Thursday, February 12, 2009

A better way to stimulate: trust the people who want to work

Thomas Friedman penned a column the other day ("The Open-Door Bailout") that is a must-read for anyone thinking about solutions to our current crisis. The problem with Obama's faux-stimulus bill is that it relies almost entirely on government handouts and government spending programs. It's all top-down, with little or no bottom-up. It's chock-full of Keynesian pump-priming, income redistribution and expanded government programs. It's completely missing measures designed to attract and incent people who want to work and create new jobs. Here are some key excerpts from Friedman's column but please read the whole thing.

Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.

“All you need to do is grant visas to two million Indians, Chinese and Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper. “We will buy up all the subprime homes. We will work 18 hours a day to pay for them.

America, please remember how you got to be the wealthiest country in history. It wasn’t through protectionism, or state-owned banks or fearing free trade. No, the formula was very simple: build this really flexible, really open economy, tolerate creative destruction so dead capital is quickly redeployed to better ideas and companies, pour into it the most diverse, smart and energetic immigrants from every corner of the world and then stir and repeat.

If there is one thing we know for absolute certain, it’s this: Protectionism did not cause the Great Depression, but it sure helped to make it “Great.”

The centerpiece of our stimulus should be to stimulate everything that makes us smarter and attracts more smart people to our shores. That is the best way to create good jobs.

When the best brains in the world are on sale, you don’t shut them out. You open your doors wider. We need to attack this financial crisis with green cards not just greenbacks, and with start-ups not just bailouts.

HT: Ramiro


Mark A. Sadowski said...

Who knows better than me that immigration made this country great. My father (an immigrant from Poland) devised the very method for making the textile fiber called Lycra being made perspiration proof (non-yellowing). It made the DuPont company hundreds of millions of dollars in profits in the next few years. It made my father's manager a $10,000 bonus in 1962 dollars. It made my father absolutely nothing (other than a patent).

If any of you are wearing a garment partially made of Lycra right now (almost certain) say a little prayer for my father right now. And furthermore, say a little prayer that our country will someday see the light.

Tom Burger said...

Amen, Scott. The "stimulus" approach not only fails to stimulate, it causes the next crisis. The simple, intuitive way to see that is to ask a straight forward question: what happens when the stimulus money stops? Or even what happens when it slows down. Economic activity dependent on government spending will expand only so long as the government spending expands.

Tom Burger

Jon S. said...

Scott: the main point of Friedman's piece re brainpower immigration is spot on, pretty amazing considering how absolutely clueless he typically is on almost any subject you can think of. Among other idiocies, he's been ranting for years how the government needs to intervene in all sorts of ways to 'fix' markets, especially energy markets.

But there's always annoying and unfactual info in his op-eds, which is why I don't read them anymore unless someone links to them. There's no evidence whatsoever, eg, for this boner: "While I think President Obama has been doing his best to keep the worst protectionist impulses in Congress out of his stimulus plan..." Right!

Then there's this: "We don’t want to come out of this crisis with just inflation, a mountain of debt and more shovel-ready jobs. We want to — we have to — come out of it with a new Intel, Google, Microsoft and Apple. I would have loved to have seen the stimulus package include a government-funded venture capital bank to help finance all the start-ups that are clearly not starting up today — in the clean-energy space they’re dying like flies — because of a lack of liquidity from traditional lending sources."

Really? We HAVE to come out of this recession with a new Intel or Google? Why? And we should have yet another govt boondoggle which sounds suspiciously like a GSE -- and we all know how stellar their record is -- to spread around venture capital? Anyone else writing this would be labeled a Soviet-style kook.

This is typical Friedman nonsense. He does not understand the first thing about markets or the economy, despite the numerous books he's written on them, and his weak analysis always seems to lead in the direction of more and more government intervention.

Randy R said...

Thank you Scott for highlighting that article. I emailed that editorial around to friends as well thinking how important it is. Funny thing - even Rush Limbaugh recently made an off-color comment about how "illegal immigrants" will end up being our saviour, and then chuckled about actually admitting to such heresy. Obviously there is a big difference between an illegal migrant grape picker and an HB1 visa programmer. In my opinion, the migrants could be (and should be) a critical resource for us if we would only deal with the issue more constructively.

I don't agree with a lot of Friedman, but on this issue and on his columns pushing the Pigovian gas tax, I appreciate him.

Scott Grannis said...

Jon: I agree with you. I was going to mention at the beginning of the post that this was one of the few things Friedman has written that I agreed with. I was amazed to see it coming from him!

Scott Grannis said...

Prospero: I am of the strong opinion that immigration is a good thing. The Republicans' anti-immigrant, anti-abortion biases are huge deadweights on the party's future prospects. If they ditched those planks and got focused on reducing spending and the size of the government (and assuming they could find an eloquent spokesman) they could sweep the next election.

Scott Grannis said...

Prospero: I am of the strong opinion that immigration is a good thing. The Republicans' anti-immigrant, anti-abortion biases are huge deadweights on the party's future prospects. If they ditched those planks and got focused on reducing spending and the size of the government (and assuming they could find an eloquent spokesman) they could sweep the next election.

Jon S. said...

