Tuesday, November 24, 2009

Illegal Immigration

We must first consider one question. Why is there illegal immigration in the United States? I posit that the reason we have an illegal immigration problem is because of a demand for sub-minimum wage unskilled labor in the United States. Given this, we can also posit that as long as there remains a demand for this labor there will also always be some form of supply of this labor. Thus, efforts to enforce current immigration laws will prove to be futile. Factually, it is literally impossible to effectively enforce a legal requirement for undocumented immigrants to return to their countries of origin.

This impossibility is created by the fact that the sheer number of undocumented immigrants in the United States makes it impossible to move them to their countries of origin. At the current time, according to the department of homeland security states that by best estimate there are 11,550,000 undocumented immigrants residing in the United States. This estimate is on the low end of the spectrum with numbers as high as 15 or 20 million being a distinct possibility. Of the 11.5 million undocumented immigrants 20% of these come from Mexico. Regardless, when discussing numbers of people in this quantity, moving them all becomes impossible in terms of cost and effectiveness, especially since the other 80% are from countries which do not border ours.

Something else worth considering is that every law the United States Congress passes has both intended and unintended consequences. I would also argue that enforcing the current immigration laws and forcing all the illegal immigrants to leave the country will have the unintended effect of devastating local economies, particularly as it pertains to the agriculture industry.

Now, why would this happen? Some local economies thrive off of illegal labor. The agriculture industry is one industry which thrives off of illegal labor. Once illegal immigration laws are enforced employers of illegal immigrants will be forced to pay more for Americans to take these jobs. The increase in the cost of labor also increases the price of the good the industry is trying to sell. Thus, the industry will sell the good, in this case produce, at a higher price. Currently the agriculture industry, due to its low labor costs, is actually able to export goods to other countries. However, once illegal immigration laws are enforced the goods will become more expensive which will hamper the agriculture industries ability to export because the price is too high. Thus, in terms of GDP enforcing illegal immigration laws will decrease our net exports and thus decrease our overall Gross Domestic Product.
Another way enforcing illegal immigration will negatively effect the United States Economic Growth is that the money the illegal immigrants spend in order to live in the United States will be gone. According to the United States Cencus bureau the national household income for undocumented immigrants is $45,748. Multiplied by 11.5 million that equals $517,500,000,000 annually, that money if removed from the economy would decrease overall consumption spending by even more than 517 billion dollars.
Furthermore, forcing undocumented immigrants to leave will hamper the ability of businesses to expand. For instance, the availability of foreign workers at low wages in the Nebraska poultry industry made companies realize that they had the personnel to expand. So they invested in new equipment, generating jobs that would not otherwise be there. In California's strawberry patches, illegal immigrants are not competing against native workers; they are competing against pickers in Michoacán, Mexico. If the immigrant pickers did not come north across the border, the strawberries would.

Tuesday, November 17, 2009

Who is Basel and Why Should I Care

The Basel Committee was created in late 1974 by the international community after the collapse of a large German bank due to liquidity problems. The Basel Committee operates as an arm of the Bank of International Settlements (BIS). The BIS is an organization made up of central banks from around the world and was created in 1930 as part of The Hague Accords. It took until 1988 to get the first Basel accords passed by the G-10 countries. Basel I established international capital suggestions in order to better calculate risk. Basel I was very similar to the net capital rule that was already in place in United States.

Basel II was established in 2004 in order to correct for changes to the financial system that had taken place since the original accords were accepted. Basel II established a series of recommendations that would theoretically reduce risk through oversight by government regulators. Basel II argued, much like the alternative to the net capital rule, which large international banks could take on what are historically riskier assets and more leverage as long as government regulators could judge the broker dealers investments. The current financial crisis has shown that banking regulators have not been able to adequately exercise oversight on these large financial institutions. The use of Value at Risk models (VAR) did not create realistic risk models because they did not take into account the possibility of a catastrophic collapse. Basel II was also similar to the original net capital rule using the concept of haircuts. However Basel II created a tier structure for assets based on quality of risk. Tier 1 being the highest quality and tier 3 and 4 being nearly completely worthless. Even though the Basel accords tried to cap tier 3 and 4 assets they were not able to do so effectively.

Now there is talk about creating a third Basel accord. I have no idea why we think it will work this time. Let each country regulate their own banks. Because if we had followed the Basel accords our banks would be in as bad a shape as England's.

