We have claimed that market-based visa (MBV) legislation can be passed in Congress and approved by the White House. I was asked by Congressional staff to support this assertion with a stakeholder analysis, the substance of which can be found below.
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Illegal immigration is a very peculiar policy area. Literally no one endorses current migrant law and enforcement practice. Conservatives hate it, because they feel they are being invaded and the border is out of control. Fiscal conservatives like FAIR hate it because it brings in dependents who represent a material fiscal burden on taxpayers. Hispanics hate it because migrants have to live in hiding and in fear. Democrats hate it because it's cruel and mean-spirited.
So we have a law now nearly 55 years in force that has literally no constituents. It's not like, say, sugar subsidies, which are a zero sum game between consumers and US sugar producers, where giving to one means taking away from the other. No one likes migrant policy. No one is defending it.
This implies quite a bit of negotiating space among the various political factions, as long as one can propose a policy superior to the loathed incumbent model. So let's take a look, stakeholder by stakeholder, at who wants what:
The Social Conservatives
In an ideal world, social conservatives (hereafter, 'conservatives') would like to deport all illegals and seal the border hermetically.
Not Going to Happen
That's not going to happen, for several reasons.
Public opinion is against mass deportation and the Wall by a 60/40 margin (Gallup), and the votes are not there in Congress, not even with the most anti-immigration president in living memory and both houses of Congress to 2018.
Meaningful enforcement against employers -- which would work -- would split conservatives and is therefore suppressed. Note Social Security's 'no match' letters, followed promptly by President Trump declaring E-Verify too hard for farmers. Conservatives themselves do not support mass deportation when the costs are laid plain.
Supply suppression, in this case border enforcement and deportation, has never been successful in eliminating black markets, illegal immigration in this case.
President Trump is down 30 pp with independents, with a net approval rating of -11 pp. No president has ever won re-election with such ratings and Biden is up on the president by 13 pp nationally. For planning purposes, conservatives need to assume that Trump is not re-elected, in which case conservatives most likely will not have another window on illegal immigration policy until 2029, when demographics will have further reduced the conservative white share of the population.
Half of undocumented immigrants have been in the US 15 years, according to PEW. Ten years from now, it will be 25 years. At some point, the American public will want to resolve the situation. Senator Graham, a Republican, is looking at some options now. If conservatives fail to make a move under Trump, most likely some substantial portion of the ten million, long-term undocumented immigrants in the US will obtain permanent status in the next decade.
Bottom line: Enforcement doesn't work historically; the votes are lacking in Congress; public opinion is firmly against mass deportation and a Wall; and time is working against Republicans regarding amnesties. Conservatives need a deal before Trump leaves office.
The Offer to Conservatives
We cannot offer deportations and a sealed border to conservatives, because we cannot deliver them. We can, however, offer compensation, numeric limits, control, safety and legality.
1. Compensation
If we cannot materially remove or deter migrants, we can at least see that conservatives receive market compensation for allowing them in. Within this, two factors matter: the amount, and how the amount is determined. How the price is determined matters for purposes of legitimacy. Americans are accustomed to paying the market price, and the market rate is accepted as legitimate. A person's home is worth what someone in the open market will pay for it. By extension, a visa is worth its market value. Just the fact that the market has set its value will comfort conservatives. Second, the value of the visa should be material. When conservatives see their minimum wage lawn guy is paying twice their rate of effective taxation, that alone will be a cause for respect. (This is an important distinction between us and CATO, by the way. In CATO's world, the US Congress sets the price of the visa; in our world, the migrants set the price of the visa, ie, the value is what it is worth to them, not us. This is also the difference between closing the border and leaving it open.) Conservatives will derive comfort from the knowledge that they are being compensated at a fair rate based on an impartial arbiter -- the market -- and that the amount of compensation is material in terms of migrants' ability to pay.
Many, and perhaps most, Americans appreciate that migrants are here to stay and that we will struggle to close the border. Given this reality, many will be willing to accept money as compensation. Put another way, we can use money to solve certain problems, and this may be one of them.
2. Control
Many Americans are offended by the loss of control over the border, not by people entering per se. Market-price visas, properly managed, will close the border. Historically, transitioning to a legalize-and-tax approach reduces associated pathology by 95% immediately and automatically, which would reduce border apprehensions from 4,500 / day last month, to perhaps 150 / day under a legalized system. This would of course have a huge impact in the border zone (as well as elevating Houston as the de facto capital of Central America), but to the average American it would signal that the US had regained its sovereignty along the Mexican border. For the conservative, this is very important psychologically--but it does not have to mean keeping people out. It means that the channel for migrants is controlled and ordered.
This analogy extends to the undocumented population. Again, conservatives are troubled by foreigners in their community who have no standing, no documentation or known identification, no background checks and are leading an unwelcome sort of lifestyle, poor and hiding, self-aware of being second class residents of the community. In a market-based system, all this ends--even though the Hispanic migrants remain essentially in place--and we do it without amnesty.
