Mon May 04 2015
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The End to the U.S. Immigration Debate?

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Immigration policy appears to be a lost cause in the U.S. political system…

Take the reform attempts in 2007 and 2013, for example. Having been developed and put forward, the proposals were swiftly captured by special-interest lobbies and ran into fierce popular opposition.

And President Obama’s “amnesty” program in November is now tied up in the courts.

It’s a good old-fashioned congressional gridlock – and as I’ll explain, we have a way to go before we reach any clarity.

Don’t expect the standoff to last long, though. Come election time, immigration policy will ring loud and clear again as a key campaign issue. Heck, we may even get a compromise…

Current Unresolved Issues

The biggest problem with immigration policy? The poor quality of debate.

It’s quite clear that there are certain groups who stand to gain from immigration, while others may not. The issue is segregated into two primary sections.

Low-Skill Immigration. On one hand, low-skill immigration (whether legal or illegal) tends to depress the wages of domestic U.S. workers in low-skill occupations. This, of course, benefits employers – and needless to say, the cheap-labor lobby is strong, especially among big donors to congressional candidates.

Economically, though, much of the lobby’s claims are unjustifiable. Take large labor-intensive farming operations in California, for instance. They already benefit from huge subsidies on their usage of scarce water. And it would be more rational to outsource production to areas with high rainfall and low-labor costs – like Latin America.

High-Skill Immigration. High-skill immigration ought to be generally beneficial. After all, these are workers with hard-to-find expertise. But there are certainly a lot of losers from it, too, especially if it’s poorly controlled.

So what does the public want?

Unsurprisingly, 39% of the U.S. population wants lower immigration than currently, while only 7% want higher immigration, according to a recent Gallup survey.

That probably correlates with the proportion of people who significantly lose out versus benefit from the trend in immigration among the voting population. The remainder likely experience little direct effect.

In both the 2007 and 2013 debates, the people who benefit from immigration were well represented at the bargaining table, while the larger number of immigration losers exerted their influence only indirectly. The upshot was two bills that boosted immigration and appeared set to pass, but then stalled on a wave of opposition. (A fine use of democracy, in my opinion.)

And in the run-up to the general election, don’t think for a second that the issue is strictly divided by political parties.

Blurred Lines of Allegiance

While party allegiances complicate this picture, they certainly don’t determine it.

It’s no secret that Democrats receive a majority of immigrant votes, including the votes of largely high-skill Asians. Only 25% of this demographic voted for Mitt Romney in 2012. Thus, on a partisan basis, high immigration benefits Democrats, as does the legalization of illegal immigrants.

However, enough Republicans are connected with wealthy cheap-labor lobbyists who favor high immigration to produce an apparent majority in Congress for liberalization.

As you’ll recall, after the midterm elections in November, President Obama’s executive action opened the door to legalize a high proportion of the estimated 11 million “undocumented” immigrants.

It wasn’t a popular move. In response, Texas and 25 other states filed a lawsuit against Obama’s action – which is currently before the Fifth Circuit Court of Appeals. It could make it to the Supreme Court, presumably for the 2015-16 term.

For now, Obama’s action has sufficiently poisoned the political debate that congressional action on immigration appears unlikely before the 2016 elections.

However, the presidential campaign now appears to produce a better representation of popular opinion. For example, Wisconsin Governor Scott Walker, previously thought a supporter of “amnesty” for illegal immigrants, came out last week with a staunch defense of the interests of low-skill domestic U.S. residents against high immigration.

That suggests the Republican candidate in 2016 will oppose both Obama’s executive action and the immigration-increasing portions of the 2007 and 2013 legislation.

It also suggests that the interests of both sides in the immigration debate will be properly represented.

So what should we expect?

A Likely Compromise in 2017

If both sides’ views are properly represented in 2016, a compromise should become visible – one that would probably be enacted in 2017. And it should properly reflect the interests of both legal immigrants and the domestic population.

As for the political hot potato issue of legalizing current illegal immigrants? Well, that will be undertaken, but only after the border fence has been fully built and E-Verify document certification is mandated for employers.

Elsewhere, “guest worker” programs will be eliminated – they create a separate class of low-paid individuals with few rights that depresses wages for the low-skill domestic population.

High-skill visas will be expanded moderately, while low-skill family reunification entry will be tightened. The “lottery” of 50,000 low-skill visas annually will be eliminated.

Does it matter who ends up in the White House regarding this issue?

Well, such a compromise may solve the problem, with either Hillary Clinton or a Republican as president.

Clinton will be unable to get an unconditional illegal immigrant amnesty through a House of Representatives that’ll probably still be Republican-controlled.

Conversely, even a Tea Party Republican president won’t want an unduly punitive approach to illegal immigrants, because of the need for Hispanic and other immigrant votes in the future.

As for the other provisions, that’s where the need of the domestic population will dictate the debate. Not to mention the overall state of the U.S. economy, which benefits from immigration… but with a bias towards high-skill entrants, proper controls, and few loopholes.

Good investing,

Martin Hutchinson


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