The economic impact of the foreign born in Arizona

This article published in the Arizona Daily Star on July 31st reveals some surprising facts about foreign born workers and their economic impact on the State of Arizona. It is surprising to read that some 920,000 foreign born workers live in Arizona; about 13% of the population. A far greater share of these, 71% are of “working age” compared to 47% of the general population. The foreign born command purchasing power of $16B with income of $21.4B. The undocumented of these have income of $3.5B and spending power of $3.1B. Since wages reflect value added at the point of production it is accurate to state that these foreign born added more value to the state than they were paid; a counter point to the assertion that undocumented workers are a drain on the economy.

It was discovered that the foreign born paid $1.7B in state and local taxes in 2014, the year studied and the latest year these statistics were available to researchers at the New American Economy; the group that conducted the study commissioned by the Arizona Chamber. The vast majority of these workers are employed in low skill, low pay, hard conditions jobs. They make up 32% of janitors and building cleaners, 50% of landscaping and grounds maintenance people and 55% of maids and housekeepers, according to the article.

In agriculture, the undocumented, according to US Chamber of Commerce Vice President Randy Johnson, make up about 60% of the workforce. “…Johnson said any federal legislation to require employers to electronically check the legal immigration status of their workers is dependent on farmers and others being able to get the laborers they need in some way,” according to the article. “Let’s just say it: They can’t work without undocumented workers in the workforce,” he said. When pressed about low wages and harsh conditions being the reason US born workers will not do those jobs, Arizona Sen. John McCain was quoted from a speech in which he claimed US workers would not do the work for even $50/hr. This assertion has not been tested that I know of.

The US Chamber, according to VP Johnson supports efforts to “legalize” the undocumented in some fashion. Johnson derided the I-9 system that allows employers to hire people with documents other than green cards “with a wink and a nod” as employers simply “verify the legal status of workers by logging in documents they present, a system that is generally considered to be rife with loopholes and people using forged and stolen papers”, according to the article. Johnson wants the undocumented in the US to be allowed to remain legally subject to a background check. He does not offer more details about what that legal status would entail.

An obstacle to the desire of the US and Arizona Chamber was provided by Arizona State Senator Noel Campbell. “We have to have the border secured first,” said Campbell who worked for 27 years for U.S. Customs and Border Protection, reflecting the views of many within his party,” according to the article. Rep. Campbell must know that most undocumented people in the USA came here legally and overstayed their visas; not by slipping across the border.  This article from the New York Times shows that in 2013 about 250,000 overstayed while about 150,000 crossed illegally. Even though Campbell admits the “border will never be 100% secure” he insists the border must, nevertheless be secured before any comprehensive path to citizenship or other form of legal work status can be granted, in his view.

Since the case has been made that millions of jobs done by undocumented workers would not be done by American born workers then one can conclude that bringing these working people out of the shadows to the light of government labor regulations and protections would allow them to add even more productive value to the economy and boost the revenue to the Social Security system along the way.

 

The Industry Offenders Are Busy Eliminating Transparency

Dodd Frank is 7 today

This article by Senior Economist Eileen Applebaum at the Center for Economic and Policy Research (cepr.org) published in the Huffington Post is very revealing and calls readers to action. She tells us that Pres. Donald Trump has appointed two private equity managers to important authoritative posts for the financial industry. They are Wilbur Ross, Secy of Commerce and Stephen Schwartzman, Co-founder of Blackstone Group who is now head of Trumps Economic Policy Forum. It seems rather obvious that these two have something to gain from de-regulation while industry groups composed of Private Equity managers overwhelmingly support regulation. They cite the value of consumer confidence that is instilled by the presence of regulations, regulators and monitoring. The article contains some serious charges to Private Equity prior to the 2007-2008 industry shock such as manipulation of the price of holdings; failure to share fees with investors; and “incorrectly” charging fee expenses.
The Trump Admin. seems to be pushing the Hensarling Ammendment that would exempt Private Equity managers from registration and reporting requirements by the securities industry. The Hensarling Ammendment is called the CHOICE Act.
President Trump leads the charge against consumer protection and Wall St. regulation by declaring Dodd-Frank to be “horrendous”. One has to wonder why Trump is plunging ahead to eliminate many reporting requirements and oversight of financial institutions still in the wake of the near financial meltdown just 10 years ago. How could the public be harmed by the required registration of PE managers who might have discretionary control over billions of dollars? A good deal of capital from public pension plans is held in private equity funds. Shouldn’t they enjoy the increased security of their investment brought by sound regulation? These are assets of good public servants, after all.

Market show us the magic hand!

