Friday, September 23, 2016

Sense and Nonsense on Immigration

Pigs get fat, hogs get slaughtered.  It's an old saying that means look out for yourself, but don't be too greedy.  Democrats could use the advice on immigration.  Of course they are pro-immigration, because most immigrants vote Democrat.  But pushing the issue too far might cost them an important election.  

A small, steady stream of immigrants from Mexico would eventually produce a permanent Democratic majority in the U.S.  As I have explained, I believe the costs of these immigrants outweigh the benefits, but below some level, the costs would be relatively small and unnoticeable for most voters.  Restricting immigration from dangerous countries would also help to keep immigration under the electoral radar.  It is a brilliant strategy - keep bringing immigrants in, slow enough to avoid attracting too much attention, but fast enough to annihilate the Republican party over the next couple of decades.  The part that is most brilliant has been convincing Republicans to play along!

The Obama administration appears to have some understanding of this strategy.  While they have weakened border restrictions, they do deport some people, although the statistics are confusing.  They just this week announced a tougher policy on Haitian immigrants, and last year President Obama signed a bill passed with broad bipartisan support that targeted European Muslims for more scrutiny at U.S. borders.  Europeans can enter the U.S. without a visa, but the new law requires visas for those with dual citizenship from "Iraq or Syria, a country designated as a country that has repeatedly provided support for acts of international terrorism, or any other country or area of concern."

If Donald Trump had proposed the same thing, Hillary Clinton would be calling it un-American, bigoted, and "not who we are."

The Obama administration miscalculated and pushed immigration a bit too far, allowing Trump to emerge as a serious contender.  Democrats, too greedy for a quick padding of the voter rolls, countered instead of co-opting the Trump message.  If Clinton had emphasised the anti-immigration policies of the Obama administration and agreed that more could be done, she would now be way ahead of Trump.  After the election she could have stuck with the steady stream strategy.  Slow and steady wins the race.

Instead, the Clinton campaign is advocating open borders extremism.   A recent Clinton campaign tweet read:
"No one has the right to immigrate to this country." Donald Trump during his rally in Florida today.   
We disagree.
If there is an international right to immigrate to the U.S. we are in big trouble, because hundreds of millions of very poor people want to move here.  Hillary Clinton knows better, but she has been painted into a corner with short-term strategic thinking.  By mindlessly opposing everything Trump says, Clinton has taken leave of common sense and risks losing everything.

Unfortunately in this case, candidates usually keep their campaign promises.  If Clinton wins, she will be under tremendous pressure to open the borders, which will lead to an even bigger backlash in the next election.

Saturday, September 17, 2016

A Reason to Vote Against Hillary Clinton

After the Cold War, the U.S. tried out a new role as world hegemon.  Reasoning that it remade totalitarian countries like Germany and Japan into liberal capitalist democracies after World War II and seeing that Russia seemed to be moving in the same direction, Americans believed that they could transform the entire world in their own image.

9/11 accelerated the process.  Troublesome countries in the Middle East were to be turned into productive, placid places.  The Clinton and Bush dynasties both agreed with the strategy, and so the U.S. went to war.   Five years later, Americans began voting against the incumbent Republicans, largely because they were disappointed to learn that wars were more costly than they had expected.  After two more years of war, they elected an anti-war president who was promptly awarded a Nobel Peace Prize.

A new Secretary of State in this environment might have been expected to rethink American strategy.  Instead, Hillary Clinton doubled down, continuing the attempt to democratize the Middle East in Eqypt, Syria and Libya.  This New York Times article makes it clear that Clinton's support was crucial in convincing President Obama to intervene in Libya, with terrible consequences.  It is also clear from her campaign rhetoric that she intends to continue a confrontational foreign policy.  Trump is harder to predict, having never served in public office, but he has suggested a more moderate approach, and has rebuked the Bush administration over the Iraq war.

If Clinton wins, policymakers will conclude that the American people will continue to tolerate military adventurism abroad.  It seems to me that voters should punish Clinton for failing to learn from mistakes and send a message to Washington that it is time to focus more narrowly on American security, and to scale back on ambitions to transform the world.




