According to Congressional Quarterly (in a paywalled article), members of the House immigration reform group have agreed in principle on a 15-year path to citizenship for unauthorized immigrants and, for now at least, to table the issue of creating a guest worker program. But Heidi Przbyla and Kathleen Hunter of Bloomberg report that the U.S. Chamber of Commerce is pressing for doubling the number of temporary work visas granted to less-skilled workers, and that some influential congressional Republicans want to go even further: 

In talks during the drafting of the Senate bill, labor unions secured caps on the number of foreign, low-skilled workers allowed in the U.S., particularly in the construction industry suffering high unemployment. That agreement reached with the Chamber is drawing criticism from House Republicans.

“The Senate bill is a nonstarter in the House,” said Texas Republican Representative John Carter, a member of the House’s immigration negotiating group. “I’m not going to accept what the Senate and the Chamber came up with.” Geoff Burr, vice president of federal affairs for Associated Builders and Contractors, a group lobbying for higher caps, blamed Democrats for the impasse.

“They do have an incentive not to agree because then the Senate would be the only game in town,” he said.

The matter may not be closed in the Senate either. Senator John Cornyn, a Texas Republican, said he would wait until the legislation reaches the Senate floor to make pro-business alterations to the temporary worker program — eliminating a 15,000-worker annual cap on construction-industry visas.

Keep in mind that only a fifth of Republicans believe that legal immigration levels should be increased while 41 percent believe that they should be decreased, according to the Pew Research Center. It seems likely that these numbers are somewhat different in Texas, but it is not at all clear that Carter and Cornyn are representative of conservative opinion in the electorate. Because I favor a substantial increase in skilled immigration and a reduction in less-skilled immigration, I see the decision to punt on a guest worker program as a good thing. One problem, however, is that the U.S. Chamber of Commerce might lose interest in a legislative proposal that does not increase less-skilled immigration. While technology and financial services firms are keenly interested in increasing skilled immigration, and would likely be content with legislation that did little more than that, firms in low-wage, labor-intensive services would be sorely disappointed. And it is these firms that are providing much of the muscle behind the immigration reform effort. Without them, it is somewhat more likely that conservative lawmakers — particularly conservative lawmakers who are skeptical about the wisdom of creating a path to citizenship for unauthorized immigrants — will defect from the legislative push. 

Mina Kimes profiles Doug Oberhelman, CEO of Caterpillar, one of the most successful U.S. manufacturing firms, in the new Bloomberg Businessweek, and in doing so she illustrates a number of important economic ideas. In the hands of a lesser journalist, one suspects that the article would become a tirade against corporate greed. And there is fodder in the article for readers eager to draw the conclusion that Caterpillar’s efforts to fight wage increases even as its profits have reached new heights are somehow sinister. Mina contrasts Oberhelman’s compensation with the hourly wages of production workers, and she conveys the anxieties and concerns of Caterpillar employees who fear that manufacturing employment will never give them the middle-class prosperity they badly want. But she also situates the Caterpillar story in the larger context of slack labor demand:

In 2005, long before recession loomed, Oberhelman oversaw the company’s plan to prepare for a steep financial downturn—a task that made him unpopular, he says, but proved invaluable. After laying off 30,000 people in 2009, Caterpillar made it through the crisis without losing money. Last year, Caterpillar made $45,000 per employee, up from $12,000 in 2007. “The argument they make is, at a time when we’re very profitable, we can’t afford to more equitably distribute the wealth, because there may come a time when we won’t be,” says Robert Bruno, a professor at the University of Illinois at Urbana-Champaign’s school of labor and employment relations. “So when is it appropriate to share the wealth?”

Caterpillar employees know that the answer to this question is up to Oberhelman. The dwindling number of manufacturing jobs combined with the decline of unions has weakened workers’ leverage. When Caterpillar offers jobs in nonunion Southern states that pay $12 an hour, applicants line up around the block. “You’re basically expendable,” says Emily Young, a welder who has worked at Caterpillar’s Decatur plant for eight years. “For every one person who doesn’t work, there’s five waiting in line.”

The root cause of Caterpillar’s unwillingness to make concessions to organized labor, as Young understands, is that Caterpillar has the option of shifting production to lower-cost locations. Caterpillar could raise compensation for its legacy workforce and in doing so reduce its profits, but this would lead to an investor revolt and it might also strengthen the relative position of Caterpillar’s competitors or encourage new firm entry. The only durable solution to the problem of stagnant manufacturing wages is, according to Oberhelman, a stronger economy and a tighter labor market:

If Caterpillar refused to pay its executives high salaries, they could probably find other jobs, whereas hourly workers have much less mobility. Oberhelman acknowledges this dynamic, though he tends to characterize Caterpillar’s role as a passive one, as though the company lacks the power to choose how it disburses its profits.

When will workers’ wages rise? Oberhelman exhales sharply. “The answer to that is: when we start to see economic growth through GDP,” he says. “Part of the reason we’re seeing no inflation is because there’s no growth. Inflation was driven by higher labor costs, not higher goods costs. Frankly, I’d love to see a little bit of that. Because I’d love to pay people more. I’d love to see rising wages for everybody.” [Emphasis added]

I found Oberhelman’s statement, which strikes me as correct, intriguing in its potential political implications. Stronger economic growth would presumably increase demand for Caterpillar’s products and those of its competitors, like Komatsu. It might even spur other firms to enter the market, thus putting pressure on Caterpillar’s profits and increasing demand for workers with the relevant set of specialized skills. One issue, of course, is that as manufacturing becomes more capital-intensive, it leads to a bifurcation of the workforce, with some job functions demanding higher skill levels and others demanding the same or lower skill levels. But stronger growth will tend to raise labor demand for workers of both types, albeit unevenly, and so firms like Caterpillar would have little choice but to raise compensation levels. So while it is tempting to demonize Caterpillar in a climate of slack labor demand, the real blame lies, I would argue, with policymakers who have failed to deliver the conditions for higher growth. 

Moreover, Oberhelman seems to be suggesting that he is not averse to somewhat higher inflation if it is part of a package with higher real GDP growth, a view that is not dissimilar to that of market monetarists like Scott Sumner. I’m reminded of hedge fund manager Daniel Loeb’s recent letter to senior Sony executives, as described by Andrew Ross Sorkin and Michael J. De La Merced earlier this week. Loeb offered fulsome praise for Japanese Prime Minister Shinzo Abe, claiming that Abe’s leadership might allow Japan to “regain its position as one of the world’s pre-eminent economic powerhouses and manufacturing engines”:

Mr. Loeb has recently expressed his interest in Japan. Referring to the changes by the Abe government, he called it “a huge game change” at an industry conference last week. “And there’s a lot more room to go,” he added.

Mr. Abe has called his revival effort a plan of “three arrows,” including aggressive monetary easing by the Bank of Japan and enormous stimulus spending by the government.

So far, that effort appears to have drawn investor plaudits. The yen weakened in value last week, to 100 to the dollar, a level unseen in four years, helping local companies like Sony and Toyota. And the Nikkei 225-stock index has risen 43 percent so far this year. At the same time two years ago, the Nikkei was down 5.7 percent.

