Category: Politics

Wall-o-nomics: Calculating the cost of refugees to the U.S. economy

by philg

The proposed Wall/fence that dominates the news right now is at least partly about economics. People who make it across the border are then entitled to make an asylum claim and live in the U.S. for years of administrative processing and, if successful, live in the U.S. forever. They can collect welfare while doing this. Their children and grandchildren born on the U.S. side of the border can collect welfare as well. Advocates for an open border (“A wall, in my view, is an immorality.” — Nancy Pelosi) say that taxes paid by migrants exceed the welfare cost. Let’s look at this…

A reader of an earlier post cited “The Economic and Social Outcomes of Refugees in the United States: Evidence from the ACS” (NBER) as evidence that we are running a profit on our refugee industry:

“By the time refugees who entered the U.S. as adults have been here for 20 years, they will have paid, on average, $21,000 more in taxes to all levels of government than they received in benefits over that time span, according to a working paper released Monday by the National Bureau of Economic Research that examined the economic and social outcomes of refugees in the U.S.”

So if we believe the expert economists at NBER and don’t dig into the paper, we make a profit of $1,050 per year on every refugee who arrives as an adult. The Federal deficit of $779 billion for FY2018, therefore, could be wiped out if we simply admitted 741,904,761 adult refugees, e.g., by asking most adults in India or China to move here and spin an abuse yarn.

When we dig a little deeper, though, it seems that the economists have had their thumbs on the scales (or somewhere else?). An “adult” is defined by the researchers as 18-45, but refugees are admitted without any age limit. A disabled 70-year-old has the same right to asylum as an able-bodied 22-year-old.

Suppose that all refugees were actually aged 18-45 and the economists had gotten the rest of the analysis correct. Would refugees yield a net profit? They’re paying more than they’re taking so they’re not “takers,” right? The Abstract reveals one question to explore: “After 6 years in the country, these refugees work at higher rates than natives but they never attain the earning levels of U.S.-born respondents.” Even for this cherry-picked age subset, the idea is that we’ll become richer overall by having lower earnings on a per-capita basis (and of course anyone in the U.S. income inequality industry will have an uglier statistic to wave around). Can that work?

The paper looks at six government welfare programs: “There are six social insurance programs that account for the majority of government payments to U.S. citizens: welfare, Supplemental Security Income (SSI), Social Security, food stamps, Medicare, and Medicaid.”

What if we subtract the cost of these programs from the total cost of running local, state, and federal government and then see if $1,050 per year per person will pay for the remainder? If we budget the above subset of welfare at $2 trillion per year and subtract from about $7.5 trillion per year in total spending (source) we get $5.5 trillion. Divide by a population of 328.4 million (popclock) and we find that it takes $16,748 per person to fund our government minus these headline welfare programs.

Each refugee paid a net $1,050 per year and consumed an additional roughly $15,700 in government services (roads, schools, libraries, police and fire protection, etc.). Over a 20-year period, then, the refugee took approximately $314,000 from other taxpayers.

Did the economists even begin to do a full cost accounting, though?

As of 2012, there were 79 Federal means-tested welfare programs (Heritage). The NBER looked at only 6.

Since the refugees never get to the median U.S. income, the typical refugee never gets above the 400 percent of poverty disqualification threshold for Obamacare health insurance subsidies. The typical refugee would also be eligible for public housing, a program that can be worth $60,000+ per year per family in the NBER’s home town of Cambridge, Massachusetts and yet they didn’t think it was worth including.

If we assume $5,000 per year in health insurance subsidies and $20,000 per year in public housing subsidies per refugee, over a 20-year period the best-case refugee now costs $814,000. That best-case refugee showed up during his or her core working years.

Once across the border, of course, the best-case refugee or asylum seeker should live for longer than 20 years. Would it be fair to round up the total cost to $2 million? Therefore if $5 billion is spend on an immoral wall/moral fence it has to stop 2,500 migrants in order to pay for itself in pure economic terms?

[Of course, there is more to life than money. We might have other reasons for wanting an open border, e.g., superior morality, loneliness if the U.S. population remains stuck near 330 million, etc.]