3. Numeric Limits
A market-based system provides the opportunity to maintain migrant numbers not much higher than the counter-factual, that is, current policy pre-asylum crisis. We will need to increase visas one-time to accommodate the demand effects of legalization, that is, the 350,000 number calculated here. But that is still far, far better than the asylum fiasco we have today, which we estimate will net 740,000 additional migrant entrants — 300,000 of them minors — in CY 2019. Put another way, with a market-based system, the current asylum crisis would never have happened and illegal immigration would be lower than it is today.
4. Safety
Black markets create adverse selection. Those who participate are the ones most likely to break the law. In a market-based system, it is exactly the opposite. If visas are available at any time on the market, there is always another Mexican or Central American ready and willing to take the place of the incumbent. It is a next-man-up system. Trip up, and there are a million Mexicans ready to take your spot. As a result, not only will such migrants be law abiding, they will be substantially more law abiding than the suburban communities they often serve. If they are not, they won't last.
5. Protect Domestic Wages
A market-based visa will have the effect of bidding migrant wages up to the US market level. Thus, the US employer has the option of hiring US unskilled labor at about $10 / hour or hiring a migrant. Because Mexicans are prepared to accept $6.50 / hour, employers can pay less or provide suboptimal working conditions. This can undermine US unskilled wages or working conditions. In a market-based system, the visa fee will be bid up by the migrants until the employer is indifferent between hiring a migrant and hiring a US worker. By this means, the employer is prevented from undercutting the market wage, even as the migrant earns only his Relocation Wage (which equals the Mexican unskilled wage, a mark-up to cover higher US costs, and an increment to compensate for leaving the home country). Thus, a market-price visa supports US unskilled wages and insures that conservatives are fully compensated for providing market access, that is, the visa system subsidizes neither the employer, the migrant nor any intermediary.
6. Vastly Improved Compliance
A widely-flouted system cannot be enforced. By providing status for those here and a legal way in for those wishing to work in the US, employers have a legal means to access incremental employees on demand, subject only to a budget (visa price), rather than administrative, constraint. In such a world, it is possible to enforce the law and reach near universal compliance, at least with respect to larger businesses.
Fiscal Conservatives
Fiscal conservatives are principally concerned with the fiscal impact of illegal immigration. Most of this is captured in FAIR's 'Fiscal Burden' report. For fiscal conservatives, market-based visas are a no-brainer.
1. Compensation
In a market-based system, the US government receives the maximum compensation from migrants which the market allows, swinging the Federal budget by about $30 bn / year. If this activity were capitalized as an equity on the S&P 500, it would be the fourth biggest company in the US, nestled between Google and Facebook with a market capitalization around $600 bn.
2. Reduction in Costs
Part of the benefit to the Federal government is a reduction in costs, particularly enforcement costs. In our approach, we cut Border Patrol by about two-thirds, because there is very little to enforce on the border. If border crossings drop by 95% -- and that's a reasonable target -- 15,000 Border Patrol agents will deliver 150 apprehensions per day. That's overkill by an order of magnitude at least.
Similarly, depending on the methodology, 50,000 to 190,000 migrants languish in US jails and prisons on immigration and related charges. These cost us about $40,000 / capita / year. Again, 95% of that goes away in a market-based system.
3. Health Insurance
A market-based visa would require migrants to carry health insurance (net that out of the visa fee). This would help ease, but probably not fully eliminate, associated health care costs.
4. Dependents
Because the visa price is determined by the marketplace, low cost providers will be at an advantage. Those who leave the spouse and children at home will have the lowest costs, so a market-based system will discourage bringing dependents, thereby lowering associated education costs paid primarily through local real estate taxes. Similarly, the visa can be designed to discourage birth tourism, in part by discouraging the bringing of spouses and in part as a condition of the visa itself. I would again underscore the importance of on-demand entry and exit in a market-based system. In an MBV system, migrants come and go as they please -- but they have to pay when they're in the US. In the current system, access to the US market is not easy, but it is potentially cheap. In an MBV system, access is easy, but not cheap. Migrants have both the flexibility and incentive to leave the family in the home country, and that will reduce the fiscal burden on taxpayers.
5. New Business Opportunities For US Companies
The traffic which currently goes through the unsecured border on foot would, in the case of the Northern Triangle countries, transfer to air travel. This represents an incremental $1.5 bn in air travel revenues, about 60% of which would fall to US carriers and two-thirds of which would transit through Houston. So there would be plenty of new opportunity for the US business community, both domestically and in the participating Central American countries.
Democrats and Hispanics
For purposes of this analysis, we will treat Democrats and Hispanics as a single group, referring to them as 'Democrats' or 'the left' here, bearing in mind that this is not a homogenous group. The left would like open borders. unqualified amnesty and other concessions for resident and incoming migrants, including access to various social welfare programs.
Not Going to Happen
That's not going to happen, for several reasons.
A liberal President Obama with two Democratic houses could not pass meaningful immigration reform, including amnesties. The best he could achieve was DACA, a presidential order not likely to survive court challenges forever. With a mixed House and Senate, a full scale amnesty is unlikely, although one or two smaller amnesties covering, say, 1-3 million people in the 2020s is possible, and probably likely
Concerns about national sovereignty and border security are not exclusive to Republicans. Questions of immigration cut to the core of identity and group dynamics. All people have such considerations, regardless of political party. Every Republican could be ejected from the Congress and White House and the border would still remain closed to unchecked immigration. (This is why Democrats have such a hard time articulating an immigration strategy.)
