Cutback in H-1B Visas Did Not Raise Employment for Natives [feedly]

Cutback in H-1B Visas Did Not Raise Employment for Natives
http://economistsview.typepad.com/economistsview/2018/01/cutback-in-h-1b-visas-did-not-raise-employment-for-natives.html

From the NBER Digest:

Cutback in H-1B Visas Did Not Raise Employment for Natives, by Steve Maas, NBER Digest: In response to concerns that foreign workers were taking jobs from Americans, especially in high-technology fields, Congress cut the annual quota on new H-1B visas from 195,000 to 65,000, beginning with fiscal year 2004. A study by Anna Maria Mayda, Francesc Ortega, Giovanni Peri, Kevin Shih, and Chad Sparber, based on data for the fiscal years 2002-09, finds that the reduced cap did not increase the hiring of U.S. workers. 

In The Effect of the H-1B Quota on Employment and Selection of Foreign-Born Labor (NBER Working Paper No. 23902), the researchers examine data obtained through a Freedom of Information Act request to present the first assessment of the consequences of the cap reduction on various sectors of the skilled labor force.

The H-1B program, which was launched in 1990, has provided foreign-born, college-educated professionals their main entry point into the U.S. market. As much as half the growth in America's college-educated science, technology, engineering and mathematics workforce in subsequent decades can be attributed to H-1B workers.

Since the cap was tightened in 2004, firms hired between 20 and 50 percent fewer new H-1B workers than they might have hired had it remained at 195,000 visas per year. The researchers find, however, that the reduced pool of foreign workers did not lead firms to hire more Americans, and conclude that this suggests "low substitutability between native-born and H-1B workers in the same skill groups." The cap only applies to for-profit companies, not to new employees of educational institutions or nonprofit research institutions.

The researchers also find that the quota reduction resulted in changes to the composition of new visa holders and the companies that hired them. Employment losses were concentrated at the lowest and highest ends of the wage scale, leading H-1B workers to become more concentrated among workers with mid-level skills. "The binding H-1B cap reduced the number of workers who were likely to have been among the most talented and productive foreign individuals seeking U.S. employment." Yet these are just the workers who might have contributed technological advances benefiting the entire economy. 

The cap led to an increased concentration of India-born workers in computer-related fields. The paper posits that Indians had a leg up on other foreign workers because of long-established labor networks in the software and semiconductor industries. 

On the employer side, the lower cap favored larger firms with greater experience navigating the bureaucracy of the visa program and with in-house legal teams that could handle the paperwork. This proved especially advantageous in fiscal years 2008 and 2009, when demand for visas was so high that the number of applications exceeded the quota level within the first week and the government resorted to a computerized random lottery system to allocate them. Smaller firms simply could not afford to spend money applying for visas when they were not sure whether they would obtain one.

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Why We’re Underestimating American Collapse – Eudaimonia and Co

https://eand.co/why-were-underestimating-american-collapse-be04d9e55235

Interesting take. Do not know this writer, but this rings true

Infrastructure, Immigration, and Trump’s War on Cities

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Infrastructure, Immigration, and Trump's War on Cities // The American Prospect
http://prospect.org/article/infrastructure-immigration-and-trumps-war-on-cities

(AP Photo/Manuel Balce Ceneta)

Trump speaks to mayors in the East Room of the White House on January 24, 2018.

The Master of Distraction has done it again. America's trillion-dollar infrastructure crisis will never get the concentrated attention from the White House that it desperately requires, because the president of the United States enjoys poisoning the American body politic with divisive scapegoating. This week's target: big-city mayors.

When he was running for president, Trump inveighed against the country's Third-World airports, rail, and other emblems of national decay. In his first year in the White House, however, he has dodged and weaved away from any decisive action on the issue. Infrastructure has been lost in the hostage negotiations that pass for legislative deliberations over immigration, taxes, and health care. State and local leaders have endured unprecedented procrastination from the administration as they try to read between the lines of memos and vague speeches.

Trump avoids constructive engagement even when opportunity walks straight into the White House in the form of mayors in Washington for a U.S. Conference of Mayors' winter meeting. The local leaders, who traditionally hear from the president, were eager to participate in a "working session," with infrastructure at the top of the agenda. The fact that the Justice Department sent out letters threatening sanctuary cities and their mayors with subpoenas on the same day as the meeting wasn't exactly throwing out the welcome mat.

