Illegal Immigration Strategies: CATO and Ideal Immigration

With the ideology framework we introduced recently, we can consider the positioning of the various think tanks with respect to illegal immigration. 

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In this post, we consider the classical liberals (top left on our chart), the CATO Institute and Ideal Immigration.  One would anticipate including the Niskanen Center in this group, as they best described as fiscal conservatives in terms of philosophy.  Notwithstanding, Niskanen's policy prescriptions are essentially indistinguishable from those of CIS or FAIR, and so Niskanen will be considered with that group in a later post.

Like Princeton Policy, CATO and Ideal argue for visa fees, 'immigration tariffs' in CATO parlance. However, the details are radically different.  

Ideal's proposal is relatively simple: a $2,500 annual fee for a work visa with an option on permanent residency after 10 years.  

Under the CATO concept, immigrants would buy a 'gold card' which allows them to live and work in the US and gain permanent residency.  The price of the gold card would be based on the age and education of the purchaser to guarantee a "fiscal windfall" to the US government.  Per CATO's mock tariff schedule, anyone younger than 25 could buy permanent residency for no more than $15,000.  If the number of visas is capped then, then visas could be auctioned to the highest bidder.


The fee is too low and the market is too big

Both the CATO and Ideal fees are too low, particularly as they offer permanent residency in some form.  From the conservative perspective, the idea is to limit or reduce the number of immigrants and reduce tenure of migrants in the US.  A low fee will not only encourage immigration, it will crush the system.

Consider CATO's $15,000 fee for young adults without high school educations.  How big is the potential market?  If we apply the offer to 133 low income countries globally -- to Latin America, East and South Asia and Africa -- then we are speaking of a gross population of 6.5 bn.  If just 0.1% decided to take up the offer...well, it would be game over in a matter of days.

If the number of visas is capped, let's say at 1 million to choose a number well beyond the political tolerance of Republicans, then the 150 million citizens of Mexico and Central America who represent illegal immigration across the southwest border would gain about 1% of all offered visas, with the rest going to countries like China, India, Pakistan, Indonesia and Nigeria, among many others.  At the current pace, that would deter illegal immigrants from the southwest border for all of three days.  Put another way, CATO's proposed fee would either have little impact on illegal immigration or blow up the legal immigration system on contact.

Congress is incapable of managing visa market conditions 

CATO sees Congress setting visa volumes and tariffs.  There is zero chance that the US Congress would post tariffs for minimum wage migrant workers at a 35% effective tax rate.  Politically, that is not feasible.  If Congress is to post a tariff schedule, the rates will be much lower.  But, of course, this would flood the market with new entrants, prompting Republicans to put a cap on numbers at low levels -- the historical pattern -- which in turn would prevent the southwest border from closing.  An auction would not change this outcome per se.  If the number of visas auctioned is materially below the demand for labor, then the auctioned visas will be sold at some price, but employers will continue to take any labor deficit from the black market, just as they have since at least 1965.  CATO's price/volume mechanism is not viable, because Congress would have no more competence in managing visa market conditions than it would in setting, say, gasoline prices.  

A price-based system is incompatible with permanent residency

For H2 class migrants -- unskilled workers typically lacking English language skills -- a price-based system is incompatible with permanent residency.  On an hourly basis, permanent residency -- even if promised fifteen years into the future -- is worth about $4 / work hour.  If we assume that migrants earn $10 / hour on average and the right to work in the US by itself is worth $3.50 / work hour, then a work visa with a residency option is worth $7.50 / hour, leaving $2.50 / hour in wages.  Of course, Mexicans cannot afford this, but a residency option will force them to make wrenching trade-offs between current consumption and future residency.  It will lead to penury for migrants, and by extension, to claims -- readily visible to the public -- that visa fees are exploitative and are impoverishing migrants.  In such an event, the system will fail, just as the Bracero system failed in 1965, and for similar reasons.  For this reason, residency cannot be included in a price-based program.  Work visas should not be conflated with formal immigration mechanisms.

Stockholm Syndrome

One of the occupational hazards of dealing with migrants is the policy analyst's human impulse to try to improve their condition.  This is laudable, and no one has done more to document migrant predation than Princeton Policy.  Notwithstanding, US policy cannot be based on the interests of migrants.  Migrants are not a voting constituency.  Legislation must serve US voters, who are the ultimate client for any policy shop, no matter how compelling the plight of migrants.  Good policy should, of course, help migrants, but that should be a by-product of high quality design, rather than the principal objective of any legislative initiative.  If a bill is seen to promote migrants at the expense of US citizens, it is likely to fail.


Overall, it is heartening to see a more business-like approach to work visas, and both CATO and Ideal Immigration represent a step in the right direction, from our perspective.  Nevertheless, if the intent is to run migrant labor as a business, then let's run it as a business, not a hybrid business / social program.  A mixed-mission program will implode from its internal contradictions.  Moreover, too little attention has been given to market sizing and segmentation, opening the door to volumes which will lack political viability and prove unworkable administratively.   Overall, therefore, the direction is laudable, but the particulars require some modification.

Finally, let's keep in mind that there are three priorities for the Trump administration:

  1. End the asylum surge

  2. Close the southwest border

  3. End the black market in undocumented labor within the US

Until this administration ends, any other immigration initiative is a poor use of time.