CBP Southwest Border Oct. 2020: Another surge on the way?

The covid pandemic has changed much in our societies.  Illegal immigration has largely been put on ice since March, both by myself and many other commentators.  Nevertheless, the world of illegal immigration has not stood still over the last six months, and it's time to start catching up.  

Consider border apprehensions: With the outbreak of the pandemic, southwest border apprehensions collapsed to only 16,000 in April, which would have been a four decade low but for April 2017, when the then new president, Donald Trump, intimidated Central Americans into postponing their journeys north.  However, then as now, April would mark the low point of the cycle and numbers would rise thereafter, this year, in linear fashion to last month.

September apprehensions were surprisingly high, 54,771, the highest for the month since 2006, during the Bush administration.  This is attributed variously to 1) continued pandemic-related lockdowns in Central America, forcing migrants north looking for work; 2) a greater propensity for catch-and-release by Border Patrol, encouraging more tries by migrants; and 3) attempts by migrants to seek medical treatment in the US.  

Be that as it may, apprehensions continue to march up, much like 2018.  The Great Migrant Surge of 2019 (GMS) began in July 2018 and accelerated into mid-2019.  Last month's apprehensions were well above the 2018 levels which would prove the harbinger of a subsequent explosion in illegal immigration.  One has to wonder whether we could see a repeat here.  Should President Trump lose the election, as many now believe, he will have little incentive to fix the border in the balance of his administration.  An incoming Joe Biden will be swamped with action items, not least a stimulus bill, should that fail to pass in the next two weeks.  As a result, the incoming administration may not be in a position to deal with illegal immigration until the spring.  In the interim, the border could devolve into yet another free-for-all.  For now, this is speculation, but anyone with a ruler can project a surge during the winter months.

One should note that the demographics of illegal immigration have returned to their traditional form.  Historically, the majority of border jumpers were single adults, mostly men.  During the GMS, families displaced individuals, as both court rulings and the Omnibus Bill of 2019 provided preferential treatment for adults traveling with children.  With the pandemic, however, families and unaccompanied minors have all but disappeared from the rolls of apprehended.  

The opportunity today is for those willing to risk illness and apprehension, and try over and over if detained by Border Patrol.  Once again, adult men traveling alone have an advantage.  And they are coming in record numbers.  Expect the trend to continue.

In contrast to apprehensions, inadmissibles -- those seeking to enter the US at official crossing points but lack proper documentation -- have fallen sharply, down two-thirds.  Traveling to the US during the covid pandemic is risky, and of course, the US-Mexico border remains closed to non-essential travel. 

Thus, illegal immigration today is largely limited to adults traveling alone, willing to risk not only apprehension but covid infection to reach the US.

Hawaii Covid Strategy Analyses

Fear of Flying and Hawaii Tourism (Sept. 3)

The Covid Exile Market (Sept. 4)

Is Quarantine Worth It? (Oct. 6)

Hawaii Needs a New Strategy - Part 1

“Just one more month.” That’s what everyone says, and it has been Hawaii’s de facto strategy for dealing with the coronavirus. If Hawaii clamps down for just one more month, the virus may be brought under control and restrictions eased. This was the hope in June, and July, and now August. Perhaps just one more month, and Hawaii can open in October.

Given that five months of quarantine have ended in an uncontrolled virus outbreak on Oahu, the time has arrived to ask whether a strategy based on short term hope has run its course. The coronavirus may very possibly remain a problem not only through September, but a year or two more. We are moving out of the short term and into the medium term. Rather than trying to beat the virus outright, Hawaii should consider approaches to reviving the economy under the assumption that the virus will remain an endemic problem indefinitely.

This may sound dire, but in fact, Hawaii is far better prepared to pull through than many may appreciate. To an extent, Hawaii will have to reinvent itself – as so many of us will in this dislocated era – but the adjustment is within the state’s capabilities.

As a Mainlander now two weeks post quarantine, I would like to offer my experience as a model for a new strategy from the visitor’s perspective.

The incoming tourist faces not only quarantine, but more dauntingly, the flight over. Back on the East Coast, we have established daily routines to protect us from the coronavirus, including face masks, social distancing and limiting interpersonal interactions outside the household. Most of us have confidence that we are relatively safe on a daily basis. We cannot, however, control the ten-hour flight to Hawaii, in an enclosed space filled with strangers – exactly the conditions the experts tell us to avoid. If Hawaii wants more visitors, reducing the actual and perceived risk of flying is a critical part of the equation.

When I flew from New York last month, until I landed at Kona, no one checked my temperature, required any kind of test, or asked me anything about my health beyond a few superficial questions. Incredibly, one can still fly around the US without anyone taking in any serious interest in whether one is contagious or not. I would have paid double for my ticket if I had confidence that everyone on my flights had passed a coronavirus test. Even if Hawaii does not lift the quarantine, requiring test results not more than a week old would go a long way to creating the confidence to fly. This would not necessarily address all the problems in multiple-stop flights, but it would at least cover the leg of the trip from the west coast to Hawaii.

In addition, the importance of new, less sophisticated virus tests cannot be overstated. These tests are cheap and quick, but they measure infectiousness rather than the illness. That is, they measure whether the test taker has a virus in an infectious state, not necessarily whether they have covid or not. For purposes of a flight, this would be a huge step forward. From the traveler’s perspective, the question is not whether someone potentially sick is on board, but rather whether they will transmit the disease to you during the flight. Rapid tests which filter out those in an infectious phase of the virus would enormously boost the confidence needed to fly to Hawaii.

Second, Hawaii should manage perceptions by preparing a regular dashboard of quarantine results. Because Hawaii – and only Hawaii – has had a blanket quarantine in place now for almost five months, it has data unique in the entire United States. Indeed, when you arrive at the airport in Hawaii, you are compelled to provide your cell number, which they call right on the spot to confirm that it is yours. In my case, quarantine control followed up twice, at the end of the first and second week. The State of Hawaii knows that I was symptom-free at the end of quarantine. This data can be used to determine the risk of flying. When I flew to Hawaii, I did not know whether my odds of contracting covid were 1 in 5, or 1 in 5000. I still don’t. If state government would share quarantine results on a regular basis, that would help potential visitors decide whether the flight is worth the risk. The state cannot promise to reduce the risk to incoming passengers to zero. But those same visitors cannot reduce their risk to zero at home, either. In the end, it comes down to taking reasonable, timely and cost-effective steps to reduce risk and helping potential visitors make informed choices at a time when all risk cannot be eliminated.

Rather than trying placing all bets on eliminating the virus completely, Hawaii should consider approaches to reviving the economy based on the assumption that covid will remain endemic indefinitely. Success will come from learning how to manage virus transmission risk while allowing the economy to function. For Hawaii, it is not a matter of victory, but of adaptation.

Hawaii Needs a New Strategy - Part 2

On the Mainland, we tend to think of Hawaii as an expensive destination suitable for a short vacation of a week or two. The state’s fourteen-day quarantine rule seeks to discourage just such tourism. And it has. Very few would come to Hawaii for two weeks of quarantine followed by a week or two of vacation. As a result, the island is all but free of its traditional tourists.

Notwithstanding, there is another market ready for the taking: covid exiles. For example, 420,000 New Yorkers have left the city for safer climes, most notably the Hamptons, Cape Cod and Maine. As an owner of a Cape Cod home, I can attest that the coronavirus has brought us an exceptionally good year, with the house rented continuously from July 4th through Labor Day. Indeed, various members of our family have occupied the house since March and will again after Labor Day. Ordinarily, Cape Cod has a short season of about ten weeks. This year, our house is likely to be occupied for ten months. And of course, this is good for the local economy, even if some restaurants remain closed and various businesses are operating at less than full capacity.

There is, of course, an even better place to go than the eastern seaboard: beautiful Hawaii. If one has to be in exile, do it in paradise. Covid exiles, however, are not Hawaii’s normal fare. To win the business, Hawaii needs to position the islands in a slightly different fashion.

The exiles will be the laptop crowd, professional couples and families in which one or both parents will spend a significant part of the day working by phone or on the computer. They will do the usual tourist things, but not in concentrated quantities. On the other hand, they will be around, potentially for the entire fall season. A key driver will be affordable housing. At least half of Hawaii’s rental offerings on Vrbo and Airbnb are empty. It is possible to negotiate landlords to rock bottom if one offers to stay for a more than one month, with a terrible day rate offset by continuous income. From personal experience, I can attest that many landlords still target high rates and short term rentals. They need to be encouraged to offer their properties long-term and publish compatible rates. Hawaii today does not have to be the high cost option, and landlords should do their share to make potential visitors aware of that fact. And exiles, particularly during quarantine, will need a higher level of service, first and foremost, help in buying groceries and other necessities. Landlords should offer ‘concierge services’ — and they can charge for it.

