Monday, May 16, 2011

Economic Development - Fed Style

I continue with my analysis of Obama's speech on immigration reform...

Cities and States have agencies that engage in Economic Development.  In short, they try to entice people to create businesses in their area.

And Obama’s right when he said this:
“In a global marketplace, we need all the talent we can attract, all the talent we can get to stay here to start businesses -- not just to benefit those individuals, but because their contribution will benefit all Americans.

“Look at Intel, look at Google, look at Yahoo, look at eBay.  All those great American companies, all the jobs they’ve created, everything that has helped us take leadership in the high-tech industry, every one of those was founded by, guess who, an immigrant.  (Applause.)

“So we don’t want the next Intel or the next Google to be created in China or India.  We want those companies and jobs to take root here.  (Applause.)  Bill Gates gets this.  He knows a little something about the high-tech industry.  He said, “The United States will find it far more difficult to maintain its competitive edge if it excludes those who are able and willing to help us compete.”

“So immigration is not just the right thing to do.  It’s smart for our economy.”
-President Obama, May 10, 2011, El Paso

He’s right.  That’s just what Barbara Jordan had in mind when she told Congress in 1994, “…it is both a right and a responsibility of a democratic society to manage immigration so that it serves the national interest.

“The Commission believes that legal immigration has been and can continue to be a strength of this country.”


So, how does immigration become a tool for Economic Development?

First, we must understand that our current formula for immigration will NOT enhance our economic position.  I speak of Family Unification taking up the majority of visas granted each year.  Family Unification (aka chain migration) grants the vast majority of visas based on one single quality: That the applicant is related to someone who is already here.

Since the majority of our immigrants since 1965 have been poor and uneducated and hail from the Third World, we will admit even MORE immigrants who are poor, uneducated and hail from the Third World by virtue of the fact that they will come from the same stock as those who have already been admitted.

(I might add that it is this model that is also creating huge pressure at the embassies and encouraging people to come here illegally.  Relatives grow exponentially, not linearly.)

So, if Obama wants to focus immigration on those who will start businesses and create jobs, he would first have to lift the cap on Employment-based visas.  Right now it stands at 140,000 or about 14% of total visas. 

The next step is very difficult.  Many Employment-based visas are scams.  The intent is to prove that the immigrant isn’t taking the job of a citizen.  But that system doesn’t work.  Too often the work visa is granted to a worker who is simply CHEAPER than a citizen.

We might consider a points-based system whereby an applicant is scored in five or six categories and the visas are allocated to those with the highest scores.

In the period between 1924 and 1965 we had a very low level of immigration, and immigrants clearly were job-creators.  We were pulling off the great brain-drain of Europe.

But the United States is no longer the entrepreneurs’ Mecca.  Take a look at this chart to see why:
 























Given the global nature of business, we are going to have to do something about the high business tax rate.  Why would anyone with an idea want to build his widgets in the United States when he can keep far more of his money by building them somewhere else?

So Mr. President, are we serious about this?  If so, we need to STOP importing needy people from the third world who have no education and no skills, and START acting like a country that “want[s] those companies and jobs to take root here.”


And it wouldn't hurt to stop bashing CEOs.

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