick up and drop off workers.
The Omaha Chamber of Commerce is running an ad campaign in Seattle to appeal to soon-to-be-laid-off Microsoft workers, because there are lots of vacant tech positions in Omaha.
Both the Greater Omaha Chamber of Commerce and the Lincoln Chamber of Commerce have endorsed LB 586 in the Nebraska Legislature to ban discrimination in the workplace based on sexual orientation and gender identity. The purpose, as expressed by both chambers of commerce, is to create a more attractive work environment in order to attract more workers from other states. The neighboring states of Iowa and Colorado have passed such laws.
What more can be done? The welcoming labor market should provide a bigger incentive for both high school and college students to finish their studies and graduate. Jobs will be waiting for them! The labor shortage should also help create more interest in immigration reform. This would insure that Nebraska has an adequate number of legal guest workers to meet the needs of the agricultural and meatpacking industries.
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!