Ancillary fees should be reduced. Vrbo and Airbnb service fees and occupancy taxes add another 25% to rental costs. The state should work with the agencies to cap their fees at two weeks’ rental. If a weekly rental is, say, $1000, then the service fee is nearly $100. Cap the fee at $250 for a transaction, and that will encourage not only more visitors, but also longer-term visitors. Furthermore, the state’s 14.6% occupancy fee is steep. For now, it should be capped or reduced.

Finally, the state should charge for covid testing. One should be tested at least twice: one upon entry into Hawaii and once before release from quarantine. Both the state and its visitors have an interest in the results of a formal test. Do not view testing as an imposition. View it as peace of mind. Visitors ultimately have the same goal as the local community: to stay healthy. The state can charge for that.

Of course, the state could also lift quarantine. Although incoming risk is better managed with a covid test than quarantine – which can be avoided by the resourceful – the problems of covid transmission, not only in Hawaii but throughout the US, are principally behavioral. Young adults partying with alcohol can spread the virus fast and wide. The lifting of quarantine will tend to bias the market back towards short-term rentals and possibly towards behaviors more likely to create transmission risks.

If quarantine is to remain, the state should target those covid exiles who never thought to spend a month or a season in Hawaii. There are hundreds of thousands of them. Give them a bit of encouragement, and many will come to Hawaii. Let the message spread: Hawaii is looking for long-term renters and making it affordable to do so. Hidin’ out in Hawaii. Paradise is on sale for those willing to make a longer-term commitment.

Even under the best circumstances, the next many months will be difficult for Hawaii. However, by refocusing the tourist sector towards long-term visitors, Hawaii’s economy may find a way to endure, and perhaps even prosper.

Why E-Verify is Useless

An important aspect of any policy is compliance and enforcement.  Compliance means getting participants to act in the way we would like, ensuring they comply with a given program.  This notion is often confused with enforcement, which generally means punishing people for failing to comply. Border Patrol and ICE are all about enforcement, not compliance.

E-Verify is an example of bad policy, both with respect to compliance and enforcement.  

E-Verify comes into play when a migrant -- the seller of labor -- is about the enter into an agreement with an employer -- a buyer of labor.  By the time the issue of E-Verify rolls around, the migrant and employer in all likelihood have agreed to do business together.  However, the employer is legally obligated to use E-Verify before concluding the transaction.  Alas, the sole purpose of E-Verify is to prevent a transaction from occurring.  It provides no value to either party.  In the dating world, it would be the equivalent of 'E-Chaperone', whose purpose is preventing boys and girls from kissing the wrong partner.  One can imagine how popular that might be.  Not only do the parties have no incentive to comply, they have a powerful incentive not to comply.

As a result, compliance must be compelled with the threat of enforcement: punishing migrants and employers who try to work together illicitly.  How effective is this threat?

We have already established that the likelihood of an illegal alien being deported from the US interior, barring a criminal offense, is roughly 8 in 10,000 per year.  The risk to the migrant is minimal.  

As for the employers, according to the Transactional Records Access Clearinghouse of Syracuse University

Not only are few employers [of illegal immigrants] prosecuted, fewer who are convicted receive sentences that amount to more than token punishment. Prison sentences are rare. For example, of the 11 individuals the Justice Department reported as convicted during the most recent 12-month period [of April 2018 - March 2019], only 3 were sentenced to serve prison time.

This can be projected onto the 570,000 employers who received 'no match' letters from Social Security and who may be presumed to employ the undocumented.  Another several hundred thousand companies probably employ the undocumented with no paperwork at all.  Therefore, the odds of enforcement against an employer in any given year is probably on the order of one per hundred thousand.  

As a practical matter, both the employer and the migrant face vanishingly small odds of enforcement for flouting employee verification in any given year.  

Thus, E-Verify is the very embodiment of bad design: a compliance procedure issued in direct opposition to the interests of the involved parties, accompanied by virtually no meaningful enforcement.

One cannot help but wonder how this state of affairs came to be.  Either its authors were stunningly naive, or baldly cynical.  It is, of course, the latter.  Black markets inevitably generate hypocrisy, because they pit our self interest against our social interest.  All of us want a properly documented society and controlled border crossings.  At the same time, the employer needs an employee, the migrant needs a job, and all of us need cheap food and housing which those very migrants will build and subsequently clean and tend.  The system is therefore the result of just this tension: the appearance of interior enforcement without the substance.  

This may infuriate conservatives.  The key, however, is to accept that employers and employees will come together as a matter of course, and that they produce goods and services of value to the rest of us.  These are inherently legitimate activities.  At the same time, society has a right to control its borders.  Therefore, it is a matter of finding a workable balance rather than taking extreme positions on either end of the spectrum.

The most important feature of a migrant labor system is ensuring that the buyer and seller have an interest in complying with regulations.  We would describe this as a 'pull' system (and E-Verify as a 'push' system).  No one has forced you to buy a smartphone, but if you are reading this, you almost certainly have one.  You did this because the money you pay for the phone and associated service are worth more than its cost to you. 

If buyers and sellers have an incentive to work within the system, then compliance will be high without enforcement.  This is and should be a principal objective of migrant policy.  And it is exactly what market-based visas do.

The cost of rejecting amnesty in a pandemic

​Conservatives resist amnesty for the undocumented for fear it may stimulate further illegal immigration and because it rewards illegal entry into the US.

A market-based visa (MBV) system would address the former concern by closing the unsecured southwest border to illegal immigration, albeit at somewhat higher migrant numbers overall.  At the same time, keeping migrant numbers within conservative tolerances implies that MBVs would carry a substantial price, $2.50 - $3.50 / work hour, or up to $7,200 / year / visa for an unskilled Mexican laborer.  

Given the high visa price, incoming migrants could have an incentive to allow their legal status to lapse and join the undocumented, alongside whom they would be working daily as is.  This in turn could be prevented by materially draining the domestic market of undocumented labor -- by providing legal status to undocumented residents of the country.  

Conservatives lump any legal status into the category of 'amnesty', but an MBV program would provide nothing more than an H2 (in our case, H2-MR) visa which could be voided by the government annually at renewal, should policy-makers so decide.  The H2-MR does not provide permanent residency, access to social welfare programs, or the right to vote.  It is just the right to reside in the US legally and work without fear of arrest or deportation.  And the US government could charge for it, by our estimates $1,200 / adult immigrant / year, about $6 bn in free money for the Federal government annually.  

Right now, such a program would be incredibly helpful.  

The White House and Congress are near to agreeing terms on the coronavirus stimulus (bridging) package.  Samuel Hammond of the Niskanen Center reports that the package should cover undocumented immigrants with US-born children or those with US Social Security numbers.  This is helpful (although rewarding migrants for using fake Social Security numbers is troubling from the conservative perspective).  Still, even with these provisions, several million undocumented immigrants may remain uncovered.   

And that could matter.  Given that most of undocumented live hand-to-mouth, they cannot afford to remain unemployed for any stretch of time.  As a result, they are likely to continue to work when they feel ill, and are likely to return to work while they are still contagious.  And they are heavily involved in ensuring our food supply, from picking fruits and vegetables, to processing poultry, pork and beef, and serving dairy farms.  Just one or two adverse media headlines about sick migrants preparing raw food could make for real public panic over food safety.

And this highlights the weakness of the anti-amnesty case.  Undocumented immigrants already enjoy amnesty as a practical matter.  The odds of ICE deporting an illegal immigrant who did not otherwise commit a crime was 8 in 10,000 last year.  That is amnesty in all but name.  

But failing to give it a name means that the government has minimal control over the undocumenteds.  How does one distribute official government support to people who are not officially in the US?  How does a migrant prove their legal status if they have none?  On what basis does the government hand out money beyond 'scout's honor'?  Without a massive invitation to fraud, it's hard to do.

And that means, for the moment, we are running the risk of a material humanitarian crisis among the undocumented coupled with a potential risk to critical parts of our supply chain.  This is a bad place to be, and most decidedly not conservative.  It is a danger to the group and its members.

If we had a market-based system, the currently undocumented population and incoming migrants would be enrolled in the most advanced system in the world, allowing us to monitor, communicate and transact with them in real time.  The proposed MBV system is predicated on smartphones and authorized bank accounts (which the government could debit for visa fees).  This system would enable real time monitoring of the respective population's health, employment status, and financial resources.  It would also allow direct deposit into authorized accounts already known and visible to the US government -- a quick, efficient and documented way to get money into the hands of those who need it.  We would have better information about and control over H2-M and H2-MR visa holders than literally any other segment of society, and this would greatly reduce associated risk and broaden policy options.

