by Dick Morris
What Americans don’t want is the dirt-poor wages the illegal immigrants are willing to accept in these occupations. And the fact that illegal immigrants are willing to work for so little is just more evidence of how they depress wages and incomes for the rest of us.
H-1B Visas: Unemployment for College Graduates
Increasingly, the unemployment and stagnant wages brought by massive immigration—legal and illegal—is being visited on well educated Americans seeking well paid jobs. Obama has acted vigorously to expand immigration and its inroads into the American job market.
On New Year’s Day, January 1, 2016, President Obama issued an executive order vastly increasing the number of green cards that will be issued to foreign college graduates seeking employment in the United States. Breitbart News reported that Obama’s new “181-page rule focuses primarily on giving work-permits to foreign college-grads who will compete against Americans for white collar jobs, despite the large number of American graduates now stuck in lower-wage positions and struggling to pay off college debts. The rule will also make each foreign graduate much cheaper for U.S. employers to hire than many U.S.-born college grads.”29 Immigration lawyer John Miano predicts that Obama’s action will lead to 100,000 new green cards every year.30
The new regulation comes on top of the 800,000 new two-year work permits that were issued to “dreamers” in 2012. (“Dreamers” are foreign migrants who were brought here by their illegal immigrant parents.) In 2013, Obama added about 2 million extra foreign workers to a US economy stagnating under persistent low wage levels. Breitbart explains that “roughly 650,000 foreign graduates are working in the United States for roughly 5 years each under the H-1B program. Roughly 120,000 foreign graduates of U.S. colleges are working in the United States for two years each via the OPT program, often called the ‘mini-H-1B program.’” Obama’s new executive order means that most of those foreign graduates will not have to “return home after several years, so American companies can continue to avoid hiring U.S. workers in their place.”31
So up and down the wage and education scale, Obama’s policies—with Hillary’s support—are denying jobs to Americans while opening up new opportunities for foreigners. Of course, behind each foreign job applicant is a business eager to hire him or her to cut payroll costs. Not only can immigrants be asked to work for lower wages, but they need not be offered health insurance under Obamacare. With employers facing a fine of $3,000 per uninsured worker, what better built-in incentive to hire foreigners who need not be covered? Democrats hope that most of these businesses show their appreciation by giving money to Hillary’s and the party’s campaigns. But to ask these workers who are losing jobs and wages to illegal immigration to vote Democratic to allow more illegals in is the height of arrogance.
Liberals are fond of saying that conservatives are against illegal immigration because we are racist. But race and ethnicity have nothing to do with it. We will never be able to restore the American dream to reality until we stop letting our wealth drain away through illegal immigration.
There are 7 billion people in the world and most of them want to come here to live. Why wouldn’t they? With the opportunity and freedom we have here, they’d be foolish not to. And with generous benefits awaiting them here, why not give it a try?
Republicans need to stand firm for:
a. Border security; a wall to keep illegal immigrants out. Walls work. Israel has kept the suicide bombers at bay for a decade with walls.
b. Deportation of all illegal immigrants. Liberals like to say that you can’t go door to door and round up 12 million people. They say this would be like the Gestapo. But Obama deported 438,000 people in 2013. If we raised that total to one or two million a year, the rest would read the writing on the wall and leave.
c. An E-verify system to stop illegal immigrants from getting jobs. Cut off the jobs and the flow of immigrants will stop. Potential employers will have to hire Americans and pay them real American wages. It’s about time!
Democrats need to grasp the essential reality that when they protest that the poor are getting poorer, the two key reasons are immigration and unfair foreign trade competition.
Increasing the minimum wage, the Left’s standard solution to income inequality, will help only a few people at the bottom of the economic ladder. In the United States, the minimum wage is only $7.25. But the median wage is $17.09 and the mean wage (the average) is $22.71. Clearly, increasing the minimum wage, even to $15 per hour, is not going to help the majority of American wage earners.32 Last year, only 3.3 million people worked at or below the federal minimum wage. They made up just 4% of the 76 million hourly workers in the United States.33 Raising the minimum wage may be the right thing to do, but it’s not a solution to income inequality.
The real solutions, curbing unfair trade practices and illegal immigration, are much tougher for the establishment of each party to achieve. They involve real sacrifices. The Republican candidate in 2016 must embrace policies designed to move up the incomes of the average worker—limiting immigration and fighting against unfair trade deals.
Go after Wall Street
Nothing so defined the Hillary vs. Sanders battle for the Democratic nomination as their different views of Wall Street. The class resentment against financiers/billionaires leveraging federal guarantees and special tax privileges to profit from the global economy is a key force that can cripple Hillary, whether deployed by a Republican or a Democratic challenger.
95% of the income gains of the Obama presidency have gone to the top 1% of earners in our economy (families who make more than $400,000 household income per year), a level without precedent in modern history.34 Under Clinton, the equivalent figure was 45%, and under Bush, it was 65%. So while Bill Clinton did what he could to share the wealth, Obama has blatantly showered the ultrawealthy on Wall Street with his largesse. Our central task is not just to get voters to see the difference between Wall Street’s incredible aggregation of income and Main Street’s lack of progress but also to place the blame where it belongs, with the bipartisan establishment, including the Democrats to whom they are so loyal.
