On Tuesday I blogged about the data behind the effect of free trade on America's economy (more specifically, on American jobs). In Arizona, debate over the pros and cons of NAFTA - especially in regard to trade with Mexico - is particularly salient. Does free trade do more damage to Arizona's ailing economy? Or could it provide a much-needed boost? A separate but related issue is the economic impact of immigration.
Both free trade and immigration are hot-button topics in this border state, but it's critically important to focus not on ideology, or even on the social issues, but on the numbers. Let's take a look.
The economic impact of Arizona-Mexico trade
The weekend before last, in the "Border" edition of its Arizona 2020 series, the Arizona Republic featured a number of insightful articles. Some of the highlights:
- "Mexicans who cross the border legally into Arizona spent $2.69 billion here from July 2007 through June 2008, according to research by the University of Arizona's Eller College of Management." (Arizona must think internationally)
- "Every day, Mexicans spend some $7.3 million in Arizona, helping to employ some 23,400 Arizonans, a 2008 University of Arizona study found. And they're spending more every year: the average Mexican family spent $91.75 during each trip to Arizona in 2001; by 2008 it had doubled to $201.11." (Mexico holds potential for rebuilding Arizona economy)
- "Mexico is Arizona's largest trading partner, with $5.9 billion in exports in 2008." (Mexico holds potential for rebuilding Arizona economy)
- "Eighty percent of Arizona's trade in Mexico is with only one of its 31 states, Sonora. . . For years, Arizona has tied its economic development with Mexico to that of neighboring Sonora, a sparsely populated state that accounts for only 2.3 percent of Mexico's 103 million people and 2.6 percent of its gross domestic product."(Mexico holds potential for rebuilding Arizona economy)
- "And while those exports accounted for 2.4 percent of Arizona's economic output, Texas' exports to Mexico accounted for 5 percent of its output." (Mexico holds potential for rebuilding Arizona economy)
- "Trade-related jobs pay 17 percent more than those not trade-related." Arizona must think internationally)
- "Not surprisingly, delays in crossing the border - whether the result of limited crossing lanes, not enough inspectors, or inadequate road connections on either side - exact a heavy financial price in the loss of increased traffic. Estimates range as high as $9 billion each year in lost sales and investments." (Opportunities for trade are out there - just reach out)
The economic impact of immigration into Arizona
In 2008, Judith Gans, of the Udall Center for Studies in Public Policy at the University of Arizona, published the results of a huge study on the economic impact of non-citizens (i.e. legal and illegal immigrants) in Arizona's economy. This is what she found:
- Consumer spending in 2004 by non-citizen households in Arizona was an estimated $4.4 billion. Approximately 28,000 full-time-equivalent jobs can be attributed to this spending along with $4.3 billion of output in the state's economy. This output included labor income of about $930 million, and other income (defined as rents, royalties, dividends, and corporate profits) of $560 million.
- Non-citizens, for their part, contributed about $29 billion, or eight percent of Arizona's economic output, resulting in about 280,000 full-time-equivalent jobs. Their output included $10 billion in labor income, and $3.3 billion in other property income. The state tax revenues resulting from this economic activity were approximately $1.5 billion.
- Total state tax revenue attributable to immigrant workers was estimated to be about $2.4 billion ($860 million for naturalized citizens plus $1.5 billion for non-citizens). Balanced against estimated incremental fiscal costs of $1.4 billion, immigrants in Arizona generated a net fiscal contribution of $940 million toward services such as public safety, libraries, road maintenance, and other areas.
Looking for more? Watch a video on "What is the overall impact of immigration on the economy?"
Granted, Gans' study looked at the economic impact of non-citizens during the most recent economic boom in Arizona; it's hard to say how that impact may look different today.
But consider another viewpoint, coming from Ed Prescott, a professor of economics at ASU and winner of the 2004 Nobel Prize in economics:
"Both the current and the Great Depression started with a near complete cut-off of immigration. During the Great Depression, President Hoover thought that foreigners were taking Americans' jobs (he was an engineer; he thought in terms of physical systems and not in terms of economics). He bragged about sending all the Italians back to Italy (the U.S. had a large number of Italian immigrants at that time).
A dramatic decrease in immigration also contributed to the onset of the current depression. The U.S. shut off immigration in August 2007. Before that, the U.S. had a million people net immigrating each year. In 2008 only 100,000 more foreigners came to the United States than returned to their country of origin."
The bottom line in the free trade and immigration debates is this: look at the facts and consider the broader economic impact of our policy decisions (that's something we'd do well to do that in every case).
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Development note: Today President Obama announced the creation of a task force to promote American exports, "hoping to bolster competitiveness overseas and create jobs in the United States." That's the right idea: promoting American competitiveness by incentivizing innovation. The wrong idea: trying to "protect" American jobs by blocking free trade (which disincentivizes innovation and hurts us all in the end).