IMMIGRANTS LAID the foundations of America’s success as a country. About 45m people currently residing there, 14% of the population, were born overseas. About half of them have become naturalised citizens; one-quarter are lawful permanent residents with a path to citizenship; and about one-twentieth are temporary residents. The remainder, 11m or so “undocumented” immigrants that reside in the country illegally, wait in hope for a means of gaining a legitimate status.
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Undocumented immigrants are winning new rights in certain areas, however. California recently announced a proposal to cover medical bills for those over 50 years old. And New Jersey and New York have launched schemes to provide economic relief for the undocumented. On June 26th Democrat lawmakers in Oregon went the furthest yet, by voting to expand health-care access to all undocumented immigrants living in the state. The bill’s sponsors argue that many of the recipients will be frontline workers that have suffered disproportionately during the pandemic. Republicans complain that such efforts are a fiscal burden.
Granting citizenship, however, remains the most controversial of all policy options. A recent analysis by Raúl Hinojosa-Ojeda and colleagues at the University of California, Los Angeles argues that it should not be. Legal recognition of undocumented immigrants would provide a big boost for America’s economy as many would begin paying taxes for the first time. The academics looked at four different future scenarios currently being considered by Congress.
The first, based on the US Citizenship Act of 2021, creates a path to citizenship for all 11m undocumented immigrants—about 8m of whom are in the labour market. Over the next ten years these workers would add nearly $1.5trn to America’s economy, about 0.5% of GDP. In turn this would generate tax revenues of $370bn and 370,000 jobs. The benefits could be higher still, because the bill would allow for immigration to increase.
The second scenario involves a more piecemeal approach where bills are introduced with a narrower focus. One ambitious one would create a path to citizenship for about 6m undocumented key or essential workers. In that scenario, the study’s projection of the bill’s economic contributions to GDP declines to $1.2trn and tax receipts fall to $300bn.
Two other bills propose granting citizenship to 400,000 immigrants who were brought as children—known as “Dreamers”—and to over 250,000 workers that have fled natural disasters and armed conflict who are living in America under a temporary protected status. In these final two scenarios the study’s projections of the economic benefits, although positive, fall substantially, to about $110bn and $60bn, respectively, over ten years.
In practice, most of these bills face an uncertain future in Congress. The US Citizenship Act of 2021 is by far the most ambitious, and its prospects do not look good. Congress has not managed to pass a comprehensive immigration-reform bill since 1986. According to GovTrack, a website, the Dreamers bill has by far the highest chance of passing, at just 29%.
That is because not everyone is keen on helping illegal immigrants. Republican lawmakers say that illegal immigrants exploit social benefits, diminish job prospects for native-born citizens and exacerbate violent crime in cities. Their claims are largely unsubstantiated. In truth, they pay roughly $12bn in local and state taxes each year, do not qualify for most social benefits and commit crimes at lower rates than American citizens. Model citizens indeed.
The global economy is falling below expectations – The Economist
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IT IS WELL known that markets hate uncertainty. Bad news, then, that by one measure the world economy is throwing up more nasty surprises for investors. Citigroup’s global economic-surprise index (CESI), which measures the degree to which macroeconomic data announcements beat or miss forecasts compiled by Bloomberg, has fallen into negative territory for the first time since November (the indices for America and China have been negative since mid-May). Since the summer of 2020 economic indicators had tended until recently to surprise on the upside. But as inflation has surged and consumer confidence has flagged, they are now failing to meet forecasters’ expectations. (See chart.)
Measures of economic surprises appear to be a useful way to gauge market sentiment. When the economy is booming data releases will typically be better than analysts expected, boosting the CESI. During an economic downturn, economic statistics will fall below the consensus estimate, leading to negative surprises. From June 2020 to July 2021, when the CESI for America was positive thanks to upbeat employment, inflation and housing figures, the S&P 500 index of big American firms rose by 38%. Since then the CESI has bounced above and below zero, and shares have fallen by roughly 9%.