This is particularly interesting because leading hedge fund managers have tended to be very critical of aggressive monetary easying, which has been the main arrow in Abe’s quiver. Might influential business leaders like Oberhelman and Loeb embrace the idea that hitting 2 percent inflation might prove an economic boon, and press their allies in Congress to respond accordingly? That is, will they embrace what we might call the Sumner-Pethokoukis thesis — that what the U.S. needs are free markets and NGDP targeting? I wouldn’t hold my breath, but the idea isn’t crazy. 

In The New York Review of Books, Anne Applebaum, author of the brilliant Iron Curtain, reviews Sheryl Sandberg’s Lean In, contrasting it against Hanna Rosin’s very different The End of Men. She concludes on a provocative note: could it be that having more women in senior leadership roles, the goal Sandberg identifies as being of transcendent importance, is not as important as some of the broader social and political goals that Sandberg largely ignores, like redressing the closely related problems caused by family breakdown and deterioration of the labor market position of less-skilled men. If greater representativeness doesn’t have a concrete impact on the lives of working women, perhaps it shouldn’t be our foremost concern. I’m really not doing the essay justice — you ought to read it. 

The casualties at Rana Plaza have prompted a far-reaching discussion of the economics and the ethics of the global garment manufacturing supply chain. Earlier this week, Keith Bradsher of the New York Times described the scramble among retailers to identify new low-cost garment manufacturing locations in the developing world, a scramble that has taken on new urgency as Bangladesh’s reputation has been tarnished. Indonesia, which has a GDP per capita (PPP) two-and-a-half times as high as that of Bangladesh and a government that has improved markedly in recent years, has been gaining momentum. Bradsher reports that many elite brands had harbored concerns about Bangladesh’s reliance on high-rise factories, a reflection of rising land values in prime manufacturing districts, which are in turn a reflection of transportation bottlenecks that threaten the reliability of shipments.

One of the sources Bradsher interviewed, Rubana Huq, managing director of the Mohammadi Group, published an op-ed in today’s Wall Street Journal detailing the challenges facing Bangladeshi garment manufacturing firms. In it, she describes the cost components of a shirt that is sold at the wholesale price of $6.75: $4.75 is spent purchasing fabric, $1 is spent purchasing labels and accessories specified by the retailer, and the last $1 is divided among “cutting and making” (includes wages), capital expenses, securing credit for future inventory, and profits. 

Imagine an order for 400,000 shirts is spread over a four-line (meaning four rows of sewing machines, each row with 50 workers) factory of 1,600 square meters. Those 400 workers produce 3,077 pieces per day. The wage cost works out to about 38 U.S. cents per shirt. Another 15 cents goes to sending the shirt for a fine washing spin. Rent and utilities for the factory floor works out to about 11 cents per shirt, and head-office and marketing costs for the factory are 11 cents.

As for the remaining 25 cents, that will just about cover repaying a 10-year bank loan at 18% interest, which the factory owner has used for set-up costs along with a home and car. All is at a delicate equilibrium, until the owner feels compelled to give in to a firmly worded request from the retailer for an additional discount, or a demand to air-freight, at the manufacturer’s expense, some boxes of shirts that suffered a two-week production delay and now won’t be accepted by the retailer if they are any later than they already are.

In light of these very narrow margins, Huq suggests that a substantial increase in the statutory minimum wage will prove problematic. The Bangladeshi government has actually proposed a retroactive increase in the minimum wage, which will prove extremely burdensome to garment manufacturing firms locked into supply contracts. If Bangladeshi garment manufacturing firms didn’t face competition from Indonesia and other low-cost locations, they’d presumably have enough pricing power to raise prices and to finance upgrades in safety standards and much else. Adam Davidson’s latest column for the New York Times Magazine argues that just such an outcome is possible, because there aren’t many good alternatives to Bangladesh as a hub for garment manufacturing:

Many in Bangladesh fear that if the country becomes too expensive a place to make clothes, countless sewing machines will be sent to new factories in Nigeria, Kenya or Ghana. But Vijaya Ramachandran, an economist at the Center for Global Development, who recently studied the industrial prospects of sub-Saharan nations, says this outcome is unlikely. African countries may have a steady supply of unskilled labor, but a higher cost of living should keep them from competing with Bangladesh.

Ramachandran and I tried to figure out what countries might inherit Bangladesh’s T-shirt phase. Other than Burma, a long shot, Ramachandran couldn’t think of any. For now, Bangladesh might be where this centuries-long T-shirt journey ends, which means that their race to the bottom may be rooted in a misunderstanding. The country’s manufacturers can afford to take a step or two up the value chain. Not only can they pay their workers more, treat them better and house them in safe and clean factories, but there is also a significant economic incentive to do so.

The problem with Ramachandran’s line of analysis, however, is that countries more affluent than Bangladesh, like Indonesia, can also pick up the slack, as many of these countries are unevenly developed, and so they still have scope, and an appetite, for an increase in labor-intensive manufacturing. India, which has a GDP per capita (PPP) twice as high as that of Bangladesh, has many regions that are just as poor, and which are desperate for labor-intensive manufacturing work. In Why Growth Matters, the economists Jagdish Bhagwati and Arvind Panagariya recommend (somewhat ironically post-Rana Plaza) that reform its labor laws to match recent progress made by Vietnam and Bangladesh:

With the wages in China reaching levels at which it is likely to be forced out of these sectors, India is well positioned to become the world’s manufacturing hub. But if the costs of employment remain as they are, that opportunity is likely to be seized by a large number of smaller countries, such as Vietnam and Bangladesh. These countries allow firms to hire and fire workers under reasonable conditions and maintain a balance between the rights of both workers and employers. As a result, large firms in sectors such as apparel can be found aplenty in both countries and both have also seen significantly faster growth of the sector and done extremely well on the export front.

It should go without saying that not everyone believes that Bangladesh has done a good job of balancing the rights of workers and employers, yet it is true that employment in garment manufacturing has been a driver of poverty alleviation in Vietnam and Bangladesh alike, and that the unevenness of India’s economic development — with growth concentrated in knowledge-intensive services and other sectors that are not very labor-intensive while most workers remain in a moribund agricultural sector — is a profound problem. Garment manufacturing could facilitate the transition from low-productivity agriculture to higher-productivity export-oriented manufacturing, and it’s hard to imagine that India will keep screwing up on this front forever. So I’m inclined to think Huq is closer to the truth about Bangladesh’s (vulnerable) competitive position than Davidson and Ramachandran. 

Alan Tonelson, an economic policy analyst who has long been critical of free trade, has an op-ed in Bloomberg View which makes the case that the best way forward for Bangladesh and other developing countries is a reimposition of the quotas established under the Multifibre Arrangement, which expired in 2005. His basic argument is that quotas took the pressure off of manufacturing firms in exporting countries, as they could be confident that they wouldn’t be undercut by foreign rivals:

[W]ithout quota-granted guaranteed market access, cost-cutting became all the more important for smaller exporting countries simply to preserve their new gains. As U.S. trade data demonstrate, most of the freed-up customers were won by the huge Asian producers that enjoyed big natural and government-created cost advantages. For example, China’s share of U.S. apparel imports rose to 33.44 percent from 26.07 percent during the first two years of quota-free trade (2005-07) alone. Indonesian and Vietnamese sales boomed, too.

Significantly, Bangladesh also excelled, and like China, Indonesia and especially Vietnam, its market share has continued to grow, reaching 5.25 percent last year, despite the sluggish U.S. economy.

