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Episode 436: If Economists Controlled The Borders

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Episode 436: If Economists Controlled The Borders

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Episode 436: If Economists Controlled The Borders

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STACEY VANEK SMITH, HOST:

Hey, everyone, it's Stacey Vanek Smith. Today we're going to replay one of our favorite episodes about immigration and economists. It's from a few years ago, but it feels very relevant today, and we will have an update at the end.

(SOUNDBITE OF ARCHIVED BROADCAST)

DAVID KESTENBAUM, HOST:

I must admit I did not fully appreciate how - strange?

ROBERT SMITH, HOST:

No, it's more, like, complicated, unusual, you know, weird. I would go with weird.

KESTENBAUM: All right, weird. I did not appreciate how weird our immigration policy is. Take, for instance, this fact - we have a cap on the number of people who can get a green card from each country. It is the same number for every country. The number does not depend on the country's size, which means if you live in a tiny country - Luxembourg or Iceland - there are plenty of open spots for you. But if you live in someplace bigger like India or even Mexico, be prepared to wait just because your country happens to have a lot of people in it.

ALEX NOWRASTEH: If you are a lower skilled Mexican with a high school degree and you have no family in the United States right now, so you want to come in and work, there's virtually no way for you to do so.

SMITH: This is economist Alex Nowrasteh.

NOWRASTEH: If you are the lower skilled Mexican, you want to wait in line for that green card, it takes about 130 years to do so. So the notion that anybody can come here and work is false. Nobody can wait in line for 130 years, obviously.

SMITH: In fact, Mexico should just split into 10 smaller countries. Then it would get 10 times as many slots.

KESTENBAUM: If you don't feel like waiting or splitting your country up, there are other routes to the United States that are also kind of weird, like the one Anthony Korda took when he fell in love with the United States - or, more specifically, with Florida.

ANTHONY KORDA: So I was a barrister in the United Kingdom - actually, I should say England and Wales. We had a vacation home here in Florida. And we - I say we, my wife and I and my two children - we came here frequently. And each time we left the nice weather of Florida, we were more and more depressed about having to leave.

SMITH: Because he'd get back to London and there'd be all this rain and fog. He hated it. And so Korda found a quick way to become a U.S. citizen. He found this obscure program that basically lets you buy your way into the United States. You just have to invest half a million dollars in an American business that is predicted to create 10 jobs - just 10 jobs.

KORDA: Truthfully, it looked too good to be true. It sounded to me at that time to be fanciful. So I did more research and realized that it actually was a genuine program.

SMITH: Korda cashed out most of his savings, he invested in a Vermont ski resort, and he got his visa. Now he's on his way to citizenship.

KESTENBAUM: So there are exceptions for the rich. And it's not just the rich. There are plenty of exceptions. But oddly, they depend on what your job is. Here's economist Giovanni Peri.

GIOVANNI PERI: There are currently maybe more than 30 different categories of temporary visas with an incredible detail of who can come in on each. There is one specific for models.

SMITH: I'm sorry, fashion models?

PERI: Fashion models, yes, one specifically for fashion models.

KESTENBAUM: Did you come to the U.S. on a fashion model visa?

PERI: (Laughter) I tried, but then I failed miserably.

KESTENBAUM: Hello, and welcome to PLANET MONEY. I'm David Kestenbaum.

SMITH: And I am Robert Smith. There is, for the first time in a while, momentum building to try to change our immigration system.

KESTENBAUM: So today we ask - what would be the perfect system? If we could scrap the mess that we have right now, what would be best for our economy? We asked three people who have thought a lot about this and we got three answers for what their dreams were, three big ideas that could fix the system.

(SOUNDBITE OF JEROME FABY'S "FEEL ALRIGHT")

SMITH: OK, our first idea to reform immigration. I'm going to give each one a title, David.

KESTENBAUM: OK.

SMITH: This one is the best and the brightest.

KESTENBAUM: That's not bad. This idea comes from Dean Baker. He is co-director of the Center for Economic and Policy Research. He identifies himself as being left of center.

SMITH: Baker's dream system would be a lot simpler than the one we laid out at the beginning of the program. You'd start by picking the number of people you were going to let into the country, the total number - so, say, a million and a half or 2 million a year, certainly more than we let in now. Then you've just got to decide who gets to come. Baker says of course he would like people to be able to reunite with their families, bring their relatives over. But after that, he wants to give out visas preferentially to the people who would benefit the economy the most - scientists, engineers, lawyers, computer programmers, doctors.

DEAN BAKER: I would like to make sure that you had a lot of immigrants at the high end.

