We Can Make Mexico Pay for the Wall

Just declare an International Emergency. From US Treasury,
U.S.C. annotated, Title 50. War and National Defense Chapter 35. International Emergency Economic Powers :

§ 1701. Unusual and extraordinary threat; declaration of national emergency; exercise of Presidential authorities

(a)(1) At the times and to the extent specified in section 1701 of this title, the President may, under such regulations as he may prescribe, by means of instructions, licenses, or otherwise– (A) investigate, regulate, or prohibit– (i) any transactions in foreign exchange, (ii) transfers of credit or payments between, by, through, or to any banking institution, to the extent that such transfers or payments involve any interest of any foreign country or a national thereof, (iii) the importing or exporting of currency or securities, by any person, or with respect to any property, subject to the jurisdiction of the United States; (B) investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States; and (C) when the United States is engaged in armed hostilities or has been attacked by a foreign country or foreign nationals, confiscate any property, subject to the jurisdiction of the United States, of any foreign person, foreign organization, or foreign country that he determines has planned, authorized, aided, or engaged in such hostilities or attacks against the United States; and all right, title, and interest in any property so confiscated shall vest, when, as, and upon the terms directed by the President, in such agency or person as the President may designate from time to time, and upon such terms and conditions as the President may prescribe, such interest or property shall be held, used, administered, liquidated, sold, or otherwise dealt with in the interest of and for the benefit of the United States, and such designated agency or person may perform any and all acts incident to the accomplishment or furtherance of these purposes.

As I read it (I’m no lawyer), we could confiscate all assets of Mexico and Mexican nationals in the U.S., and put directly to use in building a really special and beautiful concrete wall, as promised in February 2016:

“I’m talking about precasts going up probably 35 to 40 feet up in the air. That’s high. That’s a real wall.”

As of June 30, 2017, Treasury estimated Mexican holdings of US securities at $97 billion. As of end-2017, BEA estimated another $18 billion Mexican foreign direct investment in the US (at historical cost). That’s close to $120 billion we can seize, in order to fund a wall costing something like $12-40 billion  (of course that number was pre-steel-tariff cost).

All we have to do is hope that nobody seizes any US assets abroad…and nobody frets about the safe haven aspects of US dollar-denominated assets … and so forth. The question is… Does Donald Trump feel lucky?

P.S.: I am reasonably confident this act would catapult the world economy into recession.

71 thoughts on “We Can Make Mexico Pay for the Wall

  1. pgl

    “I am reasonably confident this act would catapult the world economy into recession.”

    Team Trump would not care as long as Wilbur Ross, Ivanka, and Jared could somehow profit off of the market changes.

  2. baffling

    don’t you know, silly rabbit, that it is NOT a wall trump wants to build. it is a barrier. and it most certainly is not made of precast concrete. that would be stoopid. no, its a great big beautiful thin see through steel barrier. and it is powerful. and trump never said mexico would actually pay for the wall, that was more of a suggestion. its gonna be great. and beautiful. and did i mention it is a POWERFUL wall, er, barrier? it most certainly is, the best. better than the best. it is the bestest. and powerful. we have corev designing the wall and rick stryker is going to actually build the wall. gonna be great, a party. we have talked to most of the mexicans, and they love the idea. they are willing to foot the bill. they all say this is great, will help mexico, keep us all safe from the terrorists trying to invade from iran and north korea. should wrap this wall up by valentines day, memorial day at the latest. gonna be great. can’t wait to see it tower into the sky. but its see through, so we can keep an eye on the terrorists trying to cross from iran. did you know iran is on the other side of the rio grande? yeah, bad hombres, but we are gonna make this country safe. the great wall of trump. like the sound of that…

    1. Menzie Chinn Post author

      Don: How do we know? There’s a DoD memo citing that authority — but that wouldn’t mean that Mexico would pay for the wall. And that, after all, is the title of the post…

      1. Rick Stryker


        The article you cited in your link mentions exactly the same statute I linked to and it’s not about forcing Mexico to pay for the wall. Here’s what your article said:

        ‘A previous DOD statement has mentioned the use of the Title 10 U.S. code as a way in which the military could construct a wall.

        The relevant section of that code reads: “In the event of a declaration of war or the declaration by the President of a national emergency in accordance with the National Emergencies Act (50 U.S.C. 1601 et seq.) that requires use of the armed forces, the Secretary of Defense … may undertake military construction projects, and may authorize the Secretaries of the military departments to undertake military construction projects, not otherwise authorized by law that are necessary to support such use of the armed forces.” ‘

        1. Menzie Chinn Post author

          Don: Different section (1701). The point is getting the Mexicans to pay, which is what Trump (repeatedly) said would be the case. Are you dense?

