Trump on making Mexico pay
Donald Trump made a big announcement today about his plan to force Mexico to pay for the wall. You can see several articles about it, plus links to all sorts of commentary on it, here.
It’s a mouthful. But the gist of the proposal itself is this:
The proposal would jeopardize a stream of cash that many economists say is vital for Mexico’s struggling economy. But the feasibility of Trump’s plan is unclear both legally and politically, and also would test the bounds of a president’s executive powers in seeking to pressure another country.
In the memo, Trump said he would threaten to change a rule under the USA Patriot Act antiterrorism law to cut off a portion of the funds sent to Mexico through money transfers, commonly known as remittances. The threat would be withdrawn if Mexico made “a one-time payment of $5-10 billion” to pay for the border wall, he wrote…
Nearly $25 billion was sent home by Mexicans living abroad in 2015, mostly in the form of money transfers, according to the Mexican central bank. In his memo, Trump said that “the majority of that amount comes from illegal aliens.”
But that figure includes cash from around the world, not just the United States. In addition, a Government Accountability Office report in January said that it is difficult to track how much money illegal Mexican immigrants are sending versus those working legally in the United States…
The memo includes rationales for a number of potential intimidation tactics, including increased trade tariffs, the cancellation of visas, and higher fees for border-crossing cards.
The are constitutional problems inherent in this. There are legal problems inherent in it. There are economic problems and there are international relations problems. And—if this is the sort of thing you care about—there are also human problems.
Then there are problems that are merely ones of execution: will this even have the effect Trump says it will? And last but not least, there is the contradiction inherent in Trump’s saying he will both deport all (or nearly all) of the illegal immigrants in this country and he will simultaneously execute this plan to extract large payments from the Mexican government by threatening the transfer of money that these same illegal immigrants send home to Mexico while working here. I suppose the idea is that he will do this first, and then he’ll deport them all after they’ve served their purpose.
If you read that whole WaPo article—or the other commentary at the memeorandum link I gave—you’ll see that there are many many ways to criticize Trump’s proposal. To do so point by point would be to write something much longer than I’m prepared to do here, so I’ll just say follow the links for that, and let’s just focus on the very very practical. As someone in the comments section of the WaPo article wrote:
OR – Mexicans can remit money via ANY of the world’s other 193 countries. And THEY can remit it to Mexico for a few bucks.
OR – Mexicans can remit money home via Hawala – the ancient, global, trust-based, person-to-person, money transfer system.
OR – a new class of money smugglers can rise up to do it.
Seems reasonable to me. There’s a lot more here:
If the guy who picks tomatoes in the San Joaquin Valley can no longer send money home what will he do? Will he actually stop coming to the US to work? Or will he save the money up and take it home in cash? Or (my favorite) will he decide that the whole migrant worker life has become too uncertain and just bring his whole family to the US for good?
Is targeting wire transfers going to work? What stops an illegal from buying a pre-paid Visa/Mastercard and mailing it home? How about debit cards on US banks? PayPal accounts? Wouldn’t this spawn an unregulated market in moving cash to Mexico?
Is an (more) economically and politically unstable Mexico on our southern border likely to result in more or less illegal immigration? Is a destabilized Mexico a desirable thing from a US national security point of view?
That piece goes on to explain why threatening trade with Mexico would hurt American workers, and this article goes into that issue and others even further. After putting the plan into perspective as part of a Trump “extractive, neo-mercantilist worldview,” the author adds:
…[T]o “make America great again,” [Trump’s] willing to rethink and upend the key components of [US] indispensability: America’s intricate alliances, overseas military bases, and mutual defense pacts, plus the pillars of the post-World War II international system””NATO, the UN, free trade, the global nuclear nonproliferation regime””that the United States helped design…
In an economic model produced for The Washington Post, Moody’s assumed that Trump honored his campaign promises, imposing a 35-percent tariff on imports from Mexico and a 45-percent tariff on imports from China. The model found that if both those countries retaliated with tariffs on U.S. exports, unleashing a trade war, all three countries could fall into recession. American consumers would face higher-priced Mexican and Chinese goods. U.S. companies that sell goods and services to Mexico and China, or are otherwise integrated with the Mexican and Chinese economies, might be forced to lay off workers. The tumult could cause stock markets to plummet and economic growth in Europe to contract. Millions of American jobs could be lost, at least in the short term, while the country’s manufacturing sector scales up to meet the demand for lost imports.
Any of these measures””the remittance regulations, the visa fees, the trade wars””would deal a severe blow to the U.S.-Mexican alliance. The fulfillment of Trump’s related campaign pledges””the renegotiation of NAFTA, the deportation of unauthorized immigrants en masse””would only harden the blow. Coordination between the U.S. and Mexico on intelligence and law-enforcement activities at the border would suffer. America’s commercial ties with its second-largest export market and third-largest trading partner would fray.
