Saturday, February 05, 2005

They're Coming To America:

Part 2: The Rising Tide

America
by Neil Diamond

(cont)
Home, don't it seem so far away
Oh, we're traveling light today
In the eye of the storm
In the eye of the storm

Home, to a new and a shiny place
Make our bed, and we'll say our grace
Freedom's light burning warm
Freedom's light burning warm

Everywhere around the world
They're coming to America
Every time that flag's unfurled
They're coming to America

I've seen all sorts of studies about illegal immigrants taking money out of the pockets and food out of the mouths of good upstanding Americans that can't find a job because, you know, some immigrant took it because the company would pay him or her less than the original guy. As a person in the home health sector, I can tell you that there are a lot of Latino people in California on the medical assistant rolls. I can also tell you that there are a lot of people that aren't.

Economically speaking, immigration does not have to portend the end of any economic growth nor the decline into a socialist country where they are taken care of on the "citizens" tax dollar.

Ask yourself a few intelligent questions about the state of manufacturing in the US. Why are companies moving their entire operations to countries like India and China? Cheap labor. It seems we all recognize that and, yet, deny it at the same time. At the same time, we have people demanding a higher wage base for minimum wages in many states and in the US. Ostensibly to match inflation, but, at the same time, driving that rising cost of property, food and manufactured product. Minimum wage is at best a false cure that multiplies the problem of rising costs. It is the law of business that if a product costs more to manufacture and ship, then it costs more to buy in the retail store.

Companies also move over seas because the tax laws of many countries are waived, by passed or just plain don't exist, eliminating additional costs to manufacturers. Don't forget the waiving of said laws in order to induce a company there in the first place.

Here in America, we’ve become the “tax it and tax it again” folks in the mistaken belief that the way to get blood out of a turnip is crush it with a two ton press. Funny thing about turnips, when they see their fellow turnips getting crushed, they have a tendency to run far away from the press handlers.

Now, to be sure, there are plenty of tax loop holes for people to hide in and where the US could get more money from these companies, but it isn’t going to bring back the jobs and it certainly won’t create the kind of revenue the US wants or needs and it is not going to resolve our trade deficit.

Damn, I think I could go on quite a bit more about what the hell is wrong here. You don’t have to have a business degree to know what companies want: lower overhead and higher profit margins. In manufacturing, labor costs are easily 25-30% of revenue. That's 25-30% that is not dropping to the bottom line. That includes salaries, health and other benefits and taxes. Yet, somewhere in the back of our minds, there is that little socialist voice (yes, even we alleged conservatives) that cries out against factories in countries like China, India, etc where the people work for fourteen hours a day, six days a week and make one tenth or less than the average American worker. That’s tantamount to slavery. That’s a violation of human rights. Rise up workers of the world and demand your fair share from these bourgeois bastards!

Ahem…I notice that no one is rising up. Why? Because, unlike the socialist indoctrinated workers of the US, these folks know when they’ve got it good. One buck a day in India might be a king’s ransom. They can live the dream without leaving their shores.

Yeah, a bunch of people right now are still thinking, “those greedy capitalist, taking advantage of those poor workers”. A person with half a brain and capable of balancing their own check book once in awhile would understand that there are plenty of people who are working for those greedy capitalist that are thankful to even have a job. They love greedy capitalists and if we loved them more and could have that kind of cheap labor force, we’d be kicking the world of manufacturing in the ass right about now.

I know that’s lost on some from the Socialist Worker’s Party, but you know, there was a day when my relatives worked for 12 to 14 hour days and took home $300 a month and thought they were rolling in the dough.

Let's talk about the economics of production first. Why would we want to allow more guest workers into the United States? The answer, I've said about ten times in both part 1 and part 2 of this writing: Cheap Labor.

I know everyone keeps hearing this little sentence about the immigrants coming in and taking the jobs that "Americans don't want". Everyone has it in their minds that we're talking about being the lawn guy or janitor or working at McDonald's.

Everyone needs to think bigger.

What job market has suffered the most in the last 20 years? Manufacturing.

