From Norm Matloff’s H-1B/L-1/offshoring e-newsletter.

Norm Matloff writes

As is always the case when there are news stories, such as the one enclosed below, [Widespread problems, fraud found in H-1B program--U.S. study finds incidents of forged documents, fake degrees, 'shell' companies, By Patrick Thibodeau, Computerworld, October 9, 2008 ] about fraud in the H-1B program, I’ve been flooded with e-mail messages from people who are elated that “the truth has come out.” As always, my response to them is “Thanks for writing, but as I have stated repeatedly, the main issue in H-1B/employer-sponsored green cards is loopholes, not fraud. Indeed, the industry lobbyists love these news stories, because it diverts attention away from the real issue, the loopholes.”

No one ever seems to understand that last point. Yes, the industry lobbyists are HAPPY whenever articles on fraud appear, as it allows Congress to shift responsibility to executive branch, which then tightens up enforcement, while leaving the central problems untouched. Congress can then wash their hands of the matter.

Granted, the 20% fraud/technical error rate found in the current audit is significant. But it’s no worse than the 21% rate found by the State Dept. in 2000, and the similar results in the 1994 DOL audit. And as to the H-1B found working in a laundry, Bartlett and Steele of the Philadelphia Inquirer found all kinds of incidents like this in their investigation (eventually published as a book[America: Who Stole The Dream]) in the 1990s.

More importantly, that 20% rate must be considered in context:

(a)Whatever new regulations the executive branch imposes as a result of this audit, the employers can easily adapt. For example, the audit found that some employers were paying below the official prevailing wage because they had the worker pay his own H-1B fees, causing his actual pay to dip slightly below the legally required wage. This is nickel-and-dime stuff, folks. So, the employers will now pay the worker slightly higher–big deal. The employers will still be paying only the official prevailing wage, which is far below the real market wage, and it will be business as usual. Again, this is the loopholes at work, in this case in the legal definition of prevailing wage. Most employers who are using H-1Bs as cheap labor are doing so FULLY LEGALLY.

So whatever the executive branch does now to address fraud and technical errors in H-1B applications, it will in most cases NOT cause the employers to switch from hiring H-1Bs to hiring Americans.

(b) The true rate of abuse of the H-1B program is near 100%. (Note the distinction between “fraud” and “abuse.”) Virtually all H-1B hires violate the spirit (though not the letter) of H-1B, which is to remedy labor shortages. In virtually all cases, the employer could hire a qualified American. The main exception is the hiring of “the best and the brightest,” which as I’ve shown statistically in my CIS article and elsewhere, is the case only for a tiny percentage of H-1B hires. And this near-100% rate holds for nearly 100% of the employers, including the big-name firms (whom the USCIS report cites as being largely innocent).

I don’t know how to say this any more clearly or loudly, but once again, everyone: THE FRAUD ISSUE IS IRRELEVANT. It will be used by the industry lobbyists for their benefit, to prevent Congress from taking real action. This includes the excellent Durbin/Grassley bill; if the bill is addressed at all by Congress, the good, loophole-plugging, parts will be deleted, leaving only the parts dealing with fraud, which are of very little value.

Norm

According to the October 11th Daily Express (London)

Yesterday the Daily Express revealed that, in an apparent contradiction of immigration policy, thousands of migrants – like Kanoute Tieny from Mali – are being given up to £5,500 in grants by the EU to return home to Africa.[Secret Plot To Let 50 Million African Workers Into EU, by Nick Fagge]

I haven’t found the implied Daily Express story from October 10th that might provide more details about those grants, but I did find a year-earlier article wherein asylum seekers turned down by Britain were being “bribed” to go home (i.e. being bribed to comply with their deportation orders!) with a cash bounty of up to £3,000. [£3,000 Bribes To Persuade Failed Asylum Seekers To Return Home, by Tom Whitehead, September 3, 2007] So we can say that the we’ll-pay-you-to-go-away idea is in the air.

As the quote above makes clear, the £5,500 grants are at odds with the demographic engineering that’s hankered after by the Eurocrats, which is the real focus of the current article:

Brussels economists claim Britain and other EU states will “need” 56 million immigrant workers between them by 2050 to make up for the “demographic decline” due to falling birth rates and rising death rates across Europe.

The report, by the EU statistical agency Eurostat, warns that vast numbers of migrants could be needed to meet the shortfall in two years if Europe is to have a hope of funding the pension and health needs of its growing elderly population.

