Beginning in 1999, significant offshoring of manufacturing jobs marked the U.S. economy. In an effort to achieve lower production costs, U.S. manufacturers moved jobs and capital to low labor costs environments such as Mexico and countries in Central America. Most jobs that were threatened can be characterized as blue-collar requiring little formal education and training. As a result, the most vocal resistance to the offshoring trend came from U.S. unions representing manufacturing workers occupying jobs requiring few skills. Until recently, highly educated service workers felt safe from the loss of their jobs due to offshoring.
All of us in services, including university education, continued to advocate expanded trade assuming that this would provide lower cost imported goods, but with little threat to our jobs. However after the recession of 2001, companies began to offshore service jobs to English speaking countries such as India and the Philippines. Suddenly, we feel our blue-collar brethren’s job apprehension. The question becomes: Is your job apt to be offshored? What jobs are more likely to be offshored?
The factors that characterize a job that is at risk to be offshored include: (a) little social interaction on the job. (b) tasks reducible to set of instructions. (c) information as the major component of the product or output. (d) job is easily performed from home. According to Professor Kroll of the University of California-Berkeley, the following jobs are more likely to be offshored along with the share of jobs at risk to be offshored:
Computer Systems Design –66.4%
Accounting, Tax Preparation, Bookkeeping—63.5%
Software publishers—63.2%
Insurance carriers---59.0%
Data Processing & Hosting—57.6%
Internet Service Providers—55.7%
Agencies, Brokerages, & Other Insurance Related---45.0%
Unfortunately for many of us, the current wave of offshoring will not abate but will only escalate in the years ahead as firms and organizations (yes even education and government) seek lower costs.
EPG
Thursday, July 28, 2005
Monday, July 25, 2005
Senator (?) Lance Armstrong
The news of Lance Armstrong’s seventh Tour de France victory has gotten a lot of play over the weekend. This is undoubtedly an athletic accomplishment of the highest order for anyone to achieve, and the fact that Mr. Armstrong was able to accomplish it after he came back from the devastating news of cancer makes the victory even sweeter.
Reports indicate that Armstrong has raised over $50 million for cancer research from the sale of his “Live Strong” wrist bands. These have been very popular, as my kids and their friends have them. Moreover, this idea seems to have spawned lots of copycat wrist bands as fundraisers or ways to make statements about various topics. One man’s creativity and courage has thus translated into significant accomplishment, and that is praiseworthy.
I also noted that Lance Armstrong is now becoming the subject of speculation about his future plans – in particular whether he might be interested in politics. A story in the Washington Post reports that Senator Kerry believes Armstrong would make a fine politician, though he fears he might end up on the Republican side of the aisle.
That got me to thinking: What is it about being an expert bicyclist that would make one a good politician? Several possibilities quickly come to mind:
Adeptly changing positions to avoid trouble spots
(I would say “backpedaling”, but I don’t think modern racing bikes do that.)
Drafting behind others when the headwinds are strong.
When the race turns uphill, keep pumping (your constituents for money, that is).
I don’t know what Mr. Armstrong will do, but I certainly wish him well.
EAM
Reports indicate that Armstrong has raised over $50 million for cancer research from the sale of his “Live Strong” wrist bands. These have been very popular, as my kids and their friends have them. Moreover, this idea seems to have spawned lots of copycat wrist bands as fundraisers or ways to make statements about various topics. One man’s creativity and courage has thus translated into significant accomplishment, and that is praiseworthy.
I also noted that Lance Armstrong is now becoming the subject of speculation about his future plans – in particular whether he might be interested in politics. A story in the Washington Post reports that Senator Kerry believes Armstrong would make a fine politician, though he fears he might end up on the Republican side of the aisle.
That got me to thinking: What is it about being an expert bicyclist that would make one a good politician? Several possibilities quickly come to mind:
Adeptly changing positions to avoid trouble spots
(I would say “backpedaling”, but I don’t think modern racing bikes do that.)
Drafting behind others when the headwinds are strong.
When the race turns uphill, keep pumping (your constituents for money, that is).
I don’t know what Mr. Armstrong will do, but I certainly wish him well.
EAM
Sunday, July 24, 2005
Chinese Currency Float: The Good, Bad and Ugly
The Chinese government decided last week to de-link their currency from the dollar and instead couple it to a market basket of world currencies. What will be the impact on the U.S. consumer and investor? The timid decoupling announced by the Chinese will increase the price of Chinese goods in the U.S. and lower the price of U.S. goods in China. Thus, it will tend to reduce the U.S. trade deficit with China. However, it is certainly plausible, and even likely, that U.S. consumers will replace Japanese and South Korean goods for the higher priced Chinese goods. Several other less apparent changes will occur in the months ahead as a result of the Chinese action.
First, by increasing the price of Chinese goods in the U.S., the move will contribute to higher U.S. inflation. This will, of course, force the Federal Reserve to more aggressively raise short-term interest rates. The current funds rate of 3.25 percent is the highest since the summer of 2001 and is still accommodative by historical standards. Last week Greenspan, in his testimony ot Congress, strongly hinted that more rate hikes are very, very likely. Allowing the Chinese currency to semi-float will mean even higher rates in the months ahead. Cheap Chinese goods have been an important factor restraining U.S. inflation.
