Tag Archives: Regulation

History of US Immigration

A History of Border Security, Illegal and legal immigration


Regulating the flow of immigrants into the United States has a long, and often tawdry past.

Once regulated, entry then becomes “legal” or “illegal”. And “legal” entry is now generally highly restricted, on a temporary or permanent basis to three different routes: employment, family reunification, or humanitarian protection. All other entry: “illegal”.

Once regulated, borders then become “secure” or “insecure”. Because of trade, borders needed to be highly efficient for goods, and highly “secure” for people. This distinction, between the flow of goods and the flow of people, was an almost unenforceable dilemma, where billions have been expended to do …. the best we can.

Who should regulate? The Supreme Court settled that issue in 1875, opining that this was the role of the Federal Government. Up until then, it was a state responsibility.

How should it regulate? Congress decided that racial quotas were the answer in 1917. Before that time, they actually banned Asian immigration in 1875. The essential idea was to restrict immigration by race to a % of the race’s population in the US (2% of that population was frequently used, noting that 2% of nothing is nothing). The notion of racial quotas was maintained until 1965!

Would there be any exceptions to racial quotas?

Yes, for refugees and asylum-seekers. Congress responded to American sympathies for those fleeing communism and those feeing persecution. Recognizing “refugees” added significant new complexity.

Yes, for spouses and children of American citizens.

Yes, for those born in the Western Hemisphere.

Once regulated, politicians could rail against immigrants, but they rarely provided the funds to enforce the border laws. We severely curtailed legal immigration, and illegal immigration was the easily anticipated result. In 1952, Congress specified that legal immigration be limited to 175,455 per year!

Also easily anticipated, “illegals” brought massive issues for schools, health care, housing, etc. As the number of “illegals” grew, so grew the pressure to do something, anything, to reduce the pressure. Congress has been forced to act, as they did in 1986 when they granted amnesty to approximately 3 million illegals!

So the history of immigration in the United States includes major shifts in policy in 1875 (Supreme Court rules), 1891 (Federal bureaucracy formed), 1924 (racial quotas put in place), 1986 (racial quotas replaced and amnesty granted).

“Illegals” are out of control. Estimates of illegals are 3 million illegals in 1986, 7 million in 2001, and 12 million in 2017. As a % of U.S. population, “foreign-born” dropped from 14.7% in 1910 to 4.7% in 1970, and has been rising ever since. In 2013, there were 13.1% of the population who were foreign born (CREDIT:PEW).

Immigration became a full-fledged subject for the nation in 1875, when the Supreme Court ruled that it was a Federal responsibility. Shortly thereafter, Congress stepped up and began excluding people – literally making it “illegal” for them to enter the United States. They banned Asians in 1875 and Chinese in 1882 (the “Asian Exclusion Act” and the “Chinese Exclusion Act” set the stage for all restrictions on immigration that would follow.

In 1891, the Federal Government took a big step: they created a bureaucracy to execute the laws. The Immigration Act of 1891 established a Commissioner of Immigration in the Treasury Department. With the two exceptions noted above, states regulated immigration before 1890.

Before then, this “nation of immigrants” actually had an immigration hiatus from 1790 to 1815, when “foreign-born” reached a low. Immigration as we now know it began with some force in 1830, when “foreign-born reached 9.7% of the population. By 1850, census estimates place immigrants at 1.7 million people, and “foreign-born” at 2.2 million. Between 1870 and 1910, foreign born hovered between 13% and 15% of population. It then started to dip, moving to 4.7% in 1970. It has been climbing since, reaching 13.1% in 2013.

Since then, waves of immigration brought the country waves of immigrants:

Between 1850 and 1930, 25 million Europeans immigrated. Italians, Greeks, Hungarians, Poles, and others speaking Slavic languages made up the bulk of this migration. But among them were 5 million Germans, 3.5 million British, and 4.5 million Irish. 2.5 to 4 million Jews were among them.

The twentieth century began with debates about immigration, and we have been debating the subject ever since.

In 1907, Congress created The Dillingham Commission to investigate the effects of immigration on the country. They wrote forty volumes on the subject.

In 1917, Congress changed the nation’s basic policy about immigration. We began setting “quotas” and limiting access based on literacy. The first such law was a literacy requirement in 1917.