There is little appetite on a national level to extend social programs to undocumented immigrants.
Therefore, the most likely post-2020 scenario is a Democratic president and split houses of Congress. A limited amnesty of some sort is probable, but the overriding problems of illegal immigration are likely to remain. For migrants, this includes existential uncertainty, deportation, incarceration, wage theft and worker exploitation, etc. We estimate approximately one million cases of migrant victimization and predation per year. All this remains even after the election. The most plausible outcome for Democrats and Hispanics is a continuation of the miserable status quo, plus one or two limited amnesties in the next ten years.
The Offer to the Left
While we cannot offer amnesties and concessions, we can offer a trade -- market access for a market-based fee. Just as for conservatives, this is a second-best outcome for the left. Although we have converted the prospect of a gift into a service to be purchased, we still allow access to the market, and this has many, many advantages for migrants and the Democrats.
1. The ability to enter and exit the US on demand, work at will
This step has enormous implications. It will end 95% of the observed pathology, and provide social standing and dignity for Hispanic migrants.
2. Status for undocumented Hispanic residents
Although market-based visas will close the border, they still contain a residual risk. Migrants who paid $7,000 / year for a visa will end up working next to undocumented residents who pay nothing. There will be a temptation to improve personal economics by failing to renew the visa, pocket the $7,000, and become part of the undocumented workforce. Therefore, it would make sense to extend the visa program to resident migrants to mop up the black market -- a conservative goal in any event. This would involve issuing market-based visas to resident Hispanics from 'first round' participating countries (presumed to be Mexico, Guatemala, Honduras and El Salvador, and possibly other CA countries, but excluding all others). This would imply issuing visas to approximately 7.3 million undocumented Hispanic residents (out of 10.3 million total, per PEW), of which 5.4 million would be workers. All these people are already in the country -- half of them more than fifteen years.
3. Vast Reduction in Predation and Victimization
A market-based program would materially end death while crossing the desert; end kidnapping, extortion, theft, robbery and assault during migration; end the rape or coerced sex of at least 30,000 women and girls per year; vastly reduce the risk and incidence of arrest and incarceration in the US or Mexico; end the cause of human trafficking for forced labor and prostitution to pay off cartel and coyote fees; end coerced drug smuggling; and materially reduce wage theft and worker exploitation. In humanitarian terms and with respect to the protection of an important Democratic constituency, this would be an incredible step forward.
4. Dignity and Social Standing
Perhaps as important as any other achievement in a market-based system is dignity and social standing gained not only for migrants, but for the Hispanic community as a whole. Sneaking across the border, hiding in trucks, trying to be invisible in the US -- all these would end, and migrants and Hispanics could stand as the equal to any person in the United States.
5. Ease of Working and Living in the US
A market-based system would vastly improve day-to-day working conditions for migrants by allowing access to drivers' licenses, bank accounts, housing rental, etc. and by allowing free travel to and from the US to see family, on the one hand, and contract work while abroad, on the other.
6. Closing the border opens the door to resident status
A principal objection of conservatives to amnesty is that -- as with IRCA in 1986 -- amnesty will encourage yet another round of illegal immigration. If the border can be closed and numeric limits achieved, then conservatives' objections to amnesty will be greatly reduced. Thus, a successful MBV program, while it does not provide amnesty, can provide the preconditions for securing one.
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Democrats would never propose a market-based program because it represents a fair deal, not a concession, a gift or an entitlement. Nevertheless, they would be hard pressed to oppose it, because it provides status for 7 million Hispanics, unlimited on-demand access for background-checked Mexicans and Central Americans to the US labor market at the market price; and because it ultimately protects Hispanic women from exploitation, particularly sexual assault, as well as seeing migrant men spared extended time in US jails and prisons. It is a very big deal for Democrats and a huge step up for the Hispanic community as a whole.
Conservatives, of course, would prefer to close the border and deport the undocumented.
Neither Democrats nor Republicans will achieve their preferred outcomes. The failure of the Obama administration to drive through amnesty with two Democratic houses of Congress, and the failure of the Trump administration to fund the Wall with two Republican houses of Congress, shows that neither side can achieve their best case scenario. Therefore, some version of the status quo is almost certain to persist, with the exception that amnesties for 1-3 million unauthorized residents seems likely during the 2020s.
While MBVs are not the first choice for either conservatives or progressives, they can easily be the second choice for both and represent an outcome far, far better than either the status quo or any other plausible alternative in the coming decade.
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There is a lot here, but at its core, the proposition is simple: end the Prohibition in migrant labor and transition to a legalize-and-tax system with a volumetric cap using a pricing mechanism. The rest is just technique.
This kind of liberalization has a proven track record of success. We know how events will play out and that we can deliver the results promised. This is a problem we can solve, together, to the satisfaction of most Americans.