          1. Rick Stryker

            No I’m not dense. I’m merely pointing out that no one is talking about section 1701 in the context of Mexico and the wall. The article you linked to support your contention did not talk about that. It did not support your assertion that there is a DoD memo claiming this authority to make Mexico pay for the wall. But that article you linked to did make the same point I did–Trump is considering using 10 USC 2808. Taxpayers would pay for the wall in that case, not Mexico.

          2. baffling

            “Taxpayers would pay for the wall in that case, not Mexico.”
            but i thought mexico was going to pay for the wall. or was that a lie?

        2. pgl

          Are you a lawyer? You remind me of most lawyers I know. Cite all sorts of meaningless babble without ever coming to a real point.

          Sorry dude but this legalesse babble bores me.

          1. Rick Stryker

            Whether Trump can use 10 US code 2808 to build the wall is a legal question, not an economic question. I’m sure you know as little about the legal issues around this issue as you the details of how military pay increases work. If you’d like me to explain the legal issues to you, I’d be happy to do it. But you need to ask your questions politely.

        3. 2slugbaits

          Rick Stryker The intent of that provision was to allow the military to start construction projects ahead of Congressional approval when time was critical; i.e., in a matter of hours or at most a few days. Examples would be things like construction after a nuclear attack, a massive earthquake in a major urban area, a tsunami, a Chernobyl event, etc. You’d have to torture the clear intent of Congress to believe that failing to deliver on a campaign promise constitutes a national emergency. If you believe that building a wall along the southern border rises to the level of a national emergency, then I would expect you to justify Trump spending money on anything he wants under the guise of the Foraging Act from the Civil War era as a way around the Anti-Deficiency Act.

          1. pgl

            “You’d have to torture the clear intent of Congress to believe that failing to deliver on a campaign promise constitutes a national emergency”.

            Congressional intent? The Rick thinks this is an economic question so I think he is looking to Lawrence Kudlow for legal advice!

          2. macroduck

            In the case of Trump’s Muslim ban, the court found that Trump’s stated intentions could be taken into account in determining the constitutionality of the ban.

            Trump has said he might declare a national emergency in order to build the wall, if Democrats refuse to fund the wall. Congress votes on spending. The president merely ratifies or does not. His power over spending is limited. It seems to me a reasonable bet that courts would rule that a declaration of a national emergency as a way to build the wall violates separation of powers. If Trump had not spent months demanding that Congress pay for a wall, and getting nowhere, he might have a better case.

    2. baffling

      “That’s not what Trump was referring to when he said he could build the wall himself without Congress.”
      and you know this because trump told you directly? or are you simply putting more words into trumps mouth?

      1. Rick Stryker

        I know because, unlike you, I follow issues very closely. Trump asked the DOD to look into how military construction funds could be diverted over 6 months ago. Democrats have already written to the DOD asserting that any such movement of construction funds would be illegal.

        1. baffling

          “I know because, unlike you, I follow issues very closely. ”
          i have my doubts on this one, rick stryker. you have certainly not provided any evidence that this will be a policy that trump will proceed with. no evidence whatsoever. on the other hand, donald trump has repeatedly stated his policy position on the wall, and that is mexico will pay for the wall. donald trump has made this public proclamation many times. or are we back to the issue where donald trump is permitted to lie? see where your lack of integrity gets you, rick stryker?

          “My point is that Menzie is inventing a policy that Trump does not have and then lamenting that this fictitious policy could catapult the world into recession.”
          rick stryker, i think you owe menzie an apology. his argument stems right from the mouth of trump-and you accuse him of being deceitful. and yet you produce a policy position which in fact has no basis in reality-simply from the rick stryker interpretation of trump government policy. why the deceit and lack of integrity rick stryker?

    3. noneconomist

      Headlines in today’s Sac Bee
      “Immigration to state from Latin America still near historic low/CHINA NOW SENDS MORE IMMIGRANTS TO CALIFORNIA EACH YEAR THAN MEXICO”
      Data in article (from Census and via Minnesota Population Center)
      : Immigration to California
      China 42, 092
      Mexico 36,079
      India 24, 148
      Japan 19, 267
      Philippines 17,630
      Korea 12,371
      And this: “The number of immigrants from Asia to California now dwarfs the number of immigrants from Latin America to California”
      Also: Texas sees more immigrants (according to Pew) each year than California, but “Texas unauthorized immigrant population has remained essential flat during the last decade as California’s has fallen.”
      Maybe we need that wall on the Pacific Coast? Or maybe we don’t need one at all, especially one that urgent because of national security.

