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Retiring Sen. Dorgan Was Mad about Trade
When Sen. Byron Dorgan, D-ND, announced this week that he would not be running for re-election in November, he explained that he wanted to pursue other interests such as teaching and writing more books.
As a senator, Dorgan opposed almost all efforts to liberalize trade unless it involved Cuba or the re-importation of price-controlled drugs. He holds the distinction of being the second most frequently mentioned politician (behind only Barack Obama) in my Cato book, Mad about Trade, something that I’m sure the senator would consider a badge of honor.
Here is my critical but eminently fair review of his 2006 book, Take This Job and Ship It: How Corporate Greed and Brain-Dead Politics Are Selling Out America.
New Study Seconds Cato Finding: Immigration Reform Good for Economy
The Center for American Progress and the Immigration Policy Center released a new study this morning that finds comprehensive immigration reform would boost the U.S. economy by $189 billion a year by 2019. The bottom-line results of the study are remarkably similar to those of a Cato study released last August.
Titled “Raising the Floor for American Workers: the Economic Benefits of Comprehensive Immigration Reform,” the CAP study was authored by Dr. Raul Hinojosa-Ojeda of the University of California, Los Angeles.
It finds that legalizing low-skilled immigration would boost U.S. gross domestic product by 0.84 percent by raising the productivity of immigrant workers and expanding activity throughout the economy.
Using a different general-equilibrium model of the U.S. economy, the earlier Cato study (“Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform,” by Peter Dixon and Maureen Rimmer) found that a robust temporary worker program would boost the incomes of U.S. households by $180 billion a year by 2019.
Both studies also concluded that tighter restrictions and reduced low-skilled immigration would impose large costs on native-born Americans by shrinking the overall economy and lowering worker productivity.
I’m partial to the Cato study. Its methodology is more comprehensive and more fully explained, but it is worth noting that very different think tanks employing two different models have come to the same result: Legalization of immigration will expand the U.S. economy and incomes, while an “enforcement only” policy of further restrictions will only depress economic activity.
If Congress and President Obama want to create better jobs and stimulate the economy, comprehensive immigration reform should be high on the agenda.
Global Markets Keep U.S. Economy Afloat
Three items in the news this week remind us why we should be glad we live in a more global economy. While American consumers remain cautious, American companies and workers are finding increasing opportunities in markets abroad:
- Sales of General Motors vehicles continue to slump in the United States, but they are surging in China. The company announced this week that sales in China of GM-branded cars and trucks were up 67 percent in 2009, to 1.8 million vehicles. If current trends continue, within a year or two GM will be selling more vehicles in China than in the United States.
- James Cameron’s 3-D movie spectacular “Avatar” just surpassed $1 billion in global box-office sales. Two-thirds of its revenue has come from abroad, with France, Germany, and Russia the leading markets. This has been a growing pattern for U.S. films. Hollywood—which loves to skewer business and capitalism—is thriving in a global market.
- Since 2003, the middle class in Brazil has grown by 32 million. As the Washington Post reports, “Once hobbled with high inflation and perennially susceptible to worldwide crises, Brazil now has a vibrant consumer market …” Brazil’s overall economy is bigger than either India or Russia, and its per-capita GDP is nearly double that of China.
As I note in my Cato book Mad about Trade, American companies and workers will find their best opportunities in the future by selling to the emerging global middle class in Brazil, China, India and elsewhere. Without access to more robust markets abroad, the Great Recession of 2008-09 would have been more like the Great Depression.
Trade Not to Blame for a ‘Lost Decade’
For American workers and families trying to get ahead, the decade just behind us was a stinker. As a front-page Washington Post story over the long weekend summarized:
For most of the past 70 years, the U.S. economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households. But since 2000, the story is starkly different. …
According to the story, the Aughts (2000-09) were the first decade since World War Two with no net job creation, and the first in which median household income was actually lower at the end than at the beginning.