Second, the trade deficit with China has meant that the Chinese central bank has accumulated a mountain of U.S. dollars over the past decade. They have used these dollars to buy U.S. Treasurys, particularly long term instruments. This action raises the price of U.S. Treasurys and lowers the yield (or effective interest rate) on them. This is an important factor that has produced what Alan Greenspan terms a “conundrum.” (Why are long term interest rates so low?) They are so low because our Asian neighbors, including China, have sent their accumulated dollars to the U.S. Treasury. They have been especially generous lenders to a gluttonous U.S. government and big-spending U.S. consumer. Last week the yield on the 10-year U.S. Treasury rose by 10 basis points as a result of the Chinese actions. Expect even higher rates in the near and long term.
If the Chinese become more aggressive in allowing their currency to float in the months ahead, the Fed will deal with this by raising the funds rate by more than I think is consistent with solid U.S. growth. I currently assess the likelihood of an interest rate hike at the Fed’s August 9th meeting at 100 percent. Due to the Chinese action (and likely future steps), we are very likely to see rate hikes for the remainder of 2005 until the funds rate rises above four percent. This will slow U.S. economic growth.
EPG
First, by increasing the price of Chinese goods in the U.S., the move will contribute to higher U.S. inflation. This will, of course, force the Federal Reserve to more aggressively raise short-term interest rates. The current funds rate of 3.25 percent is the highest since the summer of 2001 and is still accommodative by historical standards. Last week Greenspan, in his testimony ot Congress, strongly hinted that more rate hikes are very, very likely. Allowing the Chinese currency to semi-float will mean even higher rates in the months ahead. Cheap Chinese goods have been an important factor restraining U.S. inflation.
Second, the trade deficit with China has meant that the Chinese central bank has accumulated a mountain of U.S. dollars over the past decade. They have used these dollars to buy U.S. Treasurys, particularly long term instruments. This action raises the price of U.S. Treasurys and lowers the yield (or effective interest rate) on them. This is an important factor that has produced what Alan Greenspan terms a “conundrum.” (Why are long term interest rates so low?) They are so low because our Asian neighbors, including China, have sent their accumulated dollars to the U.S. Treasury. They have been especially generous lenders to a gluttonous U.S. government and big-spending U.S. consumer. Last week the yield on the 10-year U.S. Treasury rose by 10 basis points as a result of the Chinese actions. Expect even higher rates in the near and long term.
If the Chinese become more aggressive in allowing their currency to float in the months ahead, the Fed will deal with this by raising the funds rate by more than I think is consistent with solid U.S. growth. I currently assess the likelihood of an interest rate hike at the Fed’s August 9th meeting at 100 percent. Due to the Chinese action (and likely future steps), we are very likely to see rate hikes for the remainder of 2005 until the funds rate rises above four percent. This will slow U.S. economic growth.
EPG
Wednesday, July 20, 2005
Sell Google—Buy St. Paul Travelers
Last week I advised investors to become more aggressive in buying stocks. I cited the low valuations (low price-to-earnings ratios) relative to other investment options as the prime motivation for this action. However, I did not make specific recommendations. Today I will make such recommendations with the caveat that any money you lose is yours and yours alone. I will also state that I own each suggested stock in my personal account.
Contrary to Cramer of CNBC fame, I do not necessarily recommend buying the industry leader. These companies, since they are the “industry leader,” already sell at a premium with significant growth priced into the stock. Thus, if they miss expectations, the stock will take a significant negative hit. For example, Google (GOOG) is currently selling for $303. Next year Google is projected to earn $6.70. This means that Google is currently selling at a forward price-to-earnings ratio of 45, or a rate-of-return of 2.2 percent with no dividends. If Google misses the mark next quarter, you will see a substantial sell off in the stock. In my judgment, the downside far outweighs the upside.
I recommend buying St. Paul Travelers Insurance (STA) which is selling for $41.48 with next year’s earnings estimated to be $4.72. This means a price/earnings ratio of 8.8, or a rate-of-return of 11.3 percent with an annual dividend of $0.67. STA’s rate-of-return is five times that of GOOG. I say sell Google and buy St. Paul Travelers.
EPG
Contrary to Cramer of CNBC fame, I do not necessarily recommend buying the industry leader. These companies, since they are the “industry leader,” already sell at a premium with significant growth priced into the stock. Thus, if they miss expectations, the stock will take a significant negative hit. For example, Google (GOOG) is currently selling for $303. Next year Google is projected to earn $6.70. This means that Google is currently selling at a forward price-to-earnings ratio of 45, or a rate-of-return of 2.2 percent with no dividends. If Google misses the mark next quarter, you will see a substantial sell off in the stock. In my judgment, the downside far outweighs the upside.
I recommend buying St. Paul Travelers Insurance (STA) which is selling for $41.48 with next year’s earnings estimated to be $4.72. This means a price/earnings ratio of 8.8, or a rate-of-return of 11.3 percent with an annual dividend of $0.67. STA’s rate-of-return is five times that of GOOG. I say sell Google and buy St. Paul Travelers.