The concentration of wealth has escalated in recent years, but this is not due to increased earnings in the regular economy. It is almost entirely because of the rapid growth in both income and wealth of the Wall Street investor class and their Silicon Valley partners. This bicoastal accretion of wealth has left the rest of the country out in the cold, watching the money pile up in New York and California.
We Republicans must stress this point. We do so not to fan the envy of class conflict, but to focus on the unjust diversion of funds from the average American family to the very wealthy. This transfer occurs, not because of hard work or even shrewd investments, but because of wholesale subsidies, special privileges, immunities, guarantees, and tax advantages both parties have showered upon the wealthy in America. We must demonstrate that it is the establishment of both parties that benefits from this process and guarantees its perpetuation. Democrats are as responsible for it as are Republicans. And you can quote Bernie Sanders, Elizabeth Warren . . . and Donald Trump on it.
Donald Trump has taken the lead on the Republican side in denouncing Wall Street and its denizens. “The hedge fund guys didn’t build this country,” he says “These are guys that shift paper around and they get lucky.”35
This concentration of wealth is largely due to the runaway incomes in the financial sector that now account for one-third of all corporate profits in the United States (double the figure of 30 years ago). It hasn’t always been so. Throughout the 20th century until the 1980s, the average income of people in the financial sector was approximately the same as those in other businesses. But now it has ballooned to twice as much. The odyssey of the top 1% is a strange one.
They suffered more during the Great Recession of 2007–2008 than the rest of us did because they had more income from capital investments that crashed with the market. But then they came roaring back, gobbli
ng up an obscene portion of national income.
During the Great Recession, the top 1% lost a third of its income, three times as much as the rest of the country. They bottomed out in 2009 when their share of the national income fell to only 13.4% (two years earlier, it had been 18.7%). As Gershwin says in Porgy and Bess, “A depression is when white folks are poor too.” Then, when the so-called recovery took hold, the very rich recouped their losses and soon went on a tear, piling up income faster than anyone had ever done before in our history.
The fiscal policies of the Obama administration, in particular those of the Federal Reserve Board, kindled a growth in income for the top 1% unrivaled in history.
By 2012, the top 1% was back, making 23% of the national income. Now, in the election of 2016, we must make the Democrats eat these Wall Street gains. We must make it clear that it was they, not we, who made Wall Street rich.
Obama, Hillary, and the rest of the Democratic establishment cannot pretend that increasing the minimum wage will be the answer to preventing this kind of rampant inequality. As noted, this increase will bring more income to 3.4 million working Americans. But the real answer is to redistribute income by eliminating the unfair advantages that have been given, largely by Obama and Hillary, to the richest people in our country.
We must not call for income redistribution, just power redistribution. The rapid appreciation in the income of the richest is not due to industriousness, risk taking, wise investments, or frugality, but comes almost exclusively from massive subsidies from the Federal Reserve, protected by tax shelters and accounting gimmicks.
How Wall Street Got Richer
The first thing a foreigner learns about American politics is that the rich are Republican and the poor are Democrats. But that was before the politics of the Clintons and Obama built a passageway from the White House to Wall Street and then on to the Silicon Valley. Through this passage went massive campaign contributions to the Democrats and, in return, many special favors to the Manhattan bankers and the northern California entrepreneurs.
It is the greatest myth in our politics that Republican policies created and catalyzed income inequality. In fact, the responsibility resides mainly at the doorstep of the Federal Reserve Board, whose chairmen and a majority of whose members are appointed by the president.
Since the recession officially ended in June of 2009, the Federal Reserve Board has operated as, in the words of former budget director David Stockman, “a cash machine in the Wall Street casino,”36 letting its top operators help themselves to mountains of newly minted money with little accountability over how they spend it. The policy of quantitative easing (QE) deluged Wall Street banks with cash, supposedly to get them to lend it out to small businesses to create jobs. At least that’s what the Fed said.
But the reality—and the result—were quite different. The loans never got made. Of the $3.7 trillion in cash the Federal Reserve Board gave to the banks under Obama, almost $3 trillion of it is still sitting right where it’s always been—in the bank vaults, particularly in the Fed’s vault where it is helpfully storing the money for the banks. There, it earns a quarter of 1% interest each year, a windfall of about $10 billion that goes to the big banks every year, courtesy of the Fed.
Former Federal Reserve chairman Alan Greenspan said that as of 2012 he could discern “very little impact on the economy” from all that cash flooding Wall Street. Welfare for Wall Street.37 Economists, including Dhaval Joshi of BCA Research, agree that the rewards of QE have done little to help the real economy. He wrote, “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it.”38 And the president of the Federal Reserve Bank of Dallas, Richard Fisher, who sits on the Federal Reserve Board, admitted that that cheap money has made rich people richer, but has not done quite as much for working Americans.39
Why didn’t the banks lend out the money they got from the Fed? Part of the reason is that they couldn’t find credit-worthy borrowers who wanted and needed the money. Ever since the recession got started, Obama has followed the doctrines of British economist John Maynard Keynes and pumped money into the economy in the hopes of stimulating demand. But you can’t push a string.
