The Dichotomy of Free Trade and Immigration

At the start of the year, many pundits were asked what they saw in store for Congress in 2014. The possibility of an immigration reform deal was universally hailed as the most likely “big thing” Washington might accomplish, unless you considered not shutting down the government again to be a victory.

But our immigration woes are still much more complicated than either party's approach to reform would seem to suggest, and their concurrent approach to trade policy might best demonstrate the contradictions that begin to emerge when you get any lower than 30,000 feet.

To start with, any immigration “reform” that has a chance of passing, seems likely to be of the patch-quilt, 1,200 page, half a loaf of bread is better than none variety which aims to satisfy no one, while offending as few people as possible. The idea of how each element “works” doesn't always enter into the equation.

This is disappointing, because reforming immigration will be an important part of our economic future, and anything less than a thoughtful and pragmatic plan is much less than the American people (and those who come here hoping to make a better life while contributing to our economy) deserve.

There are somewhere around 12 million people working illegally in the United States. That's roughly 9-10 percent of the U.S. workforce working without a legal right to do so. Clearly our current policies are not realistic or equitable.

While many of these workers are paid off the books, more use fake social security numbers and pay into a system that they will never be able to access – something anti-immigration activists should remember when they complain about the stress they put on our social safety net.

Evidence as to the economic impact is sometimes contradicting – or at least more complicated than something that can be parsed into a soundbite either for or against the issue. Overall, economies that have a lot of illegal immigrants tend to see a net gain in direct economic impact. However, evidence also suggests that the lowest-skilled, bottom-wage earners are hurt by this impact.

When you consider the fact that our elderly population is poised to double by 2030 and that the growth in overall birth rates is on the decline – especially among majority demographics, or “white people” – there's an argument to be made for liberalizing immigration policies, just as many other nations facing those demographic challenges have.

In coming years, we will need young workers to both service the elderly population and pay into the safety net, as more elderly are falling into it. If we're not increasing our population through domestic births, immigration is just about the only cure.

However, that all remains just one side of the equation. During the same time that Democrats have been obsessing over liberalizing immigration, they've been busily approving free trade agreement after free trade agreement, all of which seem to make it more likely that companies will continue to move jobs above the low-skill illegal-immigrant level to other countries.

Their incentive to do so is obvious. One, the countries they move those jobs to will almost definitely have less environmental oversight and fewer worker protections like high minimum wages, overtime requirements or safe workplace laws (because we rarely insist on any parity in such agreements). The cost of operations – at least to the companies themselves – will be lower and therefore more profits will flow to the shareholders.

But the cost to the economy at large and to taxpayers in particular isn't often examined. Fewer middle-class jobs means a weaker domestic economy because of tempered consumption. It also means more stress on the social safety net. We already have three unemployed Americans for every available job and that's after nearly fours years of record stock market success, corporate profits and economic stimulants like artificially low income tax and interest rates.

Republicans have simply focused on cutting the safety net. That might make for good political theater, but it doesn't solve the problem. Anyone who thinks that long-term unemployment isn't primarily being driven by slow-to-no economic growth and too few domestic jobs being created was sleeping during economics 101 (or never had to take it).

Those people in the unemployment lines aren't going away if you take away their unemployment check, but their car or mortgage payment might be, along with most of their other consumption, which means that the associated economic multiplier – economic activity driven by the spending and tax receipts collected at all levels as a result – can quickly eat away any illusory savings in cutting the deficit.

This long-term economic effect of a sluggish economy – what economists call hysteresis – works both ways. When a government spends money, it puts more money into the economy, which is spent and re-spent many times, creating wealth and tax revenue. In this way, stimulus can often cancel itself out with growth. But when governments pull money out of the economy, the multiplier works in reverse, pulling money out of the economy at all levels.

So, back to immigration. Let's be honest, Democrats' real incentive in this arena is demographics, no different than Republicans in social matters like religion, abortion and gay marriage. Ironically, Republicans' increasing reliance on social issues to cull votes from people who by and large vote against their own economic interest is what created the Latino vacuum that Democrats successfully exploited.

The guns and religion crowd turned out to be largely anti-immigration and because people who voted almost solely on social issues had become a bloc in the GOP base that was too big to ignore, they lost control of a demographic Karl Rove had been able to do pretty well with, mostly because they too (Latinos) tended to be tilted fairly right on things like gay marriage and church and state.

Nonetheless, all that goes out the window once they start hearing calls to deport their hardworking friends, family and neighbors. Here's where things get sticky. One thing that both Democrats and Republicans can agree on is that any free trade is good. But if middle-class Americans are losing their middle-class jobs to people in low-wage, high pollution countries, while we make it easier for people from just those sort of countries to come in and legally work in the United States, all while allowing what was once the premier public education system in the world to continue to slide beneath those of our competitors, it doesn't bode well for that middle-class.

So the real plan seems to be to put more and more potentially-productive American workers into low-paying jobs or onto the social safety net, while keeping things cozy for the 1 percent of Americans whose wealth continues to rise at record pace (via artificially-low taxes), while the size of that safety net is tamed with cuts driven by the usual rhetoric about a growing welfare class that doesn't want to work when they can live high on the hog for free.

The most frightening aspect of any party's so-called plans, is the fact that none of them make the case for any sort of end game that does anything more than perpetuate the status quo in whatever they see as the most tolerable fashion – lower taxes for the rich or more social benefits for the poor. Both Democrats and Republicans have been talking a lot about the middle-class in recent weeks, but neither party has offered long-term policies aimed at rebuilding it.