When he did address the mayors, Trump reviewed the greatest hits of his first year, punctuated by grade-school-worthy patter about sanctuary cities being "best friends of gangs and cartels like MS-13." The president castigated Toni Harp, the black mayor of New Haven, Connecticut, as a "sanctuary city person." She took a pass on the White House meeting, as did Bill de Blasio of New York, Eric Garcetti of Los Angeles, Mitch Landrieu of New Orleans, Rahm Emmanuel of Chicago, and many others. Instead of offering details about his year-in-the-making infrastructure proposal, Trump offered more vague teasers. ("We'll be talking about it a little bit in the State of the Union.")

 

Rahm told us the WH blew up the mayors meeting with POTUS with sanctuary cities announcement because "the emperor has no clothes when it comes to infrastructure" - the issue mayors wanted to discuss with him. https://t.co/X9YrFP4Sbc

— Jonathan Allen (@jonallendc) January 24, 2018

 

The little that local leaders know about the president's infrastructure intentions comes courtesy of an undated outline obtained by Axios. The plan, as reported, would chiefly foment more discord along the urban-rural divide. The competition between America's cities and rural lands has been at the core of the American identity ever since Thomas Jefferson went up against Alexander Hamilton in the struggle for economic and political power between the agrarian slaveholding South and the nascent financial and industrial sectors in the North. But Trump has a knack for stoking these historic tensions, and the 21st-century infrastructure debate is the latest round in America's rural-urban wars.

The leaked memo does not hold any great promise for cities. And yet the so-called "rural infrastructure program" mentioned in the memo (which would receive 25 percent of a total infrastructure appropriation) is deceptive: States would be "incentivized to partner with local and private investment for completion and operation of projects." But most private investors who explore public-sector partnerships want a significant return on their investment. Most rural projects would not generate a high level of profits.

The biggest problem for cities comes from a radical shift in funding. Conservatives have long supported forcing localities to shoulder more of the fiscal burden for mass transit and kindred projects. In recent decades, the federal government has paid for 80 percent of these developments. Under the reported proposal, the federal government would reverse that ratio, providing only 20 percent of the funding, while municipalities somehow come up with 80 percent. That could grind urban infrastructure development to a halt: Most smaller cities have trouble coming up with the 20 percent match, much less an 80 percent requirement.

The doubts and misgivings about the (presumably) forthcoming infrastructure proposal have only been compounded by the recent tax overhaul, which has taken so much federal revenue off the table. What is clear is that the Trump administration wants to recast American federalism: Localities would have to shoulder more of the fiscal burden, with the private sector rendering a substantial assist.

At least, that's the theory. In practice, the reversal of the 80-20 division could simply dry up most major urban infrastructure projects, as part of Trump's war on urban America—which voted heavily for Hillary Clinton in 2016.

Trump's sanctuary city tantrum may also signal that his administration is contemplating some type of immigration enforcement–infrastructure dollars quid pro quo. To be sure, federal courts have already ruled that the administration cannot impose new requirements for federal grants that have not been approved by Congress. (The Supreme Court has also underlined the same principles.) But that hasn't allayed the fears that some mayors harbor.  

"He might use that as leverage—we've certainly seen some foreshadowing of that," says Mayor Steve Adler of Austin, Texas, who spoke to The American Prospect at a Center for American Progress forum on Trump's tax and infrastructure plans.

"The government isn't allowed to coerce behavior in certain programs by denying programs and benefits in other areas to cities," Adler continued. "Fortunately, cities are protected against that and we would defend that in court if we needed to."

But Trump has never let settled legal questions stand in the way of scoring political points. Despite the president's complaints about the Third World state of the nation's transportation networks and other vital components of its infrastructure, it's his policies and his rhetoric that threaten to turn America into a shithole country. The nation's mayors must anticipate that their cities, and the immigrants who live there, will continue to be the subject not of the president's concern, but of his attacks.


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Paul Krugman: America Is Not Yet Lost

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Paul Krugman: America Is Not Yet Lost // Economist's View
http://economistsview.typepad.com/economistsview/2017/12/paul-krugman-america-is-not-yet-lost.html

"it's going to be up to the American people":

America Is Not Yet Lost, by Paul Krugman, NY Times: Many of us came into 2017 expecting the worst. And in many ways, the worst is what we got.

