The biggest problem created by uncontrolled illegal immigration is wage suppression. According to economics professor George Borjas, immigration reduces the average annual earnings of U.S.-born men by an estimated $1,700, or roughly 4%. (See Yahoo News story: Illegal Workers Have Mixed Impact.) If that reduction is applied to the roughly 135 million employed Americans, that reduces aggregate annual worker income by $230 billion, or $0.23 trillion. That's roughly 2% of our $12 trillion GDP. That's a loss in consumer spending of $230 billion (less taxes). Given that our entire GDP growth in 2005 was $384 billion, this is a significant amount. Considering that consumer spending is approximately 70% of GDP, that makes the "growth" in consumer spending around $269 billion.

Again, the loss of that $230 billion is no small amount. And it is also $230 billion less money that could have been taxed, costing the Federal government anywhere between $36-55 billion per year. (Increasing the taxable income of a single taxpayer making $35,000/year by $1700 increases Federal income tax by $413. Increasing taxable income of a married taxpayer filing making $35,000/year by $1700 increases Federal income tax by $267. Multiplying these numbers by 135 million amounts to $55.7 billion and $36 billion, respectively.)

Right-wingers will argue that this wage suppression is offset by business profits, and that these profits fuel investment. But investment capital is OVER-abundant at present. Increasing this excess even further will not result in more capital investment. It will result in higher CEO salaries, further overinvestment in the stock market, and further investment in foreign production facilities, the latter of which puts even further downward pressure on American wages.

Furthermore, business profits don't fuel consumer spending. And consumer spending is the engine that drives our economy, not investment. Without consumer spending, there are no returns on investment. And if no returns are anticipated on investment, no investment takes place.

The immigration-fueled reduction in wages does NOT help our economy. It hurts it. It reduces aggregate consumer income and the consumer spending it finances. The reduction in consumer spending reduces consumer production demand, further reducing demand for the labor to provide that production. The reduction in labor demand drives down employment and wages. The resultant labor demand reduction further reduces aggregate consumer income and further reduces consumer purchasing power.

As consumer buying power declines, so do investment opportunities, since those opportunities are created by consumer demand for production. Thus the increased profits resulting from reduction in labor costs create even more excess capital, while reducing investment opportunities still further.

Does anyone really think that wage suppression is "good" for the economy? Doesn't someone have to purchase the goods produced for business to profit? Won't reducing consumer income also reduce consumer goods purchasing? Won't a decline in consumer goods purchasing reduce business revenues and reduce potential profits? Once again, is immigration-fueled reduction in worker/consumer income really "good" for the economy?

unlawflcombatnt

EconomicPopulistCommentary

Economic Patriot Forum

______________________
Capitalism cannot function without consumer income. The benefits of capital investment are limited by consumers' ability to buy the products of capital investment.

There must be balance between the "means of consumption" and the "means of production."

[quote=unlawflcombatnt]It certainly is a problem, but not necessarily the biggest. The drain on services and overcrowding are equally important.







A little clarification here would be nice. What is the essence of what you are trying to say here?

Again, the loss of that $230 billion is no small amount. And it is also $230 billion less money that could have been taxed, costing the Federal government anywhere between $36-55 billion per year. (Increasing the taxable income of a single taxpayer making $35,000/year by $1700 increases Federal income tax by $413. Increasing taxable income of a married taxpayer filing making $35,000/year by $1700 increases Federal income tax by $267. Multiplying these numbers by 135 million amounts to $55.7 billion and $36 billion, respectively.)


I have never heard of the economist you cite, however; most non-Marxists economists do agree that profits fuel investment. I don't see how, up to this point in your post that you have demonstrated that there is an over-abundance of investment capital. If that were true the capital would move to another market where it would earn a better return.


That is assuming that you could demonstrate that there is too much capital in the market, which you have not done.



What is "overinvestment"?



This contradicts your assertions that there is TOO much capital and can't be used to both demonstrate that there is too much capital and that that capital won't be moved.


I think that this last assertion is the "race to the bottom" argument.



I have never heard anyone say that it does. However; profits certainly have an effect on consumer confidence especially considering the fact that Americans are involved in the stock market at a remarkable rate. According to some reports, involvment is at 80%.


No. Growth drives economy. Current consumer spending is being financed by overseas debt. American savings rate is less than zero.



Since growth is the key, investment in the future is of monumental importance.


Completely wrong.




YOU DO mean illegal immigration right? Because the movement of labor is of great significance in our economy. It is one of the markets that our system is based on. Immigration (free movement of labor) is very important. Legal, not illegal immgration, is good.


It hurts it.Consumer spending doesn't drive the economy in the way that you think it does.



You definition of consumers must be incredibly narrow. Business are consumers, so is the government.


.

Supply and demand are related yes. Is this a big revelation to you?



Not necessarily. As you have pointed out, the increased investment and involvment in the stock market could keep consumer income high.

Wait...I thought that investment was bad? Now it helps your argument?


Man are you making this stuff up? Capital excess means the cost of investment would be reduced..hence investment would become greater because the cost is declining.



NO. Now you are getting to the heart of the matter. It took you really a long time to do so, and nothing in your post that proceeds helps you to ask this question. First, your arguments are counter-intuitive to the vast majority of people based solely on the fact that most people have, at best a rudimentary understanding of economics. Your understanding seems to be severly lacking also.



However; illegal immigration does lower the wages at the bottom end of the spectrum. But in doing so it increases them at the higher end. The costs of illegals is assumed by the majority in the form of increased services burden while the benefits are achieved by the few (those that exploit the illegal alien workers.





Yes. Your assumption seems to be that illegals will suppress all wages thereby suppressing all consumer spending, reducing all demand and thereby reducing all profits. That just isn't the case.




Where do you stand? I doubt that anyone else will read this.


______________________