EPG
Monday, July 18, 2005
Legislative Action against Kelo
The Supreme Court’s decision in Kelo v. City of New London has certainly hit some political nerves. This past week bills were introduced in both houses of Congress to limit eminent domain power. (See S. 1313 and H.R. 3135).
The language used to achieve this purpose is very brief:
(a) In General- The power of eminent domain shall be available only for public use.
(b) Public Use- In this Act, the term `public use' shall not be construed to include economic development.
(c) Application- This Act shall apply to--
(1) all exercises of eminent domain power by the Federal Government; and
(2) all exercises of eminent domain power by State and local government through the use of Federal funds.
To the extent that state or local governments are not using federal funds, then this bill will apparently not provide protection. Similar legislation would be needed at the state level to achieve protection from the takings power. Alternatively, as I have previously suggested, the state could simply require that such takings for public use be at a multiple of FMV to compensate the owner for the forced taking. In this way, the politicians who seek to pursue economic development plans have to pay up for the privilege – and hopefully their constituents will hold them accountable for foolish uses of public funds. (Then again, we don’t have such a good record on that account given what our government sees fit to fund.)
EAM
The language used to achieve this purpose is very brief:
(a) In General- The power of eminent domain shall be available only for public use.
(b) Public Use- In this Act, the term `public use' shall not be construed to include economic development.
(c) Application- This Act shall apply to--
(1) all exercises of eminent domain power by the Federal Government; and
(2) all exercises of eminent domain power by State and local government through the use of Federal funds.
To the extent that state or local governments are not using federal funds, then this bill will apparently not provide protection. Similar legislation would be needed at the state level to achieve protection from the takings power. Alternatively, as I have previously suggested, the state could simply require that such takings for public use be at a multiple of FMV to compensate the owner for the forced taking. In this way, the politicians who seek to pursue economic development plans have to pay up for the privilege – and hopefully their constituents will hold them accountable for foolish uses of public funds. (Then again, we don’t have such a good record on that account given what our government sees fit to fund.)
EAM
Saturday, July 16, 2005
Whose Side Are the Terrorists On?
I think that all intellectually honest Americans have thought about whether the US-led coalition should have invaded Iraq. Apart from the argument that the country presented an imminent threat to the US owing to an active weapons of mass destruction program, there is another more troubling argument to my mind. Perhaps we have not liberated Iraq at all. The continued insurgency appears to indicate that a significant number of Iraqis are distressed by our having removed Saddam from power. Perhaps the dictator, for all of his brutality, actually represented the hopes and aspirations of a majority of Iraqi people.
Now, I am not an idealist, and I recognize that the US might still have had compelling reasons to depose Saddam Hussein, even in the absence of a WMD program capable of threatening the US and despite the fact that he might well have been the "democratic" choice of the majority. The problem was that I could not discern what that might be, at least not from the Administration's statements. (I could, and can make, the case in my own mind, but I will leave that for another blog entry.)
The evident trend of the last several months in the terrorist bombing campaign inside Iraq, however, has laid to rest any thoughts that I had about Saddam's support among the Iraqi people, as well as the support that the so-called insurgents have. If the terrorists (more correctly named) have the support of the Iraq people, why are they killing them indiscriminantly? Why are they killing those who support them and whose hopes they represent? I can only answer the question in a single sentence: the Iraqi people are their enemies. From that I conclude that if we were to pull our troops out of Iraq at this juncture, we would be consigning the Iraqi people to mass slaughter, greater than any perpetrated upon them by Saddam Hussein. If we stay, we will win because they will (and are) prepared to fight those who would oppress them -- the terrorist "insurgent-liberators."
Now, I am not an idealist, and I recognize that the US might still have had compelling reasons to depose Saddam Hussein, even in the absence of a WMD program capable of threatening the US and despite the fact that he might well have been the "democratic" choice of the majority. The problem was that I could not discern what that might be, at least not from the Administration's statements. (I could, and can make, the case in my own mind, but I will leave that for another blog entry.)
The evident trend of the last several months in the terrorist bombing campaign inside Iraq, however, has laid to rest any thoughts that I had about Saddam's support among the Iraqi people, as well as the support that the so-called insurgents have. If the terrorists (more correctly named) have the support of the Iraq people, why are they killing them indiscriminantly? Why are they killing those who support them and whose hopes they represent? I can only answer the question in a single sentence: the Iraqi people are their enemies. From that I conclude that if we were to pull our troops out of Iraq at this juncture, we would be consigning the Iraqi people to mass slaughter, greater than any perpetrated upon them by Saddam Hussein. If we stay, we will win because they will (and are) prepared to fight those who would oppress them -- the terrorist "insurgent-liberators."
Wednesday, July 13, 2005
Buy Stocks Now
Currently stocks on the New York Stock Exchange are selling collectively at a price-to-earnings ratio of 16.0. Or if you invert that ratio, you have a rate of return on stocks of 6.25 percent. By recent historical standards, this return in quite high. Given rates of return on “risk free” U.S. Treasuries of 3.1 percent (3 month T-bill), the premium paid to stockholders appears to be strong indeed.
