Thursday, February 12, 2009

The Politics of Insourcing

. Thursday, February 12, 2009

A new proposal for stimulus, relayed by Friedman:

Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.

“All you need to do is grant visas to two million Indians, Chinese and Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper. “We will buy up all the subprime homes. We will work 18 hours a day to pay for them. We will immediately improve your savings rate — no Indian bank today has more than 2 percent nonperforming loans because not paying your mortgage is considered shameful here. And we will start new companies to create our own jobs and jobs for more Americans.”

From Alex Tabarrok, who adds:

Note that the multiplier on the "buy a house, get a visa" strategy would be much larger than any possible domestic multiplier since the money would come from outside the economy (and efficiency would improve as well.)

I think there would be considerable support among economists that immigration (buy a house, get a visa), a payroll tax cut and maintaining state and local funding would be reasonably good policies in this recession (albeit not necessarily sufficient) yet these policies seem to be the ones that the political system rejects out of hand. (See also Matt Yglesias here and here). Now, I can understand rejecting these policies as compared to doing nothing, ala a precautionary principle, but why these policies are rejected compared to taking a trillion dollar gamble is puzzling even to someone like myself schooled in public choice.

I recently praised public choice economists (relative to other macroeconomists), but if Tabarrok is really representative then I might have to take it back. Later in the same op-ed, Friedman writes "the U.S. Senate unfortunately voted on Feb. 6 to restrict banks and other financial institutions that receive taxpayer bailout money from hiring high-skilled immigrants on temporary work permits known as H-1B visas." Even worse, that sentence was quoted on Tabarrok's own blog yesterday. He seems surprised that we aren't encouraging immigration, but why should he be? The stimulus is being framed as an employment bill, and that employment is intended for Americans. No Congressperson wants to go back to their district and explain why they are giving 2 million jobs to Chinese and Indian immigrants while domestic unemployment is spiking.

Nevermind that those jobs (likely) wouldn't be going to Americans, or that those jobs would beget other jobs which would: that level of nuance isn't currently possible in the larger American political discussion. The median voter would respond to a bill that expands immigration like they always do: mumbling "Dey took our jerbs!" and voting the offending representative out of office. Ross Perot got 19% of the vote in 1992 almost entirely because of "Dey took our jerbs!" rhetoric. The biggest domestic policy battle of President Bush's second term was over what to do with immigrants already in the country. It is pretty much inconceivable that the Democratic Congress, after winning a large majority by campaigning on a vaguely-protectionist "support Main Street" platform, would make one of their first acts the passage of a bill allowing millions of immigrants to enter the country. Especially Chinese and Indian immigrants, since those two countries have been the target of many recent "Dey took our jerbs!" attacks.

And no, it doesn't matter that they'd buy our houses.

The fact that it may be a good idea is mostly academic. Given the political situation we're in, it would probably make more sense to push for a lowering of the payroll tax and expansion of payouts to state and local governments.


The Politics of Insourcing
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