Readers: Did I miss anything? Or is $814,000 over 20 years a reasonable estimate? Also, how can people imagine that someone who pays a net $1,050 per year in tax is going to be of any real help in keeping the U.S. government going?

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Why did Trump have to declare a National Emergency?

by philg

“Trump Declares National Emergency to Build Border Wall” (nytimes):

President Trump declared a national emergency at the border on Friday to access billions of dollars to build a border wall

Suppose that he wants to spend $4.4 billion per year on wall construction. That’s 1/1000th of the $4.4 trillion federal budget. It is 0.6 percent of the ordinary annual budget for the military of which Mr. Trump is Commander in Chief.

What would have stopped President Trump from directing military personnel to go down to the border area and install some fences, using the budget that he already has available? Why must it be an emergency? If the Commander in Chief decided that the military should build some new fences around various bases, that wouldn’t require declaring a national emergency, would it? How is this different?

Based on my reading of The Line Becomes a River: Dispatches from the Border, all that Trump would need to do to shake loose significant money is have the Border Patrol stop flying Eurocopters all day every day (a lot of this seems to be evacuation of the dehydrated, something that could be accomplished for $100/hour instead of $10,000/hour if done with SUVs).

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Will New York build public housing on the defunct Amazon HQ2 site?

by philg

Amazon is bailing out of New York City (thus, thousands of potential fat-target defendants have now escaped New York’s winner-take-all family law system!). From a Facebook friend:

Bezos is like every Manhattanite, says he’s going to a great house party but then finds out it’s in Queens and doesn’t show up….

What will the wise central planners in the NYC government do now? From their site:

Every New Yorker deserves a safe and affordable place to live, in a neighborhood that provides opportunities to get ahead. The market alone is not always able to meet that need, and, accordingly, governments at all levels must work together to help. Mayor Bill de Blasio has made affordable housing a top priority of his administration and has committed the City to “build or preserve nearly 200,000 affordable units, and help both tenants and small landlords preserve the quality and affordability of their homes.”

New York City’s shortage of affordable housing has reached a crisis point. The crisis has many causes, starting with the erosion of New Yorkers’ purchasing power in the housing marketplace. Wages for the City’s renters have stagnated over the last 20 years, increasing by less than 15 percent, after adjusting for inflation. During the same period, the average monthly rent for an apartment in New York City increased by almost 40 percent.

A massive increase in the population results in stagnant wages as humans are no longer scarce? While simultaneously generating increased demand for housing that drives up prices? Textbook Econ 101 in action? Not exactly, according to the government technocrats:

Another cause of the affordable housing crisis is the mismatch between demand for, and the supply of, housing.

Econ 101 wouldn’t call this situation a “mismatch.” It would just turn out that the market-clearing price is higher than people want to pay and folks would have to start sharing 2BR apartments with 7 roommates, moving to eastern Pennsylvania and riding buses, etc. Maybe the technocrats are illustrating the general principle of “When the market gives you an answer that you don’t like, declare market failure”.

Regardless of whether this shows the failure or success of Econ 101, the politicians have promised more apartments and the city has plenty of money, since the finance industry has been booming for years. With Amazon out, there is a big empty space. The neighborhood already contains a big government-run apartment complex (see “Amazon’s New Neighbor: The Nation’s Largest Housing Project” (nytimes)).

If the politicians in New York are true to their word and housing those who are unable or unwilling to work is truly a “top priority,” should we expect to see government-run housing built on the proposed Amazon site? If not, what else could happen with this part of the city?

[My own Facebook comment on the collapse of the Amazon deal with New York’s Office of Crony Capitalism: “It is a dark day when small retailers in NYC are denied the opportunity to pay the expenses of their largest competitor.”]

Related:

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AOC tax plan is a conspiracy?

by philg

Who proposes a super high tax rate on America’s idle rich? Alexandria Ocasio-Cortez (“AOC”).