In 1921, Congress adopted the Emergency Quota Act, set quotas. The National Origins Formula assigned quotas based on national origins. This complex legislation gave preference to immigrants from Central, Northern and Western Europe, severely limiting the numbers from Russia and Southern Europe, and declared all potential immigrants from Asia unworthy of entry into the United States (to our shame, this law made it virtually impossible for Jews fleeing Germany after 1934 to immigrate to the United States).

In 1924 , Congress adopted The Immigration Act of 1924. It set quotas for European immigrants so that no more than 2% of the 1890 immigrant stocks were allowed into America.

Interestingly, no quotas were set for people born in the Western Hemisphere.

This era, and its legislative framework, lasted until 1965. During this period, Congress recognized the notion of a “refugee” seeking “amnesty”. Jewish Holocaust survivors after the war, those fleeing Communist rule in Central Europe and Russia, Hungarians seeking refuge after their failed uprising in 1956, and Cubans after the 1960 revolution, and others moved the conscience of the nation.

In 1965, Congress adopted the Hart-Celler Act. It was a by-product of the civil rights revolution and a jewel in the crown of President Lyndon Johnson’s Great Society programs. It abolished the racially based quota system.The law replaced these quotas with new preferential categories. It gave particular preference to immigrants with U.S. relatives and job skills deemed critical.

In 1986, the Immigration Reform and Control Act (IRCA) was adopted. It created, for the first time, penalties for employers who hired illegal immigrants. IRCA, also granted amnesty to workers in the country illegally. In practice, amnesty was granted for about 3,000,000 illegal immigrants. Most were from Mexico. Legal Mexican immigrant family numbers were 2,198,000 in 1980, 4,289,000 in 1990 (includes IRCA), and 7,841,000 in 2000.





How U.S. immigration laws and rules have changed through history



Regulatory State and Redistributive State

Will Wilkinson is a great writer, and spells out here two critical aspects of government:

The regulatory state is the aspect of government that protects the public against abuses of private players, protects property rights, and creates well-defined “corridors” that streamline the flows of capitalism and make it work best. It always gets a bad rap, and shouldn’t. The rap is due to the difficulty of enforcing regulations on so many aspects of life.

The redistributive state is the aspect of government that deigns to shift income and wealth from certain players in society to other players. The presumption is always one of fairness, whereby society deems it in the interests of all that certain actors, e.g. veterans or seniors, get preferential distributions of some kind.

He goes on to make a great point. These two states are more independent of one another than might at first be apparent. So it is possible to dislike one and like another.

Personally, I like both. I think both are critical to a well-oiled society with capitalism and property rights as central tenants. My beef will always go to issues of efficiency and effectiveness?

On redistribution, efficiency experts can answer this question: can we dispense with the monthly paperwork and simply direct deposit funds? Medicare now works this way, and the efficiency gains are remarkable.

And on regulation, efficiency experts can answer this question: can private actors certify their compliance with regulation, and then the public actors simple audit from time to time? Many government programs work this way, to the benefit of all.

ON redistribution, effectiveness experts can answer this question: Is the homeless population minimal? Are veterans getting what they need? Are seniors satisfied with how government treats them?

On regulation, effectiveness experts can answer this question: Is the air clean? Is the water clean? Is the mortgage market making food loans that help people buy houses? Are complaints about fraudulent consumer practices low?

CREDIT: VOX Article on Economic Freedom by Will Wilkinson

By Will Wilkinson
Sep 1, 2016

American exceptionalism has been propelled by exceptionally free markets, so it’s tempting to think the United States has a freer economy than Western European countries — particularly those soft-socialist Scandinavian social democracies with punishing tax burdens and lavish, even coddling, welfare states. As late as 2000, the American economy was indeed the freest in the West. But something strange has happened since: Economic freedom in the United States has dropped at an alarming rate.

Meanwhile, a number of big-government welfare states have become at least as robustly capitalist as the United States, and maybe more so. Why? Because big welfare states needed to become better capitalists to afford their socialism. This counterintuitive, even paradoxical dynamic suggests a tantalizing hypothesis: America’s shabby, unpopular safety net is at least partly responsible for capitalism’s flagging fortunes in the Land of the Free. Could it be that Americans aren’t socialist enough to want capitalism to work? It makes more sense than you might think.

