Thread: The Economic Bubble of Immigration

We all know there was an economic bubble, with overly inflated asset prices and unsustainable spending, and then the collapse... which was followed by financial difficulties and unemployment.
I would put forth that immigration was one of the primary causes of the bubble, that one cannot really fully understand what happened without looking at immigration.

So a little prologue...
It was two decades after the second world war and the United States was enjoying prosperity. The middle class had the most consumer purchasing power it ever had.
Worker's Unions and African Americans were now demanding their rights. Ironically, it was not because things had become worse for them, but paradoxically the employment situation had improved to the point that they were now in a position to demand better conditions.

Then the United States passed the Immigration and Nationality Act of 1965, which was to open the gates, so to speak. To understand context behind this change, there are several factors to consider.
First, there was a sentiment that the emergency immigration restrictions passed in 1921 were no longer needed. Second, up to this point there were racially based quotas applied to immigration, and with the whole civil rights movement, anything involving racial discrimination was seen as outdated, unjustifiable. Third, business interests were concerned about the growing influence of Unions, and sought to counter their power by increasing the supply of available labor. Lastly, employment opportunities had so much improved that the country was now ready to take in some more people.

Coincidentally or not, five years and 2 million more immigrants later, the U.S. fell into a recession, with rising unemployment. There were other causes too, to be sure, rising oil prices and excessive deficit spending by the government. But the U.S. could handle this initial influx of people, because more immigrants continued to come, and the situation gradually improved. But then there was another phenomena growing: uncontrolled illegal immigration. Before, it was fairly easy to spot and deal with illegal immigrants. Besides the Blacks (who all spoke English), the vast majority of people in the country were white. Illegal immigrants began coming in greater numbers in about the 1980's, about 500,000 per year at first, but that number gradually increased. Then, starting in 2001, the number shot up, and by 2004 over 3 million illegal immigrants had come that year. The government's policy was basically to ignore the issue, intentionally underfunding immigration enforcement, and making it a policy not to go after employers who were in violation of the law, or most of the immigrants illegally residing in the country themselves. Big agricultural corporations needed cheap workers willing to do backbreaking labor in the hot sun, and big development companies wanted to pay their construction workers less. Immigration had a huge effect on the Southwest region of the country, with sprawling suburbs popping up, and fruit harvesting.

The United States was running big budget deficits, debt continued to rise. The population was aging, and policy makers were wondering how the country would continue to fund Social Security for all the old people. The solution? Get a younger working population, who would provide a bigger tax base to support all the retired workers and help pay off the debt. As we all know now, however, this did not work out so well. There were not enough well paying jobs for all these additional people, and rather than helping to pay off the debt, the U.S. got into a huge amount of more debt trying to counter the unemployment problems. The old people themselves continued to work, with part of their savings wiped out, they could not afford to retire. Rather than getting a bigger younger workforce, the country got a young workforce that was vastly un- and under-employed.

But all these immigrants did contribute to the bubble. The first effect of all this cheap labor was that prices fell. New homes became cheaper to build (at first). All the additional people meant that more housing needed to be built. It was not so much the immigrants themselves moving into the new housing. Rather, the immigrant communities moved into the older low-cost housing, leading to "bad neighborhoods" and "declining school districts", displacing middle class whites out into the new developments in the suburbs. This led to an increasing cost of housing, as there were fewer old houses already available on the market. Rapidly growing cities in many Southwestern states had the effect of bidding up the price of land. To some extent, there was a fear by potential homebuyers and investors that "if I do not buy now, I may never be able to afford a house". All sorts of jobs were created by the housing bubble— real estate agents, mortgage brokers, increased numbers of bank loan officers, and jobs related to new housing developments fueled by speculators. These were well paying office jobs. But this housing construction boom was not sustainable. The cheap supply of immigrant labor also made available restaurant eating, housecleaners, yard maintenance, and domestic care workers, freeing many middle class parents to work even longer hours. In many regions of the country, an ever increasing number of jobs became "jobs Americans don't want to do". The idea was more good jobs would be created, leaving the immigrant workforce to do all the rest. Who could afford to work in these jobs, with the low wages and high cost of rent? In fact, it was the immigrant workforce itself leading to the low wages and high cost of rent. The working class white and black workers had been displaced, by desperate immigrants willing to work harder for less, willing to pack multiple people into overcrowded apartments. But what about all the children these immigrant workers would have? Would they too be willing to do these jobs "Americans don't want" like their parents? And what about the young children of the middle class? What type of entry level jobs would be available for them when they became teenagers and young adults? This was a bubble that had formed. It was not sustainable.

Very interesting theory. Over the last ten years or so Ive seen many charts and graphs related to the health of America, America's families, and our citizens. Many of these charts I would consider to be our nation's vital statistics.

And for whatever reasons, between 1970-1975 a lot of these charts all go into bad territory in these time frame which is also about the time the American birth rates fell beneath the 2.1 children per female birth rates.

If there was a chart we wanted up it went down and if it was a chart we wanted down it went up! Something seems to have happened to America near the end of the Viet Nam War.

Perhaps our retreat from the communists never ended at the 38th parallel and in Saigon. Perhaps our retreat from the socialists and communists continued here at home.

W

Good post Anders.

The United States was running big budget deficits, debt continued to rise. The population was aging, and policy makers were wondering how the country would continue to fund Social Security for all the old people. The solution? Get a younger working population, who would provide a bigger tax base to support all the retired workers and help pay off the debt. As we all know now, however, this did not work out so well. There were not enough well paying jobs for all these additional people, and rather than helping to pay off the debt, the U.S. got into a huge amount of more debt trying to counter the unemployment problems. The old people themselves continued to work, with part of their savings wiped out, they could not afford to retire. Rather than getting a bigger younger workforce, the country got a young workforce that was vastly un- and under-employed.

That was a ponzi scheme to fix Social Security when Social Security wasn't broken and still isn't. However, with the disastrous actions against our economy by pro-immigrant free-traders, they've bankrupted the government, grown the national debt by 3 x, and put Americans out of work.

The solution to financial matters in DC is the FairTax, it funds Social Security and Medicare separately from General Revenue, with a split rate, with 8.09% of the 23% earmarked for SS and Medicare with the remaining 14.91% committed to General Revenue. The 8.09% robustly funds SS and Medicare and the 14.91% more than adequately funds General Revenue. Under their stupid importation of labor plan, Medicaid has grown from around 40 million participants just a few years ago to 70 million last year. So not only did their stupid plan not generate any new money for SS and Medicare, it increased the poverty rate and Medicaid budgets.

Originally Posted by ALIPAC

Very interesting theory. Over the last ten years or so Ive seen many charts and graphs related to the health of America, America's families, and our citizens. Many of these charts I would consider to be our nation's vital statistics.

And for whatever reasons, between 1970-1975 a lot of these charts all go into bad territory in these time frame which is also about the time the American birth rates fell beneath the 2.1 children per female birth rates.

If there was a chart we wanted up it went down and if it was a chart we wanted down it went up! Something seems to have happened to America near the end of the Viet Nam War.

Perhaps our retreat from the communists never ended at the 38th parallel and in Saigon. Perhaps our retreat from the socialists and communists continued here at home.

W

They all got worse after 1975. Check out these charts:

http://www.washingtonpost.com/blogs/...n-five-charts/

These are result of the twisted thinking behind the socialist/communist federal income tax which crossed its point of diminishing returns 50 years ago. We can't fix this disaster without reversing the policies that caused it.