Saturday, September 10, 2016

Don't Worry, Be Happy

Should we be worried about the election?  We all have preferences on this or that policy or personality, but how much will the election of one candidate or the other affect important things like peace and prosperity?

Since an anti-war, Nobel Peace Prize winning president has turned out to be the first ever to preside over 8 years of war, it is hard to argue that campaign promises accurately predict war or peace. 

What about economic growth?  I saw a graph on Twitter a few days ago, I think from Mark Perry.  I found long-term GDP growth data from eh.net, took logs so that constant growth would look like a straight line, and plotted actual growth (blue) against constant growth of 1.92% (red).  I calculated that this rate produces the best fit of the data for the longest time.  Here is a graph:


Starting about 1840, growth is remarkably constant through 2015.  There is a patch of slow growth from 1907 through the Great Depression.  Interestingly, that period begins with a financial panic which leads to the creation of the Federal Reserve.  The Federal Reserve was new and inexperienced at first, and many economists, including former Fed Chairman Ben Bernanke, believe that the Fed was responsible for the Great Depression.  Perhaps the Fed has gotten better at its job - but only good enough to match the growth we had before there was a Fed at all!

Measured growth is a bit more volatile during the years 1840-1906 than it is from 1949-2015, but that could simply be the result of better measurement - less noise in the data, not necessarily more volatile economic growth.  Either way, it is hard to believe that this slight volatility had serious welfare costs.

It is an amazing fact that economic growth in the U.S. is approximately 2% almost no matter what - the party in power seems to have little effect.  The stock market seems to agree, indicating that a Trump presidency would not cause serious economic problems - the market has increased in value while the odds of a Trump presidency have gone from zero to 0.3 over the past 15 months.

To see if there might still be a relationship between stock market changes and Trump odds I downloaded daily election odds from the Iowa Electronic Markets and stock and bond market data from the Federal Reserve Bank of St. Louis.  The IEM data are available from late January of 2016.  I multiplied the odds of Trump winning the nomination times the odds of the Republican nominee winning the November election for the time period before the Republican convention.

It might be the case that when Trump's odds improve, stock traders panic and the market declines.  It might also be the case that when the market declines, voters become more worried and are more likely to vote for Trump.  To disentangle these possibilities I used a Granger causality test using three lags.  It turns out that we cannot reject the null hypothesis of no causality in either direction.  It is slightly more likely that voters react to the market than the other way around, but both possibilities are unlikely.  In other words, stock market traders do not think a Trump victory would tank the stock market.

One reason for this is the American system of checks and balances.  A President Clinton would face a lot of Republican opposition, and a President Trump might not be able to count on a united Republican Party.  But another reason is that neither candidate is as terrible as the other side imagines.  Trump would lower taxes and immigration levels, Hillary would raise them, but probably not to levels that would cause catastrophe.  If they tried, they would be punished swiftly in mid-term elections, and then voted out of office before they could do permanent damage.

The election is entertaining, and we all have favorites for many reasons, but we should not expect economic disaster or nirvana as a result of either candidate becoming president.  

Saturday, September 3, 2016

Paying for the Wall

Here is a short Twitter exchange I had with Austin Goolsbee, former Chairman of the Council of Economic Advisors and currently a professor at the University of Chicago:
The issue is how much less workers in the U.S. with families in Mexico will send home in response to a tax on remittances. I assumed that a 10% increase in the tax would reduce remittances by 2.2%, based on a study I linked to that looked at remittances in Australia. Professor Goolsbee says that this estimate is too low, because if the price elasticity of demand for remittances was that low, then profit-maximising remittance companies would have raised their prices.

 My response is that Goolsbee's point is only valid if the remittance market is monopolized, and in fact it is fairly competitive. There are several companies offering remittance services. Add to this the empirical evidence from Australia and the fact (pointed out in my original post) that Oklahoma has a remittance tax that is generating a lot of revenue, and I think my argument holds up well.

 Again, I am not saying here whether a remittance tax is a good idea or not, just that it would be possible to use it as a way of paying for a wall.