Unfortunately, however, much of the surge in Bangladeshi exports can be attributed to that country’s reliance on rock-bottom wages and firetrap factories, with the tragic consequences we recently witnessed. Worse, the dynamics of today’s quotaless apparel trade practically guarantee that better, costlier work conditions in Bangladesh will simply drive much production and jobs elsewhere. That is what occurred in higher-cost garment exporters such as Turkey and South Africa, as well as smaller Western Hemisphere and African producers — most of whose U.S. exports have fallen in absolute terms since the quotas ended in 2005.

I’m extremely skeptical about the wisdom of this approach, which would, among other things, raise the cost of apparel in the consuming countries. I have no intrinsic problem with higher apparel costs, particularly if they reflect changing consumer tastes and preferences, but Tonelson is explicitly counseling the repoliticization of global trade in apparel, a process that can easily be gamed by, for example, domestic manufacturers seeking to raise prices. That said, Tonelson’s op-ed deserves praise for having introduced a broader historical perspective into the discussion.  

I recently had the great pleasure of seeing Noah Baumbach’s Frances Ha. Though I don’t to make a habit of making film recommendations in this space, I highly recommend watching if if you get a chance. A.O. Scott has written a nice review that gets at (part of) why I found it very affecting. Earlier today, after watching a conversation between Canadian Prime Minister Stephen Harper and former Treasury Secretary Robert Rubin, I had a brief conversation with a friend which reminded me of the various ways in which an era of stagnant growth — we are now seven years into what looks to be a lost decade — is infantilizing. Scott’s review observes that “27 is not as old as it used to be, as in decades past “members of the American middle class could be expected to reach that age in possession of a career, a spouse and at least one child.” This reflects changing cultural mores, obviously. Yet it also reflects economic constraints. The rigors of adult life are more easily met when housing is affordable, when labor markets are tight and jobs churn and plenty of people “fail upward,” and when young adults profit from a broader climate of optimism. Under stagnant growth, in contrast, there is a collective tendency to lower our sights, and to put off daunting decisions and commitments. Simpler, cheaper, more accessible pleasures take precedence. I’m reminded of cultural stories chronicling the lives of young Japanese during that country’s lost decade, who purchased expensive consumer goods while living with their parents in cramped quarters. In most of America, economic life is more expansive than all that, even now. But for those who aspire to knowledge-intensive work, and who are burdened by student debt (see Annie Lowrey’s recent article on the subject), the world really does feel cramped. Some manage to lead comfortable lives by relying of strong family networks, and in particular on transfers from parents, an issue that is glancingly explored in Frances Ha. Baby boomers who acquired hard assets before the Great Disinflation of the 1980s are in many cases well-positioned to aid their adult children. Suffice it to say, not every young adult can rely on this kind of parental largesse. And so children of the meritocracy raised to have the same cultural and economic aspirations find themselves divided, with those who grasshoppers for parents on one side of the line and those who had ants for parents on the other, with divorce and other forms of family disruption complicating the picture. 

Frances Ha is a smart, well-crafted look at this landscape. My guess is that Baumbach and Greta Gerwig, who co-wrote the film and who portrays the protagonist, didn’t really intend to make some kind of larger statement about the cultural consequences of economic stagnation. Rather, they just made a really smart character study that is genuinely au courant. I still can’t help but connect it to these larger themes. And before you assume the film is crazily dour, it’s actually crazily uplifting once you make it to the end. 

Congressional Republicans are debating what they ought to demand in exchange for raising the debt limit. I am sympathetic to the view that we should not have a statutory debt limit. But if we’re going to have a negotation, what should Republican lawmakers ask for? Lori Montgomery of the Washington Post recently described the debate among House Republicans:

With the budget deficit falling far faster than anyone expected, House leaders have backed off their insistence that any debt-limit increase be paired with budget cuts of equal value. Now, it seems, the sky’s the limit.

At the meeting, 39 lawmakers lined up at microphones to offer suggestions. They ranged from tax and entitlement reform to approval of the Keystone XL pipeline to passage of a bill that would require congressional approval for any federal regulation that would impose more than $100 million in new costs on business.

At least one person wanted to take on late-term abortion in the wake of the conviction of Philadelphia doctor Kermit Gosnell. Others suggested repeal or delay of Obama’s health-care initiative. But for the most part, lawmakers tried to be “realistic,” aides said, suggesting measures that could reasonably be expected to both improve the economy and pass the Democratic Senate.

Approval of the Keystone XL pipeline and requiring congressional approval for large-scale regulatory initiatives both strike me as excellent ideas, as they can plausibly be described as growth-enhancing. Jonathan Adler has written extensively about the potential implications of the House-passed REINS Act:

Over the past several decades, the scope, reach and cost of federal regulations have increased dramatically, prompting bipartisan calls for regulatory reform. One such proposed reform is the Regulations of the Executive in Need of Scrutiny Act (REINS Act). This proposal aims to restore political accountability to federal regulatory policy decisions by requiring both Houses of Congress to approve any proposed “major rule.” In effect, the REINS Act would limit the delegation of regulatory authority to federal agencies, and restore legislative control and accountability to Congress. This article seeks to assess the REINS Act and its likely effects on regulatory policy. It explains why constitutional objections to the proposal are unfounded and many policy objections overstate the REINS Act’s likely impact on the growth of federal regulation. The REINS Act is not likely to be the deregulatory blunderbuss feared by its opponents and longed for by some of its proponents. The REINS Act should be seen more as a measure to enhance accountability than to combat regulatory activity.

Kristina Costa of the Center for American Progress has outlined the various objections to the REINS Act from the left, among them that the rule-making the legislation proposes to “rein in” essentially represent a technocratic process of implementing laws that have already been passed, and so there should be no concerns about the democratic legitimacy of even the most sweeping rules. The deeper question, however, is whether this delegation of regulatory authority to federal administrative agencies is appropriate in the first place. Adler writes:

Delegation may be expedient, or even necessary, but it also has costs. When Congress delegates broad regulatory authority to executive or independent agencies, it inevitably loses some degree of control over how that authority is exercised. The resulting loss of political accountability for regulatory decisions has allowed regulatory agencies to adopt policies at odds with congressional intent or contemporary priorities. This is particularly so when Congress delegates broad authority to pursue generic—almost platitudinous goals—such as advancing the public welfare or protecting public health. For instance, if Congress instructs a federal agency to adopt measures that will address a given environmental problem as far as is practicable, the federal agency retains substantial discretion to determine what sorts of measures should be adopted and at what cost. And should the agency veer off course and adopt a measure of which Congress disapproves, it is not so easy to put the genie back in the bottle.

As Adler goes on to argue, it is unlikely that limiting the delegation of regulatory authority will lead to a larger rollback of regulation for the simple reason that many regulations are actually pretty popular. All the REINS Act does is force lawmakers to accept responsibility for approving expensive new regulations — and some will presumably be very happy to do so. One implication of Adler’s argument, alas, is that the REINS Act won’t necessarily be enormously growth-enhancing. But it seems like a good measure to press for all the same. 