For the moment, we need to make sure we are addressing the undocumented population -- both for their safety and ours.  In the context of pandemic, invisibility equals risk.  In the medium term, however, we need to consider that a blanket rejection of any sort of legal status for the undocumented is frankly inconsistent with conservative values -- if we are unwilling to deport the undocumented as a practical matter.  A hard line against 'amnesty' is a de facto endorsement of lawlessness and puts all of us at risk.

Impact of MBVs on Airline Revenues

Impact of MBVs on Airline Revenues

Carnegie Mellon Study: Visas, Legalization and Enforcement

Researchers at Carnegie Mellon University recently released a study examining the impact of increasing the number of migrant work visas on the flow of unauthorized immigrants to the U.S.  We highlight some key findings.

Legalization amplifies the effects of enforcement

The authors write:

[Legal] entry bans for deported individuals are ineffective at current rates of legal immigration, but...increased legalization rates would amplify the deterrent effects of deportation.

[Increasing] the deportation rate reduces the rate of unauthorized migration to the U.S. and the cumulative number of years a potential migrant spends living in the U.S. as an unauthorized immigrant. However, even with very high deportation rates, the policy of excluding those with prior deportations has minimal effect on rates of unauthorized migration because the baseline probability of obtaining legal status is so low. Only when the probability of gaining legal status is much higher than that currently observed does the legal entry ban policy measurably reduce unauthorized migration. These findings confirm the importance of losing the opportunity to legally move to the U.S. and highlight the interactions between enforcement and visa policies.

This is the carrot and stick problem of which we have written in earlier posts.  Because there is no chance at the carrot of compliance, all the emphasis falls to the stick of enforcement.  But enforcement is many cases not terribly effective because the migrant often has little to lose by being apprehended by Border Patrol.  It is an asymmetric value proposition.  Prospective crossers can, however, be deterred by the prospect of obtaining or retaining legal status, as in the case of market-based visas.  The Carnegie Mellon study shows that each 1% increase in the possibility of gaining legal status leads to about a 4% decline in the propensity to immigrate illegally.  If this relationship were linear (it's not), a 20% chance of gaining legal status would effectively end the inclination to come across illegally.  In the case of MBVs, all those who can pass an H2 background check could qualify for an H-2M market based visa, probably close to 95% of the population.  Thus, market-based visas should effectively end attempts at illegal immigration for all but felons, drug smugglers (most of whom come through official entry points nowadays) and illegal immigrants of convenience, that is, those who live close to the border away from official crossing points, come over for a day's work, and can't be bothered with the associated paperwork and bureaucracy, to give just one example.

Simultaneous, not sequential

While conservatives often demand enhanced enforcement as a prerequisite for any sort of legalization, the study authors argue that simultaneous implementation is likely to be more successful.

[One school of thought calls for] reductions in unauthorized migration prior to increasing the options for legal migration. This sequential approach is implemented in practice either through the use of “trigger” clauses within a single piece of legislation or by proposing legislation focused exclusively on enforcement prior to separate legislation expanding the options for legal immigration. While there may be other justifications for the sequential approach, our findings suggest that achieving a target reduction in unauthorized migration will be more costly in the absence of increased legal access to the U.S. than when implementing both sets of policies simultaneously.  

Temporary visas deter almost as well, but with many fewer migrants

The authors find that temporary visas are almost as effective as permanent residency at deterring illegal border crossing, but result in a much lower migrant headcount.

[Our] analysis shows that permanent legal status and temporary visas drive similar reductions in unauthorized immigration, but the latter increases the stock of authorized immigrants by far less. 

We estimate the model using data from the Mexican Migration Project (MMP), which provides unparalleled detail regarding the migration histories of migrants between Mexico and the U.S. Importantly, the MMP data include information on the timing of migration events and changes in legal status, showing that many migrants move temporarily and repeatedly, making the dynamic nature of the model essential to accurately understand the implications of migration policy for migration decisions.

Thus, in the presence of a legal entry ban policy, the temporary visa program amplifies the deterrent effect of enforcement policies by creating a valuable legal alternative. The temporary visas provide an effective deterrent because many immigrants seem to prefer relatively short stays in the U.S. even absent policy incentives to do so.  [The MPP database] shows that 65% of migrant spells in the U.S. last less than 3 years, so for a substantial share of potential migrants the 3-year limit on the simulated work visas may not be binding.

Therefore, in certain contexts, temporary work visa programs may provide a more politically feasible means of providing legal access to the U.S. labor market while still amplifying the deterrent effects of immigration enforcement policies.  

Virtually across the board, the DC policy analysis community cannot see a migrant without feeling a need to offer full amnesty.  Take for example, Mark Krikorian, Executive Director of the Center for Immigration Studies, in a 2014 piece outlining the Center's migrant policy:

[Amnesty] would be a risk worth taking [subsequent to the implementation of] a new enforcement paradigm. 

Who should benefit from such an amnesty? The bulk should be people without criminal convictions who have U.S.-born children or U.S.-citizen or legal-resident spouses...add to that adult illegals...and... it would be fair to estimate, then, that out of an illegal population shrunk by attrition to 10 million people, some 6 or 7 million would qualify for amnesty.

Amnesty beneficiaries should get green cards — i.e., become regular legal immigrants who can, if they qualify, become citizens 

For those who may not know, CIS represents perhaps the hardest line against illegal immigration.  Nevertheless, CIS is well to the left of both Princeton Policy Advisors and study results with respect to handing out permanent residencies.  One can nary find policy analysts left or right in Washington who, if they cannot deport the undocumented, do not want to shower them with green cards.  This is an unabashedly American-centric view of the world.  Notwithstanding, many Latin Americans like their own countries, languages, families, and communities.  They would just like to earn more money in the US to improve their standard of living.  Of course, most would happily accept permanent US residency or citizenship if it were offered to them.  But that is not what they need.  They need a predictable, convenient, and controlled way to access the US labor market on demand for a finite period of time safe in the knowledge that they will not be arrested, harassed or deported.  This is one key implication of the study and a central tenet of market-based visas.  Market-based visas do not provide a path to permanent residency -- they cannot as a function of relying on a market price. But they do provide on-demand access for those seeking to work in the US for a limited period.  

To recap: The Carnegie Mellon study highlights that temporary visas which provide increased legal access the US labor market will 1) improve enforcement outcomes without 2) swamping the US with millions of new migrants resulting from offering permanent residency  Those are two central goals of a market-based approach: a closure of the southwest border to illegal immigration while limiting migrant headcount growth.

Finally, I think study achieves an additional key, but indirect, goal.  Notably, the study helps move us past the sterile and ossified debate in DC and towards one focusing more on data, models and analysis in the hopes of elevating the discussion to one based on policy trade-offs rather than the supposed virtues or vices of Latin American migrants.  

Well done to the team from Pittsburgh.

Census: US Population Projections Under Alternative Immigration Scenarios

A Changing Nation: Population Projections Under Alternative Immigration Scenarios 

Latest population scenarios from the Census, including various alternatives for immigration levels.  The 'high' immigration scenario corresponds to about 2.0% GDP growth using CBO assumptions otherwise, ie, 1.7% GDP growth in the 2020s resulting from 1.4% productivity growth and 0.4% growth in the workforce under business as usual assumptions.  

Sure looks like amnesty

Immigration and Customs Enforcement recently issued its FY 2019 ERO Report summarizing its enforcement and removal operations, ie, arresting and deporting people.  

In FY 2019, ICE arrested about 20,000 people purely on immigration charges in the US interior.  Another 10,000 were arrested by agencies other than ICE (page 13).  

This translated into the deportation of 7,469 persons residing in the US illegally but without criminal records otherwise (p 19).

Thus, of the roughly 10 million undocumented residents without criminal records, ICE is managing to deport about 7,500, or roughly 8 in 10,000 per year.  If we throw in those arrested for traffic offenses excluding DUI, this ratio rises to 2 in 1000.  In other words, if an illegal immigrant keeps his nose clean, the odds of being deported is about once every 500 to 1000 years.  That is not enforcement.  It looks like de facto amnesty.  

​It's not that people aren't deported.  Border Patrol removed 182,000 last year.  But these are folks caught coming over the border.  ​If we focus on those already resident in the country, then only 85,000 were removed, that is, 0.8% of the undocumented population.  Hang around for 120 years, and ICE is apt to catch up to you.  But if you haven't committed a crime, you could have been here 500 years before Columbus arrived, and still no one would be bothering you.  As a practical matter, ICE data suggests there is no interior enforcement against undocumented immigrants who have not committed a crime otherwise.  My conservative friends carp, "No amnesty, no amnesty."  Well, tell me undocumented residents don't have amnesty as a practical matter, because it sure looks like it.

