Saturday, November 03, 2012

A Lesson in Economics for Immigrants

This will be about the only political piece I ever write where I try to make a case or convince a group of people to vote a certain way.  And the way I'm going to do it is by being direct, blunt, honest and truthful, as well as using logic that cannot be disputed and math that is precise (though if anybody doesn't believe me, they can always look it up).  I also will be translating this into multiple languages so most immigrants in the US can read this (though I apologize in advance is the Google Translate loses some of the meaning in translation).

First allow me some assumptions.

If you are an immigrant to the US then chances are you came here for a better economic living.  You decided to come here, illegally or not, because it would benefit you economically.  Whether you decided to be a real American and work, or simply just go on welfare and live off of other people here, it doesn't matter.  Whether you even like the United States doesn't matter.  The fact still remains the United States presented a better economic life than the country you came from. 

Also, if you are an immigrant, chances are you vote Democrat and will vote for Barack Obama.  Again, whether you're here legally or not, and whether you are allowed to vote or not, it doesn't matter.  Most of you will vote for Barack Obama.  The reasons are many.  He promises you that you will become a citizen. He promises you more money.  He promises you jobs.  Whatever he promises you, in general he will give you more stuff and money than Romney will (which I agree).

But there is a problem the immigrant community faces and it's the same problem all Americans face.  A problem of feasibility.

Barack Obama can promise you everything under the stars.  Romney can do the same.  The issue is whether or not they can deliver and make good on those promises.  And what determines whether or not they can make good on those promises is whether or not the economy is strong enough, healthy enough and growing enough to generate the economic production needed to pay for everything they promised.

Understand the government can't just "print off more money."   Printing off more money does nothing but create inflation because it isn't the paper money that has any value, it is the goods and services that money can buy that has value.  Therefore the wealth and riches of a nation isn't how much pieces of paper money you have floating around, it's the amount of goods, services and stuff an economy produces that gives a nation its wealth, strength and standard of living.  We merely use money as a means to convert our labor into a tool we can use to go and buy the stuff we need.  That's all money is - it's a tool.  So when you print off all this money without a corresponding increase in economic production, you get inflation, or worse, "hyper-inflation" that you see in modern day Zimbabwe.

Until recently, the United States was able to produce a lot of stuff that would give its money value.  However, in the past 20 years or so, especially the last 5, we have been spending more money than the amount of stuff we're producing.  Additionally, the government has been spending way more money than it has taken in, requiring it borrow money from the Chinese, Arabs and other countries.  Worse still nearly 70% of the money the government does spend goes into what is called "income transfers."  "Income transfers" means just that.  It is transferring money from one group of people to another in the form of EBT, welfare, food stamps, medicare, medicaid and other programs that disproportionately benefit immigrants.  The problem is that the government (meaning the US population) does not get anything in return for those income transfers.  Normally when you give somebody money they have to produce something or provide a service.  But 70% of our budget is spent without any corresponding increase in economic production, explaining in part why our economy is in such bad shape today.

Now stick with me if I haven't lost you yet with the boring economics lesson because the consequences of this economic lesson will have an effect on you.

As we spend more money relative to the amount of actual genuine economic production this will not only cause inflation, but (as noted before) require we borrow the money to make up the gap.  Again, the Chinese, Arabs and other countries have lent us trillions of dollars, but inevitably they would like to be paid back.  The only way we can pay them back is through economic production, not merely printing off more US dollars because that would lower the value of the dollar and our creditors would not accept that. So we need economic growth.

The problem comes in the policies Obama and the democrats have been advocating.  They are usually for increasing taxes on people and corporations.  They are also for spending more money on income transfers (which again does not result in economic production, just merely taking one person's money and giving it to another).  None of these things create economic growth and the Chinese, Arabs and other countries know this.

The point in time will come that our creditors would like to be paid back.  And if we don't pay them, they will "cut us off" and lend us no more money.  Meaning, the government will have to really cut spending because it ran out of money.  Meaning where does that leave you?

It is here you have to be intellectually honest with yourself because whether you collect a government check or you actually support yourself, it doesn't matter.  The problems that you and I both face are a matter of sustainability.  The economic growth is simply not there to keep the promises Obama has made to you as well as the promises previous politicians have made to you.  And the deficit spending Obama is relying upon today is also unsustainable.

We also must be intellectually honest in another regard.  If something is unsustainable, which this economy currently is, how can you advocate it?  How can you vote for something that simply will not work?