 Politicians, academics, and members of the media are underestimating Trump. They assume, as Goolsbee did, that Trump's proposals are ridiculous and that every accusation raised against him is true. Getting Mexico to pay for the wall is probably considered to be his most ridiculous proposal, so if that proposal has some economic basis, then it seems reasonable to think that Trump needs to be taken more seriously.

Saturday, August 27, 2016

Ctrl-Alt-Right

Hillary Clinton made the alt-right famous this week. The term comes from computer keyboards, which contain a key labeled "Alt" that traditionally acted like the shift key to give each key on the board a different meaning.  In other words, hitting alt produces an alternative keyboard.  The alt-right movement represents alternatives to the conservative movement that took over the Republican party from 1964 to 1980, and held it until this year.

An early leader of the conservative movement, William F. Buckley, was successful at controlling alternatives to his new orthodoxy, purging members of what were considered "far right" groups.  David Brooks yesterday lamented the fact that "the Republican Party has not controlled the alt-right movement" in this election.

The control key goes back to teletypewriters in 1901.  In early computers the control key grounded the two wires transmitting the first two bits of the code for each key, converting them to smaller binary numbers.  These numbers were ASCII codes that did not stand for letters, but controlled the actions of monitors and printers.  So continuing the convention, maybe Brooks could name his new counter-movement "control-alt-right."

The "conservative movement" was a product of the Cold War.  Conservatives saw communism as a threat to the West and Western values, so they abandoned conservatism's traditional reluctance to entangle the U.S. in international affairs.  The movement supported free enterprise and traditional family and religious values at home and vigorous anti-communism abroad.

Anti-communism necessitated high taxes to support a large military, upsetting libertarians.  It also required engagement with the world through trade, so Republicans abandoned their traditional support of high tariffs, upsetting manufacturers and many industrial workers.  Another Cold War tactic was to bolster America's image in the world through civil rights legislation.  Republicans were historically in favor of extending civil rights to blacks, but when Democrats alienated Southern whites by enacting civil rights legislation, Republicans took advantage of the opportunity by positioning themselves to the right of Democrats.  Eventually, however, Republicans acquiesced due to Cold War politics, historical proclivities of non-Southern Republicans, and the changing views of the country.  Republicans also acquiesced on mass immigration, partly because of Cold War strategy, but also because of their business constituents' desire for cheaper labor.

As soon as the Cold War ended, alternatives to the conservative movement sprang up.  1992 was the first post-Cold War election, and Pat Buchanan made a strong showing in the New Hampshire primary, with Bill Clinton saying "In November, we will win a great victory against Pat Buchanan."  Buchanan ran an "America first" campaign supporting higher tariffs, less immigration, and fewer foreign military interventions.  His campaign failed to win majorities, particularly after Ross Perot entered the race as an independent with many of the same themes.  At one point Perot led the race against Clinton and Bush, but he sabotaged his own campaign by withdrawing and then reentering.  Still, he won 19% of the vote, the most by a third party candidate since 1912.

Buchanan and Perot both ran again in 1996, but the economy was strong, and so was the Republican establishment.  Steve Forbes ran on libertarian ideas in 1996 and 2000 and attracted a significant following, but was not close to winning the nomination.  I noticed the demand for conservative alternatives as a delegate to the Republican state convention in 2004, when candidates for delegate to the national convention felt the need to stress that they were not "country club Republicans."

Ron Paul's campaigns in 2008 and 2012, and Rand Paul's campaign in 2016 again demonstrated significant demand for conservative alternatives, but also that libertarianism was not exactly what conservatives were looking for.

The Republican establishment controlled the alternative right by making it clear that deviations from orthodoxy were unwelcome and bad career moves.  Only seriously flawed candidates tried out new ideas, and it was remarkable that people like Perot, Forbes and Paul got as far as they did.  Forbes, for example, was described as "a comedy-club impression of what would happen if some mad scientist decided to construct a dork robot."