Why did that job market suffer? Manufacturing companies moved their factories to countries where the labor was much cheaper, cost of land, space and building the factory was cheaper and taxes were cheaper. It also put these factories in closer proximity to the raw materials or produced materials necessary in the production of the item being made. For instance, why not put a cotton shirt making factory in India? Where is the material for the shirt made? India. Basically, not only cutting the overhead from labor and taxes, but from the cost of the materials for the product. With telecommunications and shipping, the manufacturer of Indian Muslin shirts can be easily making money hand over fist for the next 20 to 30 years before the workers revolution catches on.

In America, that cheap labor market is long gone. Unions rule the floors of many manufacturers demanding and obtaining concessions for the workers. All of which go directly towards the cost of whatever product is being produced or serviced.

In todays global market, we are no longer competitive when it comes to labor.

Think of the US as one big company. Our labor costs far outstrip those of China or India. We have more debt than they do because we are buying more product than we are selling.

To be sure, we will not be able to compete 1 on 1 with China and India in terms of population regardless of the number of immigrants and there is something to be said for controlling immigration from a resource and financial stand point.

This is what it looks like to me:

1) Increase number of available workers.
2) Freeze minimum wage
3) Decrease taxes on corporations
4) Institute health savings accounts. Cheaper for employee and cheaper for the employer.
5) Total decrease in cost of labor makes it cheaper to manufacture in the US (not as cheap as China in terms of labor, but less costly in taxes and kick backs that may cost companies to have their factories in certain countries).
6) More employees working, legally and being taxed, legally. The taxed employees bring in more revenue to the government.
7) More businesses means more tax revenue.

If you widen the circle a bit, you can get an idea how improved guest worker processes can effect, positively, a number of other problems in the US.

Social Security

This is pretty obvious. Based on the guest worker's program, the guest worker will only be allowed up to three years in the United States before having to "renew" their request which may net them another three years. During which time, according to the program, the government will collect all appropriate taxes. They will also insure collection and contribution to the retirement program of the country that the guest worker comes from. Or help them set up a "pre-tax" savings account which will be taxed when the guest worker tries to take the money out when they leave.

In short, there will be a lot of contributing to the revenue sources for the government and not as many people taking from it.

Think also of the number of elderly that we have today and the rate at which people are retiring compared to our birth rate. According to data from the Medicare program, which is completely separate from social security, the number of people over the age of 65, based on our current rate, will reach a whopping 57% of our population by 2055. For every one person above the age of 65 there will be less than one person in the work force. This is from Medicare estimates not social security or involved in any other program. I know because we are using these numbers to project business opportunities.

Health Insurance

Health insurance works on the number of people contributing via premiums versus the number of people using the service. As treatments advance so do the number of people who live longer and use the resources. As science advances, so do the number of people who receive preventative treatments. In the long run, the drain on health care is decreased because illnesses that become chronic later are treated in advance and lessen the drain on resources. But, this is costly, too. For health insurance to exist, even in a government controlled environment, it requires more contributors and less users. Or, at least, users that are prone to use the services earlier and therefore, cheaper services.

With legal immigrants, legally employed, that's more contributors versus users.

Consumers

More people mean more consumers buying product on the American market at American prices. Hopefully, more American product, too. This could fuel the growth of manufacturing in the US as well.

Security

With the institution of a universal tracking system and identification process, there will be more opportunity to verify the status of immigrants inside the United States. With more people being allowed to enter, there will be less need for "coyotes" who run people across the border. In order to make this security process work, we will also have to beef up our border patrols and security measures to make the endeavor more costly to the human traffickers. They will, in turn, be forced to charge more because the risks will be higher and their American counter parts will require more payment to make the risk worth it. We will also have to institute and maintain stricter laws and punishment. We have to make guest worker passes more desirable than the outcome of being caught dealing in human trafficking or being caught for entering illegally.

We have started this process, but we will have to fight the courts. The court system allows for some long appeals and often results in the perpetrator being allowed to stay. I can understand how people feel. Most immigrants that come here do so for a better life for their family, for better opportunities. I wouldn't want to take that away from anyone either. However, we must make legal entry the desirable process and illegal entry costly in both money and outcome.

Traffickers should get penalties that are federal offenses. Those that operate the programs should get maximum penalties including and up to life in prison for violating the security of the United States. Illegals who are captured must be deported immediately with little or no appeal.

This must be done in tandem with opening the valve on legal immigration and making the process streamlined. If the penalty portion of this program is not in the plan, then we may not even put a small dent in the process.

