August 6, 2021

Economix Blog: The Challenge of Securing the Border

Two decades ago, the border with Mexico was not as big a priority as it is today. The Border Patrol‘s entire budget was only $362.6 million in 1993 — some $584 million in today’s money. It had 4,028 agents. Unsurprisingly, perhaps, border patrolling wasn’t amazingly effective.

Studies in the mid-1990s found that of all the immigrants trying to enter the United States illegally from Mexico, Border Patrol agents apprehended fewer than half — somewhere between 35 and 45 percent.

Fast forward to the present and things have changed a lot. The Border Patrol has more than 21,000 agents — 18,500 along the border with Mexico. Its budget last year exceeded $3.5 billion. We have drones and sensors and hundreds of miles of fence.

Source: United States Border Patrol

And according to a report by the National Academy of Sciences published last year, Border Patrol agents apprehend about a quarter of those trying to enter the country illegally.

To be sure, these estimates must be taken with a grain of salt. We don’t know how many people are trying to enter the United States illegally in any given year, so it is impossible to tell precisely what share gets caught. Estimates of apprehension rates are derived from statistical analyses that rely on fairly strong assumptions about immigrants’ behavior: How many times do they try to get in after being caught? Are the odds of being caught the same each time?

It is also true that net flows of illegal immigrants from Mexico have fallen to zero over the last few years, because of a combination of slow growth in the United States, expanded legal guest-worker programs and an aging population in Mexico that is slowing the growth of its labor supply. By that measure, the border is as secure as it will ever be.

Source: United States Border Patrol

But the apprehension statistics underscore the vulnerability of the current effort in Congress to pass immigration reform. In my column this week I pointed out how a similar effort six years ago was weakened by disagreements over a guest worker program, which broke apart the coalition of labor, immigrants’ rights advocates and businesses supporting the legislation. Assailed by conservatives — who viewed illegal immigrants as lawbreakers and demanded that the border be secured above all else — the effort failed.

This time around, border security remains a hitch. Some conservative Republicans are still demanding that the border be secured before the first undocumented immigrant gets a green card. But the statistics suggest that an impermeable border is a fantasy, no matter how much money and technology is thrown at it. “Border security is part of a strategy by the anti-immigration constituency to stop reform after the fact,” said Gordon H. Hanson, an expert on the economics of immigration at the University of California, San Diego. “You make the trigger impossible to meet.”

The immigration legislation presented in the Senate sidesteps the issue nicely. Under its proposed legislation, the Border Patrol must put together a plan to keep out 9 of 10 immigrants trying to enter illegally over the most common entry points — a seemingly impossible target. But it is less tough than it seems. The Border Patrol gets to count as success its own estimate of how many run back into Mexico — a fairly unscientific number that can rely on agents’ reading of a footstep in the sand or a broken blade of grass. And those immigrants will surely try again another day.

What’s more, if it doesn’t hit the target within five years, all Congress can do is form a commission to come up with a better plan.

It may be optimistic, however, to assume that this leniency will survive when the legislation falls under the full glare of public scrutiny.

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At White House Budget Meeting, Old Hurdles and New Attitude

WASHINGTON — President Obama and Congressional leaders on Friday reopened budget negotiations that ended badly in 2011 with surprising bipartisan bonhomie, and even some initial agreements toward a year-end deal. Yet a familiar hurdle remains before any handshakes: resolving the parties’ dispute over whether to extend the Bush-era tax rates for the wealthy.

Both sides indicated after the 70-minute White House meeting that their goal is a two-step compromise, since they have little time to work before the end of the year. That is when more than $500 billion in automatic tax increases and across-the-board spending cuts hit all Americans, and potentially shake the economy, unless Congress enacts an alternative deficit reduction agreement.

As tentatively envisioned, a compromise would provide an immediate down payment of at least $50 billion to reduce this year’s projected deficit, in lieu of the automatic measures that would hurt the economy by their size and suddenness, economists say. Second, it would define a framework for negotiating a long-term “grand bargain” in 2013 to shave annual deficits by perhaps $4 trillion over the first decade.

The framework would have separate goals for raising revenues and cutting the two types of federal spending: so-called discretionary financing that Congress sets annually for most programs, domestic and military; and entitlement spending, chiefly for Medicare and Medicaid, which by their growth in an aging population are driving projections of mounting debt.

The agreement to aim for a framework only in the initial talks is a quick step forward. Some lawmakers, including the Senate Republican leader, Mitch McConnell of Kentucky, had wanted a larger deal before Jan. 1 as the price for shutting off the automatic deficit reduction that would hit then. Representative Nancy Pelosi of California, the House Democratic leader, went so far as to predict that a deal to head off that so-called fiscal cliff would be at hand “well before Christmas.”

While such a two-pronged deal would put off the hardest and most far-reaching policy decisions until next year, no deal is possible unless the negotiators first decide on the deficit down payment. That installment, it is widely believed, must be large enough to satisfy financial markets, which oppose the automatic measures as too large and threatening but still want Washington to show some resolve toward getting the nation’s fiscal house in order.