So why are investors giving the stock market the cold shoulder? In my judgment, three factors are preventing stocks from rising to a more attractive price-earnings ratio. First, investors are clearly incorporating into their decision making significant Fed interest rate hikes in the months ahead. The funds rate is now 3.25 percent, up by 2.0 percent from June of 2004. Second, oil prices above $60 per barrel have spooked investors. Finally, the ever-present threat of terrorism inside and outside the U.S. has pushed investors away from equities and into what is viewed as “safer” options.
I think investors are missing a tremendous opportunity. I expect the Fed to halt rate hikes after their August 9th meeting. Outside of energy prices, there is scant evidence of significant inflationary pressures. Furthermore, slowing global economic growth will force oil prices to retreat below $50 per barrel by mid-September of 2005 just as it reduces inflationary pressures. Finally, the latest terrorists’ attacks in London demonstrate the impotence of the assaults on equity markets.
My advice---buy solid stocks now and hold until the market recognizes your astute action.
EPG
So why are investors giving the stock market the cold shoulder? In my judgment, three factors are preventing stocks from rising to a more attractive price-earnings ratio. First, investors are clearly incorporating into their decision making significant Fed interest rate hikes in the months ahead. The funds rate is now 3.25 percent, up by 2.0 percent from June of 2004. Second, oil prices above $60 per barrel have spooked investors. Finally, the ever-present threat of terrorism inside and outside the U.S. has pushed investors away from equities and into what is viewed as “safer” options.
I think investors are missing a tremendous opportunity. I expect the Fed to halt rate hikes after their August 9th meeting. Outside of energy prices, there is scant evidence of significant inflationary pressures. Furthermore, slowing global economic growth will force oil prices to retreat below $50 per barrel by mid-September of 2005 just as it reduces inflationary pressures. Finally, the latest terrorists’ attacks in London demonstrate the impotence of the assaults on equity markets.
My advice---buy solid stocks now and hold until the market recognizes your astute action.
EPG
Sunday, July 10, 2005
An "Open mind and a big heart"?
A Reuter's story by Thomas Ferraro published yesterday begins with this sentence:
U.S. Senate Democratic Leader Harry Reid urged President Bush on Saturday to say "no to the far right" and nominate to the U.S. Supreme Court' someone who will rule with "an open mind and a big heart." You can find the full story here: http://news.yahoo.com/news?tmpl=story&cid=584&e=1&u=/nm/20050709/pl_nm/court_battle_dc
I have two comments. First, it is instructive that this reporter recognizes who "rules" in this country. Of course, judges do make rulings in particular cases, but the word rule also has a broader connotation that is consistent with the mindset of many people in this country, particularly for the Supreme Court. They recognize that those who get to interpret what the constitution means do effectively rule the rest of us. Instead of a republic, governed by elected representatives, we have a new form of monarchy governed by an appointed elite who function as philosopher kings. All this stuff about "of the people, by the people, for the people" is just so much fluff in this model; it's what the chosen ones tell us that matters. (Some folks think that this is the way the world is now, and that it is naive to believe that it can be changed. I understand that position, but I hope they are wrong.)
Second, Harry Reid's chosen terminology -- "an open mind and a big heart" -- seems to fit nicely with this model. If we want a government of philosopher kings, where discretion rules every decision, I suppose that compassion is an important value. However, that is not the appropriate model for the Court and its function in our republic.
The ideal of a "government of laws, and not of men (people)" is a tough one to implement, given that people have to use language to communicate those laws. When general terms are used, some discretion is needed to interpret them, and that problem is acute when constitutional principles are invoked. However, if an "open mind" means one that is not bound by sound precedents and conventional legal reasoning, and a "big heart" means decisions guided by emotional values, this is a prescription for government by the elites, in which the politically accountable branches are relegated to a very limited role.
Government with a big heart generally means a "soft" America. (Again, see Michael Barone's great book on this topic.) That is not a path toward freedom, which brings out the best in people, but it is a path toward collective mediocrity and eventual bondage. We should cultivate "big" and generous dispositions in our personal dealings, but design our government to ensure accountability and measurement of results according to our constitutional heritage. This means limiting the scope of opportunities for government to act based on open minds and big hearts.
Conservatives understand this, and I believe President Bush knows enough not to listen to Senator Reid's prescription here.
EAM
U.S. Senate Democratic Leader Harry Reid urged President Bush on Saturday to say "no to the far right" and nominate to the U.S. Supreme Court' someone who will rule with "an open mind and a big heart." You can find the full story here: http://news.yahoo.com/news?tmpl=story&cid=584&e=1&u=/nm/20050709/pl_nm/court_battle_dc
I have two comments. First, it is instructive that this reporter recognizes who "rules" in this country. Of course, judges do make rulings in particular cases, but the word rule also has a broader connotation that is consistent with the mindset of many people in this country, particularly for the Supreme Court. They recognize that those who get to interpret what the constitution means do effectively rule the rest of us. Instead of a republic, governed by elected representatives, we have a new form of monarchy governed by an appointed elite who function as philosopher kings. All this stuff about "of the people, by the people, for the people" is just so much fluff in this model; it's what the chosen ones tell us that matters. (Some folks think that this is the way the world is now, and that it is naive to believe that it can be changed. I understand that position, but I hope they are wrong.)