This early critique of the Republican Obamacare replacement by Dean Baker at the Center for Economic and Policy research takes a dim view of the outcome. That is looking to return to more than 50 million unisured before the Affordable Care Act. As we know, currently “only” 28 million Americans are without health insurance. Baker did not go into depth about the macro economic implications of this situation but stuck to the healthcare implications. He points out, and later reports support him that with the increase in the limit on contributions to the Medical Savings Account, more affluent people will be buying low premium, high deductible health insurance plans that will provide only catastrophic benefits. The market for such a plan will likely be among younger, “professional” types. On the other hand, as was revealed in this article published in the LA Times March 8, older poorer Americans will be the biggest losers in the overhaul. The article I read in the Arizona Daily Star this morning pointed out that the vast majority of counties that supported Pres. Trump in the election will lose big under the new plan. I cannot find a link because the tucson.com website is dreadfully loaded with pop ups in every click and a poor search engine.

Paul Ryan, in this interview on CBS laughed when he was asked how many people would lose the health insurance under the new GOP plan. “We don’t know”, he said. He wants the American people to be so relieved that people will not be insured under “some government mandate” that they won’t care if they are going without. He sees  the magic marketplace that will produce just the right plan for everybody and for some, none at all. Later in the same CBS Face the Nation segment, Sen. Bernie Sanders pointed out that the real thrust of this change is to relieve the very richest Americans of the taxes that were imposed upon them to fund the ACA in part. I am of the opinion that the enormous effort to drag Congress into a very mild private-insurance based, privately delivered healthcare plan was primarily due to the pressure brought to bear by this class of Americans upon the GOP in Congress.

The macro-economics of available healthcare is on display right here in Arizona. Mounting uncompensated care was causing great financial stress upon hospitals and clinics in Arizona; particularly rural Arizona. The GOP-led State Legislature did not heed the pleas and cries of the Arizona healthcare providers to help them recover some of that uncompensated care and accept the Medicaid expansion offered by the ACA. It was not until great pressure was brought to bear upon these Legislative “leaders” by the Gov. of Arizona, Jan Brewer. Brewer, a Republican was able to bring to the table a plan to fund the Arizona premium of the expansion through a levy worked out with the healthcare providers on patient-occupied beds. Brewer was able to gain media support for this plan, got it passed over GOP leadership dissention and that by 2015 had enrolled 1.6 million Arizonans, according to this Arizona Daily Star article.

“Somebody else’s baby” is how one GOP Congressman characterized his view of the people who are helped under the Affordable Care Act. This is not only inhumane and selfish but it betrays a fundamental mindset common among these GOP leaders, including Paul Ryan that people who struggle in our society; or any society for that matter should not be the burden of those who are more fortunate. This is anathema to civil, developed societies who understand that widespread disease and want among large numbers of their society weakens and makes vulnerable the entire society.

The magic hand of the marketplace was given its chance. It resulted in skyrocketing healthcare costs, millions dying needlessly, financial ruin for millions; bloated, topheavy insurance companies and a shrinking number of enrollees. It’s time to move on to universal coverage. And no, it will not come from the magic marketplace. It will have to be demanded.

The stated objectives and the consequences of a Fed increase

The Federal Reserve Board and members raised the Fed Funds rate by .25% recently prompting pushback by Dean Baker at the Center for Economic and Policy research. His article, “The Job Cremators” is a good argument for the Fed to dwell a little longer on its other mission; to keep the rate of unemployment as low as possible. Baker gives a good historical account of a 1994 meeting he had with (now) Chairwoman Janet Yellen and another Board member, Alan Blinder at a time when most economists believed that a 6% rate of unemployment was a good target for the Fed.

Baker recounts how the Fed did not heed his argument that lowering the unemployment rate target just one percentage point (to 5%) would have the greatest impact upon middle and lower income workers, that any inflation that resulted would be minimal, and that the Fed could always raise rates later in the event of an inflation spike. The Fed raised its rates from 4% all the way to 6% by the end of 1994. However, heedless of the financial industry’s concern about an “overly tight labor market”,  in 1995 then Chairman Alan Greenspan “pushed through lower interest rates” even though unemployment was still below the 6% target. Students of economic history know that an economic and market boom ensued. Baker tells of how this resulted in record low unemployment with the marginal workforce such as teenage black workers benefited greatly. Baker shows that by the year 2000, inflation was still less than 2% while unemployment rates were still averaging 4%. This experience served to lower the target unemployment rate by two full percentage points to 4%.

A casual observer might ask, if the cause and effect is so straightforward, and the public benefit so undeniable, why then, does the Fed worry so much about inflation? The answer lies in the very good description of the makeup of the Federal Reserve Board (seven members) and the Federal Reserve Bank’s 12 regional bank presidents, together making up the Federal Reserve Open Market Committee. Baker points out that “…The process by which the regional bank presidents are picked is complicated, but it is dominated by the banks in the region. Unsurprisingly, bank presidents tend to represent the interests of the financial industry.” Baker also points out that the interests of the industry are to keep the debt obligations to those banks as heavy as possible and that inflation reduces the buying power; hence the value of those debts owed to the banks.

So, the reader is faced with the conclusion that it is the dominance of the banks that, (excuse the pun) trumps the public good that comes with a “tighter labor market” the so-called harbinger of inflation. Is it possible to have a monetary reserve system that is not controlled by  banks that except on rare occasions ensures that banks are profitable and that millions of workers stand idle with want?