Mr. Obama, Vice President Joseph R. Biden Jr. and the Democrats — Harry Reid of Nevada, the Senate majority leader, and Ms. Pelosi — made it clear around the negotiating table that the down payment is easily made by letting the Bush tax cuts expire, as scheduled on Dec. 31, for annual income of $250,000 and above for couples and $200,000 for individuals. The Bush rates would be extended for lower incomes, preserving them for 98 percent of taxpayers.

The Republicans — House Speaker John A. Boehner and Mr. McConnell — were just as plain that, while they support raising additional revenues by curbing deductions and through economic growth, they would oppose an increase in marginal tax rates. They want the down payment in spending cuts.

Yet after an election campaign in which Mr. Obama made this a top issue, Republicans have reduced leverage, many acknowledge. That shift in the Washington fiscal dynamic since Mr. Obama’s re-election also explains the rapidity with which the Republican leaders have agreed that higher revenues will be part of the deficit-reduction solution — if not through higher rates.

If the president has his way, the top rates, now 33 percent and 35 percent, would rise to 36 percent and 39.6 percent, the Clinton-era levels, on Jan. 1. But Mr. Obama has suggested he is open to a compromise that would set the rates somewhere in between, in combination with limits on deductions.

With Mr. Obama leaving on Saturday for a four-day diplomatic trip to Asia and Thanksgiving looming, the negotiators directed their staffs to flush out the Republican bottom line on the size and type of savings to get from Medicare and Medicaid in preparation for the leaders’ next meeting in the week after the holiday.

Republicans were heartened that Mr. Obama designated his soon-to-retire Treasury secretary, Timothy F. Geithner, as his lead negotiator, instead of the White House chief of staff, Jacob J. Lew. Mr. Boehner’s relations with Mr. Lew soured during the prolonged and bitter budget talks in 2011.

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New Zealand Suffers Double Ratings Downgrade

The downgrade came hot on the heels of a similar move by Fitch Ratings, which cut its rating for New Zealand on Thursday, also singling out the country’s high foreign debt levels as a cause for concern.

Despite the downgrades, New Zealand’s local and foreign currency ratings remain near the top end of both agencies’ scales. The country’s financial system is sound, the agencies said, and New Zealand continues to enjoy plenty of monetary and fiscal flexibility: public debt, unlike in many other developed economies, remains modest.

Debt levels in the household and agriculture sectors, by contrast, are high, while the country’s dependence on commodity income and an aging population poses challenges for the future.

Still, the downgrade highlighted that the turmoil sweeping the globe — prompted by worries over the slow pace of growth in the United States and doubts about the ability of several European countries to meet their debt obligations — is affecting economies even as far afield as New Zealand.

Stock markets in the Asia-Pacific region have been dragged down along with those in the rest of the world, as investors have largely ignored developing Asia’s robust economic fundamentals, and pulled funds out of stocks.

Economic data from across the region also has shown that economies are growing at a more subdued pace. The latest such evidence came Friday in the shape of an index measuring manufacturing activity in China, which showed a reading of 49.9 for September — the third successive month that the reading was below 50, signaling contraction.

In a report on Sept. 21, Standard Poor’s noted that the weaker global backdrop, combined with generally high inflation, could slow the pace of upgrades for some Asia-Pacific sovereigns, and could bring negative rating actions for those countries whose balance sheets are weak.

Asia-Pacific sovereign ratings have bucked the global trend so far in 2011 with two upgrades (Indonesia and Fiji) to one downgrade (Japan). But several countries in the region now have higher debt burdens and weaker budget positions than they had in 2008, S. P. said. It singled out the Cook Islands, Japan, Malaysia, New Zealand, and Vietnam, as countries whose net general government debt levels have risen “significantly” in the past few years.

In Japan and New Zealand, reconstruction efforts following devastating earthquakes earlier this year have added to government spending needs.

That was a factor in S. P.’s decision Friday to downgrade New Zealand’s long-term local-currency rating to AA+ from AAA, and its foreign-currency rating to AA from AA+. The day before, Fitch cut the country’s credit rating to AA from AA+.

Analysts broadly agree, however, that most emerging economies in Asia are relatively well positioned to weather the turmoil in the United States and Europe. Banks across the region have little direct exposure to the debt of Greece and other beleaguered European economies, while firm domestic demand is likely to help to insulate the region’s economies from any downturn in demand for Asian-made goods from overseas.

Exports to the West are less important now than they were in the run-up to the collapse of Lehman Brothers, said Frederic Neumann, a regional economist for HSBC in Hong Kong, in a research note on Friday. “Overall economic growth should hold up better even if shipments to the US and the EU decline more sharply.”

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DealBook: Kirin to Take Control of Brazilian Drinks Company

Kirin Holdings, the Japanese food and beverage maker best known for its beer, on Tuesday agreed to buy a controlling stake in a Brazilian beverages company, the latest example of how companies in maturing markets are seeking to expand in fast-growing economies.