As I said, this is just the tip of the iceberg. The submerged part of the iceberg is (at least in part) the instability and unpredictability of a Trump presidency and how it would affect our relations with other countries. A lot of people on the right have been critical of Obama’s foreign policy, but Obama has been a model of predictability compared to loose-cannon Trump, who proposes a re-ordering of America’s position in the world at least as great as the one Obama has tried to effect, if not more so. Here’s one theory about what might happen in a Trump presidency, and it seems rather plausible to me:
After his election, other countries will immediately hedge against the risk of abandonment. There will be massive uncertainty around America’s commitments. Would Trump defend the Baltics? Would he defend the Senkaku Islands [in the East China Sea]? Or Saudi Arabia? Some nations will give in to China, Russia and Iran. Others, like Japan, will push back, perhaps by acquiring nuclear weapons. Trump may well see such uncertainty as a positive. Putting everything in play would give him great leverage. But by undoing the work of Truman and his secretary of state, Dean Acheson, it would be the end of the American era.
[NOTE: Although this isn’t really part of the Mexican issue, it’s related to the bigger picture, and is also worth reading. It’s about Trump’s proposal to eliminate the national debt. I’m no whiz at economics, but I’m beginning to wonder whether Trump has any grounding in macroeconomics as opposed to microeconomics.]
People sending money from the US to Cuba are required to submit a Cuban Remittance Affidavit. I don’t see how a requirement for a Mexican Remittance Affidavit would be any more difficult to implement.
To come up with the $10B that Trump’s wall would cost (over 10 years), all that’s needed is a 5% surcharge on monies going to Mexico, which is roughly what Western Union charges for their services. Not exactly what one would call behavior deterring.
Oh well, given all the ‘difficulties’, obviously nothing can be done!
We are far, far past the point where half measures would prove adequate. The choice is now simple; massive economic pain and disruption OR a facade of lip service enabling a continuation of business as usual, followed by economic collapse and the end of America, past all hope of recovery.
Make no mistake, a Pres. Cruz who attempts to work through a Congress hostile to a return to fiscal sanity, hostile to Constitutional governance and hostile to an end to crony capitalism will accomplish little of note.
Trump is not the man to lead America out of the ditch but no one can make fools wise or the blind see. Pain and catastrophe await because the majority will have it no other way.
Now he’s getting his policy proposals from Cracked.com
http://www.cracked.com/blog/5-realistic-ways-donald-trump-can-accomplish-his-crazy-goals/
Geoffrey:
I don’t ascribe mytical powers to Cruz, but also am not falling into the “we are all doomed, nothing can be done” mind set either. I agree that Trump is not part of the solution.
The are constitutional problems inherent in this. There are legal problems inherent in it.
no, there are no constitutional problems with it any more than you cant employ an illegal, and so on…
the number of legals that do this is very different than the number of others that do… its that simple…
8 U.S. Code § 1324a — Unlawful employment of aliens
https://www.law.cornell.edu/uscode/text/8/1324a
if they are not legal to employ, then what money are they sending? you mean you cant stop illegally obtained monies from being laundered in another country?
give me a break…
1) if its illegal to hire them to work
2) and its illegal for them to ahve a bank account
3) then how is it legal for them to send money that they could not obtain legally?
to send money obtained illegally to anotehr country so that it can be inserted into the bank system legally is technically laundering…
and it also covers earnings in which you did not pay taxes too..
18 U.S. Code § 1956 — Laundering of monetary instruments
https://www.law.cornell.edu/uscode/text/18/1956
Of all the criticisms that might be made of Trump, the one I care least about is what it might do to our relations with Mexico. The more openly hostile the better.
If he suggested declaring war on that Goddamned country it might be enough to get me to actually vote for him.
And I do business with Mexico.
OM,
Call me Casandra. It is not doom I predict but consequence. I base that upon the rationale that this excellent article elucidates.
That same dynamic applies in every area which threatens our republic.
Obama is a symptom. The trade deficit with China is a symptom. Illegals coming over our borders in waves are a symptom. The multiple insanities happening on our “institutions of higher learning” are a symptom. ‘Black Lives Matter’ and the fraud that is ‘global warming’ are symptoms. Stealth jihad and hijrah jihad are symptoms. Etc., etc., etc.
It is not doom I foresee but the “wailing and gnashing of teeth” on a biblical level. The rot is too deep, the denial too ingrained. The reality of mortal consequence is the only thing that will begin to separate the ‘wheat from the chaff’.