Theories and Reality

For those of us in the real world, we know that this will not end illegal immigration. It will put a damper on it, slow it to a trickle, but someone will be willing to take the risk.

It will also not stop those who would violate the time period they were alloted and attempt to stay past their time. That is why it is imperative that the legal immigration system be operated like a parole board with those seeking to live here as guest workers required to report in at regular intervals and supply updated information.

That, even, will not stop it, but may reduce it. At the same time, we must leave the opportunity open for people to return to the United States on a future workers pass and give them incentives, such as preference for return based on their skills and operating as an upstanding member of the community.

Those that commit petty crimes would be deported immediately. Why place them in our jails? Theft, simple assalt, burglary, etc would result in immediate deportation. Those who commit serious crimes will be remanded to our criminal system and deported at the time of the release. We must increase our coordination with other countries law enforcement.

Illegal immigration will not be cured nor stopped. It can be limited.

There have been many attempts before. General amnesties, etc. Nothing works that well. I expect, unless our borders were hermetically sealed or until we are worried enough to pay for every mile of it to have electronic motion devices, cameras and quick reaction forces, we are not going to get the kind of security that many think of in terms of the border. Until then, what we will have is slightly better control, but not perfect.

I'm willing to give the process a shot. Those who are against it have not presented a viable, alternative plan. That has been the problem all along. Demands for the government to do more or do it better does not make a viable alternate plan.

Additionally, in regards to manufacturing jobs and keeping them in the US, I almost laughed when the Democrat party started suggesting penalties or additional taxes on American companies that manufacture overseas and then sale in the US. Way to go. What will happen if that comes into effect is that no one will even bother to start an "American" company, but will simply invest it and create companies in India and China and Mexico and import their goods here because, what will not stop is the consumer and the need for product. So, let's be realistic about the outcomes of certain plans. We need to make sure that tax laws are being adhered to, to insure appropriate collection of all necessary revenues, but we don't have to add to the burden.

Remember, "viable alternative plan."

As a famous movie once said, "show me the money." Right now, my money is on more legal immigration with improved security processes.

Open your arms, they're coming to America.

Got a dream to take them there
They're coming to America
Got a dream they've come to share
They're coming to America

They're coming to America
They're coming to America
They're coming to America
They're coming to America
Today, today, today, today, today

My country 'tis of thee
Today
Sweet land of liberty
Today
Of thee I sing
Today
Of thee I sing
Today

9 comments:

Jamie said...

Hey Kat,

You seem to have come away with about the same impressions that I have about the President's proposal on immigration. I think that it has its merits as written and could work to the benefit of the country. You did a great job of covering all aspects that would be affected and that would benefit. You thought of one that I had not thought about (health insurance).

But it would be a major undertaking to enact all of the components, would cost a ton of money and we all know that with the current atmosphere in the country, it would be a long hard fight to get it completed as proposed. Many problems have resulted from the influx of illegals in some areas of the country. People are tired of paying for their free health care, schooling and social services; the increased crime; the gang activity; illegal drugs; disease (we had some that brought in syphilis with them); etc and many people aren't too receptive to any proposals other than to "just get rid of them!".

What I would worry about is the changes that Congress would make to the proposal that would weaken it and thus more likely to fail. Just look what happened to airport security after 9/11 in regard to the security screeners. Someone in Congress submitted legislation to force the companies that handle the screening to get rid of the non-citizens (some of them illegal aliens) that were in their employ. The bill included language which would require citizenship and thus it would have helped tighten up the security. Next thing you know, some members of Congress were demanding that the screeners be federal employees. Other members of Congress demanded that the language in the bill which required that the screeners be American citizens, also be removed. And, since the screeners were now federal employees and belonged to powerful unions, the costs went way up. (There was a reason that the screening companies hired the foreigners - they worked for low wages.)

Anyway, I like the immigration proposal and have been in arguments with folks about it since Bush first proposed it back in 2000. Folks who haven't bothered to read the entire proposal and who have automatically assumed that it is an "amnesty program" and refuse to believe otherwise. Some of these same folks think that it is conceivable to just "build huge walls on the borders, stop any and all immigration and hunt down and arrest all the illegals and deport them". Just like that! As if the illegals are standing around wearing signs that say "I'm here illegally, so arrest me!"

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