Neerav Kingsland of New Schools for New Orleans is the leading proponent of the idea of “relinquishment” in public education, i.e., that centralized school districts should as a general rule cede control of the actual day-to-day operation of schools to educators, and that they should focus on monitoring quality and creating government-managed enrollment systems to ensure equity. The goal is that over time, innovative instructional models will emerge and the most successful will expand while the least successful will shrink out of existence. He’s recently written a summary of the basic ideas behind relinquishment that I highly recommend. Neerav has a knack for reconciling seemingly opposed views.

One of the greatest intellectual contributions the economists Lant Pritchett and Michael Clemens have made to the study of migration is the concept of “income per natural.” Rather than compare countries only by GDP per capita, Pritchett and Clemens, both of whom are advocates of freeing global labor mobility as a poverty alleviation strategy, they propose comparing the incomes of individuals born in a given society, or income per natural. So rather than divide all measured economic activity in Guyana by the number of people residing in Guyana, they propose measuring the mean annual income of persons born in Guyana, whether they live in Guyana or Canada or Brazil: 

If income per capita has any interpretation as a welfare measure, exclusive focus on the nationally resident population can lead to substantial errors of the income of the natural population for countries where emigration is an important path to greater welfare. The estimates differ substantially from traditional measures of GDP or GNI per resident, and not just for a handful of tiny countries. Almost 43 million people live in a group of countries whose income per natural collectively is 50 percent higher than GDP per resident. For 1.1 billion people the difference exceeds 10 percent. The authors also show that poverty estimates are different for national residents and naturals; for example, 26 percent of Haitian naturals who are not poor by the two-dollar-a-day standard live in the United States. These estimates are simply descriptive statistics and do not depend on any assumptions about how much of observed income differences across naturals is selection and how much is a pure location effect. Our conservative, if rough, estimate is that three quarters of this difference represents the effect of international migration on income per natural.

Recently, Matt Yglesias explored the implications of income per natural for the U.S. immigration debate:

The foreign-born population in the United States is poorer than the native-born population. If all those people evaporated tomorrow, the average income of the remaining people would fall but per capita income would rise due to compositional effects. We would also have “more equality” since a disproportionate share of the poorest people would have vanished, and the incomes of capital owners would fall more than the incomes of wage earners. But again, very few actual people would be made better off this way. The better way to get the poverty-reducing effects of eliminating the immigrants is to simply count income per natural instead. The average income of people born in Mexico is higher than the average income of people residing in Mexico, because many of the people born in Mexico now live in the United States. Conversely, the average income of people born in the United States is higher than the average income of people residing in the United States, because many of the people residing in the United States were born in Mexico. [Emphasis added]

One of the reasons we rely on GDP and GDP per capita, however, is that it helps define the fiscal capacity of the state. If the main vehicle for social insurance provision and human capital investment were diaspora networks of naturals rather than traditional nation-states, this line of analysis would make a great deal of sense. Guyanese migrants to Canada would rely on social services and blended learning programs financed by taxes on all Guyanese naturals, thus raising the quality of life for Guyanese naturals in Guyana and around the world. (There is a case that remittance flows can be understood along these lines, but the transfers tend to be one way.) Canadian naturals wouldn’t need to be concerned about the cost of raising incomes among Guyanese naturals to Canadian natural levels, as (somehow) parallel standards of what constitutes a decent social minimum would co-exist in the same geographical space. Standards of living among Guyanese naturals might be somewhat lower than among Canadian naturals, and perhaps Guyanese naturals would congregate in neighborhoods with building codes and public safety measures that are better attuned to prevailing income levels. The trouble, of course, is that arrangements of this kind have gone out of fashion since the era of the Ottoman millet system, and would likely prove difficult to sustain. I don’t doubt that technological and cultural change might eventually move us in this direction – Neal Stephenson imagined just such a world in his science fiction novel The Diamond Age. But as long as we live in a world in which the nation-state remains the dominant institutional form, I think a focus on policies that keep GDP per capita high makes a lot of sense. 

Brink Lindsey argues against using IQ scores as a metric of innate ability:

Though the tests are good measures of skills relevant to success in American society, the scores are only a good indicator of relative intellectual ability for people who have been exposed to equivalent opportunities for developing those skills – and who actually have the motivation to try hard on the test. IQ tests are good measures of innate intelligence–if all other factors are held steady. But if IQ tests are being used to compare individuals of wildly different backgrounds, then the variable of innate intelligence is not being tested in isolation. Instead, the scores will reflect some impossible-to-sort-out combination of ability and differences in opportunities and motivations. Let’s take a look at why that might be the case.

Comparisons of IQ scores across ethnic groups, cultures, countries, or time periods founder on this basic problem: The cognitive skills that IQ tests assess are not used or valued to the same extent in all times and places. Indeed, the widespread usefulness of these skills is emphatically not the norm in human history. After all, IQ tests put great stress on reading ability and vocabulary, yet writing was invented only about 6,000 years ago – rather late in the day given that anatomically modern humans have been around for over 100,000 years. And as recently as two hundred years ago, only about 15 percent of people could read or write at all.

More generally, IQ tests reward the possession of abstract theoretical knowledge and a facility for formal analytical rigor. But for most people throughout history, intelligence would have taken the form of concrete practical knowledge of the resources and dangers present in the local environment. To grasp how culturally contingent our current conception of intelligence is, just imagine how well you might do on an IQ test devised by Amazonian hunter-gatherers or medieval European peasants.

The mass development of highly abstract thinking skills represents a cultural adaptation to the mind-boggling complexity of modern technological society. But the complexity of contemporary life is not evenly distributed, and neither is the demand for written language fluency or analytical dexterity. Such skills are used more intensively in the most advanced economies than they are in the rest of the world. And within advanced societies, they are put to much greater use by the managers and professionals of the socioeconomic elite than by everybody else. As a result, American kids generally will have better opportunities to develop these skills than kids in, say, Mexico or Guatemala. And in America, the children of college-educated parents will have much better opportunities than working-class kids. [Emphasis added]

Brink’s analysis strikes me as entirely correct. Yet its implications for the immigration debate are not entirely clear. As a matter of distributive justice, discriminating against a given class of persons on grounds of inherited disadvantage seems profoundly unfair. And if we collectively decide that our immigration policy ought to be crafted with global distributive justice foremost in mind, admitting large numbers of less-skilled immigrants is obviously the right thing to do, given the size of the “place premium.” But if our goal is instead to recruit immigrants who are likely to flourish in an advanced economy, the case for assessing immigrants on the basis of whether or not they possess the highly abstract thinking skills associated with success seems much stronger. This would be the case whether or not a relative lack of the skills in question reflects some intrinsic quality (which, like Brink, I’m pretty sure is not the case) or contingent historical circumstances. 

Recently, Greg Clark, author of A Farewell to Alms, has been pursuing a crazily ambitious research agenda on social mobility over long historical periods. He has been drawing on surname analysis to gauge the extent to which descendants of the upper classes of the 17th, 18th, and 19th centuries predominate in the upper classes of the present. His initial results are, frankly, rather discomfiting, as they at least suggest that — to grossly oversimplify matters — having literate ancestors two hundred years ago, when, as Brink observes, only 15 percent of people were literate, is associated with doing well in the 21st century. Viewed through this lens, the really interesting thing about the contemporary U.S. economy is not the persistence of inequality across groups, some of which were disproportionately literate two centuries ago while others were decidedly not, but rather the extent of the progress we’ve made in redressing these inequalities. Back in 2011, the libertarian economist Jason Sorens compared inequality in the U.S. to other New World post-slavery societies:

The U.S. has the least inequality, by a fair margin, of these countries. Of course, the U.S. also has a smaller combined percentage of blacks and Amerindians than all of these other countries except Costa Rica, Chile, Argentina, and Uruguay. But that’s precisely the point – the overriding factor determining inequality in New World countries is the white or mestizo percentage of the population. When you control for that, the U.S. actually has very low inequality.

