Batten Down the Hatches, a Slowdown is Coming

David Leonhardt at the NY Times is correct about the sorry state of our economy, further bolstered by today's learned comment:

“Six straight months of job losses are the strongest evidence yet that the economy has slipped into a recession of uncertain depth and duration,” said Peter Morici, an economist at the University of Maryland School of Business.

In Leonhardt's article he rates the chances of a recession at 75%. I would tend to agree.

Leonhardt further addresses the fact that we have deeper problems going forward, the toughest one is that we are not creating enough good new jobs. It's a relative lack of innovation caused by our poor recent performance in education. As I have argued in the past, we need to keep all of the college educated folks we can, including the foreign ones, in order to create enough good jobs here. Let's see if this is something the new President will address, as "No Child Left Behind" has not been the answer.

Let Those Techies Stay

Among the insanity and inanity of the immigration problem and resulting debate in the US is the loss of good workers, and not just the folks who pick your lettuce. It's also the workers who helped the ignored folks in Louisiana reconstruct their houses and city after the hurricane. And most importantly it's the great minds we are educating at our Universities here and then send them off to other countries to compete with us.

As this recent Kauffman Foundation Study entitled "Intellectual Property, the immigration Backlog, and a Reverse Brain-Drain" displays in great detail (and you can access the whole report for free in pdf format via the link) it's a big problem. Strikingly, due to our restrictive immigration policies, we are missing out not simply good workers, but talented entrepreneurs, as the web summary notes:

"The earlier studies, “America’s New Immigrant Entrepreneurs” and “Entrepreneurship, Education and Immigration: America’s New Immigrant Entrepreneurs, Part II,” documented that one in four engineering and technology companies founded between 1995 and 2005 had an immigrant founder. Researchers found that these companies employed 450,000 workers and generated $52 billion in revenue in 2006. Indian immigrants founded more companies than the next four groups (from the United Kingdom, China, Taiwan and Japan) combined.

Furthermore, these companies’ founders tended to be highly educated in science, technology, math and engineering-related disciplines, with 96 percent holding bachelor’s degrees and 75 percent holding master’s or PhD degrees."

We cannot afford to lose this force of entrepreneurs, whom to a great extent we have educated and propelled ahead, and must change our policies to invite more to stay. The future of our economy, to the great benefit of the world economy, and our country depends on it.

Can New Leadership Revive Our Economy?

In THE POST-AMERICAN WORLD by Fareed Zakaria, he descibes the declining US influence in the world order, other than our military power. As China, India, and other countries arise, “in every other dimension — industrial, financial, educational, social, cultural — the distribution of power is shifting, moving away from American dominance.” Is this inevitable, or can the US maintain a leadership position, at least in terms of our economy? He has some good suggestions as briefly noted in this interview:

"America is “becoming suspicious of the very things we have long celebrated — free markets, trade, immigration and technological change”: witness Democratic candidates’ dissing of Nafta, Republican calls for tighter immigration control, and studies showing that American students are falling behind students from other developed countries in science and math."

He goes on to decry the intransigence of these issues as quoted by the article's author, " "economic dysfunctions in America today" are the product not of “deep inefficiencies within the American economy,” but of specific government policies — which could be reformed “quickly and relatively easily” to put the country on a more stable footing. “A set of sensible reforms could be enacted tomorrow,” he says, “to trim wasteful spending and subsidies, increase savings, expand training in science and technology, secure pensions, create a workable immigration process and achieve significant efficiencies in the use of energy” — if only the current political process weren’t crippled by partisanship, special-interest agendas, a sensation-driven media, ideological attack groups and legislative gridlock."

Indeed, we have many challenges and maybe a less divicive leadership can help solve these problems, for the better of all and particularly the small businesses in America.

The Fight for Immigration Reform

Thinking about the differences between big business and small businesses on the immigration issue (the latter against and the former for "amnesty"), it comes down to naked economic self interest. An examination of their membership and the economic position relating to immigration tell the story.

While the size of the immigration issue is really tied to the 12 million or so estimated contributing illegal workers, it would seem that all businesses need or are currently using these workers. But that view would be wrong, according to the NSBA (National Small Business Association). A 2007 survey of members revealed that a lack of qualified workers polled at 23%, or the 6th highest concern on the challenges measure, behind taxes and health care reform among others. Why is this issue of qualified workers so low?? Partly because small businesses hire immigrants at a much lower rate than their larger competitors. One measure comes from the NFIB (National Federation of Independent Business) in it's 2006 Member survey on Immigration. One finding was that a mere, "Seven percent of NFIB members have hired one or more guest workers within the last two years." The resultant positions by the NSBA and NFIB on immigration emphasize rational changes that don't impose additional expense on employers. Considerations of amnesty are discouraged.

On the contrary, if small businesses aren't hiring these folks, then it must be that large businesses are the ones. And as the economist community would say, these folks may be taking a small percentage of American jobs at the very low end, but on the whole they are contributing greatly to the American economy. Because the large business community needs these workers and needs them to stay, the US Chamber of Commerce supports immigration reform including, "...providing a way to earn legal status for undocumented workers who have been supporting our economy for the last decade or more." Notice no mention of amnesty, but that's what it would be.