In June I stumbled upon a quirky piece on Bloomberg Businessweek, written by Enda Curran and Augusta Soraiva. It summarised a paper by the US Congressional Budget Office (CBO), a think tank camouflaging as a state agency helping Congress to evaluate the varied, often unintended impacts of budgetary policy measures.

It answers questions parliamentarians throw at them when they want a bipartisan judgement on divisive policies, like ‘The long-term outlook under alternative scenarios for the economy and the budget’, ‘How the effects of policies differ by race and ethnicity’, or ‘Budgetary effects of policies that would increase hepatitis C treatment’. I find it astounding the agency could survive without much critique or the threat of defunding in a political climate of division, hatred and partisanship. The 270-person-strong department did so by giving their findings without opining on them.

The low-key CBO paper the Bloomberg piece reflected upon ‘The budget and economic outlook: 2024-2034’, contained a bombshell. In a country where Presidential candidate Donald Trump garners votes by promising to build a wall to keep out immigrants and promised to deport them all, lock, stock and barrel, and the incumbent Joe Biden, hoping to be re-elected in a climate of xenophobia, recently sought executive powers to turn immigrants back at the border, a state agency had the audacity to point out the financial upside of out-of-control immigration.

By sifting through immigration data from Homeland Security the CBO realised that on top of legal immigration, illegals and arrivals overstaying their visa time limits comprised 1.3 million people in the last tax year alone. Assuming the trend continued, the CBO economists calculated that this would boost GDP growth by $7 trillion and raise additional tax revenue to the tune of $1 trillion. (Additional economic growth is achieved because enterprises can increase their output collectively without – expensively – cannibalising their competitors’ workforce, while additional salaries boost demand/consumption and tax revenue.)

As an investor I have wondered like pretty much everyone else how it was possible that despite the fiercest tightening of financial conditions in a generation, the US economy had managed to stay afloat so well. The economy was growing steadily, unemployment stayed at historical lows, jobs added monthly to the workforce hit record figures, and companies’ profits rose against all expectations. When would the day of reckoning come, ruining my stock investments and boosting my bonds?

First, we assumed that excess savings amassed during COVID times, when the government showered money on a population sitting put in forced idleness, would come to an end one day soon. And it happened. Most savings are up. Credit card delinquencies are rising, as are car loan defaults. Yet consumption is still holding up. Inflation, turbo-charged by wild revenge consumption after the lockdowns, is coming down, by some measures to the desired levels of two per cent per annum.

Then we calculated that most corporations that had cautiously loaded up on cheap loans during the lockdown crisis would eventually have to return to the debt market and then feel the pinch of higher interest rates. Well, the US government was the first to get squeezed. Interest payment on government loans is now exceeding a trillion $US, crowding out funding for other departments. Yet high interest rates and high government borrowing has not stifled private investment as many had feared. And corporate bonds are yielding not much more than government debt.

Warning signs of an approaching recession – the expected outcome of monetary tightening – were aplenty. Yet its occurrence had to be miraculously postponed. And postponed. Other than Europe, which still has to struggle finding the workers it needs, the US is adding jobs without overheating labour costs which are gradually normalising. Job openings are coming down, yet payroll counts keep growing.

The CBO has lifted the veil on the conundrum. What has kept the US economy humming was unfettered, illegal immigration! Now this puts the presidential candidates in a bind: how could you put an end to immigration that the electorate loathes without damaging the economy with dire financial consequences for all voters?

What has kept the US economy humming was unfettered, illegal immigration- Andreas Weitzer

In Malta we face a very similar predicament. What has kept our economy in shape through the stifling years of the GFC and the Covid roadblocks was the ‒ often uncomfortable ‒ growth of immigration. It is easy to accuse the discontented of xenophobia and ugly forms of racism. True, right-wing commentators, including some opinion writers in this paper, bemoan the decline of native speakers, the rise of bikini wearers in public and the loss of a “true Maltese” way of life as captured in the pretty water colours of Marco Arcidiacono, without giving thought to the economy.

But the sense of unease caused by our rapidly growing population should not be dismissed with an arrogant shrug. As an island close to the African coast, we feel the impact of boat refugees more severely than other European countries. In this respect we are torn between the ethical imperative of compassion and the alienation caus­ed by unwanted guests we didn’t invite into our living rooms.

But we also loath the burden of workers gaudily invited by our businesses. These legal immigrants make us richer, but imperil our comfort. Public services are stretched. New housing encroaches on our green space, uglify our island and produce noise, dust and a tsunami of garbage. We feel endangered like the nesting turtles in Golden Bay. This sense of an end of life as we knew it is also affecting me, a foreign immigrant.

What makes the unbalanced growth of our economy more grating ‒ and this includes unfettered, low-budget tourism ‒ is not only the noise, the hustle and bustle and the disfigurement of public spaces this causes. It is also the growing awareness that our economy is exclusively serving a tiny clique of politically connected and favoured businesses. Instead of providing sensible, long-term transport solutions we build highways American style. We pour concrete over our small island, causing flooding and the disappearance of green, open spaces. We sell off our hospitals for private, illegitimate gain, thus sacrificing the scope and level of medical service now needed even more to support a growing populace. We wilfully incapacitate the public services vital for the (economically necessary!) growth of the labour force: the police, the courts, the magistrates, parliamentary commissions, the planning authorities.

All truth told, what makes immigration such an impossible burden are not the invited or uninvited arrivals, but our political-economic choices on how to deal with them.

As a retail investor the threats to my savings are multiform. The tariff wars between the US, Europe and China will certainly have a detrimental near-term effect on inflation. A President Trump could cause bond markets to crash, Liz Truss-style. Increasing war hostilities may become incalculably damaging. But the clearest threat is emanating from the two US presidential hopefuls making good on their word to curb immigration. Unbridled immigration was the last defence against a US recession. A downturn of the US economy will cause damage to all asset classes, globally.

 

Andreas Weitzer is an independent journalist based in Malta.