And it's not like ICE is lightly staffed.  It has 20,000 employees, about half of the on the ERO side.  Do the math, and an ICE ERO employee deports on average 0.8 undocumented, but otherwise law-abiding, immigrants per year.    

This would change under an MBV system.  ERO -- enforcement and removal operations -- would be rechristened CERDO -- compliance, enforcement, removal and detention operations.  There is no compliance option today, so ICE is just running around punishing people.  You can't solve a black market with such tactics.  If you provide a compliance option -- MBVs in this case -- then a big part of the mission becomes insuring migrants and employers are signed up.  ICE would also enforce much more heavily against employers -- but that can only work if the system acknowledges employer needs.  If you're starving businesses of workers, of course they will hire off the black market.  Enforcement can work, but only if employers believe it is part of a coherent and reasonable system.  They need a workable means to comply with the law.

Conservatives love enforcement, but at the end of the day, what we really want is compliance.  Right now, we have neither.

Mulvaney: US desperate for immigrants

The Washington Post reports that, at a private event in England on Wednesday night, acting White House Chief of Staff Mick Mulvaney said the U.S. economy needs more immigrants to keep growing.  He told the crowd that the United States is "desperate — desperate — for more people. We are running out of people to fuel the economic growth that we've had in our nation over the last four years. We need more immigrants." He stressed that they must come in a "legal fashion."

Let's put some numbers around these claims.

GDP growth is a function of growth of the labor force and the growth of labor productivity.  We can grow the economy by either adding more workers or by each worker producing more per year.  Labor productivity growth has averaged 1.1% per year since 2015, 1.4% per year during the Trump administration and over the last fifteen years overall.  The CBO uses 1.4% in its projections to 2030 as well.  Notwithstanding, labor productivity in Japan, which is ahead of us on the demographic curve, is essentially unchanged in the last seven years.  Consequently, US labor productivity growth may fall short of expectations.  Productivity growth of 1.4% is about as much as we can reasonably anticipate, with the risk to the downside.

To productivity can be added the growth in the labor supply.  Since 2011, the US has added approximately 2.4 million jobs annually.  In 2019, this pace fell to just over 2.0 million incremental jobs, in part because the potential labor pool is largely exhausted.

Looking forward, the CBO expects the potential labor pool to expand on average by only 680,000 annually to 2030, and only 580,000 per year after 2025, contributing a mere 0.4% to GDP growth.  This may prove pessimistic as labor reserves could be larger.  The core 25-64 working age group is increasing by only 350,000 / year on average in the 2020s, so the CBO and Census Bureau are already assuming 300,000 of the gains in the potential workforce are coming from increased labor force participation either within or without the core working age group.  For example, labor force participation in the 65+ age group is rising steadily.  Japan has managed to stave off a decline in its workforce through such adaptations, most notably increased workforce participation by women.  Thus, US domestic reserves of labor may be modestly -- but not vastly -- greater than the CBO expects.

Caveats notwithstanding, the productivity and population trends above lead the CBO to project GDP growth of only 1.7% on average in the 2020s, not the 2.9% presented in the February 2020 report of the Council of Economic Advisors (p. 299).  

Immigration can increase the pace of GDP growth.  The Bureau of Labor Statistics reports approximately 160 million persons employed in the United States. Increasing the GDP growth rate by 0.1% would therefore require an additional 160,000 workers.  To average 2.5% GDP growth, immigration would have to rise by 1.3 million additional migrant workers annually, plus their dependents, perhaps 1.8 million persons / year in total in today's visa regime (but only 1.5 million or so in an MBV program).  

The current GDP forecasts of both the CBO and CEA already assume 1.0 million net international migration into the US.  Thus, those hoping to maintain a 2.5% GDP growth rate have to reckon with increasing the pace of immigration by 180% or so.

Meanwhile, demand should be robust.  Nearly 20 million Americans will turn 65 in the coming decade, and studies suggest that their consumption falls by only 15% at retirement.  Consequently, there will be plenty of demand for labor even as our worker shortage continues to unfold.

And this brings us full circle to Mick Mulvaney's speech at the Oxford Union.  The Federal budget deficit is wildly out of control, even as the retirement of the Baby Boomers portends further rises in government spending.  Historically, we have grown our way out of deficits, but if GDP growth is only 1.7%, then this avenue is all but blocked.  And Mulvaney knows that.  Hence his desperation for more immigrants, necessary to both keep the economy growing and provide services for an aging US population.

The numbers make it clear: The calls for increased immigration are only getting started.

Market Based Visas - Document Package (Jan. 2020)

Market-based Visas - Overview

A relatively short overview of the market-based visa concept.

Market-based Visas - White Paper

This is the detailed white paper on market-based visas, January 2020 version.

Market-based Visas - Answering concerns raised at the CATO Workshop

This paper addresses the typical issues raised by those hearing about market-based visas for the first time. I think it is a quite useful document and well worth reading.

Stakeholder Analysis

This is a foundation piece exploring the objectives of each of the major stakeholders. Durbin’s office praised it.

How market-based visas meet political needs

This looks at stakeholders, ideologies, and their objectives and how these align with specific proposals regarding illegal immigration

Market-based Visas - White Paper (Jan. 2020)

Market-based Visas - White Paper - January 2020

Ideology as a consulting tool

I would like to use our model, a principal-agent framework for ideology (PAFI), to show how it handles a libertarian debate that has been swirling in the last week.  Tyler Cowen, a professor of economics at George Mason University, has discovered that libertarianism does not adequately handle climate change.  Presumably, he thinks climate change is due to excess CO2 emissions -- pollution, if you'll have it -- from various human activities.  Back in the day, pollution was treated as an externality, to be handled by the government because individuals lacked the incentive to address the issue, hence 'externality'.  Today, this newly novel problem requires a new approach: 'State Capacity Libertarianism', or as Henry Olson of the Washington Post might put it, conservatism.  

Olson writes:

Conservatism and libertarianism have long been locked in a symbiotic embrace.  [The State Capacity Libertarianism] essay by libertarian leaning economist Tyler Cowen suggests the embrace will end soon.  [The issue with] libertarianism is that people do think public entities should address public problems.  Old style, "big L" libertarianism rejects this view, contending that any form of government action is inherently unjust and creates more problems than it solves... Encumbered by the belief that [libertarians] must be kowtowed to, most Republican office holders remain unable to voice any significant alternative to progressive visions for health care policy [or] climate change...  That requires saying that government can do some good, [even though] those who do speak are uniformly -- and often stupidly -- castigated as 'statists' or even 'fascists'.  If even [Cowen] thinks government can and should act to solve problems, then advocates of [a libertarian] view have to stand up and pay attention.  That, in turn, lends intellectual respectability to conservatives...who are slowly breaking the ice that has frozen conservative thinking for so long.  The hard core [libertarians] will try to keep the rest of us in the shadows, but...more and more conservatives...will break free from their frozen slumber.

In other words, libertarians and conservatives are increasingly on opposite sides of the political divide.  In Hungary, where I developed PAFI, this split occurred in the early 1990s, not long after the fall of communism.  The anti-communist coalition of the conservative Hungarian Democratic Forum (MDF) and free-market Alliance of Free Democrats (SZDSZ) splintered soon after Hungary returned to democracy. The fiscally conservative SZDSZ — rather shockingly at the time — chose to cohabit on the left with their former oppressors, the Socialists.

In important ways, this split also happened in the US and UK with the Clinton and Blair governments, to be temporarily reversed during the Great Recession (which we refer to as the China Depression).

​So let's take a look at State Capacity Libertarianism using PAFI.  

Note that we define 'conservative' for the first time.  The term has historically drawn a number of descriptors like 'traditional', 'backward looking', 'resistant to change' and 'illiberal'.  All these are true, but none of them is a definition.  We define conservatism as pertaining to the group; seeking to maximize the utility of the group (and its members); and with property rights vested in the group, not the individual.​  By contrast, liberalism is defined as pertaining to the individual, maximizing the individual's utility, and with property rights (freedom) vested in the individual.  That's the organic left-right split: the individual versus the group; desire versus duty.

As the chart suggests, the fiscal conservatives -- more or less classical liberals or libertarians -- are structurally on the left, not the right.  Notwithstanding, if you speak to the professionals at CATO or the Niskanen Center, for example, they think of themselves as center right.  Nevertheless, if you ask them whether they speak to social conservatives, they do not.  They are not on the same team.  Emotionally, they have already gone through the divorce that Olson says is only coming now.  Cowen is trying bridge the divide by putting libertarians on the center right with State Capacity Libertarianism, in essence because he has no working definition of the term 'conservative'.  Consequently, Cowen trying to incorporate conservative ideas into libertarianism.  The chart above suggests this will prove a dead end.