Second, Harry Reid's chosen terminology -- "an open mind and a big heart" -- seems to fit nicely with this model. If we want a government of philosopher kings, where discretion rules every decision, I suppose that compassion is an important value. However, that is not the appropriate model for the Court and its function in our republic.
The ideal of a "government of laws, and not of men (people)" is a tough one to implement, given that people have to use language to communicate those laws. When general terms are used, some discretion is needed to interpret them, and that problem is acute when constitutional principles are invoked. However, if an "open mind" means one that is not bound by sound precedents and conventional legal reasoning, and a "big heart" means decisions guided by emotional values, this is a prescription for government by the elites, in which the politically accountable branches are relegated to a very limited role.
Government with a big heart generally means a "soft" America. (Again, see Michael Barone's great book on this topic.) That is not a path toward freedom, which brings out the best in people, but it is a path toward collective mediocrity and eventual bondage. We should cultivate "big" and generous dispositions in our personal dealings, but design our government to ensure accountability and measurement of results according to our constitutional heritage. This means limiting the scope of opportunities for government to act based on open minds and big hearts.
Conservatives understand this, and I believe President Bush knows enough not to listen to Senator Reid's prescription here.
EAM
Saturday, July 09, 2005
Faithfulness in Small Things
Saturday afternoon I headed into the office for a few hours. On the way, I passed one of the massive cranes downtown. (For those who read this who don't have the good fortune of living in or near Omaha, Nebraska, you should know that construction here is booming. Cranes are everywhere, and that is a good sign of things to come.) Though the site was otherwise quiet today as most people enjoyed a day off, a worker was perched on the tracks of the crane and working diligently to apply some wax and polish to the outside. It looked really good, too.
I don't know if this fellow was told to do this, or if he was doing it on his own. Either way, it struck me as a good thing to see people taking pride in what they do. Care and craftsmanship are alive and well, and it is good to recognize and applaud those efforts. Faithfulness in small things translates to significant positive impacts on the world around us.
Have a good weekend.
EAM
I don't know if this fellow was told to do this, or if he was doing it on his own. Either way, it struck me as a good thing to see people taking pride in what they do. Care and craftsmanship are alive and well, and it is good to recognize and applaud those efforts. Faithfulness in small things translates to significant positive impacts on the world around us.
Have a good weekend.
EAM
Friday, July 08, 2005
Immigration Policy: Do we have one?
Two news stories today focused on immigration issues, which have a potentially significant impact on our social and economic frameworks. The first, in today's Omaha World Herald, was an article by Cindy Gonzalez, "Immigrant birth boom tracked". This article notes that nearly 23 percent of births in the year 2002 were to an immigrant mother - the highest proportion since 1910. Back in 1970, by comparison, only 6 percent were to immigrant parents. Of course, some of the parents were legal immigrants, but some were not. Regardless of the status of the parent, this high percentage of births translates into a significant future influence on cultural trends. From an economic standpoint, this may translate into future consumers and productive workers, which in a low-population state like Nebraska, may be especially needed.
The second story, by Miriam Jordan, "Banks Open Doors to New Cutomers: Illegal Immigrants" is on the front page of today's Wall Street Journal. Jordan describes the new prospects for homebuying by illegal immigrants in Wisconsin, thanks to an innovative local banker with some help from the state and federal government. It seems a local banker located in a neighborhood with many immigrants in it wanted to find a way to do business with them. The IRS provided ITINs, which are issued to foreigners ineligible for social security numbers, thus allowing them to open bank accounts. Next, the Wisconsin Housing and Economic Development agency decided to start a pilot program to help "undocumented immigrants" get home mortgages. The agency ultimately bears risk of default, which are apparently almost nil based on the experience of the program. Of course, that is because there is no immigration enforcement, which could send the obligor on the note a long way from his property.
It's a great country when you can afford to own your own home, and it's great for the community to have owners who want to improve their property and keep their neighborhood safe and tidy. These also seem to be hardworking, honest people who pay their bills on time. I commend them for that.
But they are violating immigration laws, and we seem to be doing nothing about that. Instead, we seem to be encouraging what they are doing. Not only is enforcement not happening now, but it is not likely to happen in the future, either. Given the birth of children with rights to be citizens, coupled with roots in communities and responsible behavior, few people will support changes in the status quo. This means that well-intentioned legislation, such as that discussed from Mr. King a couple days ago (see 7/5 post), is destined not to pass.
EAM
The second story, by Miriam Jordan, "Banks Open Doors to New Cutomers: Illegal Immigrants" is on the front page of today's Wall Street Journal. Jordan describes the new prospects for homebuying by illegal immigrants in Wisconsin, thanks to an innovative local banker with some help from the state and federal government. It seems a local banker located in a neighborhood with many immigrants in it wanted to find a way to do business with them. The IRS provided ITINs, which are issued to foreigners ineligible for social security numbers, thus allowing them to open bank accounts. Next, the Wisconsin Housing and Economic Development agency decided to start a pilot program to help "undocumented immigrants" get home mortgages. The agency ultimately bears risk of default, which are apparently almost nil based on the experience of the program. Of course, that is because there is no immigration enforcement, which could send the obligor on the note a long way from his property.