Sunday, November 15, 2009

Pakistan's Terrorism Woes

This New York Times article outlines the new pressure being placed on Pakistan to step up their efforts in the war on terror in their own country. I am obliged to agree with the President and the Secretary of State: Pakistan is simply failing in its efforts to mitigate terrorist activity. The graph below illustrates the rise in the casualty rate of Pakistani’s from terror attacks and the general public opinion of the Pakistani people regarding the direction of their country.



In 2001 the Bush Administration rightly increased military aid to Pakistan to fight terrorism. This was a good move by the Bush administration (one of very few) and should be applauded. However, the question is clearly begged; where did the money and resources go? Clearly the money did not go to fight terrorism. Recently, the United States has also provided the Pakistani’s with drones so that they can broaden their fight from the cities into the tribal and mountainous regions of the country. However, we are still seeing an increase in violence. We MUST keep a better eye on where the money we provide Pakistan is going we simply cannot afford the waste that corrupt governments produce at our expense. If the money is not going to the proper place then lets provide them with actual goods. Of course we cannot control every penny and there will be losses but the investment we have placed in Pakistan in not generating a return!
Quite frankly, the Pakistani government is not doing enough to expand their fight, and as the New York Times article points out, the Obama administration is pushing the Pakistani’s to broaden their fight against terror and push it into the mountainous regions even more.
This is a good move on the part of the Obama administration. As violence is increasing in Pakistan the citizens of the country feel less secure and thus the goal of the terrorists is met. We must remember that terrorism is not so much about control of territory so much as it is control of people by instilling fear into the public. This control plunders economies and sets the stage for governmental change, which is exactly what the Taliban and Al Qaeda want.
What the Obama administration needs to do is continue to use our diplomatic prowess to ramp up the pressure on Pakistan. The Pakistani government must succeed in defeating the terrorists in their country just as we must continue to defeat the terrorist threat in Afghanistan. More to come on foreign policy in the days to come! I look forward to your thoughts on the Pakistani situation.

Wednesday, November 4, 2009

Thoughts on Last Night's Elections

Well the off-year elections have come to pass for this year, and across the media and political spectrum the pundits analyze the first major elections since last year's Presidential Race and try to divine some meaning for the future. Though obviously a year is an eternity in politics, if present trends hold there is some insight for the 2010 Mid-terms that will kick into high gear shortly (the first primaries for 2010 are in about 90 days in Illinois). So how about a discussion of last night's results:

Virginia: I said the Democrats would be lucky to avoid a true-blue hell-stomping McDonnell victory, and well, they were unlucky. The polls I'd seen averaged a 13 point McDonnell victory, his 18 point landslide clearly indicates that turnout intensity was (unsuprisingly) on the side of his Republican and Independent supporters (Independents went towards him by 2-to 1) This in and of itself, though impressive, is not particularly suprising given the historic voting trends in Virginia and the fact that Bob McDonnell is one hell of an effective campaigner. What was noteworthy was voting turnout factors and the fact that the Republican ticket swept the other two state officers by similar margins, as well as picking up about 6 or 7 (at last count) state legislative seats, particularly in Northern Virginia. After years of trending towards the Democrats, the gains they have made in Northern Virginia seem to have evaporated for the purpose of this election. Undoubtedly helped by a lack of turnout among under-30s and a reduction in African American turnout to 15 % from 20 % in the 2008 race, Virginia went quite red last night. The sheer scale of the GOP win in VA was notable to me (he even won Fairfax County). I was expecting McDonnell to win, and win heavily, but that the ticket did this well (the 2005 election saw a comparativley narrow Tim Kaine (D) win with a Republican Lieut Gov. and McDonnell narrowly as Attorney General over Deeds) indicates that Obama's Virginia coalition is not holding together for races when he is not on the ballot. If in 2010, one or more Democratic Congressional seats in the state go under-- which now looks very possible- then it will be clear that the Old Dominion is trending back to the Republican column (Obama won VA by 6 points in '08, if it is clearly back in play then likely so is Colorado and Nevada). As for the "what about the make-up of the electorate?" question-- my response is that if your base doesn't get out to vote unless you make them giddy with excitement, then your coalition will not sustain itself. The joke about the elderly always voting and their influence is no joke, of course they always vote, that's how you get people to listen to you!