America’s falling economic freedom

From 1970 to 2000, the American economy was the freest in the West, lagging behind only Asia’s laissez-faire city-states, Hong Kong and Singapore. The average economic freedom rating of the wealthy developed member countries of the Organization for Economic Cooperation and Development (OECD) has slipped a bit since the turn of the millennium, but not as fast as America’s.
“Nowhere has the reversal of the rising trend in the economic freedom been more evident than in the United States,” write the authors of Fraser Institute’s 2015

Economic Freedom of the World report, noting that “the decline in economic freedom in the United States has been more than three times greater than the average decline found in the OECD.”

The economic freedom of selected countries, 1999 to 2016. Heritage Foundation 2016 Index of Economic Freedom

The Heritage Foundation and the Canadian Fraser Institute each produce an annual index of economic freedom, scoring the world’s countries on four or five main areas, each of which breaks down into a number of subcomponents. The main rubrics include the size of government and tax burdens; protection of property rights and the soundness of the legal system; monetary stability; openness to global trade; and levels of regulation of business, labor, and capital markets. Scores on these areas and subareas are combined to generate an overall economic freedom score.

The rankings reflect right-leaning ideas about what it means for people and economies to be free. Strong labor unions and inequality-reducing redistribution are more likely to hurt than help a country’s score.

So why should you care about some right-wing think tank’s ideologically loaded measure of economic freedom? Because it matters. More economic freedom, so measured, predicts higher rates of economic growth, and higher levels of wealth predict happier, healthier, longer lives. Higher levels of economic freedom are also linked with greater political liberty and civil rights, as well as higher scores on the left-leaning Social Progress Index, which is based on indicators of social justice and human well-being, from nutrition and medical care to tolerance and inclusion.

The authors of the Fraser report estimate that the drop in American economic freedom “could cut the US historic growth rate of 3 percent by half.” The difference between a 1.5 percent and 3 percent growth rate is roughly the difference between the output of the economy tripling rather than octupling in a lifetime. That’s a huge deal.
Over the same period, the economic freedom scores of Canada and Denmark have improved a lot. According to conservative and libertarian definitions of economic freedom, Canadians, who enjoy a socialized health care system, now have more economic freedom than Americans, and Danes, who have one of the world’s most generous welfare states, have just as much.
What the hell’s going on?

The redistributive state and the regulatory state are separable

To make headway on this question, it is crucial to clearly distinguish two conceptually and empirically separable aspects of “big government” — the regulatory state and the redistributive state.

The redistributive state moves money around through taxes and transfer programs. The regulatory state places all sorts of restrictions and requirements on economic life — some necessary, some not. Most Democrats and Republicans assume that lots of regulation and lots of redistribution go hand in hand, so it’s easy to miss that you can have one without the other, and that the relationship between the two is uneasy at best. But you can’t really understand the politics behind America’s declining economic freedom if you fail to distinguish between the regulatory and fiscal aspects of the economic policy.

Standard “supply-side” Republican economic policy thinking says that cuts in tax rates and government spending will unleash latent productive potential in the economy, boosting rates of growth. And indeed, when taxes and government spending are very high, cuts produce gains by returning resources to the private sector. But it’s important to see that questions about government control versus private sector control of economic resources are categorically different from questions about the freedom of markets.

Free markets require the presence of good regulation, which define and protect property rights and facilitate market processes through the consistent application of clear law, and an absence of bad regulation, which interferes with productive economic activity. A government can tax and spend very little — yet still stomp all over markets. Conversely, a government can withdraw lots of money from the economy through taxes, but still totally nail the optimal balance of good and bad regulation.

Whether a country’s market economy is free — open, competitive, and relatively unmolested by government — is more a question of regulation than a question of taxation and redistribution. It’s not primarily about how “big” its government is. Republicans generally do support a less meddlesome regulatory approach, but when they’re in power they tend to be much more persistent about cutting taxes and social welfare spending than they are about reducing economically harmful regulatory frictions.

If you’re as worried about America’s declining economic freedom as I am, this is a serious problem. In recent years, the effect of cutting taxes and spending has been to distribute income upward and leave the least well-off more vulnerable to bad luck, globalization, “disruptive innovation,” and the vagaries of business cycles.
If spending cuts came out of the military’s titanic budget, that would help. But that’s rarely what happens. The least connected constituencies, not the most expensive ones, are the first to get dinged by budget hawks. And further tax cuts are unlikely to boost growth. Lower taxes make government seem cheaper than it really is, which leads voters to ask for more, not less, government spending, driving up the deficit. Increasing the portion of GDP devoted to paying interest on government debt isn’t a growth-enhancing way to return resources to the private sector.