It won’t be long before critics of trade will try to blame the poor economic performance on trade agreements and globalization. This has been a standard line of attack, and I address it at length in my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization. For now, just a few quick-hit observations:
The two recessions that book-ended the past decade were both “Made in the USA.” The first was triggered by the popping of the dot-com bubble, the second by the bursting of the housing bubble. Trade was not the cause of either recession. In fact, trade and globalization were charging ahead full steam in the 1990s, when everybody agreed the economy was doing well.
There is also the temptation to extrapolate short and medium trends into a long-term decline in living standards. As the Post reporter Neil Irwin rightly noted,
The miserable economic track record is, in part, a quirk of timing. The 1990s ended near the top of a stock market and investment bubble. Three months after champagne corks popped to celebrate the dawn of the year 2000, the market turned south, a recession soon following. The decade finished near the trough of a severe recession.
The U.S. economy has endured equally long stretches of poor performance in the past. For example, the Dow Jones Industrial Average was actually lower in 1982 as it was in 1966—16 years stuck in neutral. Real median household income was lower in 1983 than it was in 1969—14 years of no net gains. Yet the economy recovered and scaled new heights.
During difficult economic times, trade helps us weather the storm by offering lower prices and more choice to consumers struggling to make ends meet. When domestic demand sags, U.S. companies can find customers and profits in more robust markets abroad. Foreign investment in the United States helps to keep interest rates down, keeping more Americans in their homes and keeping credit markets open.
Our policy makers will only make our economy worse if they reach for the snake oil of higher trade barriers.
Would-be Bomber’s Profile Rose Above ‘Noise’
The Obama administration’s response to the attempted bombing of the Christmas Day flight into the Detroit has been both weak and wrongheaded.
On the matter of first principles, I agree with my colleagues Roger Pilon and Chris Edwards that among its limited and enumerated powers, the federal government has a duty to protect its citizens from people such as Umar Farouk Abdulmatullab. He’s the 23-year-old Nigerian Muslim who tried unsuccessfully to detonate a bomb sewn into his underwear with the help of al Qaeda operatives in Yemen. Thwarting attacks such as this is what should keep officials and lawmakers awake at night, not forcibly redesigning the private-sector health care system.
The government’s response has been weak in failing to acknowledge the real breakdown in the system: Abdulmatullab should never have been on that plane. His own father, one of the heroes in this story, reported his son’s radical beliefs and connections to the U.S. embassy in Nigeria. The report landed the son on a terrorist watch list but not on the no-fly list.
One news report characterized the information on Abdulmatullab as “noise” in the system. If this is noise, what does the government consider a signal? He posted his radical beliefs on his blog. He traveled twice to the terrorist hotbed of Yemen. His own family took the initiative and the risk to report him to U.S. authorities. Eight years after 9/11, what do the guardians of public safety require as a signal—arriving at the airport wearing an “I ♥ Osama Bin Laden” t-shirt?
This is no place for political correctness. The risk of denying entry to a twenty-something Muslim who is acting suspiciously but means us no harm is small compared to the human tragedy and economic cost of a plane loaded with innocent people being blown out of the sky.
The administration has, at the same time, overreacted by imposing new burdens on the traveling public. According to the New York Times, in the wake of the attempted bombing, “passengers at airports in the United States and around the world encountered stiff layers of extra security, with international travelers undergoing newly required bag inspections, body searches and questioning at security checkpoints and before they boarded planes.” Passenger visits to airplane restrooms will also be more closely monitored.
All this will needlessly inconvenience the flying the public, discourage tourists from visiting the United States, and create a false sense of security. The right response is not to give grandma an extra pat-down, but to lower the threshold for denying visas to the small but identifiable minority abroad who arouse any reasonable suspicions.
Disappointing Start for Immigration Reform
The good news is that a bill has been introduced in the House this week under the broad heading of immigration reform. Even during a recession, Congress should be working to change our immigration system to reflect the longer-term needs of our economy for foreign-born workers.
The bad news is that the actual bill put in the hopper by Rep. Luis Gutierrez, D-IL, on Tuesday would do nothing to solve the related problems of illegal immigration and the long-term needs of our economy.
