Mexico – Helping us to Create Americas Jobs Bank

Allot of news about Mexico lately. Or rather, Mexican immigrants in the US. This is really becoming quite a quagmire for the US and our policy makers. I'd like to share this email i got last week...

Dear President Bush: I'm about to plan a little trip with my family and extended family, and I would like to ask you to assist me. I'm going to walk across the border from the U.S. into Mexico, and I need to make a few arrangements. I know you can help with this.

I plan to skip all the legal stuff like visas, passports, immigration quotas and laws my grandparents were required to obey when they came to America from Europe 95 years or so ago. I'm sure they handle those things the same way you do here.

So, would you mind telling your buddy, President Vicente Fox, that I'm on my way over? Please let him know that I will be expecting the following:
1. Free medical care for my entire family.
2. English-speaking government bureaucrats for all services I might need, whether I use them or not.
3. All government forms need to be printed in English.
4. I want my kids to be taught by English-speaking teachers.
5. Schools need to include classes on American culture and history.
6. I want my kids to see the American flag flying on the top of the flag pole at their school with the Mexican flag flyin lower down.
7. Please plan to feed my kids at school for both breakfast and lunch.
8. I will need a local Mexican driver's license so I can get easy access to government services.
9. I do not plan to have any car insurance, and I won't make any effort to learn local traffic laws.
10. In case one of the Mexican police officers does not get the memo from Pres. Fox to leave me alone, please be sure that all police officers speak English.
11. I plan to fly the U.S. flag from my house top, put flag decals on my car, and have a gigantic celebration on July 4th. I do not want any complaints or negative comments from the locals.
12. I would also like to have a nice job without paying any taxes, and don't enforce any labor laws or tax laws.
13. Please tell all the people in the country to be extremely nice and never say a critical word about me, or about the strain I might place on the economy.

I know this is an easy request because you already do all these things for all the people who come to the U.S. from Mexico. I am sure that Pres. Fox won't mind returning the favor if you ask him nicely.
Thank you so much for your kind help.
Sincerely, An accepting, tolerant, but concerned, American citizen who is proud to be the grandchild of legal immigrants.

Pretty funny right? It's attempt to make a point by turning the tables is a noble attempt, but it doesn't tell the whole story. The fact is most Mexicans come here for work and free benefits. We have to address the root causes of these two draws to solve the problem. It's not the border, it's not the Mexicans, it's not the Americans....What is it? Economics 101 people, first and foremost it's the minimum wage.

Pop quiz. A business has a budget for employees. As with any business it wants to maximize the return on this expenditure. The business is faced with two choices, it can A; hire a number of American workers at the minimum wage, paying into social security, health insurance, Medicare etc. Or it can B; hire twice as many Mexican workers, pay them cash and not worry about any of the other fringe costs. This day in age far too many businesses must choose option B. I cant say that i blame them. Brutal competition with “low cost” countries is pricing the American worker out of the market. The fact is there is a huge demand for low cost employees in the US and the illegal workers are filling this demand. I would be more worried if this demand dried up. This is the EXACT same situation the auto US industry finds itself in. US workers are too expensive when compared to foreign workers. The truth hurts sometimes and I predict most people when presented with this comparison would completely deny this connection. But it's there. Take a step back and think about it.

The US is also far too generous with it's benefits. When an illegal immigrant can jump the border and walk into a hospital, receive world class service then walk out without paying, this is a huge draw for every foreigner to US soil. But this is connected to the pay issue because few immigrants come here for the medical care then go back. They come for the jobs first and foremost, the healthcare benefits are simply another benefit. However both issues can be fixed with a similar strategy regarding taxes and the withholding system for low wage earners. In the interest of not writing a novel here, lets jump ahead.

So what are the fixes? Well, as you may have guessed the prescription for the US should be very much the same as it is for the auto industry. Economics is so beautifully, painfully simple sometimes that it often seems too simple. Three very simple measures by the government could go a very long way to solving the problem.

First, cut the minimum wage. I would support eliminating it but cutting it has far more chance to get approved than eliminating it.

Second, eliminate all taxes and withholdings on wages under 35,000 dollars. I picked this number arbitrarily, but it must need to be somewhere in this neighborhood. I would even go so far as to make social security optional on this money. Social security should be a safety blanket at best (might make another good blog).