Meanwhile, wages have been flat or declining for millions of Americans for decades. People increasingly believe the economy is “rigged” in favor of the rich. As a sense of economic insecurity mounts, people anxiously cast about for answers.

Easing the grip of the regulatory state is a good answer. But in the United States, its close association with “free market” supply-side efforts to produce growth by slashing the redistributive state has made it an unattractive answer, even with Republican voters. That’s at least part of the reason the GOP wound up nominating a candidate who, in addition to promising not to cut entitlement spending, openly favors protectionist trade policy, giant infrastructure projects, and huge subsidies to domestic manufacturing and energy production. Donald Trump’s economic policy is the worst of all possible worlds.

This is doubly ironic, and doubly depressing, once you recognize that the sort of big redistributive state supply-siders fight is not necessarily the enemy of economic freedom. On the contrary, high levels of social welfare spending can actually drive political demand for growth-promoting reform of the regulatory state. That’s the lesson of Canada and Denmark’s march up those free economy rankings.

The welfare state isn’t a free lunch, but it is a cheap date

Economic theory tells you that big government ought to hurt economic growth. High levels of taxation reduce the incentive to work, and redistribution is a “leaky bucket”: Moving money around always ends up wasting some of it. Moreover, a dollar spent in the private sector generally has a more beneficial effect on the economy than a dollar spent by the government. Add it all up, and big governments that tax heavily and spend freely on social transfers ought to hurt economic growth.

That matters from a moral perspective — a lot. Other things equal, people are better off on just about every measure of well-being when they’re wealthier. Relative economic equality is nice, but it’s not so nice when relatively equal shares mean smaller shares for everyone. Just as small differences in the rate at which you put money into a savings account can lead to vast differences in your account balance 40 years down the road, thanks to the compounding nature of interest, a small reduction in the rate of economic growth can leave a society’s least well-off people much poorer in absolute terms than they might have been.

Here’s the puzzle. As a general rule, when nations grow wealthier, the public demands more and better government services, increasing government spending as a percentage of GDP. (This is known as “Wagner’s law.”) According to standard growth theory, ongoing increase in the size of government ought to exert downward pressure on rates of growth. But we don’t see the expected effect in the data. Long-term national growth trends are amazingly stable.

And when we look at the family of advanced, liberal democratic countries, countries that spend a smaller portion of national income on social transfer programs gain very little in terms of growth relative to countries that spend much more lavishly on social programs. Peter Lindert, an economist at the University of California Davis, calls this the “free lunch paradox.”

Lindert’s label for the puzzle is somewhat misleading, because big expensive welfare states are, obviously, expensive. And they do come at the expense of some growth. Standard economic theory isn’t completely wrong. It’s just that democracies that have embraced generous social spending have found ways to afford it by minimizing and offsetting its anti-growth effects.

If you’re careful with the numbers, you do in fact find a small negative effect of social welfare spending on growth. Still, according to economic theory, lunch ought to be really expensive. And it’s not.

There are three main reasons big welfare states don’t hurt growth as much as you might think. First, as Lindert has emphasized, they tend to have efficient consumption-based tax systems that minimize market distortions.
When you tax something, people tend to avoid it. If you tax income, as the United States does, people work a little less, which means that certain economic gains never materialize, leaving everyone a little poorer. Taxing consumption, as many of our European peers do, is less likely to discourage productive moneymaking, though it does discourage spending. But that’s not so bad. Less consumption means more savings, and savings puts the capital in capitalism, financing the economic activity that creates growth.

There are other advantages, too. Consumption taxes are usually structured as national sales taxes (or VATs, value-added taxes), which are paid in small amounts on a continuous basis, are extremely cheap to collect (and hard to avoid), while being less in-your-face than income taxes, which further mitigates the counterproductively demoralizing aspect of taxation.

Big welfare states are also more likely to tax addictive stuff, which people tend to buy whatever the price, as well as unhealthy and polluting stuff. That harnesses otherwise fiscally self-defeating tax-avoiding behavior to minimize the costs of health care and environmental damage.
Second, some transfer programs have relatively direct pro-growth effects. Workers are most productive in jobs well-matched to their training and experience, for example, and unemployment benefits offer displaced workers time to find a good, productivity-promoting fit. There’s also some evidence that health care benefits that aren’t linked to employment can promote economic risk-taking and entrepreneurship.