Liberals and conservatives will be structurally at odds with each other.  Both libertarians and egalitarians (progressives) represent the individual against the system, against power and against the patriarchy.  To concede the primacy of the individual is to concede a critical issue of principle, for the individual will always be in a weak position against the establishment.  Libertarianism must stay distinct and uncompromised.  CATO in particular has a very clear philosophy well aligned with neoclassical economics. 

On the other hand, theoretical conservatism has no champion at all, because, no coherent theory of conservatism — other than ours — has been proposed to date.  Conservative theory in our framework is the mirror to that of CATO, with solid philosophical and theoretical foundations consistent with established economic theory.  

Our theory asserts that libertarianism will find its home on the left.  If the median voter boundary falls to the right of the classical liberals -- and it does -- then the classical liberals will dominate the left, because policy must be near the median voter boundary to pass into legislation.  Thus, the fiscal conservatives will marginalize the egalitarians in the future just as they marginalized social conservatives during the Soviet era.  There will be lots of talk of progressive policy, but the actions will look fiscally conservative, says the theory.  We will see the return of Bill Clinton-style administration, perhaps in the form of Joe Biden, Amy Klobuchar, Michael Bloomberg or Pete Buttigieg.  The model suggests that Elizabeth Warren and Bernie Sanders come up empty, because the balance of Democratic voters will increasingly be those suburban independents -- the fiscal conservatives -- whom Henry Olson and the Republican Party have been so assiduously purging.  It is not time to cashier libertarianism, but to recognize that it must find a new home.

It is also time to put conservatism on a sound, theoretical basis.  We have the theory.  Where should it go?  The Heritage Foundation could be a natural home, although Heritage is positioned perhaps more as a Republican shop than independent think tank.  The Hoover Institution, arguably a more brainy place, could also be a good home.  Be that as it may, our model suggests that the social conservatives are on the median voter boundary — there because communism collapsed.  Consequently, conservatives could crowd the boundary for a very long time to come, literally centuries.  Unlike liberalism, conservatism contains very serious risks for civil society domestically and for conflicts abroad.  It is power over money, and power is more dangerous.  As a result, we need to improve theory to ensure we draw the best from conservatism while avoiding its pitfalls.  And Tyler Cowen is right about another thing: libertarianism for now is hollowed out.  Twentieth century liberalism has run its course.  For the next generation or two, the interesting running will be made on the conservative side.  That's where the action will be.

To close with our opening point: A principal-agent framework for ideology is a very useful tool.  I have relied on it for 15 years and use it almost every day.  Our framework has both great explanatory and predictive power.  The tool is not hard to learn or apply, and integrates well with both liberal theory and neoclassical economics.  Many of the readers on our email list are academics, think tank professionals, brainy journalists or ideology junkies.  All of you will find this framework helpful in better understanding the world and the possibilities for successful policy initiatives.

I am always happy to make a presentation on the topic.

A Principal-Agent Framework for Ideology

How market-based visas meet political needs

Princeton Policy Advisors advocates for a market-based approach to solve illegal immigration across the US southwest border.

In this post, we consider some of the related analytical tools.

Bills pertaining to immigration struggle to find sufficient political support in Congress to pass into legislation. The prospects for such support can be assessed ex-ante using stakeholder analysis, historically taught in public policy schools like my alma mater, Columbia University's School of International and Public Affairs.  

In the business world, everything ultimately boils down to a single objective function, some version of return on equity.  In the world of politics, we have three separate objective functions which align with the major ideologies.  Egalitarians would like everyone to be equal, even if all are poor.  Classical liberals (libertarians) want maximum scope for the individual (which is not conceptually dissimilar from ROE in practice).  And conservatives want to maximize the benefit to the group and its members.  These objectives cannot be reconciled mathematically, which is why politics is so...political.  

For any given policy, usually two ideologies are for and one against; or two against and one for.  For example, Medicaid can be justified in egalitarian terms as taking from the rich to uplift the sick and poor; or it can be justified in conservative terms as fulfilling our duty to take care of society's weaker members.  The egalitarian approach is bottom up, and the conservative approach is top down, but either can lead to essentially the same policy.  (And that's how Republicans become big spenders, by the way.)

In addition to the three ideological groups, stakeholder analysis also considers economic interests, in this case, Hispanics, businesses and unions.  Hispanics want legal status, market access, and to maximize take home pay.  Businesses want ample, low cost labor.  Unions want to protect US workers by limiting foreign competition.  As a practical matter, Hispanics can be lumped with Democrats, business with classical liberals (libertarians) and unions perhaps fit best with social conservatives today.

With respect to illegal immigration, each of the stakeholders has a list of specific goals they would like to achieve.  Our version of this criteria list by stakeholder group can been seen below.

Any policy proposal -- including HR 5038, the various Goodlatte bills, a universal immigration bill like the ‘Strengthening America’s Workforce Act’, or market-based visas -- can be assessed using this list.

Ideal's Proposal

For example, Ideal Immigration advocates for a universal immigration policy which lets in as many immigrants as businesses care to hire at a visa price of $2,500 / year. On the chart below, we can assess the prospects for this proposal by each stakeholder’s specific criteria.

Such a proposal largely serves libertarian and business interests.  Conservatives, however, will flatly reject any unlimited immigration proposal.  Thus, at a minimum, both houses of Congress and the White House must be held by Democrats for unlimited immigration to pass.  But the situation is much worse than this.  The Ideal proposal was largely embodied in a draft bill entitled the 'Strengthening America's Workforce Act' (SAWA).  After this bill was sent around for comment, it picked up a clause which prevents undocumented immigrants from participating, ie, no amnesty.  This implies businesses could import, say, legal, lower cost Asian labor to displace undocumented Hispanic workers in the US.  This is a deal killer for Hispanics.  And unions will reject the proposal because it opens the US labor market to unlimited foreign competition.  Thus, our framework shows that Ideal's proposal is unlikely to garner material support on either left or right.  It is a non-starter by a very large margin.

Market-based Visas

Market-based visas are predicated on the assumption that employers are entitled to hire employees; that we will never deport undocumented immigrants in material numbers; and that conservatives are entitled to limit guest workers to the lowest number which ends the black market in Hispanic labor.  

As the chart below shows, MBVs achieve conservative goals with the exception of mass deportation and with the requirement to increase the migrant headcount by 500,000 to allow for the demand effects of legalization.  Businesses have to accept that they will have to provide pay and working conditions at levels comparable to those for unskilled US labor -- but employers can access more workers faster as compensation.  Democrats and Hispanics receive legal status for seven million undocumented Hispanics and on demand access for migrant labor, subject to visas numbers set to conservative preferences and the resulting market price for a visa.  Everyone has to make a concession, but these are the necessary steps associated with lifting a prohibition.  After a one-time adjustment is absorbed, the system should work reasonably well for most stakeholders.

Thus, MBVs can meet the requirements of all the major stakeholder groups with one material concession from each.

This is a political oddity.  Legislation is ordinarily a partisan affair.  Nevertheless, those who care to look -- and we have -- will quickly find that black markets arising from prohibitions — including the prohibition in migrant labor — generate such incredibly bad side effects that it is in fact possible to make policy which is Pareto optimal for all.  By Pareto optimal, we mean better than current policy or any likely alternative which could be passed in the next, say, five years.  In the case of illegal immigration, MBVs provide each and all ideological and economic interest groups a Pareto optimal solution.  Ending prohibitions is the equivalent of ceasing to hit yourself on the head with a hammer: not that much of an achievement in terms of insight or technique, but boy, you feel a lot better afterwards.  Strange as it may seem, fixing illegal immigration is conceptually trivial, and, on paper at least, achievable with all the major stakeholders participating in the process.

Market-based Visas

A market-based visa (MBV) approach would allow background-checked migrants from Mexico and the Northern Triangle countries to purchase a work visa at a market rate and enter and work in the United States on demand.

Program Goals

Such a program would seek to:

• Close the unsecured southwest border to illegal immigration 

• End the black market in undocumented Hispanic labor without mass deportations

• Create an orderly guest worker program and achieve market-level compensation for the U.S. government for providing labor market access, thereby generating both public confidence and visa revenues in excess of related migrant social costs, in turn laying the foundations for a more constructive dialogue on immigration policy

• Recognize and accommodate conservative concerns with respect to migrant numbers, status and comportment.

• Create tolerance and dignity by ending the impact of black markets – the lawlessness, victimization, racism and simmering ideological civil war – on employers, migrants, the policy community, and the U.S. public

The Black Market in Migrant Labor

Black markets arise when the government attempts to prohibit willing buyers and sellers from consummating a transaction.  For conservatives, this arises for issues of perceived morality, social nuisance, or threats to the group.  Typical prohibited items have included alcohol, marijuana, hard drugs, gambling, prostitution – and migrant labor.   