If your goal is to simply take as much money from the American taxpayer as you can and leave when the government runs out of money, fine, at least you are honest in that regard.  But if you plan to live here or would like to live here, whether you are an illegal immigrant or not, then you must accept this fact and vote accordingly because you are literally delusional (in psychological terms) voting otherwise.

Furthermore, chances are the countries you all came from suffered from this exact same problem.  You just didn't bother to familiarize yourself with the economics and politics that caused your country's economy to be so poor.  The problem is you are simply causing the same problem again because you didn't bother to learn the economic lessons from your home country.  This is why you absolutely must study the budgets of the government.  You must study the economics of your country.  Because if you don't, then you are uninformed and vote for policies and politicians that sound good, but are not sustainable.  So please let me inform you and trust me, I'm not making these figures up.

First, our debt is currently at 100% to GDP (meaning we have enough federal debt so that it is equal to 100% the amount of economic production - "GDP" - we produce every year.  It is currently I believe 75% "net" federal debt to GDP, but that is another economics lesson for another time.  The point is that our debt level is high and it cannot go much higher.

Second, it is going much higher.  Higher and faster than ever before under Barack Obama.  For every year in his presidency he has had a $1 trillion deficit, or a deficit amounting to about 8-9% GDP.  This annual amount is added to our debt.  We are not paying down the debt, it is increasing at a rate faster than any time in US history except during times of war (which are those spikes in the chart).  It is not sustainable.  It will end either by Republicans cutting the budget or the Chinese refusing to lend us any more money.

Third, our economic growth is slowing.  We used to grow around 4.5% per year, now we're at about 2.25% per year. It is not enough to keep up with population growth.  This is in part because more and more people are living off of the government and not working.  If people had kept working and the government not spend so much money on income transfers the average person would not be making the $47,000 they do today, but rather closer to $100,000.

Again, this economy is not sustainable.  It is not in your best long term interests to vote for Obama.

Now, you can dismiss me, you can dismiss my logic and you can ignore my charts.  But it will be at your own peril.  Whether you believe me or not, you have stepped on the Titanic.  I don't care what the Democrats, the socialists or Barack Obama promises you, the economic boom days of the United States are over.  The only reason the government can spend money on income transfers today is because it's borrowing it and once that dries up, the money and economic opportunities you came here for will disappear.  You will face a situation similar to the one you saw back in your home country and there won't be a thing you can do about it. 

My final argument though is the most compelling.

Being an immigrant, chances are you have children.  The only reason the US population is growing is because immigrants are having more children than the natives.  What this means is you have "skin in the game" an English phrase that means you are personally invested in this country.  So if you don't want to study economics, you don't want to be educated and you are so naive you can't see a problem with a politician that promises "free everything" fine.  Your children will suffer your ignorance.  I'm lucky in this regard because I have no children.  Matter of fact I watch with a macabre fascination with the demise and collapse of the United States.  I'll be dead leaving no loved ones behind, I don't care.  However, you have much more at stake in the future of this country because you have children. 

So the choice is really up to you and all other immigrants in the United States.  You can keep going down the road you have before.  You can keep voting in politicians that promise you everything and in doing so will simply repeat the economic collapses of the countries you came from.   You can remain ignorant about history and economics of not just the United States, but your home country.  And you can be lazy about studying the finances of a country you are in charge of (because this is a democracy).  Just be prepared to have yourself or your children pay for the consequences.

I will, again, be watching the Titanic sink with everybody on it in macabre fascination.


abprosper said...

Up-fronts here Cap, I am a distributivist (setting a system that incentives broad distribution) and favor social credit and limited immigration.

The economic malaise we suffer not just about income transfers.

Its also about outsourcing, women entering the workforce nearly doubling the labor pool , mass illegal immigration and especially automation.

The fact is there haven't been significant numbers of labor intensive manufactured good made in many years in any modernized country.

There really aren't that many new things from when i was young, just slightly better versions of the same stuff.

What new goods that exists like PDF's are often virtual and have no supply chain or job chain attached to them.

If you E-Publish that is efficient (been there, done that) but it eliminates a great many jobs and no wealthy economy is a nation of bazaars

Watch old footage of factories some time and compare with say Modern Marvels or How Its Made. Thats a world of difference.

Another example , take making media now, this is effortless requiring a man and a computer often as not. In a few decades we may be able to make movies the same way, no actors, no cameras, just a person or two with savvy.

heck the modern factory is a miracle of automation and it doesn't need expensive Joe Six Pack.