In a paper published in 2016 Chiara Scotti, an economist at the Federal Reserve, constructed her own surprise index based on five indicators: GDP, industrial production, employment, retail sales and manufacturing output. America’s index also measured personal income. Ms Scotti found that positive economic surprises in America were associated with appreciation of the dollar relative to the euro, pound sterling and yen. (In fact, Citi’s index was designed by the bank’s foreign-exchange unit for trading currencies, not stocks.)
But the surprise index can be hard to interpret. The CESI includes both backward- and forward-looking macroeconomic indicators, and is weighted in favour of newer releases and those that tend to have the biggest impact on markets. Because the index reflects economic performance relative to expectations, it can be negative during expansions if forecasters are too optimistic, and positive during contractions if they are too gloomy. But as Citi analysts wrote in a research note, “coincident rather than causal relationships are relied on even if they have no consistency whatsoever.” ■
Sri Lanka Economy Shrinks 1.6% Amid Political Chaos, Inflation – BNN
(Bloomberg) — Sri Lanka’s economy fell back into contraction last quarter as the country battled its worst economic problems since independence, with emergency aid to stabilize the island nation proving elusive.
Gross domestic product declined 1.6% in the quarter ended March from a year earlier, the Department of Census and Statistics said in a statement on Tuesday. That’s shallower than a 3.6% contraction seen by economists in a Bloomberg survey and compares with a revised 2% expansion in the previous quarter.
The contraction likely marks the beginning of a painful and long recession for the country, whose Prime Minister Ranil Wickremesinghe last week said the economy had “completely collapsed.” The crisis follows years of debt-fueled growth and populist fiscal policies, with the Covid-19 pandemic’s hit to the dollar-earning tourism industry serving as the last straw.
Absence of foreign exchange to pay for import of food to fuel led to red-hot inflation, the fastest in Asia, triggering protests against the government led by the Rajapaksa clan that eventually led to the resignation of Mahinda Rajapaksa as premier. While the months-long protests hurt business activity in parts of the country, the government on Monday imposed new curbs, which includes a call to residents to stay home until July 10 to conserve fuel.
That will depress activity further, while raising the risk of more unrest given lingering shortages of essential goods.
Sri Lanka is in talks with the International Monetary Fund for aid to tide over the crisis, with at least $6 billion needed in the coming months to prop up reserves, pay for ballooning import bills and stabilize the local currency. The central bank has raised interest rates by 800 basis points since the beginning of the year to combat price gains that touched 39%.
Other details from the GDP report include:
- For the first quarter, the services sector grew 0.7% from a year earlier
- Industrial production slipped 4.7% and agriculture output contracted 6.8%
©2022 Bloomberg L.P.
China's economy recovering but foundation not solid, premier says – Financial Post
BEIJING — China’s economy has recovered to some extent, but its foundation is not solid, state media on Tuesday quoted Premier Li Keqiang as saying.
China will strive to drive the economy back onto a normal track and bring down the jobless rate as soon as possible, Li was quoted as saying.
“Currently, the implementation of the policy package to stabilize the economy is accelerating and taking effect. The economy has recovered on the whole, but the foundation is not yet solid,” Li was quoted as saying.
“The task of stabilizing employment remains arduous.”
China’s economy showed signs of recovery in May after slumping the previous month as industrial production revived, but consumption remained weak and underlined the challenge for policymakers amid the persistent drag from strict COVID-19 curbs.
China’s nationwide survey-based jobless rate fell to 5.9% in May from 6.1% in April, still above the government’s 2022 target of below 5.5%.
In particular, the surveyed jobless rate in 31 major cities picked up to 6.9%, the highest on record. Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in summer.
Li vowed to achieve reasonable economic growth in the second quarter, although some private-sector economists expect the economy to shrink in the April-June quarter from a year earlier, compared with the first quarter’s 4.8% growth.
(Reporting by Kevin Yao and Beijing newsroom; Editing by Andrew Heavens, William Maclean)
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