Black markets are characterized by a predictable set of pathologies.  These can be addressed with either enforcement or, alternatively, legalization coupled with taxation.  Enforcement in turn can be applied to the supply – in this case, the migrants – or to demand, their employers.  Almost without exception, enforcement against supply is the default option for handling black markets.  This inevitably fails, as it did with Prohibition for alcohol (1920-1933) and the other vices before and since.  The war on drugs, for example, has been raging for fifty years, and we are no closer to winning than we were during the Nixon administration.

The United States has, by contrast, experienced repeated success with liberalizations, notably with Repeal in 1933, gambling legalization outside Nevada from the 1970s, and marijuana legalization in the last decade.  Indeed, marijuana legalization has led the quantity of marijuana smuggled over the unsecured U.S. southwest border to fall by an astounding 81 percent just during the Trump administration, and 93 percent since its peak in 2009.  

Market-Based Visas

Market-based visas are a type of legalize-and-tax approach to ending the prohibition in migrant labor.  Rather than regulating the market using quotas or quantitative restrictions, a market-based approach seeks to regulate the market by either setting visa prices and allowing visa volumes to adjust accordingly, or setting the number of visas to be issued and allowing the market to set the price.

As noted above, a market-based visa (MBV) approach would allow background-checked migrants from Mexico and the Northern Triangle countries to purchase a work visa at a market rate and enter and work in the United States on demand.  

In terms of mechanics, the system might work as follows:  A Mexican decides he would like to work in the United States.  He visits the local U.S. consulate and fills out the associated paperwork, much as for an H2 visas, but leaning more heavily on biometrics.  

The United States would conduct the usual screenings.  If the migrant passes the background check, he would only receive the right to purchase a work visa (here dubbed the H2-M) at a market rate.  

He would then seek to obtain a work offer, or barring that, plan to enter the United States speculatively and look for work.  He could, for example, go to the Spirit Airlines website, buy an air ticket and a U.S. work visa at the same time for the duration of his choosing to the maximum permissible.  With that, he could hop a flight from, say, Guadalajara and enter the United States at his discretion, with his visa tab running at an estimated $20 / day.   When he exits the United States, the meter would stop.  

In this system, we substitute ‘cheap’ for ‘easy’.  In the current system, it is not too expensive to enter the United States, but it is not easy.  In the proposed system, it is easy, but in no way cheap.  We are, in effective, monetizing the cost of crossing the border and working illegally.

The H2-M would grant the rights of a standard H2 visa: ability to open bank accounts, obtain driver’s licenses, and rent property, among others.  It would not allow participation in any Federal welfare programs, and health insurance would be mandatory. 

The H2-M visa would not – and cannot – provide a pathway to permanent residency. As the visa would be purchased at a market price, any future benefits deriving from the visa would be reflected in its market value. Permanent residency in the United States is an extraordinarily valuable right, by our calculation, worth more than $4 / work hour even if promised for 15 years in the future.  Were the option of permanent residency included in the H2-M program, participants would be reduced to penury by facing the trade-off between eating today and becoming citizens years hence, and the program would fail politically.  

The Importance of On-Demand Entry

On-demand entry to work in the United States at the discretion of the migrant is a cornerstone of the market-based approach.  Today, migrants come across the border illegally because they cannot enter legally.  To close the unsecured border to illegal immigration, therefore, the most direct solution is to allow migrants to enter at will.  

But how then to limit the quantities?  A fully open border would see millions cross in short order.  Fortunately, the market provides a solution in the form of a price, the same mechanism used by every business the world over.  A market price rations access without discrimination or preference.

In this system, the U.S. government does not choose who enters the United States to work, it only qualifies a pool of potential workers via a background check.  Having passed that, however, the migrant is in full charge of the decision to enter, subject to the visa fee.  A price-based system ensures that visas are readily available on demand at any time, leaving the migrant in full control over his options.  For the migrant, the key to working in the United States – as it is for Americans themselves – is finding a good job, getting good references, and staying in good standing with the U.S. authorities.  This is the means to close the U.S. southwest border: allow migrants to enter legally at will.

Status for Undocumented Hispanic Residents 

A guest worker program like the proposed H2-M is, of course, not ideal for undocumented migrants who are for practical purposes permanent residents.  Nevertheless, since negotiations regarding the status of DACA and Dreamer participants seem at an impasse, market-based visas (MBVs) can serve as a substitute, even if an imperfect one.

Providing market-based visas just for incoming migrants is less than ideal.  Even assuming the border can be sealed with this approach, incoming migrants will end up working alongside undocumented immigrants.  In such an event, either the value of the visa may remain low or a migrant who entered on H2-M visa may allow it to lapse and join the black market to improve his personal economics.  Moreover, the American public will remain unsatisfied if 90+ percent of the migrant market remains illegal.  

As a consequence, extending the H2-M program to undocumented migrants already resident in the country makes sense.  This would materially wipe out the black market in labor over time and ensure the unsecured southwest border remains closed to undocumented economic migrants.

The process of issuing and purchasing visas could be identical for undocumented residents as it is for incoming migrants.  Both could purchase visas online, although the pools would likely be segregated (an H2-MR visa for residents).

If the government intends to provide status to undocumented migrants in the country, it will have to accommodate administrative violations of U.S. law in order to ensure widespread adoption of the program.  This, of course, does not apply to those known to have committed serious crimes representing a tangible danger to the community.  Indeed, the entire point of leniency for administrative crimes is to ensure a high level of program adoption and compliance while isolating hardcore criminals and depriving them of social support and work opportunities.

The Number of Visas

Migrants from just four countries – Mexico, Guatemala, El Salvador and Honduras – constitute 96 percent of attempted crossings at the U.S. southwest border.  The citizens of these four countries (‘the MCA countries’), therefore, must be included in any program seeking to close the border.  The remaining 4 percent, from a variety of countries, would be excluded simply as a matter of practicality.  

The number of visas would be set by the price which reduces apprehensions at the U.S. southwest border to approximately 150 / day, compared to the current level of 2,000 / day.  This represents a reduction of approximately 93 percent, which is a fairly typical reduction in pathology associated with the repeal of prohibitions.

The end of a given prohibition has historically led to an increase in demand for the now legalized good or service by 10-15 percent.  Assuming 5.0 million undocumented Hispanics work in the United States, legalization would increase demand for migrant labor by 500,000 – 750,000 persons, on approximately two million open jobs in the category, per our analysis of JOLTS data from the Bureau of Labor Statistics.

Over the longer term, demand might increase with GDP, or perhaps an additional 100,000 – 150,000 incremental visas per year.  The point, however, is to demonstrate that the system can function acceptably over a relatively short horizon of perhaps 3-4 years.  Within that time, either the virtues of the system will become apparent, or it will fail.

Visas must also be granted to resident undocumented aliens in the country.  Of the 10.5 million undocumented immigrants estimated by the Pew Research Center to be living in the United States in 2017, 7.0 million (67 percent) originate from the MCA countries.  Non-MCA countries would be excluded from this program in its pilot phase as a matter of practicality.

Setting the Visa Price

In the MBV plan, the price of the visa is set by the market.  This is a central component of the Plan and critical to its success for many reasons.

First, while we estimate the visa value at $3.50 / work hour, the market value could be higher or lower and could change materially over time, with seasonality and with the business cycle.  

If Mexicans and other Central Americans are allowed to set the price in an open market, then they will essentially convert the value of legality into the visa price.  On average, therefore, the undocumented migrant should be no worse off than they are today, and economics ensures that a producer surplus will exist for all participants.  

The Visa Issuing Authority

Unlike price-based approaches, a market-based approach does not allow unlimited quantities of migrants to enter the United States.  To achieve that goal, price / quantity pairs must be actively managed, unlike a fixed price system.

This in turn requires a management capability, in this case, a visa issuing authority which has flexibility to respond to market and social conditions.  We refer to this as the Visa Oversight and Management Committee, the VOMC, not coincidentally similar to the Federal Open Market Committee (FOMC) which conducts U.S. monetary policy.

Like the FOMC, the VOMC would have a mandate to manage prices and volumes, notably to 

• Issue the number of visas which closes the unsecured southwest to illegal immigration and ensures material visa coverage of all non-violent, undocumented Hispanics in the country with the goal of reducing ‘no match’ Social Security numbers by perhaps 80%

• Limit incoming migrants under an agreed cap (for example, no more than 400,000 additional visas in Year 1, and no more than 200,000 additional visas in any subsequent year)

• Adjust visa price, terms and conditions to ensure compliance with payments and other requirements

• Monitor, report and make recommendations to Congress on 

  • Key program performance indicators (visas issued, retired, outstanding; border apprehensions)

  • Financial indicators (revenues; expenses; direct and indirect social costs; net revenues)

  • Migrant employment, wage, remittance and societal indicator trends (incarceration, use of social services, health and well-being indicators, etc.) 