  3. Steven Kopits

    Well, market-based visas would generate something like a net $30 bn to the government per year, more than enough to build the wall every year.

    On the other hand, the whole point of such a program is close the southwest border using market forces rather than physical structures. With an MBV program, the border could be closed in part before the election, fully probably late 2021 into 2022.

    1. Rick Stryker


      I think market-based visas are a very good idea, especially given conditions at the southern border now. 10 years ago, the cost of crossing illegally was just a few thousand dollars and not controlled by organized crime. Now it can be as much as $10 thousand dollars. The difference today is that the drug cartels completely control the border crossing process. Often people who are trying to cross are horribly abused by the cartels, held for ransom for more money, sold into prostitution, etc. Market based visas would help to stop the crimes committed by organized criminals on people trying to cross.

      1. baffling

        not sure how a market based system will keep those iranian terrorists from crossing the border illegally? and could those caravans afford a market based system? if one cannot afford a market based visa, and dreams of a better life, will your approach deter them from trying to enter the country anyways?

        1. Steven Kopits

          Re: Terrorists

          At present, roughly 1500 people attempt an illegal border crossing every day, with an estimated 46% probability of success. Three attempts bring the odds of success to roughly 85%. It’s pretty easy to get across the border for the determined.

          In a market-based system, we would be looking to reduce the number of attempts to 50 per day. That is, we would issue visas literally until the number of attempts reported by Border Patrol (or more precisely, the number of apprehensions) falls to about that level. Thus, Border Patrol data is of itself a key metric of the number of visas necessary to end the black market in migrant labor.

          Now, this will have some important effects on the market.

          First, if we maintain the current number patrol agents (I personally wouldn’t), the the agent-to-crossers ratio rises by a factor of 20 compared to the situation today. That should help weed out some Iranians.

          Further, if the visa system only excludes those who represent a material danger to the US (ie, those borrowing someone else’s social security number for employment and taxation purposes would be treated administratively with some proportional fine), then the Border Patrol can take a much more aggressive posture on the border. Today, Border Patrol seems to be Doctors without Borders (or more precisely, Doctors with Borders) with some enforcement component.

          In a market-based system, anyone who is coming through the desert can be presumed to be a hostile and treated accordingly by local citizens, local police and Border Patrol. So that’s a big change, too.

          Finally, such a system provides simply extraordinary leverage over the respective governments of Mexico and the Northern Triangle countries. If we ask to put monitor drones twenty miles on the Mexican side of the border, they really have no choice but to comply.

          Thus, as always, the replacement of a prohibition with a market-based solution eliminates criminal activity at any number of levels, and it would be no different in this case.

          1. pgl

            You are a foundation of irrelevant babbling. Why do you NEVER directly address the issue? Here we go – more meaningless data from Princeton Steve. YAWN.

      2. pgl

        A good idea for those migrating for economic opportunities. Of course the point that Princeton Steven could give a rat’s arse about is those moving here just to survive. Good to know you are as heartless of the always greedy and generally pointless Princeton Steven. No wonder you love Trump!

        1. Steven Kopits

          You are referring to those who come to the US to become wards of the state. Market-based visas are not intended for that group. However, I can assure you that most of them will in fact use MBVs, if for no other reason than that MBVs are on-demand rights for those with background checks. You can wait for two years to get an asylum application processed with some slim hope of acceptance, or you can go out and buy a visa tomorrow. I think it is relatively clear how the market will work in practice.

          1. pgl

            Wards of the state? You are indeed one heartless babble machine. But thanks for confirming my point – you babble misses the entire point of these discussions!

          2. baffling

            “Market-based visas are not intended for that group. However, I can assure you that most of them will in fact use MBVs, if for no other reason than that MBVs are on-demand rights for those with background checks.”
            steven, how much would it cost somebody to obtain this market based visa? how would you conduct background checks on potential immigrants coming from countries with little/no infrastructure in place to store this information?

        2. Steven Kopits

          Baffs –

          Let’s start with background checks. For incoming migrants, I am proposing no changes to the current H2 system in place. I think we’ll be able to improve that over time, but for now we stay with established practice.

          As for the visa price: Price is determined by visa volumes offered and demand.

