25.5.07

Amnesty or Economic Stability?

The issue of immigration is not likely to be solved by the new immigration bill currently under consideration in both Houses.. Immigration is ultimately an issue of economics and social science more than anything else. The new law, like previous ones, focuses upon legality, security, and punitive actions. This law—no law—can be used to stop the valve when an imbalance between internal and external pressures has resulted in a vacuum. That is where the United States is.

Wages
In the US—as in most western countries—manpower is expensive while supplies are (relatively) inexpensive. Not surprisingly, in most developing countries, the opposite is true. Knowing this to be true, large companies have outsourced their labor or completely moved overseas in attempts to reduce costs associated with the human element of production. This reduction of midlevel jobs has resulted in an upward thrust in education: where 50 years ago a bachelor’s degree was sufficient in most industries (and 50 years before that, a high school degree was often sufficient); today, employment contends largely on a master’s degree. More people are getting higher educations, in turn hoping for higher salaries. With midlevel outsourcing, this creates a vacuum in low-level labor and services: housekeeping, yard-work, garbage, etc. These are the jobs that are essential but, nevertheless, difficult to fill—jobs that immigrants are rushing to fill because the prospect of $5 an hour in the US outweighs the prospect of $10 a day in Central America. This is the first part of the vacuum

Population
Growth within any nation must continue along standard-multiplication trajectories. Just as sudden bursts in population growth can send a nation into instability, so sudden declines in population trajectories creates a vacuum. In a socialistic system, when the benefits of one individual depends upon the taxation of more than one laborer, demand is met only by increasing GDP, wages, and a stable increase in the employment pool. Whereas many European nations have begun to decline in their population growth among the native peoples, the US employment pool began to decrease along a sudden, steep trajectory with the legalization of abortion. The US has aborted between 500,000 and 1.5 million children every year since 1972 (totaling 15-20 million children)—which further adds to the strain that already existed on the employment pool created by socialized benefits. This is the second destabilizing element that has created the vacuum for low-wage workers in the US.

Margins
Despite the massive growth of Wal-Mart and the like, the US economy depends largely on small to mid-cap businesses for a majority of the GDP. The margins of these businesses are thin as they are—but add in the inability to get someone who will empty trash and clean an office for less than $10 an hour and full medical coverage (benefits for which one used to require some education, but now being guaranteed despite the lack of education) and the environment is ripe within a plurality of businesses nation wide to the hiring of immigrants.

Resource Drain
Some argue that granting legal status to the 12 million currently here (and upwards of 60 million over the next decade) would only result in further drains to the US entitlement system. Consider that the low-education status of some of these immigrants would actually fill the low-wage employment pool that is already shallow in the US; in addition, it isn’t like these 12 million haven’t already been costing the US extensively through public education, through loss of taxes, through use of public facilities (uninsured hospital visits, or uninsured motorist accidents) and through any number of other illegal activities that illegal status breeds.

Amnesty
Many have criticized the new law as being little more than amnesty for lawbreakers. I don’t like it, But consider the other side: if the 12 million illegal immigrants were exported today, it would begin such a downward effect businesses that first wages would skyrocket—creating a strain on employment resources—then the weakest businesses would begin layoffs en masse—resulting in an unemployment bubble that would effectively send the economy into recession. Amnesty, as unattractive as the option appears to most, is the best bet the US government has to increasing tax revenue on already existing labor-pools without broad tax increases. Some have asked what happens to the billions or trillions that immigrants will pay to be able to legally stay in the US? At best, these funds will continue to feed the disproportionate entitlement benefit / employment issue at play. Either of the other options—exporting all illegal immigrants or simply ignoring their presence (and thereby allowing them to earn untaxed wages)—is a recipe for disaster. The only remaining option, in the environment that the country has embraced—of regular abortion, upward-movement education and wages, the socialized entitlement system, and loss of revenue through untaxed wages currently earned by illegal immigrants—is to find ways to repopulate the low-wage employment pool while still continuing to increase the taxable employment pool.

Conclusion
No, ultimately this new law doesn’t solve the long-term problems that we have created in our selfish myopia—but that would actually take some self-reflection and life-style change whereas this law just passes the problem beyond the scope of our lives to that of our children.

15.5.07

Green-M

Is anyone else surprised by the move at GM to join the United States Climate Action Partnership? This is GM, you know: one of the Big Three, long time bed fellow of oil producing companies, committed to improving emission quality at rates no greater than minimum EPA standards. Yes, we’re talking about the same GM. Whether or not there is credence to reports of 100 mpg carburetors or 200 mpg fuel injectors, the fact is that GM—like all major automobile manufacturers—has played a key role in keeping disruptive technology from making it to market. Between Big Oil and Big Auto, there just hasn’t been room for anybody else.

So why is GM suddenly turning green? Is $10.5 billion in declining revenues (FY05; with another $1 billion decline in FY06) a big enough reason? There is no renewed love of the earth driving the change. Rather, GM is surveying the unfriendly carbon-producing landscape and sees one of two options: stay the same or change. We all can imagine what staying the same will mean: continued plummet of revenues this year (as Toyota continues to dominate the market), and the next, and the next—and so on, until GM bonds are worth less than a well-used ‘72 Yugo.

But what about change? Not a chance in a thousand years of fossilization can we expect to see real change, like the mass production of hybrid battery & synthetic fuel vehicles populating the GM lots. Despite all the hype, the cost of producing synthetic fuel is still significantly higher than the value of the product itself ($1.75 per gallon, vs. .95¢ per gallon for gasoline). But GM knows there is still a lot of money to be made on the venture. Enter Uncle Sam with tax breaks for businesses in the business of turning things that run on black (oil) to green (biofuels). And green in the tank is green in the pocket for companies who look poised to birth the next big, environment saving product (whether or not they ever do seems to be irrelevant).

GM’s move to join the Climate Action Partnership is a hedging of bets, ahead of competitors Chrysler and Ford, against the potential downfall of a change in government next year. If republicans win, GM can rely on its old methods: cuts in business taxes driven by corporate advocacy groups. But if democrats fill the oval office, you can be sure GM isn’t going to be shy about broadcasting its trailblazing…er, trailsaving steps. I can hear it now: “After all, Mrs. President, we choose to join the Climate Action Partnership last year when those other guys (read Ford and Chrysler) we just about turning a buck.” (Stick out hand here to receive large tax breaks and federal aid).

What this means for stock holders—real and potential—is not much. GM is still burning through money faster than a hybrid can burn though the fuel produced by 10 acres of corn. So, go ahead GM. Hedge your best. While you’re at it, change your name to Green-M. Neither move will put you into better position against Toyota who, as it stands, just keeps making long-lasting vehicles: standard and hybrid. And if joining the Climate Action Partnership is what you call a 10-year business plan…well, let’s just say that—green or black—2007 promises to finish in the red.