  • Employer conditions and compliance (new hires, wages paid, job titles; Social Security ‘no match’ rate, employment rates, etc.)

  • Services utilization and compliance (healthcare, education, etc.)\

  • Impact of visa policies on U.S. unskilled wages and employment

  • Societal impact (public opinion on migrant numbers, comportment; protests, etc.)

Put another way, the VOMC would be responsible to manage a government profit center generating $30 billion of net revenues per year, making it an economic entity with an impact comparable to Facebook or Amazon in dollar terms.  The VOMC would be mandated to ensure key stakeholder objectives are met, including those of migrants, employers and the public, and in particular, conservatives.

Political Considerations

The key political challenge is persuading conservatives to consider a price-based approach. 

Conservatives, and perhaps most Americans, feel most comfortable with controlling the country’s borders with quantitative restrictions, boundaries to be protected with force using Border Patrol or Customs.  The intent is to keep foreigners apart from citizens, ‘them’ from ‘us’, unless permission is specifically granted. 

Nevertheless, quantity-based restrictions, whether at the border or in policies like affordable housing, always bring markedly suboptimal outcomes and promote corruption and cronyism.  They are to be avoided, as a matter of policy, whenever practicable. 

The alternative is a price-based regime.  Rationing by price is highly efficient, paradoxically much fairer than quantity restrictions, and does not require force. 

That said, switching from a conservative to liberal mindset is inherently unnerving, because items perceived to exist outside monetary value are suddenly monetized, where ‘everything has a price, but nothing has value.’  Letting go risks a venture into the unknown.

Nevertheless, it is also true that black markets are phenomenally destructive, and condoning them is not conservative, but anarchic.  And prohibitions inevitably fail.

Therefore, the hope is to persuade conservatives to accept a price-based approach, while acknowledging key conservative values.  First and foremost is a limit on incoming migrants, and we achieve this by providing a management capability which allows conservatives to retain control over visa issuance within a price-based framework, hence ‘market-based’ visas.

Conclusion

An MBV program does not constitute ‘comprehensive immigration reform’, nor does it address other immigration programs which may have merit in their own right.  It is, in essence, not even an immigration program, but rather the repeal of a prohibition on migrant labor.  This is its strength.  Black markets are easy to fix.  Both the theory and practice of market liberalization are well understood, and therefore, so is the expected outcome.  Illegal immigration is a problem we can solve in a manner which both meets the needs of incoming migrants and undocumented Hispanics, and addresses and respects the legitimate goals of Americans as a whole, and conservatives in particular, to control our borders and ensure a safe, orderly and economically viable migrant policy.

Border Apprehensions Nov. 2019: Normal

Customs and Border Protection reported 33,510 apprehensions at the southwest US border for the month of November.  This is about 2,000 below the prior month and 500 below our forecast, that is, actuals are essentially at forecast levels.  The rate of apprehensions for November was average for the past decade.  

The rate of improvement in apprehensions has been decelerating.  Families have been largely discouraged, and the remaining traffic is primarily single men traveling alone to avoid detection.  This traditional traffic is not much changed over several years, and if the Trump administration wants to claim improved border security over the Obama administration, then that result really has to be demonstrated in the single adult, traveling alone category. We would guess that this will be hard to do.  Families are, as a practical matter, amateurs.  Men traveling alone count as professionals. 

Our model (60% apprehension rate, three tries) suggests that 200,000 migrants make it across the border undetected every year.  The US government could achieve the same outcome by setting up a toll booth and allowing in 200,000 migrants.  This would represent $1.4 bn in incremental revenue per year in an MBV program, as well as allowing a reduction in enforcement costs in the billion dollar range, all in representing a capitalized value around $15 bn.  And the exact same number of migrants would be in the US in either case.   We can enforce the border the hard way, or the easy way.  The easy way is more fun. We might try it sometime.

Turning to inadmissibles, these are coming in again right on our forecast made in January of this year.  In other words, the level of inadmissibles is also largely normal.

Ten Debate Points for Politicians

I often feel that political debates miss points that actually matter to me. I thought to write a few items down, in no particular order.

Tolls are Out of Control

Tolls on the east coast are out of control. For our family in central Jersey, tolls / vehicle amount to $700 / year. A person making $17 / hour will have to work for one week of the year just to pay their tolls. Here are some tolls versus gasoline costs:

Is the wear and tear on roads really as much as the gasoline we use? In the case of the Pennsylvania Turnpike, about half the toll goes to pay for other items in the state budget, and indeed, the legislature put such egregious requirements into the Turnpike's budget that, since 2008, cash tolls have risen 154%, compared to 25% for the CPI, and EZ Pass tolls have by 42% since 2011, compared to about 19% for the CPI. And tolls continue to rise by an unconscionable 6% annually.

Tolls should only be allowed to be used for the object which they support, eg, a bridge or a road. The Federal government should review toll costs and mandate downward revisions as indicated. This is reasonably important for the middle class and a big deal for low income, but not poor people, including many in the black and Hispanic communities. It's also a question of equality: rich people are allowed to cross the George Washington Bridge; people working for $15 / hour aren't. If a candidate told me we were going to knock the toll on the GW Bridge back to the $5 it is on the Tappan Zee, that would win my vote.

Tolls are out of control, and the Federal government needs to act.

One Day's Pay for Fines

I was caught speeding near Newark Airport. I chose to go to court in scenic Elizabeth, New Jersey. I was perhaps one of two white people in the courtroom, the rest being blacks or Hispanics. They seemed mostly low income, but working, people, and I struck up a conversation with a young black man next to me. Like me, he had been caught driving 20 mph over the limit. The fine is around $200, which he didn't have. So he didn't pay, was summoned, didn't go, was summoned again, didn't go again, and then a warrant was issued for his arrest. For him, $200 was probably close to two days' pay. If he wanted no points, he would have had to pay another $240 -- the cost of an indulgence in NJ and the reason I was there. So to save himself, he would have to pony up nearly a week's pay, and I would guess most of the people in that courtroom were in similar shape. If you are a finance professional, a fine like this is a nuisance. If you're in the lower 50% of the population, it's crippling.

Fines for other than serious safety violations should never be more than one day's pay.

Be Careful with those Green Promises

I think one could make a plausible case that California's renewables policies were a major contributor to burning down Paradise. Similarly, NJ's and NY's rejection of a natural gas pipeline has led to a supply crisis in Westchester, NY, which has become a major political problem for Governor Cuomo. We're going to see more of this as green rhetoric starts to come up against bread-and-butter, real life considerations. Again, lower and middle income people will take the brunt of it--a theme of a number of the suggestions here. Green policies are morphing into class warfare. If Trump were a little more Evita Peron and a little less Francisco Franco, he could mop up a large portion of the Hispanic vote and find decent support in the black community.

Add Road Capacity

Baltimore has more takeaway capacity to the north on I-95 than does NYC. We need four more lanes north of NYC on both sides and frankly, a whole new Hudson River crossing. And there are many issues like this all over the country: I-90 west of Boston or Rt. 3 towards Cape Cod, I-93 into Boston. One could go on and on. But be specific and be local. The people who are suffering in traffic are not interested in 'infrastructure'; they want to know you're going to string up every Connecticut politician until I-95 is seven lanes each way to New Haven. A candidate could secure my vote with this single issue. Easily.

Can we not give some public housing to its residents?

About 600,000 people live in NYC public housing. That's the population of Baltimore City. Could we not find a way to transfer ownership of, say, 25% of the units to their residents? That should have some appeal, particularly to minority communities, who would be the principal beneficiaries.

Introduce Market-based Visas

No surprise to our readers. Here's how I'd pitch it: "We're going to give legal status without amnesty to seven million undocumented Hispanic residents; close the unsecured southwest border by lifting the prohibition on migrant labor, and use market mechanisms to keep the migrant headcount within limits acceptable to most conservatives. If we succeed in closing the unsecured border for a period of time, we can start to migrate long-term unauthorized residents to permanent status."

Note the Harm of Prohibitions

Democrats have spoken about legalizing marijuana, and indeed, hard drugs. This points deserves more than two minutes of pandering. The current prohibition on hard drugs, for example, is the cause of two-thirds of violent crime in Mexico and US inner cities. That is, prohibitions literally define the nature of these communities. Prohibitions are also the cause of 95% of opioid deaths. So, sure, cracking down on the drug trade has an appeal, but it carries a huge, huge cost, almost entirely borne by minorities. We need a more thoughtful--and less politicized--approach.

Limit State and Local Pension and Healthcare Liabilities to Three Years Post-Employment

Costs have to be expensed as incurred. You'll never hear that from a Democrat (maybe Mayor Pete?), but, well, this is my list. It's the most important reform you could give to Democratically controlled states.

