Wednesday, March 25, 2009

A Trojan Horse for Green Cards

Eddie Meek points me to this WSJ article, which suggests that, in order to raise housing prices, Green Cards should be given to foreigners who buy a home in the U.S. At its best, the proposal is a Trojan horse for opening the gates to immigration.

Edward Glaeser has effectively argued that, thanks to a housing “bubble,” we have too much housing and are better off by adjusting to that reality rather than introducing a subsidy or trying schemes to temporarily and artificially bolster housing demand. On these terms, it might seem that the cards-with-houses proposal is another attempt to avoid taking needed medicine.

However, the flip side of “too much housing” is too few people to live in the houses. From some perspectives, America has had, and continues to have, too few people. Skilled immigrants add much to our economy and society. They are often leaders, for example, in patenting and starting businesses. Yet we still severely restrict their entry into the United States.

A perennial concern is that our neighborhoods might not be able to absorb many immigrants without some turmoil. But these are not normal times. Many neighborhoods have homes that are in need of occupants, so if there were ever a good time to distribute more green cards, this may be it.

However, the cards-with-houses proposal is not just about cards, and therein lie its weaknesses: It proposes to tie the green card to a housing purchase. As a result, the proposal is excessively interventionist and, compared with the simpler alternative of just distributing more green cards, would not achieve its desired effect (raise housing prices).

If green cards were sold without housing-purchase conditions, that would bolster housing demand and (in the short run, before additional housing might be built to accommodate the extra demand) therefore prices. The reason is that foreigners working in the United States (that’s the purpose of the green card — to make it easier to work here) need to live somewhere in the United States.

Adding a housing purchase condition to green card distribution, and wiping out the old means for obtaining green cards, would not bolster housing demand. It would only reduce the willingness of skilled immigrants to seek a green card. With the extra condition, immigrants would have to either buy a house that they would have purchased anyway (see above), or turn around and rent or sell the housing in the case that they do not really want to own one. Either way, housing demand would be unaffected.

As with many well-intentioned policy proposals, the cards-with-houses policy quickly degenerates into government micro-management. The authors of the proposal recognize the resale problem, and think they can “solve” it by having government authorities watch for several years to make sure that the immigrants still own, and do not rent out, the houses they have purchased. But as everyone in New York knows from witnessing (or partaking in) rent control cheating, it is quite difficult to police who lives in which house.

The simpler and more efficient alternative is to drop the house-purchase requirement — just distribute more green cards to skilled foreigners — and trust that immigrants have to live somewhere and will thereby bolster housing demand.

Cards-for-houses might be politically more feasible because it more explicitly leverages the housing crisis to increase immigration — an increase that would make sense (but lack political support) even without a housing crisis. I cheer for the Greeks in the Iliad, but are Trojan horses a necessary part of our democracy? Acting as if our political system is so dishonest that worthwhile goals can be achieved only by poorly executing ill-advised surrogate ones is not a good way to start someone’s time in the United States.

1 comment:

Dr Gene Nelson said...

A woefully one-sided analysis. As my 2007 article, "The Greedy Gates Immigration Gambit" documents, there have been more than 24 million visa admissions in just 5 high-skill visa programs between 1975 and 2005.

This unprecedented tidal wave of immigration has crowded out experienced American citizen technical professionals, who are then forced to take positions that make scant use of their knowledge, skills, and training. That massive displacement is very harmful to innovation - and drains governments of financial resources.

I'm willing to wager that the writer receives incentives to boost immigration - and ignore the trauma of bright American citizens.