As I argued in a recent blog post and a Washington Times op-ed, immigration reform must include expanded opportunities for legal immigration in the future through a temporary worker visa.
Any so-called reform that is missing this third leg will be doomed to fail. We will simply be repeating the mistakes of the 1986 Immigration Reform and Control Act, which granted amnesty to 2.7 million illegal workers and ramped up enforcement, but made no provision for future workers. Rep. Jeff Flake, R-AZ, agrees.
Slavery and the Tariff: Exceptions to the American Spirit
We have much to be thankful for as Americans. We live in a country founded on the principles of liberty and limited government, and the freedom and prosperity we still enjoy today flow from those foundational principles.
I was reminded of our great heritage recently as I was re-reading Frederic Bastiat’s classic pamphlet, “The Law.” He wrote his impassioned defense of individual freedom and limited government in 1850, at a time when socialist ideas were on the march in his native France. Bastiat observed that, as government grew more powerful on the Continent, the struggle for political power became more bitter, stoking hatred, discord and social disorder.
In contrast, Bastiat beckoned his readers to
Look at the United States. There is no country in the world where the law confines itself more rigorously to its proper role, which is to guarantee everyone’s liberty and property. Accordingly, there is no country in which the social order seems to rest on a more stable foundation.
Being a lover of liberty, Bastiat also saw two great exceptions to “the general spirit” of our republic:
Nevertheless, even in the United States there are two questions, and only two, which, since it was founded, have several times put the political order in danger. And what are these two questions? The question of slavery and that of tariffs, that is, precisely the only two questions concerning which, contrary to the general spirit of this republic, the law has assumed a spoliative [despoiling or plundering] character. Slavery is a violation, sanctioned by law, of the rights of the person. Protective tariffs are a violation, perpetuated by the law, of the right to property …
Bastiat went on to warn, prophetically, that these two “scourges” posed a grave threat to the social order:
certainly it is remarkable that in the midst of so many other disputes this twofold legal scourge, a sad heritage of the Old World, should be the only one that can and perhaps will lead to the dissolution of the Union.
And then he wondered how much greater the coming conflict would be in Europe, where the law had become far more perverted. (He truly could not have imagined what was to come a few decades later.):
It is in fact impossible to imagine a graver situation in a society than one in which the law becomes on instrument of injustice. And if this fact gives rise to such dreadful consequences in the United Sates, where it is only exceptional, what must be its consequences in Europe, where it is a principle and a system?
Among today’s advocates of higher trade barriers, Pat Buchanan is especially fond of hearkening back to our “heritage” of high tariffs throughout the 19th century. Implied in his argument is that true patriots who celebrate the founding principles of our country should embrace higher duties on Chinese tires and Mexican tomatoes. But Frederic Bastiat, the Frenchman, understood far more accurately the real spirit of our Republic.
Chile Shows the Way on Trade
The longest and least uplifting chapter in my new Cato book Mad about Trade is Chapter 9, where I describe all the remaining duties and restrictions our government imposes on our freedom to trade with people in other countries. We are certainly not “the most open market in the world,” as a member of President Obama’s Cabinet asserted in China last week. In fact, by one measure we rank a lowly 28th.
After mentioning this fact in speeches lately, I’ve been asked more than once to name the markets that ARE the most open in the world. Here, according to the latest 2009 Economic Freedom of the World Report, are the top ten most open economies:
1. Hong Kong
2. Singapore
3. Chile
4. Ireland
5. Panama
6. Netherlands
7. United Arab Emirates
8. Slovak Republic
9. Hungary
10. Luxembourg
(The list is a bit different from the one I cite in the book, which was based on the 2008 EFW report.)
One of the most remarkable members on the list is Chile. Decades ago, it was one of the most closed, protectionist economies in Latin America. Today it is the most open. In fact, when you consider that Hong Kong is a special administrative region of China, and Singapore is a tiny city state, Chile is the most open full-sized country in the world. (I hope our free-trade friends in Singapore won’t take offense at that!)
It is no coincidence that Chile has become the economic star of Latin America.
Will our own president and Congress learn from Chile’s example?