This means Joe's wages are pushed down to those of China. This also means that if there were not massive interventions parasiting off the existing wealth, the US would rapidly grow poor too since fewer people can buy stuff and savings must rise.

Compete withe the 3rd world or places like China and they'll drag you down to their level.

Also we've know since the 1930's there really isn't enough useful work for a 40 hour work week. Kellogg Company had a 30 hour work week back than and got everything done.

The reason this was eliminated was status whoring the "investor" class resented the relative prosperity and freedom of the workers and leveraged a change to their benefit and labors detriment.

Because people need to eat and the number of slots is limited (if people don't move up and out, investment in the future slows and the nation suffers) we have come up with half measures.

The problem with the Capitalist solution is that it inevitably turns to oligarchy and central planning anyway.

The money is used to leverage buyouts, control the politicos , become rentiers and engage in a lot of useless behaviors.

I hate to quote Marx but he was right in that Capitalism does contain the seeds of its own destruction.

Now in theory a sufficiently taciturn populace well accustomed and trained to it could handle a purer Capitalism.

They'd save mass sums of money (hopefully this won't kill the economy) and be well prepared for the inevitable ups and downs.

Assuming that foreign manipulators were kept at bay and the state didn't screw things up , the market would work .

However that leads us to the single most important change, family planning. Seriously

As a society we are not coping well with the fact that in a society with perceived inadequate stability people can still have sex and not have kids.

This means family planning ends up lowering IQ and impulse control since the people with those useful traits tend to say "This situation is not looking good, I'll pass on kids" We have this all through Europe and the US
leaving highly natal, low investment people doing much of the reproduction.

From the POV of an employer wanting talent this is a very bad thing.

The political solution is not however palatable, starting at 18 paying low income people extra to not have kids won't fly.

So what you get is an inevitable situation of a poorer, dumber, less capable populace and while the Internet can help, it won't plug them into non existent work either. The US inevitably goes to pot

Alex said...

Excellent post!
We have the same delusions/problem(s) over here in Germany, albeit even more severe.

BTW: I have been an avid reader of your post for quite some time now, bought "Worthless" and "Behind the Housing Crash". Both pretty awesome, too.

How about you write some compendium about the theory of economics in general?

I (and most probably many others) would pay good money for something like that.

Or do you know of any existing book you could sincerely recommend to the aspiring economist?

Captain Capitalism said...

Hi Alex,

I will be putting together a book like that later. I have several books though that woudl take precidence over it.

In the meantime Economics in One Lesson" is a good one and Thomas Sowell wrote a book, the name of which I forget.


Paul said...

Tom Sowell wrote many books, but in this context you're probably talking about his Basic Economics, excellent stuff.

Boheme Chinois said...

Just to let you know... Asian immigrants are the exception and have habits that help the US economy.

It's mostly the Latinos and hurdles of single mothers that leech off the system.

I'd let in more Asians and Eastern Europeans if I had to let in immigrants. Otherwise, keep 'em out!

OmarReb24 said...

awesome article. ... " we merely use money as a means to convert our labor into a tool we can use to go and buy the stuff we need. That's all money is-its a tool." - is a good way to explain capitalism/ free market as an exchange of values in simpler terms... good economic history piece I would add the inflation problems Argentina faced not too long ago... Also even though this is a good intro or brief intro into economics and more should be written,explained, and distributed widely to all just like bibles are, I don't think it matters in our present day culture; as long as the "have nots"- those who have less and want more are being told by the media, hollywood, and the democratic party that they are oppressed by those who have more than they do, the whole citizen body will be held hostage to a growing gov that provides all the things the masses want for free instead of working for them. I think of immigrants especially those who came illegally at one point such as my family, how they came to find better work than what they had and are now I feel in bondage to the democratic party b/c they "can" provide far easier lifestyles, have more stuff for less work than what they would otherwise have from where they came from, I feel immigrants and those in low income class have been taught to expect more from the government b/c they are "oppressed" by those who have slightly or alot more than they do... the feeling of oppression and of asking/expecting gov to be there at all times needs to stop, its sad that generally we are all feeling oppressed as if we can't do it on our own instead of being inspired and uplifted to try at least.

Anonymous said...

Fascinating straight talk. As previous commenter pointed out, this applies mostly to Latin American immigrants, and a lot of them are probably slowly coming to terms what's going on here. Mexican economy is actually doing better than the US economy, and large-scale Mexican migration is over. Some are going back, and I'm curious to see if the rate of return will escalate. GOP establishment is talking about amnesty again. It would be interesting to see how many Mexicans are interested in in.