If the U.S. is exceptional at all, it is exceptional for its high GDP per capita and low income inequality, relative to similarly situated countries.

This suggests that if African Americans make substantial economic progress in the next three decades, or in other words if black men catch up with the extraordinary progress made by black women in educational attainment, wages, and occupational stature over the past three decades, the reduction in inequality and the gain in collective wealth would be enormous. I see this as cause for optimism rather than despair. The problem, however, is that achieving this kind of economic and social uplift will be a resource-intensive endeavor, whether those resources are drawn from the public sector or civil society. Recruiting immigrants who will find it difficult to navigate what Brink (correctly) describes as the mind-boggling complexity of modern technological society means making our inherited disadvantage challenge bigger rather than smaller. If we assume finite resources — a pretty reasonable assumption — we have to decide if we want to focus resources devoting to breaking the intergenerational transmission of poverty to long-settled U.S. historical communities that have endured a long history of discrimination or if we want to spread them across a larger population that includes people who have voluntarily chosen to settle in the U.S., yet who bear the legacy of other histories of exclusion and disadvantage. 

There is, to be sure, another view, which is that a history of exclusion and disadvantage has absolutely no consequences in the present day and that Clark et al. are entirely wrong. This would mean that the children of less-skilled immigrants won’t require more substantial taxpayer-funded human capital investments than the children of educated middle-income native-born Americans to fare well as adults. Though I’m sure that this is true of some of the children of less-skilled immigrants, I wouldn’t count on it being true for all of them. 

Keith Hennessey points out that two of the main drivers of the federal government’s improved fiscal position are the tax increases under the post-cliff ATRA legislation and, as Economics 21 recently noted, surging dividends from Fannie and Freddie, which reflect the effective nationalization of mortgage finance. Hennessey’s core contention, which is clearly correct, is that the new deficit news is far less promising than it looks, particularly if you prefer a lower tax burden and a truly private market for mortgage finance. Sen. Bob Corker (R-TN) has proposed legislation that would prevent the federal government from using revenue from Fannie and Freddie to subsidize other government functions on the grounds that turning the government-sponsored entities (GSEs) into cash cows will make reform all but politically impossible. But of course this kind of self-denial is never likely to be popular in Congress.

Once again, the new deficit projections are a reminder that focusing on the deficit alone has always been a fool’s errand. The country faces a number of interrelated challenges. Reforming entitlement programs, and in particular health entitlement programs, are among the most important of these challenges, but not just because they are a driver of future deficits. After all, we could raise taxes, including relatively efficient consumption taxes, to address fiscal imbalances. Rather, the deeper problem is that while some of our institutions work relatively well for most people — we live in one of the world’s most prosperous countries, and gains in the material standard of living have been pretty decent for Americans living above the bottom two-fifths of the household income distribution, even during periods of sluggish growth —  a lot of them work really badly for people in the bottom two-fifths. It’s not that K-12 education is substantially worse now than it was in the 1970s. It’s just that as family patterns have changed and the demand for skilled workers has increased while the demand for less-skilled workers has decreased, we need K-12 schools to do more for more people, and the strategies we’ve pursued to meet this need (e.g., reducing class sizes) has proven to be both very expensive and of limited efficacy, a miserable combination.

Something broadly similar is true of medical care. In The Cost Disease, the economist William Baumol observes that in 2005, U.S. health care spending per capita was $6,400 while all other spending per capita was $35,400. He projects that if growth in output continues at its historical average while growth in medical expenditures does the same over the next century, health care spending per capita in 2105 will be $213,000 while all other spending per capita will be $130,000. That is, health care spending will go from 15 percent of GDP to approximately 60 percent in the space of a century. Baumol’s eye-catching extrapolation has potentially enormous implications for how we ought to think about government. As of 2011, the federal government financed 28 percent of total U.S. health expenditures while state and local governments accounted for an additional 17 percent, with the rest divided between business (21 percent), households (28 percent), and other private revenues (7 percent). Medical expenditures by business and households and other private sources are subsidized in various ways by government at all levels, but we’ll leave that aside and say that government accounted for 45 percent of medical expenditures in 2011. This number will most likely increase as the Affordable Care Act is implemented, but let’s also leave that to the side and imagine that government will account for 45 percent of medical expenditures in 2105 — government spending on medical care alone with represent 27 percent of GDP. This is the best-case scenario. In this world, total government expenditures (federal, state, and local) might represent as much as 60 percent of GDP. Even if we achieve fiscal balance with government expenditures at 60 percent of GDP, the space for private enterprise, civil society, and voluntary cooperation writ large will be smaller than it is today, and it is not unreasonable to believe that this might have deleterious consequences on dynamism and initiative. 

This landscape creates opportunities for more ambitious thinking. In the realm of medicine, for example, James Pinkerton has called for what he calls a “cure-first” approach, which aims to reduce medical expenditures by curing seemingly intractable ailments, thus reducing the demand for medical care. Early experiments in online education and blended learning remain in many cases inferior to the best brick-and-mortar alternatives, but like all disruptive innovations, they have the advantage of being cheaper and thus more accessible to the non-consuming population and they have the potential to get better faster than brick-and-mortar education. These causes are fairly familiar on the pro-market right, and for good reason: they are paradigmatic. And though both are related to the cause of spending restraint, they are also related to the cause of delivering better services and a better quality-of-life. Focusing on the deficit, meanwhile, gives advocates of tax increases and status quo government the upper hand. 

Ross Douthat has some excellent thoughts on related themes. We’re in this, or we should be in this, for more than just paring down the debt.

Rebecca Strauss of the Council on Foreign Relations offers a sobering perspective on America’s demographic future:

1. While the U.S. has a higher birthrate than the affluent market democracies of Europe and East Asia, labor force participation among men has been drifting down in recent years. The labor force participation rate of American men in their late 30s, for example, is lower than in almost every European country.

2. As we’ve often discussed in this space, the rate of increase in labor force quality in the U.S. is stagnant.

3. And finally, American children tend to experience higher levels of family disruption than their counterparts in other wealthy societies, and this has lasting consequences for well-being. 

So America’s edge relative to peer societies in terms of demographic vitality is arguably outweighed by declining labor force participation, stagnation in educational attainment, and chaotic child-rearing patterns that damage the lives of future workers. The first two challenges are susceptible to well-designed policy interventions; the third is much less so, and it is arguably more consequential than the first two.

In a new report on the Pell Grant program, Stephen Burd of the New America Foundation’s Education Policy Program outlines how many U.S. colleges and universities design their policies to enroll as many affluent students as possible. Alex Holt of New America summarizes Burd’s findings:

Burd uses data, many of which are available through our Federal Education Budget Project database, on Pell Grant enrollment and net price for the lowest-income students at thousands of individual colleges. The analysis shows that hundreds of public and private non-profit colleges expect the neediest students to pay an annual amount that is equal to or even more than their families’ entire yearly earnings. As a result, these students are left with little choice but to take on heavy debt loads or to behave in ways that are demonstrated to reduce the likelihood of earning their degrees, such as working full-time while enrolled or dropping out until they can afford to return. Only a few dozen exclusive colleges meet the full financial need of the lowest-income students they enroll. Nearly two-thirds of the private institutions analyzed charge students from the lowest-income families, those making $30,000 or less annually, a net price of over $15,000 a year.