This approach of bringing in armies of low-human-capital workers from the Third World to rescue modern economies is presumably equivalent to the storekeeper who loses a little on each item he sells but hopes to make it up on volume.

Of course, that pertains to just the immigrant generation, itself. Thomas Sowell has memorably pointed out the social time bomb that’s inherent in such a project:

There is the second-generation phenomenon. You have people who move in from some poor country — the Middle East, Mexico, whatever. Those people may be very glad to be in the United States or Britain or wherever they may be. But then they have children. And their children have never seen those other places; they’ve never lived that poorer life. All they know is that the population around them is a hell of a lot more prosperous than they are. And there are all sorts of ideologues and hustlers ready to tell them that it’s society’s fault that they don’t have what other people have. This then gives you the people who hate the country in which they live.

Anyway, the promising Cash On Departure approach was suggested several years ago by VDARE’s Steve Sailer (A Buyout Option For Europe’s Muslims?, November 6, 2005; and The Sailer [Immigrant Buyout] Scheme: Well—Why Not?, November 27, 2005).

So progress may be on the march, at least in Europe! Now, if our Republicans would only catch on, systematically, to the other, better known “Sailer Strategy” …

Paul Krugman just won the Nobel Prize in economics, but they should have given it to the economist who has been hollering since the 1990s about the government’s mortgages for minorities and the poor policies, Stan J. Liebowitz.

He’s got a new analysis out that’s fairly definitive.

UT Dallas economist Stan J. Liebowitz’s witty report on how “relaxed lending standards” to increase home ownership among minorities and low income whites led to the collapes is now online (1 meg PDF).

Anatomy of a Train Wreck: Causes of the Mortgage Meltdown
by Stan J. Liebowitz

Download PDF File (29 pages)Why did the mortgage market melt down so badly? Why were there so many defaults when the economy was not particularly weak? Why were the securities based upon these mortgages not considered anywhere as risky as they actually turned out to be?

This report concludes that, in an attempt to increase home ownership, particularly by minorities and the less affluent, virtually every branch of the government undertook an attack on underwriting standards starting in the early 1990s. Regulators, academic specialists, GSEs, and housing activists universally praised the decline in mortgage-underwriting standards as an “innovation” in mortgage lending. This weakening of underwriting standards succeeded in increasing home ownership and also the price of housing, helping to lead to a housing price bubble. The price bubble, along with relaxed lending standards, allowed speculators to purchase homes without putting their own money at risk.

The recent rise in foreclosures is not related empirically to the distinction between subprime and prime loans since both sustained the same percentage increase of foreclosures and at the same time. Nor is it consistent with the “nasty subprime lender” hypothesis currently considered to be the cause of the mortgage meltdown. Instead, the important factor is the distinction between adjustable-rate and fixed-rate mortgages. This evidence is consistent with speculators turning and running when housing prices stopped rising.

Anatomy of a Train Wreck is included in the forthcoming Independent Institute book, Housing America: Building Out of a Crisis, edited by Randall G. Holcombe and Benjamin Powell.

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Stan J. Liebowitz is Research Fellow at The Independent Institute, Ashbel Smith Professor of Economics and Director of the Center for the Analysis of Property Rights and Innovation at the University of Texas at Dallas, and co-author with Stephen Margolis of Winners, Losers, and Microsoft: Competition and Antitrust in High Technology, published by the Independent Institute.

Keep in mind that 15 years ago Peter Brimelow debunked the original report/hoax on discrimination against minorities in mortgage lending that set off this chain reaction catastrophe. See his 1993 Forbes article The Hidden Clue.

There is an interesting degree of overlap between the swing states in recent presidential elections:

The recent spurt of mortgage defaults:

I would suggest that what Karl Rove was paying attention to wasn’t just particular minority groups, but that hewas attempting to ingratiate the GOP with the political and business establishments in states that were likely to be key in national elections.

Even when immigration isn’t directly affecting apportionment of electoral votes, there is an indirect effect, because much of the growth in other states relates to Americans leaving high immigration states like California. If you look at the direct effect of immigration, there has been a tendency to swing votes towards Democrats. However, the net effect of apportionment has been towards Republicans(i.e. a Democrat that won the same states as Gore in 2000 wouldn’t be as close to the White House as Gore was). One of the oddities of the Electoral College  is that minor movements of population can have a significant impact on national elections. I can’t help but wonder if part of Rove’s logic in encouraging lending patterns was to create an electoral map that had some short term advantages for GOP candidates-and this whole plan backfired wildly.