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The Budget Deal Stinks

In Washington, the word “bipartisan” usually means “watch your wallet.” If anyone needs any further proof, just look to the bipartisan budget agreement announced yesterday.

Hailed in the name of “coming together” and “compromise” to “get things done,” the proposed deal is a dog’s breakfast of every bad budgetary idea to land on the table in recent months.

It’s a deal so bad that even incoming House Speaker Paul Ryan says it “stinks” (although, it appears, he will still be voting for it). Still, current speaker John Boehner, House Minority Leader Nancy Pelosi, Senate Majority Leader Mitch McConnell, and Senate Minority Leader Harry Reid, who hammered out the deal behind closed doors, can probably put together enough votes to push it through, with a united Democratic caucus and just enough pro-defense spending Republicans.

The deal essentially guts the spending limits in place under the 2011 Budget Control Act which brought about sequestration. It would increase spending by at least $80 billion over the next two years above current spending limits, split equally between domestic and defense spending. It would also increase funding for the military’s Overseas Contingency Operation slush fund by $32 billion, meaning the total spending hike would top $112 billion. More domestic spending for Democrats. More defense spending for Republicans. Everyone wins except the taxpayers.

But the deal is much worse than just the particular spending increases it contains. Sequestration may have been a blunt instrument but it has been one of the few successful restraints on federal spending in recent years. Without it and the caps in the Budget Control Act, federal spending would have been at least $200 billion higher since 2011.

This really would mark the second consecutive budget deal in which Congress agreed to ignore the caps. That’s a pretty clear signal that Congress plans to return to its wide open tax and spend past.

The deal would supposedly offset these increases through a rehashed collection of budget gimmicks such as selling some of the strategic petroleum oil reserves, auctioning telecommunications spectrum (again), and making changes to the crop insurance program. Been there. Done that. Still paying for the t-shirt.

In fact, this deal actually weakens long term entitlement reform. For example, it cancels coming increases in Medicare Part B premiums for the 30 percent of beneficiaries not already shielded from premium increases by a hold harmless provision. It would also allow Congress to avoid reforming the Social Security Disability Insurance program by shifting funds to it from Social Security’s retirement program. The move weakens Social Security’s overall financing, but props up the disability program for another six years.

So we will spend more on domestic discretionary programs, more on defense, and more on entitlements, while papering over the cost. Happy days all around.

The deal would also raise the debt ceiling by enough to last through March 2017. In fact, the deal doesn’t just raise the debt ceiling, it simply does away with it for a year and a half.

Of course, no one really expected Congress not to raise the debt ceiling eventually. But this deal surrenders even token Republican leverage.

We’ve been fortunate the last few years. A combination of renewed economic growth and sequestration-driven spending restraint has reduced our budget deficit to just (just!) $435 billion. But this is only a temporary respite. Within just a couple of years, deficits are expected to start growing once more. By 2025 we could again see $1 trillion deficits. Worse, our $18.2 trillion debt is scheduled to rise to $26.9 trillion over the same period. And all of this is before the big cost of entitlements really kicks in. By some measures, our real debt tops $80-90 trillion.

But at least we’ve found something everyone in Washington can agree on: screwing the taxpayer.

Cross-posted to Cato@Liberty

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Some Questions for Immigration Opponents

No matter what policy topic I write about lately, the comments section (and my in-box) quickly blows up with a discussion of immigration. And, judging from the otherwise inexplicable success of Donald Trump’s campaign, it appears that there are a lot of Americans who share a Trumpian opposition to immigration. It also appears that opposition to illegal opposition is increasingly slopping over into opposition toward all immigration, both illegal and legal.

I’m having a great deal of trouble understanding this, so maybe my readers can help me. I admit that, as a libertarian, I am pretty close to an open borders advocate. Yes, I believe that immigration needs to be orderly and that we need to be careful about terrorists or criminals slipping in. But in general, I feel that this country benefits from immigration. Besides, my political philosophy is essentially based on individual rights, and its hard for me to see whose rights immigrants are violating. And, certainly, it seems to me, that most anti-immigration policies would end up violating a lot of rights.

But, as I said, perhaps my friends on the other side of this debate could answer some of my questions:

How do you envision deportation working?

Those seeking to expel illegal immigrants currently living in this country, generally fall into one of two camps. The most radical group simply wants to round them up and ship them home. This would lead to thousands of Elian Gonzales-style raids, with SWAT teams kicking in doors of suspected illegals. Children being hauled out of classrooms. Then what? Boxcars? Is that really what we want to be as a country?

And, what if the authorities get it wrong? What if the arrested family is not really here illegally? Will they be allowed/given legal representation? Look at the drug war and all the innocent families hurt (and some people even killed) in mistaken raids. Such a policy will lead to a network of informants and tips, many of which will be mistaken and others malicious. (Of course many of those advocating this approach are unlikely to be mistaken for an illegal immigrant.)

More thoughtful immigration opponents simply call for enforcing exist laws, especially laws against hiring illegal immigrants. By denying employment to illegals, the hope is that they will self-deport (in Mitt Romney’s inelegant phrase).

The key to this approach is some variation of E-Verify, a government data base to check the employment status of workers applying for jobs. But do we really want to give government another way to track us? E-Verify might seem harmless now, but missions always creep and bureaucracies expand. E-Verify will be an attractive way to enforce hundreds of other employment laws and regulations. In the age of big data, the government can easily E-Verify age, union membership, education, employment history, and whether you’ve paid income taxes and signed up for health insurance. And while the government screens employee applications, it can also check on employers’ compliance with all sorts of regulations by looking at the job applications they submit for verification. That scares me more than illegal immigration.