KESTENBAUM: Feels a little unfair. It's basically saying, you know, you can only come in or you have a much better chance of coming in if you have a graduate degree. If you're someone who arguably really needs the money more, there's less chance you'll get in.

BAKER: Well, you might say that. But in terms of, you know, sort of world justice, realistically we're going to let a tiny, tiny number of people from the rest of the world into the United States. So I don't have much qualms about saying, OK, who are those going to be? Those are going to be workers with high education, high qualifications. And then I'd like to repatriate a portion of their earnings so that it will benefit their home countries as well. So if we get a doctor from India, take 10 percent of their earnings when they're here for their first 10 or 15 years, use that to train two or three more doctors in India. So India actually ends up with better health care as a result of doctors emigrating to the United States.

KESTENBAUM: Sorry, we would require that?

BAKER: That's - you gave me the choice to design my dream system. Yes, I'd like to see - ensure that India benefits from that story as well.

KESTENBAUM: So you would say to this doctor, you came here, we're going to tax you 10 percent of your earnings and...

BAKER: They don't have to come if they don't want. You know, the reality is, again, the differences in wages are so large that if you have a doctor come to the United States and 10 percent of their income off the top is taxed away and then sent back to India to educate more doctors, they'd still end up way ahead. And again, you know, if they're not happy about it, they don't have to come here.

KESTENBAUM: What about farm workers?

BAKER: You know, I'm less concerned about farm workers. I mean, I know there's a lot of farmers who say that, you know, they couldn't operate their farms without low-cost labor. And, you know, I'd say that a lot of those farms perhaps shouldn't be operating. I'm not really troubled by the idea that farmers should have to pay the same sort of wages to attract people as retail stores or anyone else. I don't really see a problem with that. I don't think we need a special underclass of people to work at real low wages in the farms. I don't think that makes a lot of sense.

KESTENBAUM: Can you - so let's say we put it in the system you just described. Paint a picture of how life in the United States is different.

SMITH: All I know is there are doctors on every corner. They're - they're everywhere (laughter).

BAKER: We're going to be surrounded by doctors.

SMITH: All these doctors, come on.

BAKER: They're going to be setting up a shop on every corner, undercutting each other in prices. I think we would see lower-cost health care. And that's obviously something that I think everyone has to be concerned about because, you know, we know in terms of health care, you know, insurance, whether we're paying it out of pocket - and certainly as a government category - government spending. It's the most rapidly rising category of government spending. So I think it would have a very positive impact in terms of lowering health care costs.

On the other hand, a lot of the types of labor that, you know, we currently get very cheap would cost more - you know, people working in hotels as housekeepers - You know, presumably, they would be getting higher wages - Restaurant workers, certainly - the people working in the kitchens, custodians in office buildings - all these people would be getting more money, which would mean higher costs. So we'd probably see things - fewer restaurants. You know, when we go to a restaurant, it might cost us, you know, 20, 30 percent more for a meal, which means most of us would go out somewhat less.

So what we'd see is that a lot of the goods that are relatively cheap today would be somewhat more expensive, whereas at least some of the things, most importantly health care, which is of course very expensive, would cost us less.

KESTENBAUM: So there you have it, idea No. 1. We should point out that Dean Baker is far from alone in wanting to let in more high-skilled workers. The Chicago Booth School of Business does these surveys using a panel of expert economists, economists of all stripes. And one of the survey questions was - would average U.S. citizens be better off if we let more highly educated workers immigrate? They asked 38 economists. One did not respond. One said he was uncertain. All the others agreed - let more professionals in.

SMITH: Now, we should say there is a challenge to this particular idea, which is that it still depends on the government picking who gets it and who doesn't. So you say professionals - but which professionals? How do you decide? What does our economy need? There's going to be plenty of people lobbying.

KESTENBAUM: Fashion models.

SMITH: Those supermodels are going to want to get in. So this brings us to our second economist. He has what he thinks is a better way to pick and choose.

KESTENBAUM: Immigration idea No. 2 - what's he call this one?

SMITH: The highest bidder.

PERI: My name is Giovanni Peri. I am professor of economics at University of California, Davis.

KESTENBAUM: Giovanni is the guy who told us about the special category for admitting fashion models. He says the best way to figure out who to let in is that you auction your visas off to the highest bidder.

PERI: Whoever employer is willing to pay more is going to get the permit to hire the worker.

KESTENBAUM: So if we need - if it turns out we do need more fashion models or more doctors, presumably, those employers would be willing to pay more and they would get those visas.