Scott -- I too was amazed to see anything coherent coming from Friedman. And I think on immigration, the Republicans are mostly in favor of sensible inflows but are rightly opposed to illegal immigration, amnesty or anything of the sort. McCain, as you know, was the standard bearer loudly proclaiming that amnesty was fine, and it didn't serve him well.

The base and moderate independents, in my humble view, are not in favor of illegal immigration, bending the rules, amnesty, etc, but Republicans never controlled the public debate, which really distorted their mainstream position into "Republicans are opposed to immigration."

We need a more articulate spokesman next time to make it clear that illegal immigration is antithetical to the best traditions of the American experience, but legal immigration is very good for America -- especially when focused on bringing brainpower and money power to our shores.

Scott Grannis said...

Jon: in my experience, one of the main reasons we have illegal immigrants in this country is that we make it very difficult for them to become legal. We have incredibly strict immigration quotas. I've known people that have waited 12 years to get an immigrant visa. If you were one of them, I bet you would have been tempted years ago to just come here as a tourist and stay, especially if you can work and enjoy a standard of living here that is far better than they country you left.

We can solve the illegal immigrant problem by greatly expanding our immigrant visa quotas. And by limiting the social welfare programs that tempt even legal immigrants to abuse the system.

Mark Gerber said...

Don't you think we should have some sort of merit based immigration policy? It seems to me factors such as skill, education, english literacy would be good places to start. What we have no is mostly a free for all with anchor baby mania. Why are we stuck with this immigration insanity?

Scott Grannis said...

Here's another rationale for a more open immigration policy, and I learned it from Art Laffer: if a nation has free trade and free capital flows, it must also allow for the free movement of labor across its borders. Otherwise you will end up with problems eventually. Capital goes where the opportunities are greatest, and labor wants to do the same. If you block either, you are left with an inefficient economy.

The only thing I would ask of immigrants is that they be willing to work. That's how it used to be--there were no social safety nets that could be abused.

Randy R said...

The immigrants come for the work. Of course we can find plenty of singular stories about abuses, but by and large they come here to work. Considering how much we all rely on their labor, and the lower costs we enjoy on the services they provide, it sounds counter-productive to demonize them.

That there are abuses are our own fault for not changing the immigration and social services systems that allows the abuses to happen. They will still come for the work if we fix the problems.

If we are going to rely on their services (and whether legal or not, we all do rely on them), wouldn't it be smarter to promote education, assimilation, and health wellness to enhance the value of this resource, rather than undermine their development by making it harder to function in our society?

We all see the demographic trends, and it scares the hell out of a lot of us. But wouldn't we be better off if we worked to develop each new generation as Americans rather than battle them into second class participants?

Jon S. said...

Scott, I happen to agree with you on relaxing tough quotas, and it's a big piece of the answer, along with a serious border security approach and a few other things. But we have also allowed a crazy system of preferences that has got to end.

I was referring to the idea that those of us who want to disincentivize illegals who are here and reverse the illegal tide coming in each year are somehow anti-immigrant, and for most of us it's simply not the case.

This is not an immigration blog, so I don't want to unnecessarily prolong this, but one other huge part of the puzzle is Mexico -- which, you will likely not be surprised to learn, is one of the two biggest future country risk problems identified by DOD (among others in the national security world)!

Scott Grannis said...

Prospero: assimilation is definitely the answer. And, to open a can of worms, English as a second language should therefore be eliminated. Immigrants must learn to speak English.

Scott Grannis said...

Jon: if we allowed any immigrant to come who had an offer to work, and pledged to not receive any government assistance, would you be against that?

Jon S. said...

Scott -- good question, and my answer is unreservedly yes. But we still need to unravel the unworkable system that has proven itself broken for the most part, and get back to a sound immigration concept driving our policies. Right now, though, b/c of the family preference program, we are very far away from a smart system centered around, as you and I both support, a skills-based approach.

One observer among many good ones whose work I think highly of is Steven Malanga of City Journal; if you get a chance, take a look at this article from 2006:

Mark A. Sadowski said...

I just noticed your coments on visa quotas. It took my father over 12 years to get into this country. As I noted already I think he more than contributed to our national (if not global) welfare. If we could come up with a fairer, simpler system for getting people who merit entry into the country I think that would be a tremendous improvement over our current system.

Jon S. said...

Scott -- in my answer (#16) above to your question, I see I read your question to me a bit too hastily! You asked in part, "if we allowed any immigrant to come who had an offer to work.." and I said unreservedly yes.

For some reason my brain processed it as "any skilled worker.." and that is my view: we have far too many unskilled workers coming in, who are contributing to keeping wages low among native unskilled workers, among other problems.

I don't say keep out all unskilled workers, but our present system works out to bringing in a surfeit of low- or unskilled workers, and our policy should be the opposite of that. This is the model laid down by Australia, Ireland and others since the '90s, and their success stories in this area is nothing short of incredible.

Scott Grannis said...

I don't entirely agree with you that we have too many unskilled workers that are depressing wages for legal residents. Living in So. California it is easy to see how we are all utterly dependent on Mexican immigrants. They are hard workers and I don't know anyone who would want their jobs (e.g., gardeners, busboys).

I don't think government should be in the business of deciding who is qualified to enter. Let the marketplace decide that.

Meanwhile, let's definitely expand visa quotas for highly skilled workers.