National Debt Considered Stupid

Devin Finbarr makes an astute point about national debt:

there is almost never a need for a country to go into debt. Debt is useful for entities that have a life cycle. People go into debt when young to buy a home, and then pay it back as they age. Companies go into debt to buy capital, and then pay it back as they mature. But a country (should) never die. There is no reason to pay for tomorrow what can be paid for today. The only reason ever to go into debt is if you have a tremendous, one time expense, that is large in relation to current income. Buying a home or a factory qualifies. But countries almost never have single one time expenses that are large in proportion to GDP. Thus they should never go into debt. Even a highway should be an operating expense for a country. The only time a country should go into debt is during war.

This observation can also be applied in reverse. If you know a state has debt, then either (a) it is in a war, or has just come out of a major war (5-10 years), or (b) it is irresponsible and poorly run.

Selling Citizenship: Monetizing the Rule of Law

Via Darth Moldbug, I've converted to the Sith. I am resigned to the inevitability of the state, at least insofar as given humanity as it now is, statism is a necessary and unskippable stage on the way to anarchocapitalism. (Perhaps more on this in another post.) That said, it is worth thinking about how to run a neocameral state, or any state. (My post on improved democracy was in this spirit.)

So what sort of immigration should a profit-maximizing state run? Certainly nothing like USG's current policy. USG has a monopoly on US citizenships -- restricting the supply is what all rational monopolists should do. USG should set a restrictive quota and sell immigration rights. Use an auction to fetch top dollar.

One immediate consequence of selling citizenships is that illegal immigration would be seen in an entirely new way. Current illegals do cost USG something, but they also pay taxes, so it is hard to say exactly whether or not they are a good deal or not. In a regime where citizenships have a market value, illegal immigration is tantamount to stealing directly from the treasury. As such, the state will not put up with it; you'd see real enforcement almost immediately. Yes, even from Democrats -- would they rather enforce immigration law, or cut education spending?

How much money could be raised for the US Treasury in this fashion? Quite a bit, is my estimate. The economic value of being in America is huge for most immigrants: they get access not only to America's capital, but to the rule of law (which is far more important than capital).

By my very rough estimate, the lifetime value of immigration to America even for unskilled labor is on the order of $1 million for people coming from places without the rule of law. How did I compute that? The annual disposable employment income per worker in constant 2005 international dollars for USA: 31,410. Mexico: 5,837. Difference: $25k/year. $25k/year over a working life of 40 years is $1 million. To be clear, I don't think the average person in the Mexico or the world would get a $25k raise by moving here. (Though I would point out that Mexico is not poor nor distinctly disfunctional, by world standards.) That's not the question; rather, it is can .14% of the world population per year command that raise? I think so.

Of course most immigrants would need credit to raise $1 million, or something loan-like: i.e. immigrants pay an income surtax for N years. And USG would have to make legal provision for this, by making "citizenship loans" be unbankruptable, like student loans. Without unbankruptable citizenship loans, the market would be relatively tiny. With them, though, practically anyone in the world might be able to afford America.

To cut off the obvious exploit of getting a loan then going on welfare, USG should do two things. First, require a "trial period", akin to current green-card status, where the immigrant is on the path to citizenship, but does not have it yet. Second, require some downpayment on loans. Perhaps 10% -- $100000 or so -- from the immigrant. The downpayment is also a bond, to be forfeit if the immigrant acts sufficiently badly (i.e., criminal acts while in green-card status).

So, USG should be able to extract something on the order of $1 million per immigrant, so long as we keep the numbers relatively low. How low? It is hard to say for certain, but USG should be able to work out the demand curve for citizenships pretty well by increasing and decreasing the monthly quota of citizenships sold. See what the market will bear.

My feeling on the demand for immigration to the USA, even at $1m per, is far higher than than the current citizenry is comfortable accepting. (Currently, immigration is about 1 million legal immigrants per year, plus another 500000 illegal.) So I might guess that under a more restrictive monopolistic regime, USG would accept 1 million immigrants per year. 1 million immigrants per year, fetching $1 million each for that privilege, is a cool $1 trillion per year. That, by itself, would almost eliminate USG's current budget deficit.

So, what sort of consequences do I foresee if such a policy were enacted?

First, it would be very hard to undo, once it was running even for a year. The state would find it very, very hard to replace $1 trillion per year.

Second, it would change the immigrant mix drastically. It is hard to know exactly how the mix would change, but it is fairly certain that immigrants would be higher skilled, since higher skilled people would be more likely to have the downpayment required, and to be able to repay their loans. The mix would also change away from Mexican peasants to a more even mix of people from all over the world, because given a high price and reasonable enforcement, proximity would cease being such a decisive factor.

Readers are invited to put their predictions in comments.

Making money in America

Can one make it in America starting with nothing? This guy did.:

Alone on a dark gritty street, Adam Shepard searched for a homeless shelter. He had a gym bag, $25, and little else. A former college athlete with a bachelor's degree, Mr. Shepard had left a comfortable life with supportive parents in Raleigh, N.C. Now he was an outsider on the wrong side of the tracks in Charles­ton, S.C.

But Shepard's descent into poverty in the summer of 2006 was no accident. Shortly after graduating from Merrimack College in North Andover, Mass., he intentionally left his parents' home to test the vivacity of the American Dream. His goal: to have a furnished apartment, a car, and $2,500 in savings within a year.

To make his quest even more challenging, he decided not to use any of his previous contacts or mention his education.

During his first 70 days in Charleston, Shepard lived in a shelter and received food stamps. He also made new friends, finding work as a day laborer, which led to a steady job with a moving company.

Ten months into the experiment, he decided to quit after learning of an illness in his family. But by then he had moved into an apartment, bought a pickup truck, and had saved close to $5,000.

The effort, he says, was inspired after reading "Nickel and Dimed," in which author Barbara Ehrenreich takes on a series of low-paying jobs. Unlike Ms. Ehrenreich, who chronicled the difficulty of advancing beyond the ranks of the working poor, Shepard found he was able to successfully climb out of his self-imposed poverty.

He tells his story in "Scratch Beginnings: Me, $25, and the Search for the American Dream." The book, he says, is a testament to what ordinary Americans can achieve.

The link has a short interview with the author. Practically the first question is, "but surely your background – you're privileged; you have an education and a family – made it much easier for you to achieve." Shepard thinks not, but of course he does have many advantages ("privilege" means "advantage" to the left). He's white for one thing. Young and healthy, presumably. And most importantly, he has a work ethic. That's a very real advantage.

I've been given Nickled and Dimed to read, by goodthinking friends. And I've read it; it's good, but you should read it knowing that its author is a hard-left ideologue. She documents ably the fact that low-end jobs are not very pleasant, nor hugely remunerative. She works hard for little, and is amazed that people can work that hard. But her experiment doesn't show what she thinks about opportunity in America. Ehrenreich was, by intention, sampling how she might live given certain jobs. She was not trying to get ahead. And her lifestyle, for all the privation she experienced, was nonetheless not the same as many of her coworkers. For example, she'd get an apartment for herself to live in when she tried a new job. Real minimum wage workers rarely live alone; they live with relatives, or get roommates. When I was in graduate school making $14000/year, I lived in a series of group houses with up to 4 other people. My share of the rent: from $250 to $400 per month. I also lived alone, when I was first in College Park, in a tiny miserable mildewed little basement apartment which rented for $650/month. Living alone, as Ehrenreich did, is not what the working poor do.