Fans of open-handed redistributive programs tend to oversell this kind of upside for growth, but there really is some. Moreover, it makes sense that the countries most devoted to these programs would fine-tune them over time to amplify their positive-sum aspects.

This is why you can’t assume all government spending affects growth in the same way. The composition of spending — as well as cuts to spending — matters. Cuts to efficiency-enhancing spending can hurt growth as much as they help. And they can really hurt if they increase economic anxiety and generate demand for Trump-like economic policy.

Third, there are lots of regulatory state policies that hurt growth by, say, impeding healthy competition or closing off foreign trade, and if you like high levels of redistribution better than you like those policies, you’ll eventually consider getting rid of some of them. If you do get rid of them, your economic freedom score from the Heritage Foundation and the Fraser Institute goes up.
This sort of compensatory economic liberalization is how big welfare states can indirectly promote growth, and more or less explains why countries like Canada, Denmark, and Sweden have become more robustly capitalist over the past several decades. They needed to be better capitalists to afford their socialism. And it works pretty well.

If you bundle together fiscal efficiency, some offsetting pro-growth effects, and compensatory liberalization, you can wind up with a very big government, with very high levels of social welfare spending and very little negative consequences for growth. Call it “big-government laissez-faire.”

The missing political will for genuine pro-growth reform

Enthusiasts for small government have a ready reply. Fine, they’ll say. Big government can work through policies that offset its drag on growth. But why not a less intrusive regulatory state and a smaller redistributive state: small-government laissez-faire. After all, this is the formula in Hong Kong and Singapore, which rank No. 1 and No. 2 in economic freedom. Clearly that’s our best bet for prosperity-promoting economic freedom.

But this argument ignores two things. First, Hong Kong and Singapore are authoritarian technocracies, not liberal democracies, which suggests (though doesn’t prove) that their special recipe requires nondemocratic government to work. When you bring democracy into the picture, the most important political lesson of the Canadian and Danish rise in economic freedom becomes clear: When democratically popular welfare programs become politically nonnegotiable fixed points, they can come to exert intense pressure on fiscal and economic policy to make them sustainable.

Political demand for economic liberalization has to come from somewhere. But there’s generally very little organic, popular democratic appetite for capitalist creative destruction. Constant “disruption” is scary, the way markets generate wealth and well-being is hard to comprehend, and many of us find competitive profit-seeking intuitively objectionable.

It’s not that Danes and Swedes and Canadians ever loved their “neoliberal” market reforms. They fought bitterly about them and have rolled some of them back. But when their big-government welfare states were creaking under their own weight, enough of the public was willing, thanks to the sense of economic security provided by the welfare state, to listen to experts who warned that the redistributive state would become unsustainable without the downsizing of the regulatory state.

A sound and generous system of social insurance offers a certain peace of mind that makes the very real risks of increased economic dynamism seem tolerable to the democratic public, opening up the political possibility of stabilizing a big-government welfare state with growth-promoting economic liberalization.

This sense of baseline economic security is precisely what many millions of Americans lack.

Learning the lesson of Donald Trump
America’s declining economic freedom is a profoundly serious problem. It’s already putting the brakes on dynamism and growth, leaving millions of Americans with a bitter sense of panic about their prospects. They demand answers. But ordinary voters aren’t policy wonks. When gripped by economic anxiety, they turn to demagogues who promise measures that make intuitive economic sense, but which actually make economic problems worse.

We may dodge a Trump presidency this time, but if we fail to fix the feedback loop between declining economic freedom and an increasingly acute sense of economic anxiety, we risk plunging the world’s biggest economy and the linchpin of global stability into a political and economic death spiral. It’s a ridiculous understatement to say that it’s important that this doesn’t happen.

Market-loving Republicans and libertarians need to stare hard at a framed picture of Donald Trump and reflect on the idea that a stale economic agenda focused on cutting taxes and slashing government spending is unlikely to deliver further gains. It is instead likely to continue to backfire by exacerbating economic anxiety and the public’s sense that the system is rigged.

If you gaze at the Donald long enough, his fascist lips will whisper “thank you,” and explain that the close but confusing identification of supply-side fiscal orthodoxy with “free market” economic policy helps authoritarian populists like him — but it hurts the political prospects of regulatory state reforms that would actually make American markets freer.

Will Wilkinson is the vice president for policy at the Niskanen Center.