What part of the country benefits most if there is a super high tax rate on the idle rich? Puerto Rico, the only place on Planet Earth in which an American citizen need not pay Federal tax. (see GQ for the lifestyle; search for “Act 22 tax” for the details)

Where is AOC’s family from? Wikipedia: “Her father was born in the Bronx to a Puerto Rican family, and became an architect; her mother was born in Puerto Rico.”

Related:

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Why the disrespect toward Alexandria Ocasio-Cortez?

by philg

Folks have pointed me to mocking memes regarding Alexandria Ocasio-Cortez, e.g., “It’s so cold, I had my hands in my own pockets,” in connection with her “Green New Deal” that “offers economic security for those unwilling to work.” (original draft)

But why not respect her for ably representing the interests of her constituents? Census data show that median household income in her district is about $58,000/year. That means more than half of the people she represents are eligible for welfare (less than $83,450 for a family of 4 entitles a New Yorker to public housing). More than half would also qualify for health insurance welfare (either Medicaid or subsidized Obamacare for those who earn less than 4X the official poverty line).

“Unwilling to work” should probably be understood as “unwilling to work given the existing system of incentives.” As of 2013, six years before Ms. Ocasio-Cortez took office, welfare in New York paid 110 percent of median income (CATO) and therefore it wouldn’t be rational for the typical person in her district to work. Why is it Ms. Ocasio-Cortez’s fault that Americans have voted to create a system in which work is irrational for anyone who can get welfare or child support after having sex with a high-income partner? She wasn’t old enough to vote when these systems were created.

Mitt Romney stated in 2012 as a simple fact that the 47 percent of Americans who don’t pay income tax weren’t going to vote for him (Politifact):

“There are 47 percent of the people who will vote for the president no matter what,” Romney said in the video. “All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what.

He didn’t say that these folks were stupid, irrational, or evil. They were rationally voting their interest. (Politifact says that the proportion with no federal income tax liability may actually have been as high as 51 percent.) Why can’t folks who disagree with AOC and who are differently situated in life compared to her welfare-qualified constituents credit her for faithfully representing her voters’ interests in Congress?

Personally, I’m kind of a fan. Her tweet that health insurance as a waitress was twice as costly as health insurance for a member of Congress was an inspired way to wake people up to absurdity of our health care and health insurance systems (my proposal for reform is different from hers).

Readers: Given her welfare-qualified constituents, is it fair to slam this young member of Congress for advocating for expanded welfare?

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Virginia Democrats take over Dulles Airport

by philg

Recent conversation in the D.C. area:

  • Where did you land?
  • We were planning to go to Dulles, but our landing clearance was revoked.
  • Why?
  • The controller could see that we hadn’t installed a blackface kit on the Cirrus.
  • What did you do?
  • We landed at Gaithersburg. [Maryland]

Related:

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How was Trump’s State of the Union speech?

by philg

I had to attend an aviation event this evening and then proceed to the gym for my annual workout. So I missed the Trumpenfuhrer’s speech at the Reichstag. How was it?

Are people who didn’t vote for Trump shocked and horrified by his continuing failure to do the stuff that they want him to do? I found that in Manhattan last week. My elite (either through wealth or education) friends there continued to express their shock that Trump was doing X, Y, or Z. I would point out that they hadn’t voted for him and therefore wouldn’t it make more sense for Trump to instead do the stuff that he promised to the people who did vote for him? Answer: NO! The elite point of view is so obviously correct that they expect Trump by now to have come around to adopting it!

Update: Boston Sports Club was showing professional wrestling and State of the Union on adjacent TVs (a friend pointed out that Trump has a history with WWE).

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Fahrenheit 11/9

by philg

Michael Moore’s Fahrenheit 11/9 is streaming on Amazon Prime right now.

It’s worth watching, even if you don’t advocate for abandoning capitalism in favor of socialism, as Mr. Moore does.

The first section is about the 2016 election. Moore says that Trump didn’t want to run for president, but only staged a couple of fake rallies to show NBC that he should be paid more. Only when Trump saw how voters loved him did he decide to run in earnest. The presentation of footage from the respective campaigns on the night of the election is dramatic even though we know the outcome.