New Jersey - In what may be a very big shot in the arm to the GOP, unseating an (admittedly unpopular) incumbent in a very blue state is a tonic that hasn't happened since 2004. In fact, this is probably the most unlikely GOP gain since seizing the top offices in Maryland for one term in 2002 (the eccentric election patterns in New England don't count-- the citizens of Vermont elect a Republican to Governor, throw up their hats whenever Bernie Sanders runs for anything, and require no permit whatsoever to tote concealed firearms throughout the state). Chris Christie defeated Governor and ex-Senator Jon Corzine 49% to 44 % with Chris Daggett fading back to about 7 percent of the vote. Christie was outspent by Corzine and his fortune about 3 to 1 and also managed to outperform the polls by a point or two. This race largely revolved around the local issues of New Jersey and a general statewide resentment of Corzine. Still, I think a GOP win in a state the President won by about 16 points and in which he personally appeared alongside the incumbent at campaign rallies is somewhat embarrassing to the White House-- to say nothing of how embarrassing it must be for Corzine, who's political career is likely over. This is a wider margin of victory than Christie Todd Whitman had in the 1990s, if not exactly in play for future Presidential Elections, this at least implied Republicans could win state-wide races again in New Jersey, perhaps at the Senate level at some point. GOP gains in the state legislature appear to be only one or two seats, but it still may be a worrying sign for 2010 among moderate democrats in marginal seats-- if the assumed moribund-outside-the-South Republican party can reach up into New Jersey-- they could easily be unseated if the voters turn against them.

New York Mayor - So Michael Bloomberg appears to have achieved a rarity in major electoral politics, a very large number of the people approving of his job performance voted against him, I presume on reasons of third-term principle. He held a near 70 percent approval rating and was re-elected to his third term by only about 51% of the vote, or about a 5 point margin. He appears to have spent a tremendous amount of money on this election and it seems the message is that no matter how much they may like you, to New Yorkers, changing the term limit law has its political price.

NY-23- I have no idea what message to draw from this race other than perhaps the unsuprising idea of - unless you have a very strong party structure, have primaries in disputed areas. The mishaps between the liberal-leaning Republican who was ousted by a Conservative and then in turn endorsed the conservative-leaning Democrat who edged a 49 to 45 percent victory (about 4,000 votes, smaller than the number picked up by the Republican that dropped out beforehand) over his grass-roots opponent. All this in a district-most of which has been represented by Republicans since the Civil War Era (even FDR never got ahold of this one) that went for Clinton and Chuckie Schumer in their Senate runs and Elliot "I'm a motherfucking steamroller!" Spitzer in his gubernatorial run and that will apparently be redistricted out of existence when New York loses a CD seat after the next census. All that and a bag of chips. If this district exists in 2010, it will likely be in play. The "split" between Conservatives and Moderates in the Republican Party in this area I think is overplayed, but clearly this likely cost them another Congressional Seat when they should be looking at pick-ups. It also adds one more likely blue-Dog to the disfunctional Democratic majority. Still, this race prevented a Democratic Golden Sombrero in competitive "newsworthy races" (if they'd lost California's CD 10 - the margin was about 10 points in a suburban San Francisco area- Southern and Midwestern democrats would've hit the nearest liquor cabinets so hard that Tip O'Neil would have sprang from the grave and expressed his approval. It also implied that the New York State Republican party is still not through in its time in the woodshed, which is truly remarkable considering the unpopularity of Governor David Patterson. If they are going to have any chance competing against the Democrat that likely unseats him in a primary or Senator Kirsten Gilibrand (Chuckie Schumer's polling suggests that if he calls for an A-Rod or Matsui 3-run homer, an Eli Manning pass completion, or a new Rodgers and Hammerstein Broadway Revival-then yea, verily, it shall be so) then NY GOP hopes are some combination of George Pataki and Rudy Guiliani, and not much else.

So where does that leave us for 2010--? Ideas, discussions, commentary?