Cruz is today’s little dutch boy, holding his finger in the hole in the dike.
Trump’s supporters are gravely wrong about the man but at least some of them sense just how desperate is our plight, for we are a house divided and our leaders wish us ill.
While the barbarians gather at the gate with traitors committed to throwing open those gates.
Would that it could end well but it cannot for humanity, in the aggregate is determined to go down a path of tribulation and ruin.
Geoffrey B…”Obama is a symptom. The trade deficit with China is a symptom. Illegals coming over our borders in waves are a symptom…”
Many of the things you cite are indeed symptoms, of a very serious disease…but the trade deficit with China?If you combine the (partial) liberalization of the Chinese economy with the technological advances relevant to globalization (cheap telecommunications and the Internet, low-cost container freight by sea, rapid air transport) then surely a large flow of exports from China to other nations would have been expected.
The trade deficit would have been *smaller* if the US had fewer manufacturing-hostile policies and a less manufacturing-hostile social climate, but I think it would have been substantial in any case.
GB,
I agree with your assessment that eventually our debt based economy, kept afloat by easy credit and ‘magical’ currency creation, is leading us to a day of reckoning. The same goes for every nation around the globe.
Artfldgr,
I too see no legal issue with banning remittances by illegal aliens.
If the word gets out that returning illegals are carrying cash, they will probably never get home. The criminal gangs, infesting the border, will have a field day.
That probably is a truth that should not be overlooked.
Many people are hostile to or contemptuous of manufacturing for a great many reasons – most rather naive.
Among them are environmentalists, platonic elitists, and those, whether young and callow or old and cynical who see manufacturing and production as a primitive process to be socially outgrown.
And there even those from the right who ruefully recognized that manufacturing and production had been colonized by left-leaning labor unions which drew enormous resources and influence from a largely – at one time- captive labor population. Their despairing “solution” was to transfer the opportunity – the agar plate out of the political left’s reach.
Artfldgr:
I wonder whether you read any of the links, because—whatever you may think of the goodness or badness of Trump’s proposal—the potential constitutional and legal problems are myriad.
Here’s just a bit from the WaPo article:
The right has spent a lot of time criticizing Obama’s use of executive changes to Congressional acts, and has considered that there are very basic constitutional and legal questions regarding what he has done. There is little question that undoing Obama’s executive actions would be well within the scope of the next president, and can be done by executive action. But something like what Trump is proposing here is not that; it is instead a mirror image of Obama’s power overreach, only with a different goal in mind.
DNW:
That’s only a small part of the criticism of this proposal of Trump’s. And even that part is not just about relations with Mexico as a country, it’s about the effect of the entire proposal on certain segments of our own economy.
Mike Giles Says:
“If the word gets out that returning illegals are carrying cash, they will probably never get home. The criminal gangs, infesting the border, will have a field day.
Mike, that money will be stolen before it gets to Mexico. All the border towns will set up Asset Forfeiture Teams to do cavity searches of every person crossing the border, presume any significant amounts of cash are drug related, and seize it.
I’ve repeatedly posted about Trump as Jackson… who DID pay off the national debt by selling Federal assets. ( land )
The net result was that Jackson crushed the Big Bankers — and the national economy.
He’d created the tightest liquidity conditions since the Revolutionary War and its antebellum years.
{ The common history text entirely omits the fact that the Colonies were in a massive depression in the lead up to Concord. The only folks with any cash were employees of the monarch. }
The fire sale of assets would be a global fiasco of epic impact.
&&&&
Trump’s opening salvo aimed at Mexico City would quickly evolve — like all of his real estate deals.
The sole and only purpose of this draft is to suck the oxygen out of Cruz’s campaign.
The most likely Mexican deal will feature the Mexicans shutting down the coyotes — and patrolling the border most actively. This will be in lieu of hard dollar construction funding.
And, yes, the Mexicans will end up building a wall on their northern border so as to keep Trump satisfied.
The days of the “open range” on the southern border will come to a close — rather like the end of the American frontier in the late 19th Century.
Much more worrying than the remittance policy is the proposed tariffs that Trump is proposing and that you mention. Isn’t a tariff war what caused the great depression (I’m not a student of this but that is my recollection of one of its causes)?
David Foster,
To clarify; the size of the trade deficit with China would be much less, if our fiscal and manufacturing policies not heavily oriented in favor of America’s oligarchy.
From one of the links …
The Atlantic:
What was that again? What actually happens if we concede the negative scenario?
Well, you don’t say …
What alliance? Mexico, at least the government, and probably the political culture in general is our enemy.
It’s an entitled punk-ass nuisance state, that should be crushed. No American owes it a second thought or any moral obligation at all.