Many private colleges have small endowments, making it extremely difficult for them to provide adequate support to those students with the greatest need. According to the report, the poorest schools are often the ones that enroll the largest share of federal Pell Grant recipients, but they charge these students high net prices because of their own limited resources. At the same time, many of these institutions provide deep tuition discounts to wealthier students to attract those high-achieving students to the school.

A number of public universities are pursuing similar strategies — rather than focusing aid resources on students who might not otherwise afford to go to college, they use them to attract the strongest students, most of whom would attend college even at higher cost. Holt concludes on a discouraging note:

And worse yet, there is compelling evidence to suggest that many schools are engaged in an elaborate shell game: using Pell Grants, the primary source of federal aid for low-income students, to supplant institutional aid they would have provided to financially needy students otherwise, and then shifting these funds to help recruit wealthier students. This is one reason that, even after historic increases in Pell Grant funding, the college-going gap between low-income students and their wealthier counterparts remains as wide as ever.

Holt’s analysis raises the question of why so many Republican lawmakers are unwilling to subject colleges and universities that receive large amounts of federal funds to increase access to greater scrutiny. 

Aaron Renn argues that gentrification, which he defines as the gradual replacement of an urban neighborhood’s poor population with a more affluent population, has emerged as a popular strategy for urban revitalization because there are few other proven pathways. Immigrants have succeeded in revitalizing outlying urban neighborhoods, to be sure, but the decline of mid-skill manufacturing employment and the fiscal limits to expanding public sector employment limit the potential for an influx of middle-income households in urban neighborhoods. The problem with the gentrification model, in Renn’s view, is that it generates few benefits for households further down the economic ladder.

My sense is that gentrification is fully compatible with a broader strategy for the economic uplift of low- and middle-income city residents, provided the supply of housing increases as public safety and local quality-of-life improve. This will tend to mitigate increases in housing costs, thus limiting the geographical displacement of incumbents and creating mixed-income neighborhoods. Poverty concentration will decline, which will tend to reduce the economic isolation of low-income households. Renn laments the decline of mid-skill manufacturing employment, yet gentrification coupled with an increase in housing supply will create opportunities for relatively lucrative service work, provided less-skilled workers have the necessary complement of noncognitive skills. This is a big “if,” and it is a reason why immigrants often fare better in urban labor markets than the native-born poor.

Jim Manzi, author of Uncontrolled and a leading expert on the design of business experiments, offers observations on the Oregon Health Experiment. Among other things, he notes that of the 90,000 Oregon residents who applied for Medicaid coverage under the state’s lottery, 35,000 won the lottery — yet only 60 percent of the lottery winners took the next step of actually signing up for coverage. As Jim goes on to explain, this raises a number of hard-to-answer questions about the experiment itself, as it is premised on the notion that we can differentiate between those who secured coverage via the lottery and those who lost the lottery, despite the fact that there is a large population of lottery winners (approximately 14,000) who chose not to accept coverage. In an ideal world, we’d want to know more about the rationality and the conscientiousness of participants in the experiment, as these qualities are not necessarily evenly distributed across this population. It turns out, for example, that while fewer than 25 percent of Americans between 19 and 64 smoke cigarettes, the same is true of 48.4 percent of those who received free coverage smoke cigarettes. If granting smokers coverage makes them somewhat more likely to quit smoking, the health benefits would be substantial. But if it made them somewhat less likely to quit smoking, the health benefits would be far more modest. The experiment doesn’t settle this particular question. Jim observes that advocates of Medicaid expansion have pointed to some of the observed health benefits of coverage that don’t pass the test of statistical significance. The problem, however, is that there are also negative effects that don’t pass the test of statistical signifiance, and there is no principled way to embrace the former findings while dismissing the latter.

Jim concludes that if nothing else, the Oregon Health Experiment demonstrates the value of randomized controlled trials in informing public policy decisions. One promising area for policymakers to explore is how we might embed the capacity for experimentation and analysis into social service provision more broadly.

Over the past several months, a combination of higher-than-expected revenues and lower-than-expected spending levels has been shrinking the federal deficit at a healthy clip. James Pethokoukis of the American Enterprise Institute recently observed that if growth climbs above 4 percent by 2014, it is at least possible that there will be a surplus by the 2015 fiscal year. The news that the federal government generated a substantial surplus in April came as icing on the cake. Yet Red Jahncke, a Greenwich-based management consultant, suggests that what we’re really seeing is a last-ditch attempt to take advantage of the lower capital gains taxes of the Bush-era tax code as the post-cliff ATRA legislation goes into effect:

Much of the increase in 2013 receipts is due to final tax payments for 2012 deriving from a rush to realize long-term capital gains before the 15% “Bush” tax rate on such gains expired at the end of 2012—and before the new 23.8% rate on long-term capital gains for higher-income taxpayers took effect on Jan. 1. How do we know this? Because virtually the same tax change occurred during the Reagan years, when the long-term capital gains tax rate jumped eight points, to 28% in 1987, when the Tax Reform Act took effect, from 20% in 1986.

Jahncke acknowledges that we can’t be sure that the recent revenue surge reflects shrewd tax planning, at least not yet, but he makes a compelling case. One hopes that a stronger recovery is doing at least some of the work, and Jahncke’s scenario doesn’t preclude that possibility. But it ought to temper our enthusiasm.

Kelly Field of the Chronicle of Higher Education reports on the bipartisan Student Right to Know Before You Go Act of 2013, which aims to provide students and parents with reliable information on earnings by program of study and state of employment, cumulative debt levels, transfer rates, and graduation rates at U.S. coleges and universities. The higher education lobby has fought similar measures in the past on the grounds that a federal “unit record” system threatens the privacy of students, and so students and parents have no reliable way of knowing, for example, how many Pell Grant recipients at a given school actually graduate within five years. This data can be anonymized, and so the privacy concerns are almost entirely a canard. But the widespread availability of reliable data on student outcomes would, for obvious reasons, represent a grave threat to colleges and universities that offer a substandard education and that leave many students with heavy debt loads and little else. Opponents of the legislation are now turning to delaying tactics — some are calling for further study to determine the data students want on outcomes, as though we will somehow discover that students don’t really care about graduation rates and debt levels and earnings by program of study after all. It could be that students would prefer to know which colleges party the hardest. I doubt it, but it’s at least possible. Yet data on things like graduation rates and debt levels and earnings are presumably of great interest to parents and to taxpayers, which seems like reason enough to pass the Student Right to Know Before You Go Act, and indeed to go further in the direction of creating a unit record system.