Tuesday, November 3, 2009

Too Big To Fail

As I have been watching the debates about financial regulatory reform I find myself wondering how so many people can be missing the whole point. Both Treasury Secretary Tim Geithner and Federal Open Market Committee Chairman Ben Bernanke are trying to determine how to handle an orderly bankruptcy of any firm that is determined to be too big to fail. The reasoning behind to big to fail does make sense. If a Broker Dealer or Bank is bankrupt should the government let that bank go out of business if it means that other financial institutions will also fail triggering a domino effect eventually destroying our financial system. In 2008 and 2009 I think that the government made the right choice to stop a complete financial collapse. The government has backstopped far more then the AIG Balance sheet for 180 Billion or TARP for 700 Billion or even the stimulus for 787 Billion. Our Government has backstopped the commercial paper market for short term government loans which is a FIVE TRILLION DOLLAR MARKET. MSNBC's Dylan Ratigan has added up the figures and claims that in the past 2 years the government has backstopped TWENTY TRILLION DOLLARS. I mean the Citigroup portfolio alone was THREE TRILLION DOLLARS.

The question that regulators should be asking is what can we do to unravel these hugely complicated financial systems now to make sure that no financial institution contains systemic risk. If there are financial institutions that threaten the United States economy they should be broken up. Nothing within the United States should challenge the supremacy of the federal government. In some ways these systematically important financial institutions pose more risk to Americans safety then foreign powers. A complete collapse of the financial system which would lead to a collapse of the US Dollar (which we are beginning to see now as evidenced by the rise in Gold prices as a potential alternative to the Dollars reserve status) would destabilize the world which could easily lead to more violence. But I digress. So how can we make these institutions smaller? Easy, Bring back Glass Stegal which separated Broker Dealers from banks and reduced some moral hazard. By ensuring that Banks could not invest their depositors money which meant the size of the asset bubble that could be created by broker dealers was much smaller. Without the banks deposits the Broker Dealer/ Bank hybrids like Citigroup could not have lost as much money and created a systematic risk for the economy. We could also use anti trust laws. I know, people will say "were is the monopoly" there are multiple companies. The problem is that these financial institutions were acting together which created ologopolistic behavior. There was no efficient market functioning. Republicans who are PRO MARKET should be against this perverse ologopolistic behavior and failure of markets. I hope republicans get there soon.

Monday, November 2, 2009

awesome link

hey check out this awesome link I found. It shows by percentage how different major countries spend their money on health care, military, and education. Id love to see what discussion could develop from this!

http://www.visualeconomics.com/how-countries-spend-their-money/

Vote Against Orie-Melvin and for Jack Pannella



Interestingly enough, if one checks out judgepedia (yes it does exist haha) and looks up Pennsylvania State Supreme Court Justice and incumbent contender Jane Orie-Melvin; it notes that she is a self-described strict constructionist. Interestingly enough, and as is the case with most strict constructionists, she is a total hypocrite.
A few years ago a web site based out of Pittsburgh PA (Orie-Melvin’s hometown) had posted anonymous derogatory comments about the judge apparently in an attempt degrade her political name.
Upon finding out about the site Orie-Melvin sued in the State of Virginia to find out who the author was. When the state of Virginia threw out her claim, she then sued in Allegheny County who also threw out her claim. She protested that the author of the site was defaming her. However, in order to prove defamation Orie-Melvin would have to prove financial loss (something she could not do) and so thus the speech was considered political and thus protected by the U.S. Constitution.
The tactic Orie-Melvin was using was political bullying from the bench and is a terrible quality that we Pennsylvanians surely do not want on our Supreme Court.
If Orie-Melvin’s bullying tactics aren’t bad enough her blatant hypocrisy concerning her own description of her judicial style is. A strict constructionist who claims to want to limit government and practice judicial restraint is doing just the opposite while trying to bully her way and infringe upon my free speech.
Finally, Melvin’s bully tactics and unrelenting desire for political power have blossomed during this years campaign in her dirt tactics and negative ads. A few weeks ago if one went to a prominent conservative blog they would see the ad at the beggining of this post for Orie-Melvin.
I certainly understand that not everyone agrees with our President but how low does the GOP have to stoop to get votes these days. Also, if you’re a PA resident like myself then you also know that Orie-Melvin has been airing negative ads against candidate Jack Pannella which describe him as “not protecting our children.” However, I do admit that candidate Pannella is not innocent as he is airing negative ads as well.
Either way, tomorrow is election day and I urge all Pennsylvanians to vote against Orie-Melvin’s retention as I will be. Now that this has been posted I need to call my lawyer in case she decides to sue me as well for having a negative political opinion of her judgeship.