Security and Sovereignty No. 5: A Tale of Two Small Businesses

In the first 4 postings in this series, I discussed security and sovereignty, the ground rules, the powers and duties of the President with respect to national security and sovereignty, and the number of illegal aliens in America. In this 5th posting, I address the economic impacts of illegal immigrant workers on America. This is best done by an example. What’s the overall economic impact of illegal aliens? The short answer is they cost America hundreds of billions of dollar a year. Hurricane Katrina will cost the federal government about $200 billion [1]. Imagine this much or more each year due to illegal immigration.

Recall that we really don’t know how many illegal aliens are in America but in the last posting we estimated about 18 million and about 10 million illegal workers. Also recall that there are high levels of uncertainty in these estimates, plus or minus several million. Let’s consider a hypothetical situation and then try to draw some general conclusions. Suppose there are two small businesses just starting up in a service industry, say carpet cleaning. Business A has the owner/operator, one American employee, a part time accountant, and the necessary equipment and supplies. Business B is similar in every respect but has one illegal alien employee and no accountant. Business A is a law abiding company. Its employee is paid $20/h and with taxes, social security, insurance, and accounting overhead costs the business about $30/h or some $60,000 per year. Business B is a racketeering [2] company and hires an illegal alien employee “under the table” for a flat $10/h with no taxes, social security, insurance, accounting, etc. overhead. The employee costs for Business B is $10/h or some $20,000 per year. All other things equal it costs Business A $40,000 more per year to be honest and obey the law than it does Business B to break tax laws, social security laws, required workman’s compensation laws, OSHA, and on and on. Further, suppose that the gross income of each business is about $200, 000/y. Business B starts out with a $40,000 or 20% advantage. To be competitive, Business A has to cut prices 20%, take $40,000 less personal salary from the business, or, more likely go bankrupt.

Now let’s see who wins and who loses in this example if we assume Business A is forced out of business by unfair racketeering. Government loses taxes on a base of $200,000 from Business A plus however much Business B is hiding and avoiding. The owner of Business A loses everything and has to start over to try and make a living. The legal employee of Business A loses his job and must find another job (probably at about $10/h, or 50% less, to be competitive) or goes on unemployment or welfare or both. As we saw in the last posting, the illegal alien and any of his family get free medical care and free education. Add these to the above costs and the cost to the taxpayer is mounting up to some serious money. Now, individual homeowners or businesses get their carpets cleaned a little cheaper so they win something (but depending upon their income level, may wind up paying more in taxes than they gain). The racketeers (Business B owner, the illegal alien worker, the “coyotes” who smuggled him into the USA, the Mexican government who encouraged him to emigrate, and the businesses who cater to illegal aliens; check cashing, wire transfer, etc.) all gain from their criminal activity. In effect the racketeers are taking money from low income workers (the legal employee of Business A) and transferring it to the better off in society (those that can afford to have their carpets cleaned). Finally, most illegal aliens send money back to their homeland. In the case of Mexico, this money may be as much as $50 billion a year (a Mexican agency estimates it is as much as $17 billion a year [1],) but this is based on an unrealistically low number of illegal immigrants (< 10 million) in the USA. This means that as much as $50 billion is sucked directly out of the American economy. If there are 10 million illegal alien workers from Mexico and $50 billion dollars, this would mean that, on average, each would send about $5000/y to Mexico. This is another indirect tax on America’s poorest workers in addition to the money the illegal workers make and spend in the USA, maybe as much as another $100 to $150 billion a year. Can anyone loyal to America say that it is fair for the illegal aliens, their employers, and the Mexican government to conspire to break US laws to take this kind of money from our lowest paid workers and give it to Mexico and to the richer Americans getting cheaper services? One might also consider the unfairness to the US taxpayers footing the bills for all of the costs resulting from illegal aliens working and living in America. Finally, imagine the human tragedy of the owner of Business A; played by the rules, loved his country, obeyed the law, and lost everything.

This happens millions of times a year. At what cost to America and its belief in the rule of law? We see persistent injustice, persistent racketeering, persistent disregard for the law, and persistent punishment of Americans to aid illegal immigrants. How serious are the rips and tears in our society from not meeting its needs for fairness, the rule of law, and justice? Can America stand as a land of opportunity if we take hundreds of billions of dollars away from our poorest people to give to our richest people and to illegal foreigners? If illegal immigration puts an end to upward mobility of our poorest workers, what happens to the American dream?

In the next posting I will try to assess how much illegal immigration is hurting our two party system and propose some simple ways to protect our national security and sovereignty as a nation.
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1. Hayworth, J. D. 2006. Whatever It Takes: Illegal immigration, Border Security, and the War on Terror. Regency Pub., Inc. Washington, DC 20001, 230 pp.
2. Note. Racketeering as used herein does not mean the Mob, Mafia, or any of the organized crime we are used to seeing in America. But the criminals involved in infiltrating and employing illegal aliens conspire to break the law, break laws, cheat on taxes and employee benefits, steal from the government, and prey on some of the weakest in our society. They are thus racketeers; organized criminals conspiring to commit criminal acts.