          Because this is a conservative proposal, the intent is merely to close the black market in migrant labor. It is not intended to provide a channel for migrants to come in wholesale. To illustrate the difference: There is a group, for example, who would like the US government to sell visas for $1500 / year, or about $0.75 / work hour. If the wage in, say, Honduras is $1 / hour, then an American offering travel + room and board + $1.25 / hour + $0.75 / hour visa fee is making a pretty competitive offer. Put another way, you could have a live-in Guatemalan maid for about $450 / month. I can assure you, with that kind of economics, there would be nary an adult women left in the Northern Triangle countries and the US middle class would all have maids — just as the middle class has in Guatemala. This is not what conservatives mean by ‘border control’.

          By contrast, our proposal merely seeks to end the black market in migrant labor. Therefore, we’re targeting the rate of Border Patrol apprehensions, using that as our volume guide, and pegging visa prices to that level. When Border Apprehensions fall to near (but not to) zero, then we’re issuing the right number of visas.

          We don’t set the visa price. The price is set in the marketplace by the Mexicans themselves.

          Nevertheless, we can estimate that value by reference to the Relocation Wage, the wage necessary to induce Mexicans to leave their homes and come work in the US. The Relocation Wage consists of the Mexican unskilled wage, about $2.50 / hour, + an addition for the higher cost of living in the US, figure another $2.50 / hour, + a relocation premium for leaving one’s home country, which we’re estimating at about $1.50 / hour. So that puts the Relocation Wage for Mexicans around $6.50 / hour–and we believe that’s pretty much what they have been receiving in recent times.

          We can also estimate wages by starting with the prevailing US wage and deducting from there. Although there is plenty of talk of the Federal minimum wage, really, not many adults work at that level, but some 20 million Americans do work around $10 / hour. So we can take that $10 / hour as the nominal market wage. From that, we deduct wage theft, around $1.25 / hour, under-utilization (unemployment), around $1.25 / hour and a hassle factor for living without documentation, a non-cash cost, but still worth about $1 / hour. That also brings us back to around $6.50 / hour realized wage.

          We can infer from PEW, and also from remittance data, that US realized wages of Mexicans (although not Northern Triangle countries) were below the Relocation Wage from late 2007 until July of last year. That’s why the number of undocumented Mexicans were falling continuously throughout that period until probably just a couple of months ago. So we can assume that net realized wages were, until just recently, at or below the Relocation Wage. Wages should be just above equilibrium today.

          So, if Mexicans are working at the Relocation Wage, then the wall is not a binding constraint at that point — the market is working, in effect, and Mexicans are receiving the wage they would have earned in any event without border enforcement at all.

          In a market-based system, we are not relying upon the wall, but upon a market-clearing price. If the wall is not binding and Mexicans are working near the Relocation Wage, then we can simply substitute a tax for the deductions from the nominal earnings level. Mexicans will pay $3.50 / work hour equivalent in visa fee, and you will see wage theft disappear, under-utilization vastly reduced (because they can leave the country and return on demand) and of course the hassle factor eliminated by being granted status. So all we’re doing is monetizing costs that Mexicans would otherwise incur. At the Relocation Wage, it’s a net wash — it has to be by definition.

          So again, we do not set the price. The Mexicans set the price. We set the visa volumes and those are set at a level which closes the US southwest border and ends the black market in Mexican and Northern Triangle (but not, say, Korean, Chinese, or Indian) migrant labor.

          This has to include those already working here. If you don’t, you won’t kill the black market. Our goal is the drain the pool, and we do so by providing status to those already here (same terms as new migrants, except with an ex-post background check). So in essence we eliminate the black market by 1) legalizing those already in country and 2) issuing new visas at the minimum level to prevent the black market from re-emerging. That’s the conservative goal: an ordered, safe, transparent, accountable market with appropriate compensation for services rendered.

          I would note that this is a trade, not a gift. This recognizes that there is a demand in the US for migrant labor, and that, if this demand cannot be met legally, it will be met illegally through a black market — and black markets are virtually impossible to defeat. But it also recognizes that the right to work in the US is incredibly valuable, and if you want to work here, you’re going to have to pay what it’s worth. If you’re not willing to pay it, then it’s next man up. Put another, we convert a supply-constrained market — a black market — into a demand-constrained market, an ordinary commercial market. The binding constraint becomes the ability to find a paying customer willing to hire you, not the ability to beat Border Patrol in the Arizona desert.