The establishment kept control during the prosperity of the '90s and the War on Terror of the '00s.  But Americans tired of war and were shaken by the financial crash of 2008.  Conservatives were even more shaken by the election of Barack Obama as president with Democratic control of both houses of congress.  The Tea Party movement grew outside of the Republican Party, and demonstrated its independence and strength in the 2010 congressional elections, and again in 2014 by defeating Republican House Majority Leader Eric Cantor.

Meanwhile, concern was building outside of the political establishment about immigration.  Republicans passed a bill that purported to control immigration while Ronald Reagan was president, but the bill granted amnesty to millions of illegal immigrants, further encouraging immigration.  It was the 1980 census that first alerted Americans of European descent that they were on a path to minority status, as the effects of the 1965 immigration act were first felt.  That realization grew over time, and accelerated as data from the 2010 census showed that immigration was picking up speed.  Republican politicians decided that their 2012 defeat was the result of insufficient outreach to minority communities, and so were unwilling to act on the concerns of voters wanting reduced levels of immigration.

It was around this time that what we now call the alt-right began to grow.  The Internet allowed writers with unconventional ideas to publish, and readers increasingly found themselves in agreement with the positions of Pat Buchanan and Ross Perot.

The Republican establishment continued to control talented politicians well enough to prevent them from deviating from conservative movement orthodoxy, but by 2016 the demand for alternatives was too great.  Donald Trump, even further from the norm than previous outsiders, destroyed a field of 14 governors and senators, a CEO, and one other outsider.   An editorial from September of 2015 summed up establishment opinion:  "If one were to exclude Trump from the equation (granted, an enormous "if," given that his ego spans several area codes), the Republican field might be the most talented field of candidates ever assembled."

Trump satisfied the pent-up demand for an alternative by opposing immigration, free trade and military interventionism.  He might prove too unconventional to win the general election, but his nomination signals the end of the era of the conservative movement that began with Buckley in the 1950s and reached its high point with the reelection of Reagan in 1984.

Is Hillary Clinton correct when she describes the alt-right as extremist?  Ted Kennedy promised in 1965 that the "ethnic mix of this country will not be upset" by the immigration act.  Worry about whether new immigrants holding a voting majority will have the same values and positions as current citizens is not an extremist view.  Opposition to foreign wars, and support of tariffs over income taxes is not extremist.  Support of police and incarceration of convicted violent criminals was an important part of Bill and Hillary Clinton's administration of the 1990s, and is not extremist now.

There are, of course, writers who call themselves alt-right who are extremist, but there are also communists who support Clinton. Clinton's speech will help traditional Republicans running for congress, because she essentially describes them as good Republicans: "Republicanism as we have known it."  It will also help Trump to attract independents and Republicans who are looking for a candidate with new ideas.  On the other hand, if she wins in a landslide, a purge of the alt right might be coming.  Hillary will pitch in with condemnation, income tax audits and prosecutions - the ultimate ctrl-alt-right.

Saturday, August 20, 2016

From Stone Mountain of Georgia to the Molehills of Mississippi

My family and I just finished a trip from Stone Mountain Georgia to the molehills of Mississippi.  (see) We hit about 40 sites in 14 days across Georgia, Alabama, Louisiana, Mississippi and Arkansas.  Just in case anyone is looking for a hectic trip itinerary, here it is:

Day 1:  Atlanta; CNN tour, Coca Cola museum, Margaret Mitchell house, Jimmy Carter library
Day 2: Stone Mountain, Horseshoe Bend National Military Park, Cheaha Mountain
Day 3: Little River Canyon National Preserve, Birmingham; Sloss Furnaces, Civil Rights Institute
Day 4: Montgomery; capitol, state museum, first White House of Confederacy, F. Scott Fitzgerald house
Day 5: Eufaula; Shorter mansion, Fendall Hall
Day 6:  I'd recommend Gulf State Park, but we had business to do in a small Alabama town
Day 7: Mobile: USS Alabama, Mansion tours, Fort Conde
Day 8: Biloxi; Beauvoir  New Orleans, French Quarter, Preservation Hall
Day 9: McGee's Landing swamp tour, Baton Rouge; state museum, capitol
Day 10: Nottoway Plantation, Natchez; tour historic homes
Day 11: Vicksburg National Military Park
Day 12:  Highway 61 Blues Museum, BB King Museum
Day 13: Hot Springs: National Park, Quapaw Baths, Gangster Museum
Day 14: Little Rock; Little Rock Central High School National Historic Site, Clinton library, capitol

The most fascinating historical characters we learned about were William Weatherford, Andrew Jackson, Jefferson Davis, Huey Long, Leo McLaughlin, Bruce Klunder, Lurleen Wallace, and Jimmy Carter.