It's a great country when you can afford to own your own home, and it's great for the community to have owners who want to improve their property and keep their neighborhood safe and tidy. These also seem to be hardworking, honest people who pay their bills on time. I commend them for that.
But they are violating immigration laws, and we seem to be doing nothing about that. Instead, we seem to be encouraging what they are doing. Not only is enforcement not happening now, but it is not likely to happen in the future, either. Given the birth of children with rights to be citizens, coupled with roots in communities and responsible behavior, few people will support changes in the status quo. This means that well-intentioned legislation, such as that discussed from Mr. King a couple days ago (see 7/5 post), is destined not to pass.
EAM
Thursday, July 07, 2005
The London Bombings: Some Early Thoughts
The news from London this morning is not welcome. I grieve with the British people over this senseless loss of life.
At the same time that I grieve, I condemn terrorism. As I sit and write this blog entry, it is still not known who is responsible for the bombings that have thus far taken dozens of lives and brought the city’s transport system to a standstill. Given that the bombings (of which there appear to have been four) were timed, most everyone suspects Al-Qaeda. That is all the more the case given the similarities with the tragic bombings of public transport in Madrid of last year. If it is indeed behind the bombings, just what does Al-Qaeda think it will accomplish by this act?
Among other things, there appear to be two constants in Al-Qaeda’s strategic planning: 1) a self-assured arrogance that they are wiser than their “western enemies” and 2) a propensity to misunderstand their enemies. The latter of course belies the former. The London bombings are a near perfect demonstration of both. Given that the Madrid bombings led to the Spanish withdrawal from Iraq, the most obvious goal of the London bombings would appear to be to convince the British government to mimic the Spanish response. Indeed, Al-Qaeda’s strategy is all too obvious in this instance: to strengthen the movement against involvement in the war in Iraq to such a degree that public pressure forces the British government to withdraw its sizeable contingent from that country. In my view, the likelihood of that happening is virtually nil. My assessment hinges on the simple fact that such a strategic calculation depends on public reaction and the British public is not likely to react as the Spanish public did.
There are several reasons why I believe they will not. First, the British public is quite aware of Al-Qaeda’s strategy in this instance. Concerns were voiced throughout Europe when the Spanish government declared that it condemned terrorism at the same time that it was withdrawing from Iraq. The country had essentially given in to Al-Qaeda’s major demand and in so doing was encouraging terrorism elsewhere in Europe. Secondly, the British public is likely to be offended that it is being equated in the minds of Al-Qaeda strategists with Spaniards. The British have dealt with IRA-sponsored terrorism for decades and view themselves historically as a good deal tougher than the south of Europe. Thirdly, the opposition to British involvement in Iraq most certainly knows that Al-Qaeda is calculating that these acts of violence are intended to strengthen the anti-war movement. This is not the kind of support that it wants or needs, nor is it the kind of support that it is likely to attempt to capitalize upon. To do so would paint it as capitulating to terrorists, or worse, working to achieve their goals. Fourth, and this may be the most important miscalculation of all, there is no war in Iraq, except Al-Qaeda’s war to seize control of the country. The war has long since been over. What is left is an attempt to rebuild the country against the opposition of die-hard Saddam loyalists and terrorists. The fact that the vast majority of acts of violence are against Iraqis, not coalition forces, speaks to this. This is no longer about the rightness or wrongness of the decision to invade Iraq. What Al-Qaeda is demanding is that Britain, and the international community, surrender Iraq to oppression and tyranny.
I believe that the London bombings will be seen as a blunder in Al-Qaeda’s war against the west. Instead of strengthening the anti-war movement and weakening the British government’s resolve, in the end it will have weakened the former and strengthened the latter. Neither the leadership of the Labor Party nor the Conservatives is currently amenable to withdrawing from Iraq. In the wake of this incident, which has further blurred the distinction between Iraq and the “war against terrorism,” it is difficult to see that changing. Look to Tony Blair’s speeches in the coming day. Unlike the Spanish government of its day, he will address this incident head-on to mobilize the public behind his resolve to see Iraq and the struggle against terror through to the end.
At the same time that I grieve, I condemn terrorism. As I sit and write this blog entry, it is still not known who is responsible for the bombings that have thus far taken dozens of lives and brought the city’s transport system to a standstill. Given that the bombings (of which there appear to have been four) were timed, most everyone suspects Al-Qaeda. That is all the more the case given the similarities with the tragic bombings of public transport in Madrid of last year. If it is indeed behind the bombings, just what does Al-Qaeda think it will accomplish by this act?
Among other things, there appear to be two constants in Al-Qaeda’s strategic planning: 1) a self-assured arrogance that they are wiser than their “western enemies” and 2) a propensity to misunderstand their enemies. The latter of course belies the former. The London bombings are a near perfect demonstration of both. Given that the Madrid bombings led to the Spanish withdrawal from Iraq, the most obvious goal of the London bombings would appear to be to convince the British government to mimic the Spanish response. Indeed, Al-Qaeda’s strategy is all too obvious in this instance: to strengthen the movement against involvement in the war in Iraq to such a degree that public pressure forces the British government to withdraw its sizeable contingent from that country. In my view, the likelihood of that happening is virtually nil. My assessment hinges on the simple fact that such a strategic calculation depends on public reaction and the British public is not likely to react as the Spanish public did.