The next section is about the incompetence, insincerity, and mendacity of establishment Democrats, including Hillary Clinton and the officials who suppressed votes for beloved Bernie Sanders at the convention, even from states that Mr. Sanders had won (but what difference would it have made? Hillary did win more votes).

Moore doesn’t waste too much time trashing establishment Republicans, whom his audience presumably already associate with being on the payroll of the rich. In fact, he says that, starting with Bill Clinton, most Democrats are also on this payroll and there is little to distinguish non-socialist Democrats from Republicans.

Moore covers the Flint, Michigan water situation in detail (it was all caused by Republicans and cronies who wanted to make big $$; simple incompetence was not a factor), but the relevance to Donald Trump is never clear. Everything significant happened prior to Trump taking office (though Trump was the only candidate from either party to visit Flint during the campaign, according to Moore). There is footage of Obama lying to citizens about drinking the water. He is shown asking for a glass and just wetting his lips with the potentially tainted water, but not sipping any. Hidden below the podium is a glass of the actual water that he is consuming.

Another theme that keeps coming up is the Parkland shooting, but Donald Trump’s involvement is not explained.

There is a lot of footage of Adolf Hitler. Trump’s voice is synced up with Hitler’s lips moving. (Those who are passionate about women in aviation will be disappointed that Hannah Reitsch isn’t shown or quoted (“It was the blackest day when we could not die at our Führer’s side.”))

Yale History professor Timothy Snyder is quoted saying that the comparison of Trump to Hitler isn’t perfect, but only because no comparison ever is. A 99-year-old Nuremberg prosecutor is interviewed saying that what Trump is doing by separating children from migrant parents at the border is as bad as the crimes he was prosecuting, e.g., killing 90,000 Jews. (Michael Moore has experience with U.S. family court litigation, but not a custody lawsuit that separated a child from a parent. All of the fighting has been over cash and real estate. The litigation has stretched over most of this decade and a new lawsuit was filed a few months ago (Daily Mail).)

The Reichstag fire is compared to 9/11 in terms of providing the would-be dictator an excuse to seize power, but it is unclear how Trump could have engineered an emergency 15+ years prior to taking office.

Moore and Professor Snyder seem pretty sure that Trump is on track to be the next Hitler, but they don’t say how it can be accomplished.

I had never seen Alexandria Ocasio-Cortez on video before (we are not TV news watchers), so it was interesting to see footage of her campaigning. Moore expresses enthusiasm about young female socialists, preferably immigrants and/or Muslim, taking over the Democratic Party.

The documentary footage closes with the Hawaii mistaken missile alert (all done by state officials in a state that last voted for a Republican in 1984) and with a student from Parkland speaking dramatically about the school shooting (but, again, why is Trump to blame for these unfortunate events?).

So Fahrenheit 11/9 is worth seeing both for how Michael Moore weaves together familiar topics and also to try to understand how young Americans who call themselves “socialist” think.

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Why aren’t the payday loan companies getting rich off the shutdown?

by philg

There is turmoil in our land:

Where there is turmoil, however, there is often opportunity. Neither article includes the word “loan”. Yet the U.S. is packed with payday loan companies. Federal workers have been guaranteed to receive back pay, even for weeks or months in which they did no work, as soon as the government reopens (“Trump signs law guaranteeing back pay for federal workers”).

How much credit risk could there be in lending money to someone whose paycheck is guaranteed by an entity with a printing press for dollars?

Readers: What do you think? Shouldn’t it be possible to lend money to furloughed or working-but-not-yet-paid workers at a 1% per month interest rate (12%/year) and make a substantial profit? One-month LIBOR is roughly 0.2% (2.5%/year). That’s a slightly thinner profit margin than a bank gets on a typical credit card, I think, but federal workers should be a better-than-average risk, no?

Is the problem competition from existing credit unions to which federal workers belong? This credit union offers 0% interest for 60 days to furloughed workers. Tough to compete with 0%!

Related:

  • NASA employee credit union: “Our special Furlough Relief Loan will allow you to access up to $10,000 for up to a 60-month term – interest free and payment free for 60 days.”
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