Higher Immigration, Lower Crime
Yes, you read that right. The story is more complicated than a short headline can covey, but that is the gist of an article of mine in the just-out December issue of Commentary magazine. [Subscription needed.]
The past 15 years have witnessed two undeniable trends: dramatically rising levels of immigration, both low-skilled and high-skilled, and an equally dramatic plunge in crime rates nationally. I don’t argue that increased immigration in the past 15 years is the primary cause of falling crime rates, but I do argue that the evidence punches a gaping hole in the Lou-Dobbs contention that immigrants have clogged our prisons and unleashed a new wave of crime.
In the Commentary article, and in an earlier Cato Free Trade Bulletin, I cite Census data that show that incarceration rates for immigrants are significantly lower than for native-born Americans. The contrast is especially sharp between immigrants without a high-school diploma and their native-born counterparts. Along with their lower propensity to commit crimes, immigrants are also more likely to be employed than similarly educated Americans.
Or as the subhead of the magazine article nicely puts it, “Today’s ‘underclass’ of newcomers seeks a day’s work, not a drug deal.”
Colombia Trade Deal Enters Fourth Year of Limbo
Sunday marked the third anniversary of the signing of a free trade agreement between the United States and Colombia. It is an embarrassment to our great nation that this agreement with an important Latin American ally still sits on the shelf three years later, a victim of congressional trade politics.
As my Cato colleague Juan Carlos Hidalgo and I argued in a 2008 Free Trade Bulletin, and as I wrote in a more recent op-ed, the FTA with Colombia is a win-win for Americans. It fully opens the Colombian market and its 44 million pro-American consumers to our exports, while deepening our ties with one of our most dependable allies in the Western Hemisphere.
The AFL-CIO and other opponents of the agreement demand that Colombia further reduce violence against trade unionist before approval can be considered, and the president and Democratic congressional leaders have dutifully agreed. Never mind that the number of trade union members murdered in traditionally violent Colombia has declined dramatically under President Alvaro Uribe. Congress and the administration keep moving the goal posts, much to the frustration of the Colombian government.
Meanwhile, since the agreement was signed, U.S. companies have paid $2.3 billion in unnecessary duties, according to the “Colombia Tariff Ticker” sponsored by the Latin America Trade Coalition. On the foreign policy front, Colombia faces continued threats from the Marxist FARC guerrilla movement and its anti-American neighbor, President Hugo Chavez of Venezuela.
Refusing to enact the trade agreement with Colombia only reinforces suspicions in Latin America that the U.S. government is unreliable.
Tear Down This Wall … between the U.S. and Cuba
The House Foreign Affairs Committee is holding a hearing today on the almost 50 year old ban on travel to Cuba. The ban is part of a broader economic embargo in place since the early 1960s that was supposed to bring about change in the island’s oppressive, communist regime.
Instead, the embargo and travel ban have needlessly infringed on the freedom of Americans, weakened our influence in Cuba, and handed the Castro government a handy excuse for the failures of its Caribbean socialist experiment.
I wrote an op-ed recently advocating change in U.S. policy toward Cuba, and delivered a talk on the same theme at Rice University in 2005.
Will Congress finally change this failed U.S. policy?
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Los Angeles Crime Rate Declines Again Despite Complaints about Immigrants
Posted by Daniel Griswold
One of the more common complaints I hear about illegal immigration is that low-skilled workers from Mexico and Central America allegedly bring with them a wave of crime and incarceration expenses, especially to southern California.
Those complaints are hard to square with the mounting evidence that immigrants, even low-skilled, illegal immigrants, are no more prone to commit crimes than native-born Americans. The latest data point comes from Los Angeles, where the Wall Street Journal reports this morning: “Violent crime in Los Angeles hit its lowest level in more than half a century last year, one of a growing number of U.S. cities reporting its streets were remarkably safe in 2009.”
I tried to connect the dots on immigration and crime in a recent article I wrote for Commentary magazine, titled “Higher Immigration, Lower Crime.” My conclusion was entirely consistent with the latest crime report from Los Angeles:
Filed under: General; Trade and Immigration
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