There are several reasons why I believe they will not. First, the British public is quite aware of Al-Qaeda’s strategy in this instance. Concerns were voiced throughout Europe when the Spanish government declared that it condemned terrorism at the same time that it was withdrawing from Iraq. The country had essentially given in to Al-Qaeda’s major demand and in so doing was encouraging terrorism elsewhere in Europe. Secondly, the British public is likely to be offended that it is being equated in the minds of Al-Qaeda strategists with Spaniards. The British have dealt with IRA-sponsored terrorism for decades and view themselves historically as a good deal tougher than the south of Europe. Thirdly, the opposition to British involvement in Iraq most certainly knows that Al-Qaeda is calculating that these acts of violence are intended to strengthen the anti-war movement. This is not the kind of support that it wants or needs, nor is it the kind of support that it is likely to attempt to capitalize upon. To do so would paint it as capitulating to terrorists, or worse, working to achieve their goals. Fourth, and this may be the most important miscalculation of all, there is no war in Iraq, except Al-Qaeda’s war to seize control of the country. The war has long since been over. What is left is an attempt to rebuild the country against the opposition of die-hard Saddam loyalists and terrorists. The fact that the vast majority of acts of violence are against Iraqis, not coalition forces, speaks to this. This is no longer about the rightness or wrongness of the decision to invade Iraq. What Al-Qaeda is demanding is that Britain, and the international community, surrender Iraq to oppression and tyranny.
I believe that the London bombings will be seen as a blunder in Al-Qaeda’s war against the west. Instead of strengthening the anti-war movement and weakening the British government’s resolve, in the end it will have weakened the former and strengthened the latter. Neither the leadership of the Labor Party nor the Conservatives is currently amenable to withdrawing from Iraq. In the wake of this incident, which has further blurred the distinction between Iraq and the “war against terrorism,” it is difficult to see that changing. Look to Tony Blair’s speeches in the coming day. Unlike the Spanish government of its day, he will address this incident head-on to mobilize the public behind his resolve to see Iraq and the struggle against terror through to the end.
Reflections on Responsibility
I’m going to depart from usual themes today to make a few personal comments. In light of this morning’s news about terrorist attacks in London, it is plain that conflict is part of our world. Our President spoke plainly and truly about conflict this morning as he highlighted the contrasting position presented by those who choose to do this kind of evil. Taking the lives of innocent people in random acts of violence clearly fits in that category.
I believe our government’s policies against yielding to the terrorists have made life more difficult for them and for nations who tolerate them. The “hard” and “soft” principles applicable in other economic and social institutions also apply in political conflicts (thank Michael Barone for these concepts in his terrific book, Hard and Soft America). Libya’s decision to give up nuclear weapons is one example of a positive event that probably would not have happened if the United States had not shown itself capable of decisive action.
Efforts to begin democratic processes take time, but efforts in Afghanistan and Iraq can ultimately bring a new hope and freedom in areas which have experienced much oppression and suffering. However, it is easy to weaken and be critical when things like this happen. We don't know who is responsible yet, but it is likely that this effort is some protest against the UK involvement in war efforts which have been unpopular with many citizens. However, whether terrorist acts are effective ultimately depends in a significant part on the daily responses of individuals to their challenges – as well as other challenges – that life deals to us. In this sense, we all have some responsibility.
This concept is made clear in Viktor Frankl’s autobiographical reflection, Man’s Search for Meaning, which I happened to read last night. In the midst of horrific experiences of human suffering, Frankl concludes that human beings still have choices about how they react in any circumstances. “[E]verything can be taken from a man but one thing: the last of the human freedoms – to choose one’s attitude in any given set of circumstances, to choose one’s own way.” He viewed this spiritual freedom as that which "makes life meaningful and purposeful.”
Choosing involves more than just talk, but also how we behave. Frankl made this observation about his life in the camps:
“What was really needed was a fundamental change in our attitude toward life. We had to learn ourselves and, furthermore, we had to teach the despairing men, that it did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist, not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual.”
Frankl’s approach toward human responsibility is difficult to embrace, particularly for us moderns who are used to expecting much from life and blaming others when it does not get delivered to us. He finds meaning in suffering – which is not exactly the stuff of which modern feel-good, self-help books are made. But his thoughts are worth considering as we decide individually how to respond to life’s challenges.
I have been privileged to be around people – such as my parents – for whom the manner of acting with responsibility in the face of life’s demands has been a regular part of their life. We can all do well to emulate their responses.
EAM
I believe our government’s policies against yielding to the terrorists have made life more difficult for them and for nations who tolerate them. The “hard” and “soft” principles applicable in other economic and social institutions also apply in political conflicts (thank Michael Barone for these concepts in his terrific book, Hard and Soft America). Libya’s decision to give up nuclear weapons is one example of a positive event that probably would not have happened if the United States had not shown itself capable of decisive action.