At best official Mexico is like some obnoxious drunken behaviorally incontinent husband of your wife’s cousin – who, unlike your wife, is nothing to you herself. He’s a worthless pest, and everyone knows it. It is just their attitudes that differ on whether to tolerate it or to do some thing in retaliation. Most of the men in the group would just as happily as not take him out behind the building and kick him till he bled from every orifice. The reason they don’t is because the women become hysterical at the thought.
He’s not at fault. He’s a victim of himself. We should share his pain. Bull …
Sorry, but Mexico is the moral enemy.
DNW—re cultural hostility to manufacturing…I discussed this topic at length in my post Faux Manufacturing Nostalgia:
http://chicagoboyz.net/archives/11680.html
There’s absolutely nothing wrong, unconstitutional, or even unusual about imposing a withholding tax on remittances to Mexico — or anywhere else for that matter. The US already imposes withholding taxes on income paid to most non-US payees, at rates from 5% to 30%. I have been predicting withholding on remittances for a long time.
Of course, those persons who file income tax returns will be able to use the withholding as a credit, just as nonresidents do now. If they never file returns, well, too bad.
Will there be people who try to evade the withholding? Of course. Are there people who try to evade taxes now? Of course. Does that mean we stop collecting taxes? No.
David Foster — No surprise there — it’s the Eloi vs. the Morlocks. Wells was a genius!
blert,
If you asked DJT about Andrew Jackson you would receive a blank stare or at most a he was great like I am YUGE! response. Comparing Trump to Jackson is IMO is a dead end street. There is no there there simply because DJT is as dumb as a stump when it comes to history. Why? Because history began with his birth.
Richard Saunders:
Do you think a tax can be imposed by executive fiat?
Trump has absolutely zero understanding about the national debt and the unfunded welfare state liabilities. ZERO as in zlich. To his sole credit, no other candidates for POTUS has any clue about the drastic measures required to address the problem. It will not be adequately addressed. It must collapse.
I’m feeling cynical this morning. I’ve long thought that we’re having a Reality Election. But as I read your post neo, I realized that this really is a parody. Trump offers a poorly thought out idea, then people analyze it and discuss it. Other people call it like they see it – ‘he’s just mouthing off, and it means nothing’. This smaller group knows for sure that it would just be a starting point, and would evolve into something completely different if elected. Or even next week – who knows.
But the same thing happens with the serious candidates. They make these promises/stated intentions, put up policy opinions on their website, then get elected and things evolve into something different.
Trump’s campaign is an entertaining parody of our system.
If I were conspiracy minded, I would say that the global elite is bringing bread and circuses to our election and governing.
Also – selling off federal assets has been a long standing libertarian belief. I think having a fire sale would be a bad thing, but the trend should be reversed.
The attitude you cover is widespread. And as you point out the reasons behind the attitude are various.
For some it is as if they equate all of manufacturing with the low IQ potbellied teenaged shamblers who were shunted into shop and “practical math” class as a kind of dumping ground for the project of mass education.
The fact is that those guys were likely no more fitted to become tool and die men than they were electrical engineers or medical doctors.
Tightening the bolts on rear deck lid brackets for 8 to 10 hours? loading a fixture with a cover plate and pulling the handle of a Natco gang drill again and again? Well, that might be something they could do to earn money honestly, however miserable the work might be.
And because semi-automated manufacturing and assembly at one point emphasized a high degree of division of labor and repetitive rote work, it absorbed many of these brainless types and kept them off the streets. Of course they were sometimes about as useful to corrupt and self-dealing union leaderships as they were to their employers.
There is a theory that the stupid can be as morally edified as anyone else, that moral sense is a different faculty than the intellect, so to speak; and that the dull therefore do not deserve ostracism and marginalization -done in self-defense one might say.
I don’t know myself …
At one extreme the self-regarding effete “elite”, who are proudly clueless when it comes to the material foundation and contingency of their own lives; at the other, those who have to be constantly reminded to close their mouths because there are flies, about.
And trapped in between, by their own civility and tender consciences, are the rest.
Neo — It’s not a tax, I’m talking about fully creditable withholding.
Actually, the IRS probably has the power now to order 30% withholding on all remittances (IRC Sec. 1441), but it might have to issue deficiency notices to everyone making such a remittance, or even better (if it had the computer capacity to do so) run the name and social security number (Hah!) against the list of filers and issue a jeopardy assessment against any who don’t have SSNs or don’t file returns.
However, if you think that’s an unwarranted exercise of the IRS’s power, do you think any Congressperson could be found to vote against a withholding tax on remittances? (Excluding Sen. Sanders, of course.)