PERI: Absolutely, yes. Indeed. The allocation of this worker is not determined by the government through some numbers that they come up with but is determined by the market.

KESTENBAUM: You can imagine that under this system, there would not be a whole lot of people coming in to work on farms or work on construction sites. It's hard to imagine some tomato farmer who's trying to hire that worker outbidding Microsoft in some visa auction.

SMITH: Yeah. And unlike with Dean Baker, I mean, Giovanni is worried about the situation. So his idea is that you have two categories of visas, one for high-skilled workers - there would be an auction there - and one for low-skilled workers - separate auction. And each category would find the right price for their workers.

PERI: So this, I think, is another very important point of this. And I don't know if I want to give some numbers.

KESTENBAUM: Go ahead. Give some numbers.

PERI: We say probably in high-skilled, a permit for three year would go between $5,000 and $10,000. And a low-skilled permit, which is only one year right now for these temporary worker, we go probably between $1,000 and $2,000.

SMITH: And when Giovanni does the math, he comes up with a figure of maybe a billion dollars the U.S. government can make off of auctioning these visas - not a lot of money but not bad.

KESTENBAUM: And you know when you hear people talk about immigration, there's all this language around it - you know, moving to America to live the American dream. But the economists we talked to, they did not make a huge deal about the citizenship part of things. The auction Giovanni is talking about would be for temporary work visas good for a year or a few years. He says if things work out on the job and they're still here when time is up, we should let them stay, become citizens if they want.

So there, we've got two options so far. One, allocate visas preferentially to high-skilled workers or, two, auction them off. Let businesses decide who they need and what they're willing to pay for the visas. Or - you could go with dream proposal No. 3. Robert, what are we calling this one?

SMITH: The free-for-all.

KESTENBAUM: This one comes from Alex Nowrasteh, a self-described libertarian at the Cato Institute. Here's his proposal - let them in.

SMITH: All of them?

KESTENBAUM: Well, most.

NOWRASTEH: The dream setup - my dream setup would be a system whereby only criminals, suspected terrorists and those with serious communicable diseases, like, you know, a drug-resistant tuberculosis, are barred from coming to the United States to live and work.

SMITH: It's pretty simple. Everyone who wants to come to America, just show up at the border. Fill out some forms, maybe a background check - and boom, you're in. It's not as crazy as it sounds.

NOWRASTEH: The United States had a system like that from roughly 1790 to about 1882.

KESTENBAUM: Did you catch that? He is saying that this crazy system of open borders - that was the law of the land for almost a hundred years of American history. To him, the crazy system is the system that we have now with all these restrictions. That's crazy. And it wasn't put in place because of logic or fairness. It was put in place because, he says, of racism, in particular, fear of people from China who were coming in and providing cheap labor, working the gold rush, building railroads.

NOWRASTEH: And the Chinese were a convenient scapegoat. They looked very different from Americans at that time. So it was easy to point to them as being, you know, different and sort of a severe economic threat to the United States.

SMITH: After the Chinese, we started to block European immigration, changed the laws so that immigrants had to come from certain parts of Europe and had to have family here. This dynamic where we'd exclude groups of people, this continued over the last hundred years. That's why it ended up like this. Certain groups were afraid that other groups would come in and take away their jobs. Eventually, you ended up with the messy system we have today.

KESTENBAUM: Alex's argument for basically opening the borders is pretty simple. The more people, he says, the better. People who immigrate to the United States, they tend to work really hard. They're more likely to start up businesses. Sergey Brin, the co-founder of Google, he was Russian.

SMITH: And if you Google immigrant entrepreneurs, you find out that Intel, co-founded by Hungarian; eBay, founded by the French; Yahoo by the Taiwanese; The Huffington Post by a Greek woman.

NOWRASTEH: So more immigrants means more entrepreneurs, more doctors, more computer programmers, more teachers, more...

SMITH: Um, more radio reporters.

KESTENBAUM: Alex, you probably can't tell from his accent, but Robert's from Canada.

NOWRASTEH: Oh, well, welcome.

(LAUGHTER)

SMITH: Your country is strange to me. But I'm getting along well and working hard.

NOWRASTEH: Well, you're blending in and assimilating very well, I must say.

KESTENBAUM: Robert, all of a sudden, this just got really personal. I mean, if we let in all the brilliant Canadian radio reporters...

SMITH: And there are a lot of them.

KESTENBAUM: ...They could take my job. Or, you know...

SMITH: Yeah, we're coming.

KESTENBAUM: ...I could get a big salary cut. Like, I mean (laughter) - I know competition is good, but it is stressful if I think about it personally (laughter).