Third, revamp our immigration policies to offer streamlined citizenship to those wanting to come into the US. I would also offer a naturalization period to those already here, say 2 years.

There are many problems with this course of action primarily because it's political suicide. I can't imagine any politician supporting these steps because they are contrary to the beliefs of most Americans, but they are the economic truth. Also the minimum wage is set by the states, not the fed's. It might be possible to get a few states to go along, but getting all 50 to go along is a long shot.

Now before people start leaving hate comments, first consider the flipside of the scenario we are in today. Consider the situation where there was near zero immigration, illegal or other. What if no one wanted to come to the US? What if all jobs currently supported by illegal immigration had to be paid minimum wage? How much higher would our unemployment be? How many farmers and companies would be unable to compete globally?

The Chinese leader is here this week and it is causing many to highlight the disparity between the US and China. If the US really wants to compete with China we must address our labor costs. Globalization is a bitch, but it's not going away. The US system may not be the best possible, but it is the best the world has seen so far. I think we are fast approaching a crossroads where the US will have to make a choice. Do we continue to be a global economic giant, a source and destination for vast amounts of FDI or do we choose the path of isolation and protectionism like France and so many other European countries have chosen.

I love the dismal science....

Theres so much going on right now to write about...gas prices ( a non issue in my mind), China's visit (he visited gates before bush..there's a subtle message), budget defecits, election season, Kofi Anon (biggest tool in the world)...not enough time!

Happy Easter..now pay up bitches

Leave it to big brother to ruin a long weekend. Tomorrow Americans all over the world must take place in that yearly ritual whereby we are all told whether or not we paid too much, or not enough to our fabulously efficient state and federal governments.
It sickens me that former communist countries in the former soviet union have a better understanding of free markets than we seem to today. If you consider the amount of taxes you pay you are actually working for the government for anywhere from 3 – 6 months of every year.

Really think about that for a moment.

Where does that money go?
What does it pay for?
What services do you get in return?
Does the government get good value for your dollars?

Clinton raised taxes in '93, Bush lowered them after 9/11 but not since Reagan have we had any substantial tax reform. And even then Reagan's reforms were band-aids. We have not addressed (what i think) are the real problems in our tax system.

First, it's too complex. The government spends billions every year in paperwork and processing. This also means government jobs. Remember the government shutdown over the budget in the '90's that was “caused” by the republican congress? I remember news organizations reporting that all non essential government services were temporarily shut down until the issue was resolved. Did no one care to ask why the government even has such non essential services? If it's non essential, eliminate it!

Second, it's a tiered system. I'm a strong proponent of a flat tax OR a VAT tax. Decide on a reasonable income level, say 30,000, and tax all income at the same rate above that. Why does the government feel it's their job to redistribute income or bring high wage earners down to everyone else's level? Isn't America built on the premise of hard work and upward mobility. Do we really want to discourage this? If you earn it, great! You should be able to keep it. A simple flat tax on all income would save in preparation costs, processing costs and would decrease the benefits of tax evasion. A VAT tax is an interesting alternative because it would tax the people that spend the most.

Third, we have too many ghost taxes. Gas tax, water tax, phone tax, sales tax, sewage tax, the list goes on. From the moment your alarm clock goes off (electricity taxes) to the moment you brush your teeth at night (sales tax on the tooth brush and water tax on the water) big government is skimming off the top. Far too many of us don't realize it.

Fourth, income tax withholdings are paramount to stealing. I think all Americans should have to write a check to the government every month instead of allowing companies to automatically withhold taxes. Too many of us don't realize how much we actually pay and this would force us to see the true numbers. Take a look at your next pay stub and compare the gross to your net. Imagine if you had that money in your pocket for the year to invest, save, spend...it is your money afterall.

As an expat, you might think i don't have to pay US taxes. But no, the US is the only country i am aware of that requires citizens to pay US taxes no matter where they reside. Luckily my contract takes this into account. But think of the hindrance this creates for foreign companies to hire Americans abroad!

Taxes piss me off, plain and simple. I see government doing so many things that it should stay out of and taxes are the only way the government has the resources to complete such tasks. Where does government get it's power? From it's ability to tax the people. Lest we forget, the US didn't even have an income tax until the early part of the 1900's.

So enjoy your long weekend, Monday it's back to work for big brother.