One of the main ways Sen. Marco Rubio has tried to build support among conservatives for immigration reform is by establishing that immigrants receiving provisional status will not be eligible for subsidized health benefits under the Affordable Care Act. As Jed Graham of Investor’s Business Daily explains, however, this introduces a serious complication:

While the outlook for immigration reform is uncertain, the hurdle to passage could be significantly higher if the employer mandate remains unchanged. As IBD first reported, the interaction of the Gang of Eight’s immigration reform with ObamaCare would give some employers a $3,000 incentive (after taxes) to hire a newly legalized immigrant over an American citizen

This perverse outcome, which isn’t desired by anyone, and the growing realization — even among Democrats — that the employer mandate risks hurting working-class wage-earners whom ObamaCare is intended to help have created a window of opportunity.

And Los Angeles County is concerned about this provision as well, as Kitty Felde of Southern California Public Radio reports:

Tucked away in the 844-page Senate immigration bill is a provision that forbids undocumented immigrants from getting health insurance through the exchanges set up by the Affordable Care Act — until they complete their provisional status. L.A. County Supervisor Don Knabe says that’s 15 years of no federal dollars.

Knabe says the county currently gets about $600 million annually from the federal government to partially reimburse hospitals for treating the uninsured. Because the immigration bill also forbids any entitlement dollars from being spent on the undocumented, the county would lose the money.

“While we all we all may support immigration reform to a certain degree or a path to citizenship, ” says Knabe, “it can’t be at any cost. They have to be sensitive to the costs to local governments.”

I think it is far more likely that Los Angeles County and similarly-situated local governments will receive a carve-out of some kind, now or later, than that hospitals won’t be reimbursed by the federal government. And if the Gang of Eight immigration reform is passed in its current form, there is good reason to believe that W visa holders — less-skilled “temporary” workers who will be permitted to bring their spouses and children with them — will eventually join the ranks of the unauthorized immigrant population rather than return home to their native countries. This will create a new population of mixed-status households led by unauthorized immigrant parents, as some nontrivial number W visa holders will inevitably have children while living and working in the United States. Medical providers in metropolitan areas with large immigrant populations will have a strong incentive to advocate expanding federally-subsidized medical coverage to this population, the more comprehensive the better, as the federal government is in a better position to use debt finance to meet its obligations than state and local governments. All this is to say that the toughest provisions of the immigration reform bill will likely prove unsustainable.  

According to Eli Dourado, existing federal, state, and local privacy laws are more than enough to protect consumers, and so there is no need for new regulations to govern the commercial use of unmanned aerial vehicles. I am inclined to agree. 

Matt Yglesias finds conservative objections to less-skilled immigration puzzling:

Liberals care not just about the size of the economic pie, but also its distribution. And it’s perfectly appropriate to put greater weight on the economic needs of poor people than rich people. But in the low-skilled immigration calculus the poorest people—the immigrants—are the ones who receive the largest benefit. To the extent that you have more immigrants you have both a stronger moral case for redistribution to low-income natives (greater objective needs) and a stronger practical case for redistribution to low-income natives (greater fiscal capacity) but the idea of avoiding a small harm to poor people by inflicting a much-larger harm on substantially poorer people makes very little sense to me. That’s especially true when the pie could be further expanded and the distributional effect counteracted by allowing for more skilled migrants—not just computer programmers but doctors and other professionals.

The conservative view of this manages to be even more puzzling, since in all other contexts conservatives strongly favor policy measures that increase the marginal return to capital and vehemently reject consideration of the distributional implications of such measures. Class war is a great evil to be avoided at all cost except in a case where the interests of the American working class can be putatively advanced by punishing the third world poor.

I think this puzzle is pretty easily resolved if you believe a few things:

1. You could believe that membership in a given nation-state community is not best understood as morally arbitrary, but rather that the citizens, and perhaps all lawful residents, of a given country are better understood as the “heirs” of a series of historical achievements. A bus driver in Flatbush earns far more than a bus driver in Varanasi, India, despite the fact that if anything, the work of the bus driver in Varansasi is more stressful and strenuous. This reflects decades of “capital deepening” that greatly magnifies the value of an hour of work in Brooklyn, a cumulative process to which millions of anonymous individuals — not just great entrepreneurs, industrialists, and inventors — have contributed. We could understand the productive potential that has arisen in America’s cities as the common inheritance of humanity, or as the common inheritance of the set of people we understand as Americans. Suffice it to say, it is not surprising that people who are uncomfortable with the idea of the intergenerational transmission of wealth within families find the intergenerational transmission of wealth within nation-state communities uncomfortable as well, as kin-based networks are far more substantial and “real” than nation-state communities. 

2. Or you could believe that membership in a nation-state community is significant because it embeds one in “the coercive network of state governance,” as Michael Blake has suggested. That is, even under a globally impartial liberal theory, one might conclude that a concern with relative economic shares makes sense only when we are asked to live under the same system of laws. This absolutely doesn’t preclude worrying about the absolute deprivation of those who live under other regimes. But if we ask people to live under a set of private property rules and there is a class of persons that finds itself getting the short end of the stick, it’s not crazy to be concerned about how this class of persons fares in relative terms, particularly if we believe that we have an obligation to establish some moral justification for this set of private property rules. This obligation doesn’t apply, or rather it doesn’t apply in the same way, to individuals who don’t live under the laws established by the regime in question. And so advancing the interests of the U.S. working class — understood as working to increase its relative economic share — really ought to take precedence over the interests of foreigners.

I tend to think about this through a historical lens. Specifically, the United States has a long history of entrenched, multi-generational black poverty. Extreme relative deprivation among African Americans is a really serious problem, and I think that we ought to devote more resources to combating it. I see this as a legitimacy issue, i.e., the legitimacy of the U.S. political order would be greatly enhanced if we could achieve greater economic and social uplift among blacks. The reason is that historically, black Americans have been on the “business end” of coercion, from the enslavement era to the segregation era to, in complicated and very different ways, the era of mass incarceration. African Americans have made a great deal of social and economic progress over the last century, but much more can and ought to be done. Welcoming less-skilled immigrants who’ve also experiened entrenched, multi-generational poverty in their own countries introduces a complex set of challenges for U.S. policymakers and social service providers. Learning how to address the unique challenges posed by impoverished Wolof- or Bengali-speakers who have only a very limited experience of urban life in their own countries (if any) is actually really, really hard, as many New York city public school teachers will tell you. In light of what we might think of as our inherited poverty challenge, I think it makes a lot of sense to be somewhat cautious about taking on new poverty challenges. 

One complication with this coercion framework is that some countries have more power than others in the international system. It is undoubtedly true that the United States shapes the regimes of many other countries, whether through the direct application of military coercion or through the exercise of our economic weight in trade negotiations. So it could be that we’re not dealing with bright lines, but rather with a continuum. This intuition is captured in a number of ways: the U.S. was far more open to Hmong refugees in the years following the U.S. military effort in Vietnam than to, say, Bihari refugees from Bangladesh’s 1971 war of liberation, for the obvious reason that many Americans felt an obligation to “do right” by the Hmong and other ethnic communities that had allied themselves with the U.S. Similarly, one of the arguments for offering unauthorized immigrants a path to legalization is that failures of U.S. policy and U.S. demand for immigrant labor are at least partially responsible for the size of this population. 

3. And most fuzzily — but not least importantly — you could believe that culture matters. Matt illustrates an economistic frame of mind, which is fair enough (it’s his job):

If immigration policy can be structured to make the welfare state more sustainable, then it’s a huge win for everyone. If immigration policy is structured to make the welfare state less sustainable, then there’s potentially a problem. The great thing about immigration is that since it uncontroversially increases GDP, it’s clearly possible to structure immigration policy in a fiscally beneficial way.

