After World War II the United States along with many other countries experienced a population explosion. With soldiers returning from war creating new families, birth rates shot up. By the 1960s, books were written claiming that the dangerous rate of increase in world population meant that we needed to start looking for another planet to populate, as earth would soon become overpopulated.
In recent decades the dramatic drop in birth rates in the United States and elsewhere has produced a Darwinian natural selection paradox. The species that has come to dominate the earth has suddenly dramatically reduced its rate of population growth to below the population replacement rate of 2.1 children for each woman in her reproductive years. The world population appears to have reached a maximum with many countries subsequently experiencing a persistent and precipitous drop in their populations.
In the United States, with the large number of baby boomers retiring, an even more dramatic potential reduction in the labor force would be occurring if it were not for the ability of America to attract large numbers of immigrants. Without a substantial number of immigrants, the work force in the United States would shrink. Without additional workers, the cost of everything would rise substantially.
Someone needs to go out in the hot California sun and pick the fruits and vegetables that we all need, or we will all end up paying a lot more for our basic groceries. I am too old to climb up on my roof to replace my rusting gutters and downspouts, so I am forever grateful to those two Spanish-speaking immigrants who did it for me. I also need them to pay the earning tax matched by their employer to finance my Social Security income. A smaller work force with fewer people working would mean less money for Social Security.
The reality is, from a purely economic point of view, we need immigrants now more than ever. Chaos at our borders is never welcome. Many undocumented immigrants need to be processed to become legal immigrants so that they can properly contribute to our economy and keep prices down. Statistically, immigrants in general have a lower crime rate and a higher rate of new business creation than the general population of Americans. We often get the best and the brightest people coming to America in what is often seen as a brain drain in their originating countries. We should feel blessed to have such wonderful people coming to America in what has been a long tradition that began in 1492 with the first “illegal” immigrant coming to the Americas, Christopher Columbus.
Economists call the idea that there is somehow a fixed number of jobs in this world, and we need to fight over them, the lump of labor fallacy. It may be cheaper to produce textiles in China than in the United States, but that does not mean that the United States cannot expand the economy to provide jobs with greater productivity and higher compensation in America than those menial jobs that we have off-loaded to China.
What about jobs in the steel industry? Shouldn’t politicians increase tariffs to protect jobs in the steel industry to gain the votes of the members of the United Steel Workers (USW)? When competition from abroad is blocked, it results in higher steel prices that suppress jobs in industries using steel as a factor input in the production of their products. Protecting steel industry jobs with tariffs just takes jobs away from the workers in the steel-using industries. Taxing Peter to pay Paul may work to deceive voters, but it does not improve overall employment or productivity in our economy and just raises prices for everyone.
When products for Walmart are unloaded at the dock at the port of Long Beach, California, a U.S. federal inspector and a broker representing Walmart arrange for Walmart to pay the tariff on that shipment. To keep its prices low, Walmart maintains a very low profit margin and relies more on volume to make its money. Since many of the products Walmart sells are low-price day-to-day necessities, Walmart can and generally does pass the cost of the tariffs on to its customers. The wonderful pair of memory foam sneakers from China that I bought at Walmart a few years ago for $9.98 are now selling for about $15 after the imposition of higher tariffs.
More tariffs will directly and immediately drive up prices. Some politicians seem to think that the exporting country has to pay for a tariff we place on the products we import from them. There is no way that the Chinese government is going to pay us for any tariff we place on Chinese exports. At best the Chinese could cheapen their currency to maintain their competitive position, but even that may be unlikely as they would like the Chinese yuan to replace the U.S. dollar as the world’s reserve currency.
Are we losing to China in the international trade battle? The Chinese people take their natural resources and make products for us that we import at exceptionally low prices. In return, instead of sending them our products, we send them pieces of paper with George Washington’s picture on it ( U.S. dollars ). Ordinarily, those U.S. dollars would go out to the foreign exchange markets and drive down the price of U.S. dollars and increase the price of the Chinese yuan (also known as the renminbi or people’s money). That would make our products cheaper for the Chinese to purchase and the Chinese products more expensive for Americans to purchase to create a more balanced trade between the USA and China.