Alex told us - yes, look, in some places, this competition, it could depress wages. But he figures it won't actually be too bad because, he says, a lot of what happens when you let a bunch of people in is that the economy just expands to accommodate them.

SMITH: And it doesn't just expand a little. Immigration is more than stealing talent from other countries. It's about allowing people to come to a place where they can flourish, where they can in fact do more for the world.

NOWRASTEH: It's a transfer of somebody who is less productive in their home country to the United States, where they are three to five to 10 times more productive. So it increases the size of the global economic pie tremendously as well as the pie in the United States.

KESTENBAUM: Which makes sense. I mean, we have electricity here. We have a functioning court system. We have law enforcement. We have financial markets so you can get your business going. We got Silicon Valley. When people come here, he says, it benefits them, but it also helps everybody else.

SMITH: Alex's proposal does have this one very nice feature, which is that, yes, you have to screen out criminals and terrorists at the border. But you don't have all these undocumented immigrants, the danger of them crossing the border in the middle of the night, of living here in fear. You don't need so many immigration police. All of that goes away.

KESTENBAUM: We ran Alex's idea of open borders by our two other economists, and both of them had the same worry - too many people. Too many people would want to come. Here's Dean Baker.

BAKER: Well, it's kind of funny. I was at a conference, I remember, some years back. And there were a few people that - they weren't all economists there - but a few people said, well, what would happen if we opened the borders? And all of the people who were there from developing countries just laughed. And they said, why don't you do it for a few years and see?

You know, the reality is, obviously, the United States is a much wealthier country than, say, sub-Saharan Africa, Bangladesh. If you had open borders and you just said, look, you want to come here, come here. You know, you could work just like anyone else. My guess is you would see a massive flow, I mean, tens of millions of people.

And I don't think a lot of people would really be happy with that outcome. It would be a very different country, and I'm not just talking about complexion. I'm talking about, you know, sheer numbers of people, the strains on infrastructure, the strains on the natural environment. I don't think - you know, we're a country of 310, 320 million people. I don't think people would really be that anxious to see the U.S. as a country of 600 or 700 hundred million people in, say, 10, 15, 20 years.

SMITH: We kept asking Alex about this. If you open the borders, how many people would come here? Alex says there are some polls where they asked people around the world - so you want to move to the United States?

There were a lot of yeses.

NOWRASTEH: It was about 500-700 hundred million.

KESTENBAUM: So that would - that would more than double, triple the U.S. population?

NOWRASTEH: That would. But, you know, you have to take a big grain of salt with that because, you know, it's very easy for people to say they want to move. One of the main features of modern migration around the world is that a lot of people move temporarily for a couple of years and they move back to their home.

SMITH: Alex figures more like 50 to 100 million people would want to move here. And he thinks we can handle that.

NOWRASTEH: America is comparatively underpopulated compared to a lot of other countries. I mean, compared to Western European countries and East Asian countries, America has a lot of space, a lot of room to build.

KESTENBAUM: What chances do you give this passing in Congress?

NOWRASTEH: About zero (laughter). The type of thing that I want - right now, somewhere near to zero.

KESTENBAUM: There you have it. Three economists, three proposals, each one more unlikely than the next.

SMITH: But not impossible.

(SOUNDBITE OF JEROME FABY'S "FEEL ALRIGHT")

VANEK SMITH: Hello. Stacey Vanek-Smith here. We are back in the present. So since this story ran, a lot has happened to Anthony Korda, the Englishman we heard from earlier in the show, the guy who moved to the U.S. after falling in love with Florida. Last year, the developers behind Jay Peak, the Vermont ski mountain he invested in, were accused of fraud. The SEC's complaint alleges that the executives have, quote, "systematically looted more than $50 million raised from hundreds of foreign investors."

And we should say that situations like this have thrown the visa program known as EB-5 into question. Last week, two senators drafted legislation to end it altogether. We talked to Anthony Korda. He says he is still owed around $400,000 of his investment. But he is now a citizen.

(SOUNDBITE OF JEROME FABY'S "FEEL ALRIGHT")

VANEK SMITH: We always love to hear what you think of the show. Send us an email - planetmoney@npr.org or find us on Facebook and Twitter. This episode was originally produced by Jess Jiang. Today's version was produced by Nick Fountain. If you're looking for another show to listen to, check out Pop Culture Happy Hour. This week, they're talking about a new film "Lego Batman." You can find it on npr.org/podcasts or on the NPR One app.

I'm Stacey Vanek-Smith. Thanks for listening.

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