Name a Commissioner for the Seas

A few issues here:

The Great White Sharks: These have become a significant issue from Nova Scotia to Mexico, in particular on Cape Cod. The local townships are clueless as to how to tackle the problem and need Federal help and guidance.

Garbage Islands: The giant islands of garbage floating in the Pacific are about more than plastic bags and disposable straws. The topic needs substantial research and a coordinated international effort.

Abandoned nets: This seems to be a major contributor to sea life fatalities. This is an issue we need to understand better.

All of these have symbolic meaning and emotional resonance. None of them is terribly expensive. All are pro environment.

Have a Suggestion Box

Put a suggestion box on your website. See what is actually bothering people in their daily lives. A lot of it is local. Some of it has a federal angle, but often people just want to hear the issue acknowledged. Put up an email address, for example, suggestions@candidatename.com. Ask not only for donations, but also what you can do for your country.

Market-based visas are the only option on the table

On Nov. 7th, the CATO Institute held a workshop on innovative approaches to both legal and illegal immigration, and invited me to speak on market-based visas (MBVs).

I would like to reflect on my takeaways from that event.

Before that, though, let me express my gratitude to Alex Nowrasteh of CATO for giving me the opportunity to speak. Also, please note that the comments here reflect only the views of Princeton Policy and not necessarily those of CATO or any other participant at the workshop.

The Approaches to Immigration
During a full day of presentations, experts presented on a variety of approaches to immigration, but overall their proposals could be categorized into three groups: incrementalists, utopians and radicals.

The Incrementalists
Incrementalists typically had sensible, limited proposals which are easily understood and derive from international or historical precedent. For example, one proposal called to increase work visas in line with population growth and GDP; another, to look at rural sponsorship of migrant workers. These can pass if the political winds are properly aligned and can improve policy at the margins. They also have the enviable advantage of simplicity. On the other hand, none of these approaches addresses root causes of illegal immigration. They offer no solution for the plight of millions of undocumented workers and hundreds of thousands of migrants coming across the border (nor were they necessarily intended to).

The Utopians
The utopian proposals typically called for unlimited immigration in return for low, fixed-price visas. Unlimited proposals have lacked adequate analytical elaboration and, in particular, convincing stakeholder analysis. Indeed, to the best of my knowledge, Princeton Policy is the only one to have prepared a formal analysis of such a proposal, the 'Strengthening America's Workforce Act' which was recently under consideration in the House.

Utopians face two deal killers. First, unlimited immigration will be categorically rejected on the right as a matter of principle. Second, while such policy will close the unsecured southwest border and end undocumented migrant labor, it is anti-Hispanic in practice. Undocumented immigrants will be prevented from participating in the program under Title 8 Sec 1182, and incoming Mexican and Central American migrants will lose out to larger numbers arriving from South and East Asia. Further, unlimited proposals will be opposed by unions because they expose US labor to large scale, low wage competition from immigrants. As a result, Democrats will not support it. Thus, unlimited immigration, low fixed-price visa proposals will fail to gain traction on either left or right. They are a non-starter.

At the same time, unlimited approaches tend to suck the oxygen out of the room, because they present a universal vision well aligned with libertarian values. Because they are priced-based models -- as are market-based visas (MBVs) -- they tend to have a negative impact on the MBV approach because they look superficially similar. From our perspective, it is high time for proponents of unlimited immigration solutions to clarify how these proposals will find political acceptance or move on to more pragmatic approaches. On a typical day at the border, up to three migrants will die, a few dozen women will be sexually assaulted and a similar number of migrants will be kidnapped and extorted in Mexico; and 1,500 migrants will be arrested by Border Patrol, of which 100 may serve real prison time. And that is not the complete list of pathologies of just another day at the border. I am unable to fathom why we continue to discuss options which fail any reasonable stakeholder analysis when one of the world's worst humanitarian crises unfolds on our border every day. Why is there no sense of urgency and a greater focus on pragmatism?

The Radicals
Market-based visas count as a radical proposal in terms of immigration policy. In terms of traditional black markets, MBVs are nothing more than the application of basic economic theory and a proven track record of legalize-and-tax solutions operating under a kind of Pigouvian tax to try to keep the migrant headcount in a range acceptable to conservatives. They are not radical at all, except in terms of migrant policy.

MBVs are crafted to solve major political issues: closing the unsecured border to illegal immigration and ending the domestic black market in undocumented Hispanic labor. They are Pareto optimal for every major stakeholder group, and they have received enthusiastic, if anecdotal, support from members of the public. There is a very long way to go, but we are systematically working down the checklist-- a key item of which is creating greater understanding and comfort on the conservative side.

MBVs were the only option presented at the CATO workshop which met all the criteria for managing illegal immigration.

The Real World Choices

Therefore, if you are interested in fixing illegal immigration, you must choose one of three options:

First, like the political right, you may pin your hopes on stricter enforcement: "Try harder." If only we try harder, we can close the border. This approach has categorically failed for the last half century for every black market, including the market in migrant labor. Moreover, this approach precipitated the asylum crisis of 2019, an absolute debacle in terms of conservative goals. Enforcement is a failure, and has been for a very long time--something which any competent economist could have easily predicted in 1965. If you're pinning your hopes on enforcement, you should expect 2040 to look a lot like 2020.

On the left, you may pin your hopes on amnesty. Senators Durbin and Hatch proposed the Dream Act in 2001, nearly twenty years ago. The only amnesty which has passed in any form since is Obama's 2012 Executive Order for DACA, and even that hangs by a Trumpian thread. And that was eight years ago. And even if DACA and the Dreamers were passed, it would not close the unsecured southwest border. If fact, it would likely do the opposite. DACA participants will probably obtain some sort of legal status, and some additional amnesty in the 2020s is possible. But maybe not. Amnesty does not address more than a small portion of illegal immigration challenges and has no systemic implications. Counting on amnesty is largely banking on the status quo for another twenty years -- if the last twenty years are to be our guide.

That leaves market-based visas. And that is all it leaves. There was no other suitable proposal at the CATO workshop. And the team at CATO -- Alex Nowrasteh and David Bier -- are very good at their jobs. If there were some Plan B, or C, or D -- they would have given it a hearing. They didn't, because there isn't. Consequently, if you are interested in actually fixing illegal immigration, then you're left with MBVs. It is the only option with the potential to meet the full spectrum of political and policy requirements.

That's my key takeaway from the CATO workshop.

Readers' Reactions to Market-based Visas

Our participation in illegal immigration policy derives directly from reader feedback to two articles I wrote for CNBC (here and here).  I have written more than seventy articles for publication across a range of periodicals, and I have never received comments remotely similar, especially considering that neither my email nor mailing address was listed on the article.  Reader reaction was not one of grudging acceptance, but unbridled enthusiasm.  In their own words:

If possible please let [Steve Kopits] know that I read his article about how to end immigration without a border wall and it was simply the most brilliant and humane way of handling the illegal immigration issues that I have ever seen. If it could be implemented it would be a home run for all parties involved. Hope the powers that be, read it and not only consider his approach but implement it as well.  

Kurt Ladd (Dallas, Texas)

I read your opinion piece regarding market forces to address illegal immigration.  Great article!  I believe the proposal is well thought out and could achieve the desired objectives if the decision makers in Washington really want to find a viable solution to this issue. 

Please know that you are now on my must read list and I applaud you for the courage to offer a viable solution in a public forum that many would consider operates on the third rail.

Wayne Green

My wife Jane and I recently read and shared with many friends, your tremendous article re: Trump and the wall. Fabulous insights and ideas.  I wish there was a way that we/you could submit this to the man.  It makes total sense and is a perfect solution!

Mike and Jane Cappellio

Thank you for one of the best articles I’ve read in a very long time. I’ve believed for a long time that here must be better solution to the illegal immigrant issue that has been debated in Washington for so long without a resolution. Your solution is so simple and only a truly bright mind could “solve” such a complex issue. Maybe, just maybe, both parties could agree on your outline as a framework to an otherwise politicized topic.

Johan Scholdstrom 

I read your article on issuing work visas with great interest, and believe it could be a true working solution…Thank you for an original and workable idea for this thorny problem.

 Patricia Biczynski  (Dallas, Texas)

I just happen to have read with interest your Mexican Wall article and I very much approve your suggestion of seeing the wall as a "gate" of having the approx. 11 Million undocumented immigrants who come from Mexico pay our government for entering. This would be a far less expensive undertaking than continuing to add to our outrageous national debt let alone the violence and death associated with illegal smuggling.

Nathaniel White (Multi-cultural teacher, Annandale, VA)

 So how are you going to get Trump to use your brilliant idea about the virtual wall?

Gary Orlando