We're Going To Build A Wall
Mexico is going to pay for it. Creation Date Saturday, 28 January 2017. Hits 8256
These words rang out time and again from Donald Trump during the Presidential campaign. "We're going to build a wall," Trump would exhort his rally audiences. He would then ask them who is going to pay for the wall? "Mexico!", they would yell back. As President, Trump signed an executive order to get the wall started. This lead many people to proclaim that he was keeping his campaign promise. However, the President has asked Congress to pay for the wall with the promise that he would find a way to get the money from Mexico at some point in the future. Then the Administration floated the idea of a 20% tax on Mexican imports. Now before we get into that, let's discuss the notion of keeping promises.
I wonder how the conversation would have gone back when Donald Trump was still a real estate developer if I had run a similar plan by him as a business proposal. "We're going to build a building, and the bank is going to pay for it." I'm sure before the project got started Trump would ask for the money from the bank. "Don't worry about it, Donald. You get the project started with your money and I'll figure out a way to get the money from the bank later." Do you honestly think the project would ever get off the ground on those terms? Of course not, but it gets worse. Let's look at the 20% tax.
When a tax is levied on imports, the tax is paid by the importer of record. This is the U.S. company importing the goods, not the Mexican company manufacturing them. That aside, no matter who pays the tax at the top of the food chain, the cost is always passed down the line to the end user. If Wal Mart is importing a $10 item and selling it for $12, and the Trump Administration levies a 20% tax on that item, the price Wal Mart now pays for the item will be $12. Do you think you will still get it for $12? That is highly unlikely, but even if you did, Wal Mart would then be paying for the border wall, not Mexico. Furthermore, there are other expenses that get added in and passed along to the consumer.
“I do think we would lose business on our Mexican-made goods,” says Allison Geitner, manager of Greenheart Shop, a fair-trade gift, clothing and home decor store at 1714 N. Wells St. in Old Town.
So, to try to make up for that, Geitner says, “The price would definitely go up.”
On Friday, the Greenheart Shop had new offerings on display of handcrafted Mexican handbags and duffel bags ranging from $100 to $360. It sets profit margins at 50 percent — standard, according to Geitner, for goods whose creators get paid a living wage.
Another 20 percent price increase would make the Mexican imports “really difficult to sell,” Geitner says.
In other words, she sells an item for twice what she pays for it to maintain her profit margin. So an imported purse that cost her $100 she would sell for $200. With the tax added in the cost jumps to $120, so the same purse would go for $240 with the import tax added in. She would have to add on this fee to make up for the decreased demand based on consumers who were now priced out of the market. Fewer overall sales leads to each sale being a more significant portion of total revenue and, if you're familiar with the laws of supply and demand, this is a dangerous tilting point for her business. If she's able to continue to sell at the higher price, she will be fine. If not, the Mexican import tax will put her out of business. If this happens enough times over, it makes it that much harder to pay for the wall using the tax.
This is a predictable problem that Trump ran into based on a short sited vision, both for the funding of the wall, and of the need for a wall in general. First off, we are now at a negative flow of illegal immigrants from Mexico into the United States. What does that mean? More Mexicans are crossing the southern border to go back home than to come here.
More Mexican immigrants have returned to Mexico from the U.S. than have migrated here since the end of the Great Recession, according to a new Pew Research Center analysis of newly available government data from both countries. The same data sources also show the overall flow of Mexican immigrants between the two countries is at its smallest since the 1990s, mostly due to a drop in the number of Mexican immigrants coming to the U.S.
Now this is an ebb and flow kind of thing, and these numbers could change, but it seems off base to address illegal immigration with a technology that would stop more immigrants from deporting themselves than from coming here illegally in the first place. Furthermore, 60% of the illegal immigrants enter legally, then overstay their visa. This method of illegal immigration added 500,000 undocumented residents to the country in 2015 alone.
After years of delay, Homeland Security officials in January released a report detailing part of the problem. Of the nearly 50 million business and tourist visas issued, about 1 percent — or 500,000 — remained even after their permission expired in 2015.
Canadians were the largest group of offenders, accounting for nearly a fifth. Mexico, Brazil, Germany and Italy rounded out the top five, the Pew Research Center said.
Supporters of the wall will be quick to remind you that terrorists could use the southern border to enter the country illegally, and while this is true, there have been no recorded instances of terrorist attacks by people who have entered in this manner. Instead, the attacks by radical jihadists in this country have been from those who have used the visa system to enter the country, to include the 9/11 attackers. Focusing on the southern border instead of the larger (both in numbers and in measurable impact) issue of visa overstays is like working on the leaky faucet in the upstairs bathroom while a pipe is burst in the basement. It doesn't make any sense, and it creates a bigger problem that Ronald Reagan warned us about many years ago. (See video below.)
"I think the time has come that the United States and our neighbors, particularly our neighbor to the south should have a better understanding and a better relationship than we've ever had. But I think that we haven't been sensitive enough to our size, and our power. They have a problem of 40 to 50 percent unemployment. Now this cannot continue without the possibility arising with regard to that other country that we talked about, of Cuba and everything it is stirring up of the possibility of trouble below the border. And we could have a very hostile and strange neighbor on our border.
Rather than making them, of talking about putting up a fence, why don't we work out some recognition of our mutual problems, make it possible for them to come here legally with a work permit, and then, while they're working and earning here, they pay taxes here. And when they want to go back they can go back, and cross. And open the border both ways, by understanding their problems. This is the only safety valve they have right now, with that unemployment, that probably keeps the lid from blowing off...And I think we could have a fine relationship."
As America's relationship with Mexico hits a new low, and Trump's rejection of TPP opens the door to Mexico to enter the trade pact that is being pushed by China, it is important to focus on the larger impact of our relationship with our southern neighbor. There are real world impacts both to antagonizing your neighbors, and to governing as if border security is something that can be solved with a slogan that fits on a T shirt. Trump's phone call with the Mexican President today was a good sign that perhaps he is waking up a little to this notion. Hopefully he can get his Administration on the right track on this issue before irreparable damage is done.