But the Chinese government does not allow that to happen. The Chinese administration is facing a political problem. Many Chinese peasants are moving from the rural areas in China to the cities. The Chinese government needs to find work for these peasants to avoid the political unrest that would come with large numbers of unemployed Chinese peasants in the cities. But China does not yet have a large enough middle class to buy up all the products that these peasants can produce. Consequently, China is taking advantage of America’s much larger middle class to find the buyers it needs for all these products. To avoid a rise in the price of the Chinese yuan and a drop in the price of U.S. dollars, the Chinese government requires that the Chinese businesses turn in those dollars to the Chinese government in exchange for yuan. The Chinese government uses those dollars in its sovereign wealth funds to buy US Treasury securities in the New York financial markets.
Has China been taking advantage of America in this battle over international trade? Let’s see now, we get the Chinese products, but instead of sending them our products, we send them U.S. dollars and keep our products for ourselves. The Chinese government then loans us our money back to pay for our federal government deficit spending by buying trillions of dollars in US federal debt ( US Treasury securities). Who is getting ripped off here? Hint: It is not us.
Eventually China will build up a large enough middle class to not have to rely on America’s middle class to provide enough demand for Chinese products. At that point China will allow all the U.S. dollars it acquires to flow out into the foreign exchange markets to drive down the value of the U.S. dollar and increase the value of the Chinese yuan to produce a more balanced trade between China and the United States.
In addition, the U.S. dollar is the world reserve currency and is used widely in international trade. As international trade expands, the demand for U.S. dollars increases so the US is able to print more dollars out of thin air without taxation and without undermining the value of its currency. America is not getting ripped off. In fact, it is almost like some type of colonial exploitation.
Can stopping abortions make American great again? What are the demographic and economic consequences of abortion restrictions? Advocates for more restrictions on abortions may be in for a big surprise. America already has a less-than-replacement birth rate, and it has been falling steadily. But won’t stopping abortions mean more children and eventually a larger workforce?
Banning abortions won’t result in more children. In fact, in response to abortion bans, more men are already getting vasectomies and a new form of male chemical contraceptive has just been invented. Women may cut back on sex and make much better use of contraceptives. Even marriage rates are falling. The fear among women is that having a miscarriage may be interpreted as some form of illegal abortion so that the doctor and mother may be brought before a court for the judge and the jury to decide if the loss of the fetus was really a miscarriage or actually an abortion. Women may decide to avoid this risk by just not getting pregnant. Will having fewer children make America great again?
But won’t having fewer children reduce the demand for day care workers and free more women up for the workforce? In theory and in the past, this may have worked. But in reality, in recent years retired grandparents have more and more filled the day care role. Consequently, most young mothers are already working, so having fewer children will not lead to much increase in the workforce, either now or in the future.
Baby boomers are retiring big time. A shrinking workforce means that fewer goods and services will be produced. But the baby boomers are not dying off that fast, and the demand for health services is growing. Supply of goods and services will drop, but demand will remain strong. Too much money will be chasing too few goods and services. If you are unhappy with our current rate of inflation, you haven’t seen anything yet.
Deporting massive numbers of undocumented immigrants will shrink our workforce, suppress the supply of goods and services and drive up prices. Imposing tariffs will drive up prices even more. Abortion restrictions will ironically cause us to have fewer children and potentially shrink our work force, which, in turn, will reduce supply relative to demand and drive up prices.
These policies taken together will generate inflation levels only seen in recent years in Zimbabwe and Venezuela. If you think that deporting all undocumented immigrants, imposing more tariffs and imposing abortion restrictions are going to make America great again, you are going to be in for a big surprise as the American economy shrinks and inflation drives prices and the cost of living through the roof.