Efforts to begin democratic processes take time, but efforts in Afghanistan and Iraq can ultimately bring a new hope and freedom in areas which have experienced much oppression and suffering. However, it is easy to weaken and be critical when things like this happen. We don't know who is responsible yet, but it is likely that this effort is some protest against the UK involvement in war efforts which have been unpopular with many citizens. However, whether terrorist acts are effective ultimately depends in a significant part on the daily responses of individuals to their challenges – as well as other challenges – that life deals to us. In this sense, we all have some responsibility.
This concept is made clear in Viktor Frankl’s autobiographical reflection, Man’s Search for Meaning, which I happened to read last night. In the midst of horrific experiences of human suffering, Frankl concludes that human beings still have choices about how they react in any circumstances. “[E]verything can be taken from a man but one thing: the last of the human freedoms – to choose one’s attitude in any given set of circumstances, to choose one’s own way.” He viewed this spiritual freedom as that which "makes life meaningful and purposeful.”
Choosing involves more than just talk, but also how we behave. Frankl made this observation about his life in the camps:
“What was really needed was a fundamental change in our attitude toward life. We had to learn ourselves and, furthermore, we had to teach the despairing men, that it did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist, not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual.”
Frankl’s approach toward human responsibility is difficult to embrace, particularly for us moderns who are used to expecting much from life and blaming others when it does not get delivered to us. He finds meaning in suffering – which is not exactly the stuff of which modern feel-good, self-help books are made. But his thoughts are worth considering as we decide individually how to respond to life’s challenges.
I have been privileged to be around people – such as my parents – for whom the manner of acting with responsibility in the face of life’s demands has been a regular part of their life. We can all do well to emulate their responses.
EAM
Tuesday, July 05, 2005
Tax Policy and Immigration
Last week, Iowa Congressman Steve King introduced legislation designed to beef up enforcement of immigration laws. His bill, the New Illegal Deduction Elimination Act (New IDEA), would deny federal income tax deductions for salaries and benefits paid to illegal aliens.
In a press release issued June 28, King's office states that "last year no employers were sanctioned for hiring illegal workers." I haven't independently confirmed that statement, but if it is true, this is truly surprising. I'm not naive enough to believe that there were no illegal workers in the United States.
From all accounts, it looks as though immigration laws are frequently unenforced. My own employer, however, fastidiously applies them. It even requires high-level government officials (including judges and prosecutors) to submit their "papers" each semester they may be hired to teach a course. While that may go overboard, many others apparently do not get these forms, or they are satisfied through counterfeit documents.
A study released earlier this year by Bear Stearns, The Underground Workforce is Rising to the Surface (available at http://www.bearstearns.com/bear/bsportal/Info.do?left=Asset%20Managementhttp://www.bearstearns.com/bear/bsportal/Info.do?left=Asset%20Management ) suggests that there are as many as 20 million illegal immigrants in the United States, and that they may account for up to 15 million jobs -- or 8 percent of the workforce. This is a significant piece of the U.S. economy by any account.
If the INS has not been successful, perhaps the IRS will be. It would seem that this agency is already overtaxed in its audit duties, but this would perhaps provide another threat that might bolster enforcement. We have tried other more direct tactics, however, and they have not worked so well. Imposing potentially large fines on employers has not worked. We have also tried denying government contracts. However, unless the government gets serious about enforcement, these laws become dead letters or worse -- they are used selectively against those unfortunate souls who manage to hack off a government employee.
Of course, the issue of immigration has potentially huge impacts on our econonomy. Though some say that the low-wage jobs taken by illegal immigrants would not be done by anyone else, a lax immigration policy effectively increases the supply of labor at these levels and helps to maintain those low wages. Think about that when you argue about economic justice.
EAM
In a press release issued June 28, King's office states that "last year no employers were sanctioned for hiring illegal workers." I haven't independently confirmed that statement, but if it is true, this is truly surprising. I'm not naive enough to believe that there were no illegal workers in the United States.
From all accounts, it looks as though immigration laws are frequently unenforced. My own employer, however, fastidiously applies them. It even requires high-level government officials (including judges and prosecutors) to submit their "papers" each semester they may be hired to teach a course. While that may go overboard, many others apparently do not get these forms, or they are satisfied through counterfeit documents.
A study released earlier this year by Bear Stearns, The Underground Workforce is Rising to the Surface (available at http://www.bearstearns.com/bear/bsportal/Info.do?left=Asset%20Managementhttp://www.bearstearns.com/bear/bsportal/Info.do?left=Asset%20Management ) suggests that there are as many as 20 million illegal immigrants in the United States, and that they may account for up to 15 million jobs -- or 8 percent of the workforce. This is a significant piece of the U.S. economy by any account.
If the INS has not been successful, perhaps the IRS will be. It would seem that this agency is already overtaxed in its audit duties, but this would perhaps provide another threat that might bolster enforcement. We have tried other more direct tactics, however, and they have not worked so well. Imposing potentially large fines on employers has not worked. We have also tried denying government contracts. However, unless the government gets serious about enforcement, these laws become dead letters or worse -- they are used selectively against those unfortunate souls who manage to hack off a government employee.
Of course, the issue of immigration has potentially huge impacts on our econonomy. Though some say that the low-wage jobs taken by illegal immigrants would not be done by anyone else, a lax immigration policy effectively increases the supply of labor at these levels and helps to maintain those low wages. Think about that when you argue about economic justice.
EAM
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