Moreover, do they really expect that the government responsible for HealthCare.gov will suddenly develop the competence to manage such a massive database? The most recent audit of E-Verify found an error rate of between 0.3 and 0.7 percent. While that might sound small, if applied to the entire national workforce of 150 million people, it would yield somewhere between 450,000 and slightly more than one million errors. That would mean as many as a million American workers wrongly denied employment.

Beyond E-Verify, do we really want to open the door to a national ID system? Or become the type of country where police stop you on the street to “see your papers?”

Why do you oppose illegal (or increased legal) immigration?

On the illegal side of the ledger, the most commonly heard – and, frankly, the most convincing argument – is the rule of law. Those immigrants who come here illegally are, by definition, breaking the law. (Though it is actually an administrative violation, not a felony). At a time when the president seems to feel free to rewrite laws at will, regard for the “rule of law” is more important than ever.

If you feel this way, do you apply it equally to all violations of the law? For example, it seems utterly hypocritical to speak of the rule of law when talking about illegal immigration, but applaud Kim Davis’s refusal to obey the law regarding the issuance of marriage licenses to same sex couples.

Besides, most immigration reform proposals do impose penalties on those who crossed the border illegally, fines, back taxes, they must go to the end of the line to apply for citizenship. If you think those penalties should be stronger, argue for that. But, unless you think that every violation of law – any law — is forever unpardonable, the rule of law doesn’t seem sufficient to oppose any reform that allows current illegals to stay.

The far weaker argument against immigration is the worry that immigrants – and here the anti-illegal immigration argument morphs into an overall anti-immigration argument – take jobs away from Americans and drive down wages.
For the most part, immigrants have different skills and job preferences than native-born workers. They typically take jobs at the high end and low end of the skill spectrum. Where there is competition, illegals are competing less with American workers than with automation. The demand by American workers to pick vegetables is, shall we say, underwhelming. The vast majority of immigrants should be considered complementary, making American workers more productive.

The CBO, projects that under comprehensive immigration reform average wages would be “0.5 percent higher in 2033” if the bill were passed. Even this undersells the positive overall effect immigration would have on wages, because a majority of new immigrants would have lower-paying jobs, bringing the average wage amount down, meaning wages for native workers would increase even more than 0.5 percent. And, a recent study looking at state legislation intended to make it harder for undocumented immigrants to work found that passage of such a bill had slightly negative effects on overall population and employment, and that this kind of legislation “not only has a negative effect on the undocumented population, but it also unintentionally harms a much broader segment of the population.”

There may indeed be some job loss or wage depression for the lowest skilled Americans, but those negative effects would be swamped by beneficial impact throughout the economy. For example, if some businesses are able to reduce labor costs, those savings can be passed on through lower prices or steered into greater investment elsewhere.

Indeed, the CBO estimates that comprehensive immigration reform would increase real gross domestic product by 3.3 percent over the next 10 years and by 5.4 percent by 2033. After all, economic growth depends on the growth and productivity of the labor force. An increase in immigration would help offset an ongoing decline in U.S. labor force participation.

Immigrants positively impact both the demand and supply sides of the economic equation. Obviously, immigrants are consumers, providing additional demand for goods and services in the areas where they reside. At the same time, immigrants are nearly twice as likely to start a business as native-born Americans. Immigrants now account for almost 30 percent of new entrepreneurs, more than double their share in 1996. In addition, the US is by far the most popular destination for migrant inventors. Roughly 57 percent of the world’s inventors who live outside their home country, reside in the U.S. There are 15 times as many immigrant inventors in the US as there are US inventors residing abroad.

More importantly, for my conservative and libertarian friends, why do you believe it is the government’s job to keep wages higher than they would otherwise be in a free market? What other government interventions do you favor in order to prop up wages? Minimum wage laws? Protectionist trade barriers? Public works programs? Mandatory union membership?

There is also the welfare question. Yes, increased immigration, under current laws, is likely to mean more people receiving welfare benefits. Immigrants, both legal and illegal, immigrants tend to use most social welfare programs at a slightly lower rate than native-born Americans with comparable incomes. But because they tend to be poorer than the average American, they use welfare at a higher overall rate. This is a real problem, but would seem to argue more for walling off the welfare state than for walling off America? Would my friends who oppose immigration be willing to accept a compromise where there is increased immigration, but immigrants are ineligible for welfare?

This leaves the question of culture. There seems to be a fear that increased immigration will change our culture. Of course it will. But why is that a bad thing? America’s culture has been changed by immigration at least since Benjamin Franklin complained about all those Germans living in Pennsylvania. And we are wonderfully better for it, richer, more diverse, more interesting. Like the Brad Paisley country & western song puts it:

Shes got Brazilian leather boots on the pedal of her German car
Listen to the Beatles singing back in the USSR
Yeah shes goin around the world tonight
But she ain’t leavin here
Shes just going to meet her boyfriend down at the street fair
It’s a french kiss, italian ice
Spanish moss in the moonlight
Just another American Saturday night
There’s a big toga party tonight down at Delta Chi
They’ve got Canadian bacon on their pizza pie
They’ve got a cooler full of cold Coronas and Amstel light
It’s like were all livin’ in a big ol’ cup
Just fire up the blender, mix it all up
You know everywhere has somethin’ they’re known for
Although usually it washes up on our shores
Little Italy, Chinatown, sittin’ there side by side…

Frankly, the only thing that seems different about these immigrants is that they are brown skinned. While I know my friends have more substantive, policy-oriented reasons for their immigration concerns, many of those commenting on message boards after my columns, and many of those applauding Trump, seem to flirt with racism and xenophobia.

As I said, I have many friends and people I respect on the other side of this debate. Perhaps I’m missing something. If so, I hope you will enlighten me. On the other hand, maybe more facts and less emotion might make you reconsider, what I think is a wrong-headed and even dangerous policy turn.