Donald Trump has been every bit as horrible as one might have expected; he continues, day after day, to prove himself utterly unfit for office, morally and intellectually. And the Republican Party ... turns out, if anything, to be even worse than one might have expected. At this point it's evidently composed entirely of cynical apparatchiks, willing to sell out every principle — and every shred of their own dignity — as long as their donors get big tax cuts.

Meanwhile, conservative media have given up even the pretense of doing real reporting, and become blatant organs of ruling-party propaganda. ...

Yet I'm ending this year with a feeling of hope, because tens of millions of Americans have risen to the occasion. ... What we've seen ... is the emergence of a highly energized resistance...

Let's be clear: America as we know it is still in mortal danger. Republicans still control all the levers of federal power, and never in the course of our nation's history have we been ruled by people less trustworthy. ...

So we can't count on the consciences of Republicans to protect us. In particular, we need to be realistic about the likely results of Robert Mueller's investigation. The best bet is that no matter what Mueller finds ... Republican majorities in Congress will back up their president and continue to sing his praises. ...

So it's going to be up to the American people. They may once again have to make themselves heard in the streets. They'll certainly have to make their weight felt at the ballot box.

It's going to be hard, because the game is definitely rigged. ... Gerrymandering and the concentration of Democratic-leaning voters in urban districts have created a situation in which Democrats could win a large majority of votes yet still fail to take the House of Representatives.

And even if voters rise up effectively against the awful people currently in power, we'll be a long way from restoring basic American values. Our democracy needs two decent parties, and at this point the G.O.P. seems to be irretrievably corrupt.

Even at best, in other words, it's going to take a long struggle to turn ourselves back into the nation we were supposed to be. Yet I am, as I said, far more hopeful than I was a year ago. America is not yet lost.


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Martin Feldstein: The Heightened Risks of a US Downturn [feedly]

....from Reagan's Chair of Council of economic advisors, no less....

The Heightened Risks of a US Downturn
https://www.project-syndicate.org/commentary/us-recession-inadequate-stimulus-tools-by-martin-feldstein-2018-01

Jan 26, 2018 MARTIN FELDSTEIN

The US economy has experienced nine recessions during the last 50 years. What makes the current situation unusual and more worrying than in the past is the low level of short-term interest rates and the high (and rising) level of federal debt, which will limit policymakers' ability to provide the stimulus needed to counter a recession.

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The greatest risk to the economic expansion is the fragility of the financial sector. A decade of excessively low interest rates has pushed asset prices to extreme heights. The real yield on ten-year Treasury bonds is approximately zero. The price-earnings ratio of the S&P 500 share index is about 70% above its historic average. If these and other asset prices reverted to their historic benchmarks, investors would suffer losses in excess of $10 trillion, leading to declines in consumer spending and business investment.

Economic activity could also slow as a result of international conflict in Korea, heightened trade disputes, or domestic political events in the US.

Downturns are a normal feature of the US economy, which has experienced nine recessions during the last 50 years. What makes the current situation unusual and more worrying than in the past is the low level of short-term interest rates, which limits the ability of the US Federal Reserve to bring monetary policy to bear in countering the next recession.

The Fed traditionally responds to a downturn by sharply reducing the short-term federal funds rate. During the most recent downturn, the Fed lowered the benchmark rate from over 5% in July 2007 to just 0.16% in December 2008, a total reduction of more than five percentage points. At only 1.4% now, the Fed has little scope for a significant rate reduction. At its meeting in December, the Federal Open Market Committee's median forecast for the federal funds rate at the end of 2019 was still a very low 2.9%.

To stimulate demand in the last downturn, the Fed also practiced what it called "unconventional monetary policy," promising to keep short rates low for a long time and buying long-term bonds for its own portfolio. This strategy was aimed at keeping long-term interest rates low enough to boost demand for equities and real estate, and thereby increase wealth and spending. It is not clear that this strategy would provide the hoped-for stimulus as long as real interest rates remain low.

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The responsibility for stimulating the economy in the next downturn will therefore fall to fiscal policy – changes in taxes and government spending.

A new temporary tax cut would not work. Experience shows that a temporary cut in personal income taxes would provide very little stimulus, because most taxpayers would use the resulting extra net income to pay down debt or increase their savings, rather than spending more.

But the 2017 tax law provides an opportunity for a permanent tax cut by preserving the cuts that are now scheduled to expire in 2025. The Republicans who designed and voted for the 2017 law expected to extend those cuts beyond 2025 in subsequent legislation. An economic downturn in the next few years would be a good time to enact make the cuts permanent.