Kirin said it had agreed to pay ¥198.8 billion, or $2.6 billion, for Aleadri-Schinni Participações e Representações, a company that owns 50.45 percent in Schincariol, one of the largest beer and soft drinks manufacturers in Brazil.

‘‘Through this share purchase, Kirin will obtain a solid operational platform in Brazil, the biggest economy in Latin America,’’ Kirin said in a statement.

The already sizeable beer and soft drinks market in Brazil promised to benefit from significant wealth and population growth in coming years, Kirin said.

Schincariol, well known in Brazil for its Nova Schin and Devassa beers, has 13 production facilities and a nationwide distribution system.

Kirin’s foray into Brazil follows a string of acquisitions by the company in the Asia-Pacific region as part of its drive to reduce its dependence on Japan, where anemic economic growth and an aging population make for a tough business environment.

In 2009, Kirin, whose portfolio also includes yogurt, health drinks and wine, bought stakes in the Australian brewer Lion Nathan and San Miguel Brewery of the Philippines, for a total of about $4 billion.

Last year, Kirin acquired a 14.7 percent stake in Fraser and Neave, a major player in the Singaporean and Malaysian drinks market, for ¥84.6 billion. And in January, Kirin announced a deal to establish a joint venture with China Resources Enterprise, the biggest beer maker in the country, to produce and distribute non-alcoholic beverages in China.

The expansion drive echoes the wider wave of mergers and acquisitions that has swept the global food and beverages sector in recent years, as slowing growth in mature markets, the growing popularity of other drinks like low-carbohydrate beers and rising input costs have put pressure on brewers to consolidate or buy market share, preferably in developing markets.

Last year, for example, Heineken of the Netherlands acquired Femsa of Mexico for $7 billion after outbidding SABMiller. And SABMiller, the brewing giant behind beers like Peroni and Grolsch, in June offered about $10 billion for Foster’s of Australia. Foster’s rejected that bid as too low but has not ruled out talking to the company.

Japanese companies — not just in the drinks sector — have been especially eager to expand overseas. They have been helped in this by the strong Japanese yen, which has increased their financial firepower abroad.

So far this year, Japanese companies have staged 361 overseas acquisitions, for a total of $46.7 billion, which is more than twice the amount during the same period in 2010, according to data from Dealogic.

By far the largest overseas acquisition by a Japanese company in several years was the $13.6 billion purchase by Takeda Pharmaceutical, the largest Japanese drug maker, of Nycomed, a privately held Swiss company with large exposure to emerging markets. That deal was announced in May.

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Japan Announces Emergency Budget

The $48.5 billion budget is likely to be followed by more spending, as Japan takes on the gargantuan task of rebuilding the section of its Pacific coastline ravaged by the March 11 earthquake and tsunami. Parliament is expected to pass the budget next week.

At least 14,133 people been found dead, an additional 13,346 remain missing and more than 130,000 still live in evacuation centers. Government estimates put the total damage from the quake and tsunami at $300 billion.

The nuclear crisis set off by the tsunami has added to the human and economic toll. On Friday, the government banned residents from a 12-mile evacuation zone around the Fukushima Daiichi Nuclear Power Station, where several reactors have suffered explosions and radiation leaks. A previous order urged but did not require evacuation from that zone; the government still recommends that residents leave if they are within 19 miles of the plant.

“We all share the hope that reconstruction does not mean a return to where we were, but the building of a brighter future,” Prime Minister Naoto Kan said at a news conference.

“I feel it was my fate to be prime minister at a time of great adversity,” said Mr. Kan, whose handling of the crises has been criticized sharply in Parliament and in the country at large.

Japan has rebounded from prior catastrophic disasters. The 1923 Great Kanto Earthquake, for example, killed as many as 140,000 people and brought widespread destruction to Tokyo. It also is thought to have wiped out almost 40 percent of the country’s gross domestic product. In comparison, the death toll from the March 11 quake and tsunami is far lower, and the economic damage is likely to add up to just a few percent of G.D.P.

Still, Japan faces different challenges now, which could weigh heavily as it rebuilds: a rapidly aging population, a long-stagnant economy and public debt that is already at twice the size of its economy, thanks to its profligate public works projects of the 1990s.

That debt burden adds serious obstacles to financing the great reconstruction. Raising taxes, for which there appears to be a measure of public support, will dampen already tepid personal consumption levels. Issuing more government bonds will add to the ballooning deficit.

Adding to the country’s troubled forecast, Mr. Kan’s grip on leadership appears to be weakening under the withering criticism, including charges that he bungled the initial response to the nuclear crisis, causing it to worsen.

The president of Fukushima Daiichi’s operator, the Tokyo Electric Power Company, visited an evacuation center on Friday that houses those evacuated from around the crippled plant.

“I have no words to express my regret,” the president, Masataka Shimizu, told the evacuees after making his way through cardboard beds and blankets. TV cameras in tow, he knelt on the ground and bowed deeply — the ultimate posture of apology in Japan.

Some refugees bowed deeply back, while others heckled him. “We all just want to go home,” one told him quietly.

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