It was also interesting to see an exhibit on Admiral Thomas H. Moorer in at the Shorter Mansion in Eufaula, Alabama.  He was involved in the Moorer-Radford affair, which was related to the Watergate affair.

I have travelled many times to the South, but Alabama and Mississippi were prettier and more prosperous than I had expected.  I downloaded some Census data and found that after adjusting for cost of living, mean income in southern states is 5% higher than in northern states.  This is remarkable given the larger black population in southern states.

Saturday, August 13, 2016

Trump on the Issues - Immigration

The character and personalities of the candidates are interesting, but this election is also about more substantial policy differences than is normal in U.S. politics.  Both sides have legitimate positions on complicated issues, but my guess is that more voters agree with Trump on most issues than agree with Clinton.  The strategy of Democrats this year is to frighten voters about Trump's character and ignore issues as much as possible.

Regardless of whether voters agree with Trump on the issues, are his positions rational?  This week let's look at immigration.

Countries sometimes see emigration as a solution to their problems.  The British transported prisoners to Australia and North America, France did the same to French Guiana, New Caledonia, and North America, and Cuba sent convicts to Florida in the Mariel boatlift of 1980.  Historians have documented at least 56 incidents of engineered migrations around the world since World War II.

√Čtienne Jaurat: La Conduite des filles de joie (1755)
(The transportation of the prostitutes)

Mexico has many reasons to encourage migration to the U.S.  Migration keeps the Mexican unemployment rate low, and it increases Mexican influence in the U.S.  When criminals migrate the Mexican prison population is reduced.  This is what Trump meant when he said "they're not sending their best." Why would they?  A rational country tries to keep its most productive citizens, and if possible, export the rest.  I explained here why I think immigration is currently a net economic drain for the U.S., and why it causes social and political problems.

Any link between immigration and crime is controversial, but the U.S. population is 10% Mexican while the U.S. federal prison population is 15% Mexican.  States do not all report ethnicity or prisoners in the same way, but in Arizona, for example, 40% of prisoners are Mexican-American or Mexican nationals, while 26% of the population is of Mexican descent.  Prison populations include many long-term inmates who entered prison when the immigrant population of the U.S. was much lower, so the prison population is a lagging indicator of immigrant crime.

Even if the crime rate of immigrants is the same or lower than the native population, why should the U.S. take in any immigrants who have any significant risk of committing crime?  Why not take in foreign doctors, lawyers, and engineers, reducing the cost of hiring professionals instead of reducing the wages of gardeners and construction workers?

Hillary Clinton says that our current porous border is plenty secure, and that she would legalize immigrants who are now in the U.S. illegally.  It is obvious that this combination will lead to massive immigration of low-wage people from around the world.  The effects would be greater income inequality in the U.S., strain on public services, and a permanent Democratic Party majority in the U.S. - the real reason Democrats support more immigration.

With massive numbers of people illegally crossing the border, terrorists will certainly see it as an opportunity to smuggle in weapons and people.  Of course, they might not need to sneak across, since Clinton wants to significantly increase the number of refugees admitted to the U.S. from countries in which terrorist groups are based.  Clinton claims that these refugees would be screened, but it seems obvious to me and others that this is an impossible task.

As I have pointed out before, the U.S. limited immigration from the 1920s through the 1960s, with no clear negative economic or social consequences.  Canada uses a point system to evaluate whether potential immigrants have more to offer Canada than Canada has to offer them.  Why shouldn't U.S. immigration policy be geared to the national interest, instead of the interests of the Democratic Party and the immigrants themselves?