The other way to reverse an economic downturn would be to increase government spending. There is now widespread bipartisan support for increased spending on infrastructure of all kinds, just as there was in the 2007 downturn. Although the Obama administration spoke about "shovel ready" projects when promoting its putative stimulus legislation, the reality was that very little of the money was spent on infrastructure, owing to the long delays involved in implementing such projects.

The US Congress and the White House should begin now to develop an inventory of infrastructure projects that could be implemented when the economy slows. If there is no downturn during the next several years, it would still be desirable to start some of those projects.

Another form of spending to stimulate the economy would be increased outlays for defense. Because of the "sequester" rule in the Budget Control Act of 2011, the level of defense outlays is required to decline from 4.3% of GDP in 2012 to just 2.8% of GDP in 2023, the lowest GDP share since World War II. Defense experts agree that this level is far too low for America's defense needs. An increase in outlays to 4% or more of GDP would be a significant source of increased overall demand and a crucial contribution to national security.

The high level of the national debt – about 77% of GDP now and heading to 97% at the end of the next ten years – would create strong resistance to either tax cuts or increased spending. But a significant economic downturn with limited scope for Fed action would leave Congress with little choice.

The need for a future fiscal stimulus makes it clear that the US needs to start now to develop a strategy for slowing the growth of the national debt. That is the only way to create enough room for the expansionary fiscal policy that the economy eventually will need.MARTIN FELDSTEIN

Writing for PS since 2008
116 Commentaries

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Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan's Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush's Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama's Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.
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U.S. economy slowed at year's end, once again unable to sustain 3% growth [feedly]

U.S. economy slowed at year's end, once again unable to sustain 3% growth
http://www.latimes.com/business/la-fi-trump-economy-20180126-story.html

The U.S. economy slowed at the end of last year, once again unable to sustain 3% growth for very long in a trend that has plagued the recovery from the Great Recession.

The 2.6% figure for the October-December period reported Friday by the Commerce Department — the first of three estimates in the coming weeks — was down from 3.2% in the previous quarter and below analyst expectations.

Still, it marked another solid quarter in one of the longest economic expansions in U.S. history, even if it fell short of President Trump's promise of much faster growth because of his polices.

Total economic output, also known as gross domestic product, had expanded at more than a 3% annual rate for two straight quarters. U.S. economic growth hasn't exceeded 3% in three consecutive quarters since 2004-05.

In the wake of that, Trump had boasted that his administration's policies had reversed the sluggish growth of about 2% that had marked the years since the Great Recession ended in 2009.

"The economy now has hit 3%," Trump told reporters last month. "Nobody thought it would be anywhere close. I think we could go to 4, 5, or even 6%, ultimately."

Economist said it takes months for a new administration to affect the economy and that much of 2017's performance, including continued strong job growth, was attributed to former President Obama's policies.

But Trump has argued that his election in November 2016 began boosting the economy even before he took office as business and consumer confidence rose in anticipation of his pro-growth policies.

Those include reducing regulations and pushing through a tax bill at the end of last year centered on large corporate tax cuts.

The Commerce Department said the economy expanded 2.3% in 2017. That was a significant improvement over the previous year's 1.5% growth. But it was below the 2.9% recorded in 2015.

Economic growth stumbled a bit in the fourth quarter of last year as the biggest increase in consumer spending in more than a year was offset by less business investment and a large jump in imports.

Despite Trump's premise that he had already engineered a major economic turnaround, 2017 continued the sluggish sub-3% growth of the Great Recession.

Trump and Republicans have noted that Obama's administration was the first in U.S. history that never produced at least one year of 3% growth.

Though it's true that under Obama the U.S. economy never had a calendar year of 3% growth as it dealt with the aftermath of the Great Recession, his administration did preside over three 12-month periods in which growth exceeded that level.

Those periods were from October 2009-September 2010 and two overlapping periods from 2014-15.

The tax cuts enacted by Congress last month are expected to boost growth this year, but not above 3%. The International Monetary Fund this week projected that the U.S. economy would expand 2.7% this year and 2.5% in 2019.

Last month, Federal Reserve policymakers forecast the U.S. economy would grow 2.5% this year but decline to 2.1% in 2019.

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The Economics of Dirty Old Men [feedly]

The Economics of Dirty Old Men
https://www.nytimes.com/2018/01/25/opinion/solar-power-trump-administration.html

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