Major companies and small businesses alike had so little confidence in the future of the US economy that they didn’t want to spend the money they had piled up over the years. After many months of accumulating cash, America’s businesses have $1.7 trillion of cash on hand. So why borrow more? Even at rock-bottom interest rates, they would rather stick the cash under the mattress than invest it in the economy. That’s how much confidence they have in Obama’s economic wisdom.
The other reason the banks won’t lend is that Obama’s bank regulations made it very, very dangerous to make loans to businesses, especially those that are left as possible borrowers after the big corporations have said “no more.” Even as his administration was shoveling money into the upper echelons of Wall Street, it was enacting bureaucratic regulations that made it virtually impossible for the banks to use the funds to create jobs. Under Obama, bank regulation, aimed largely at midsize and small community banks, has become tight and strict. Even though these institutions were not responsible for the crash of 2007 and 2008, they are bearing the brunt of the regulatory retaliation.
Between 2009 and 2015, Obama has closed 500 community banks, with a collective $75 billion in assets. Counting these closures along with other bank failures, the total number of banks in the United States has dropped to the lowest level since the Great Depression. We are shedding hundreds of banks per year and now are down to 6,270 commercial banks and savings institutions.40 This policy of closing community banks makes it almost impossible for local banks to take advantage of the quantitative easing funds to lend to local business. Banks are scared to death of making loans that could be seen as risky by nit-picking federal regulators. Each audit kindles a morbid fear of being closed down, wiping out the salaries, bonuses, stockholdings, and in some cases, even the pensions of their executives. Who would lend money in that kind of regulatory environment? And what incentive was there to lend out the money? The Fed was, after all, paying banks interest not to lend it out, but to keep it in its vaults.
As Trump put it: “Under Dodd-Frank, the regulators are running the banks. The bankers are petrified of the regulators. And the problem is that the banks aren’t loaning money to people who will create jobs.”41
And the regulatory excesses were totally unnecessary. It wasn’t the small community banks that had caused the 2007–2008 crash. They didn’t buy subprime mortgages. They didn’t need TARP federal bailout funds. They lent to their own communities and were largely solvent. But Obama came down on them like a ton of bricks. Why would he do that? To help the big banks. Obama wants to get rid of the thousands of small banks throughout the country. By forcing small banks out of business, he increases the market share of the giant banks. And they give a lot of money to Democratic candidates.
Between 2006 and 2014, Wall Street gave $348 million to Democratic candidates and committees. They gave comparable amounts to Republicans. Both parties are part of the Capitol gang that fixes things for Wall Street and screws the average American.
Besides, helping big banks gobble up small ones is part of Obama’s economic philosophy. Myriad small banks would be hard to control; their whims would make a mockery of the central planning that underscores Obama’s socialist worldview. But concentrate power in a handful of banks, a few big unions, and big government regulators, and you can control the economy. Just like they do it in Europe. No more of this messy and wasteful free enterprise.
So while Obama was hell on wheels on the small banks, he coddled the big ones, giving them $3.7 trillion in QE money. The money was given to these big banks largely in exchange for worthless mortgage-backed securities that were lying fallow in their vaults. These securities were backed by mortgages on bankrupt properties that had long since stopped m
aking payments and that could not be sold on any open market. But the Fed was a willing purchaser. Not only didn’t the Fed get any real consideration for this avalanche of money, but it actually paid interest to the banks in return for storing the money it had paid them. The big banks were supposed to lend out the money to help the economy, but they held onto the money. They didn’t lend it out. They kept it in the vault. They didn’t earn it. They don’t lend it. They don’t do anything for it. And the $10 billion interest the Fed pays these banks just rolls in year after year.
If the big banks don’t share their largesse with job-creating American businesses, they are very generous with their employees, their stockholders, and, most of all, with their executives, driving up the incomes of the richest 1% beyond all comprehension. While they don’t lend out the money the Fed gave them to businesses, they do use it to buy stocks and push up the Dow Jones to new heights. They buy their own company stock and give it to employees as a stock option bonus. They pay lavish salaries to top executives and a lot to everyone else.
In 2014, the average income of a Wall Street employee was over half a million a year—$355,900 in base income and $172,860 more in bonuses. This income level is more than 10 times higher than the median family income in the United States. Total Wall Street bonuses in 2014 came to $29 billion.
And when the income goes to hedge fund managers, they pay only the capital gains tax rate rather than the ordinary income tax the rest of us have to pay. Usually, you can get capital gains treatment on that portion of your income that is a return on an investment. The idea is that you already paid taxes on the money you invested so you get a lower tax rate on the profits the investment returns to you. The larger economic purpose of separate capital gains taxation is to encourage investment through lower tax rates. Wages and salaries are not capital gains—except for hedge fund managers.