Here’s the thing: does redistribution ever work this smoothly? Less-skilled immigrants enable skilled workers to work longer hours, as it makes it cheaper for skilled workers to outsource household production. But instead of working longer hours, at least some skilled workers might choose more leisure. This clearly benefits the skilled workers in question, yet it doesn’t yield revenue that can be devoted to transfer payments. Much depends on the mix of taxes we choose, the demographic composition of the population (a workforce of parents with mortgages might have a lower elasticity of income than a workforce of single adults who love to party), etc. And what form will redistribution take? To some degree, this questions rests on culture.

Some societies place a strong emphasis on the value of work, and so they are less inclined to back unconditional cash transfers and more inclined to back work supports and wage subsidies. Immigration shapes these cultural preferences. Edward Glaeser and Alberto Alesina have observed that ethnoracial heterogeneity is associated with lower support for redistribution, and Robert Putnam has found that neighborhood diversity appears to be associated with lower levels of social capital. Policymakers can’t anticipate with any certitude how immigration will shape political preferences, as much depends on the quirks of how different cultural encounters play out and how quickly newcomers embrace the values and sensibilities of the native-born population. It could be that newcomers have superior values, and that the native-born population ought to get with the program. But it is hardly surprising that the native-born population might be disinclined to embrace this view, and that it will prefer that newcomers assimilate. This implies that it’s not crazy for members of the native-born population to select immigrants who are more likely to assimilate and to intermarry. There is some reason to believe that immigrants who match or exceed the average native-born skill level are more likely to flourish along these dimensions. 

Though I can’t imagine I’ll persuade Matt of the correctness or wisdom, or even the moral decency, of this framework, I hope it clears things up. 

In Politicians Don’t Pander, the left-of-center political scientists Lawrence Jacobs and Robert Shapiro argued that the democratic responsiveness of the American political system was in decline:

Politicians respond to public opinion, then, but in two quite different ways. In one, politicians assemble information on public opinion to design government policy. This is usually equated with “pandering,” and this is most evident during the relatively short period when presidential elections are imminent. The use of public opinion research here, however, raises a troubling question: why has the derogatory term “pander” been pinned on politicians who respond to public opinion? The answer is revealing: the term is deliberately deployed by politicians, pundits, and other elites to belittle government responsiveness to public opinion and reflects a long-standing fear, uneasiness, and hostility among elites toward popular consent and influence over the affairs of government. 

It is surely odd in a democracy to consider responsiveness to public opinion as disreputable. We challenge the stigmatizing use of the term “pandering” and adopt the neutral concept of “political responsiveness.” We suggest that the public’s preferences offer both broad directions to policymakers (e.g., establish universal health insurance) and some specific instructions (e.g., rely on an employer mandate for financing reform). In general, policymakers should follow these preferences.

Politicians respond to public opinion in a second manner—they use research on public opinion to pinpoint the most alluring words, symbols, and arguments in an attempt to move public opinion to support their desired policies. Public opinion research is used by politicians to manipulate public opinion, that is, to move Americans to “hold opinions that they would not hold if aware of the best available information and analysis” (Zaller 1992, 313). Their objective is to simulate responsiveness. Their words and presentations are crafted to change public opinion and create the appearance of responsiveness as they pursue their desired policy goals. Intent on lowering the potential electoral costs of subordinating voters’ preferences to their policy goals, politicians use polls and focus groups not to move their positions closer to the public’s but just the opposite: to find the most effective means to move public opinion closer to their own desired policies.

Essentially, Jacobs and Shapiro argue that this second manner had gained ground over the first. Though I don’t agree with Jacobs and Shapiro on many policy questions, their work has informed my thinking about the divergence between Republican and Democratic policymaking elites and their voting constituencies. It has motivated me to think harder about the stated goals and ambitions of voters, and how we might use this information to inform policymaking in a substantive way. 

And the recent immigration debate strikes me as an excellent illustration of this broader phenomenon of “crafted talk.” Consider the fact that FWD.us, the coalition of technology leaders backing immigration reform, has sponsored two organizations — Americans for a Conservative Direction and the Council for American Job Growth — to appeal to conservatives and liberals respectively. The rather clever idea is that to build a real bipartisan coalition, it is necessary to advance separate, partisan messages emphasizing the core commitments of different ideological constituencies. And so Americans for a Conservative Direction insists that the Gang of Eight immigration reform bill is really, really tough, because conservatives like toughness. This is “crafted talk” at its best:

Politicians track public opinion not to make policy but rather to determine how to craft their public presentations and win public support for the policies they and their supporters favor. Politicians want the best of both worlds: to enact their preferred policies and to be reelected.

I was reminded of crafted talk as I read a new Pew survey on immigration reform, conducted earlier this month. Here are some of the findings:

The latest national survey by the Pew Research Center, conducted May 1-5 among 1,504 adults, finds that 73% say there should be a way for illegal immigrants already in the United States who meet certain requirements to stay here. But fewer than half (44%) favor allowing those here illegally to apply for U.S. citizenship, while 25% think permanent legal status is more appropriate.

That is, the position articulated by Boston College political scientist Peter Skerry, that we ought to grant unauthorized immigrants a path to permanent non-citizen resident status — is in fact more popular than granting them a path to citizenship, the position that has become politically unassailable.

When it comes to legal immigration, relatively few (31%) see current levels as satisfactory, but there is no consensus as to whether the level of legal immigration should be decreased (36%) or increased (25%).

I take this to mean that 75 percent of Americans believe that legal immigration levels should remain at or below current levels, yet it seems very likely that the Gang of Eight proposal will increase the size of the immigrant influx.

And there appears to be a significant gap between the views of Hispanic survey respondents and the views of immigration advocacy organizations:

Hispanics are divided in views of legal immigration: Approximately equal percentages say it should be decreased (32%), kept at its present level (29%) and increased (28%). A plurality of whites (39%) favor decreasing the level of legal immigration, while just 22% say it should be increased and 32% say it should be kept at its current level.

We’re left with an interesting question. Does anyone believe that these survey results will have a significant impact on the immigration reform debate? Pew notes that views on its broad immigration questions “are virtually unchanged from March,” and widespread skepticism about increasing the legal immigration flow doesn’t seem to have made much of a difference.

Josh Barro writes that his jury duty experience in Queens led him to believe that New York city’s most cosmopolitan borough is an attractive model for America’s ethnocultural future. Having grown up in neighboring Brooklyn, and having chosen to live in a fairly diverse stretch of Downtown, I am inclined to agree that dense, diverse neighborhoods can be very pleasant places to live. But Queens is not the only imaginable future. Heather Mac Donald’s account of California’s demographic revolution in City Journal reminds us that in some regions, less-skilled immigration has led to hypersegregation, economic isolation, and entrenched poverty. Moreover, not all Americans believe that density and diversity are ideal. I’m inclined to think that while density and diversity ought to be an option, which they very much are in the form of our big, highly-productive metropolitan areas, there is also much to be said for diversity across regions. In a democratic polity, the fact that large majorities oppose increasing legal immigration ought to at least inform the policy debate. So far, I don’t think this pretty significant fact has played much of a role, which, when you think about it, is both weird and telling.