Border Follies

Political debates on illegal immigration and border control can quickly veer off course, miring the discussion in a swamp of recriminations. This is where we currently find ourselves. To escape the quagmire we should acknowledge some recurring myths and fallacies:

1. Frequently we lump together lawful immigration and illegal immigration, but there is an important political distinction between the two: There is wide public support for lawful immigration, but little tolerance for illegals;
2. The illegals themselves are the wrong focus. Attacking or catering to illegal immigrants and migrants only invites distracting charges of racism or pandering. Illegals are responding rationally to the incentives in place; to change their behavior we need to change the incentives. This, as opposed to mass deportation, is within our control;
3. This is not a partisan issue between Republicans and Democrats, or liberals and conservatives. The costs and benefits of uncontrolled immigration fall along the lines of elites vs. non-elites. Both political and business elites benefit from a free flow of labor, while ordinary taxpayers and workers get stuck with much of the bill. The power of the ballot box is the only recourse these citizens have;
4. All countries benefit economically from open markets (this includes capital and labor markets as well as goods markets), but the costs and benefits of trade are unevenly distributed across society. A political solution must allow for the distribution of these costs and benefits in some manner that insures free and open trade. It’s foolish to throw the baby out with the bathwater;
5. To increase border security we must first control the flow of economic labor migration and this can best be addressed by changing the incentives.

The nature of the problem is two-fold: an economic disequilibrium between the US and less developed countries in their stocks of capital and labor and their growth rates; and a stark disparity in the provision of social benefits between rich and poor countries. These two related issues color both the economics of trade and politics of labor migration.

The way forward is to remove structural barriers to the cross-border rationalization of the supply and demand for goods and services. This means allowing price changes by removing price subsidies and tariff protection for industries on both sides of the border, which requires political fortitude from US and foreign governments alike. Only market price adjustments can affect the flow of capital and labor across borders. The result will be that some goods and services prices in the US will rise and some US industries must migrate to low wage countries to survive.

The second problem requires a clear recognition of the social and political consequences of trade. Illegal labor migration is a rational response to greater demand for labor in the US and the increased social benefits this labor can earn, such as education and health care. But these gains must come from increased labor productivity, which requires a substitution of capital for labor. Illegal migration impedes this substitution as industries find it easier to use cheap workers instead of investing in more expensive capital equipment. This inefficiency must be subsidized, and this is where the taxpayer gets hit paying for the socialized benefits we provide citizens and non-citizens with public education, first-rate health care and social welfare services.

Resolving immigration is critical to our national politics and the foregoing analysis suggests the following policy guidelines for comprehensive reform:

1. Establish a system of temporary labor migration and identification to facilitate the economic adjustment period;
2. Secure the borders with a controlled flow of legal immigration and temporary migration;
3. Reduce industry prices supports, protectionist tariffs and non-tariff barriers in the US and apply political pressure to trading partners to also liberalize their economies;
4. Establish a reasonable enforcement mechanism to sanction employers who hire illegal labor. We know which industries these are and a decreasing supply of these workers will push wage and price increases in these industries;
5. Target social adjustment benefits for dislocated labor toward retraining and relocation assistance;
6. Revise current immigration and citizenship laws to be consistent with a policy of controlled immigration;
7. Reform entitlements consistent with the reality that social benefits ultimately are earned through economic productivity, not political redistribution. There is no Santa Claus in Washington.

These guidelines are economically and politically consistent and can help restrain the partisan politicization of immigration that bogs us down. The US is the world’s beacon for immigration and as globalization continues marching forward most people around the world would welcome US leadership on the issue.