          1. baffling

            steven, i asked a simple question. what will be the cost of a visa. and if those thousands coming to the border cannot afford that fee, how will that discourage them from crossing illegally? you need to make sure your solution solves the problem as it exists, not as you postulate.

          2. Steven Kopits

            $3.50 / work hour x 2,000 hours / year = $7,000 for a year equivalent. Not too hard to calculate, Baffs.

            Again, this is an estimate based on an analysis, not a fixed price. The price may be higher or lower, depending on the value Mexicans put on the right to work in the US.

            It also assumes assumes you are selling year visas. (As envisioned, we would not be selling visas with a duration greater than one year initially.)

            I think that’s not likely in most cases, in part because I don’t know how many Mexicans can pony up $7k in a go (although plenty can come up with the coyote guide fee, which the NYT today pegged at $7,000).

            As envisioned, the visa dates would be custom. You can buy your visa when you buy your air ticket, for example, on Spirit Airlines. The visa dates could thus parallel your stay in the country and return travel plans. I think most visas would be three months or less, certainly initially, which would run about $1,800 for the period, a bargain compared to the coyote fee. If you stayed for, say, two weeks, the fee would be 80 hours x 3.50 / work hour = $280. Again, I don’t know the actual fee, which would be set by the market, but my estimates keep coming back into the $3.50 / work hour range.

          3. baffling

            “I think that’s not likely in most cases, in part because I don’t know how many Mexicans can pony up $7k in a go (although plenty can come up with the coyote guide fee, which the NYT today pegged at $7,000).”
            as i said, you need to make sure your solution is solving the problem. you pay a coyote guide once. your fee is yearly. this is a solution in search of a problem. i agree with parts of your arguement. bringing immigrants out of the illegal shadows will vastly improve their condition both on the trip to the us, as well as while they are here. there is plenty of immoral behavior by employers towards illegal immigrants as well as on the trip here. i cannot control what happens on the other side of the border, but we should be sending more employers to jail who abuse immigrants as well.

            steven, i think you have commoditized the immigrant too much. part of the issue is economics-we need workers and they are willing to work. you have priced those economics. but the usa is also the land of dreams, the light on the hill, and people desire to come here to make their lives better-and the nation better in the process. these are not always wealthy people, but they are good people. your approach completely ignores this aspect of immigration.

          4. Steven Kopits

            “…there is plenty of immoral behavior by employers towards illegal immigrants as well as on the trip here. i cannot control what happens on the other side of the border, but we should be sending more employers to jail who abuse immigrants as well.”

            Wage theft, in a perverse sense, is the market at work. If the nominal wage is above the Relocation Wage, then wages will tend to be driven down to the Relocation wage through 1) wage theft and 2) under-employment. So, let’s take a wage theft example. A sweatshop employer near Los Angeles promises Inez, an illegal Mexican, that he will pay her $10 / hour to sew the logos on clothing for sports teams. After a month, he only pays her $6.50 / hour. Why? Because he believes either 1) that she’ll continue to work for that lower pay, or 2) he can easily get a replacement worker. This suggests the underlying market wage is in fact $6.50 and not $10. If Inez has other employment options or a replacement is hard to find, then the employer will be more circumspect about wage theft.

            Now let’s assume a market-based visa system. Inez is paying $1,800 per quarter for the right to work. If the employer pays her less than $10 / hour, then she’ll be below the Relocation Wage and either changes jobs or leave the country. (If jobs are scarce, the value of the visa will drop.) Moreover, if we use an app-based system, she’ll write a nasty review of the employer which now everyone in Mexico, Guatemala, Honduras–and even Los Angeles–can easily read on-line.

            Further, her bank account is visible to Treasury and she has launched a complaint against the employer, who by law has to pay her in the specified account.

            Further, she bought wage insurance for $14.99 / quarter which unleashes two SJW lawyers from Harvard on employer.

            And even further, all the other employees, who are also paying $1800 for the right to work, are going to rat out the employer as well (and also if the employer hires off the books).

            So, we’ve migrated from a completely opaque system to a hyper-transparent one.

            Now, note that we have not necessarily increased Inez’s wages. The Relocation Wage is as before, with the differential now going to the US government in a visa fee. (That is, we have transferred the differential between the market wage and the Relocation Wage from the sweatshop owner to the US Treasury.) We have, however, created a much less exploitative and safer environment around Inez. Put another way, we may not have changed mean wages very much, but the variance around the mean will be vastly reduced. The shift supervisor is not going to be able to coerce Inez to have sex with him to keep her job, for example.

            I’d add that we have also now given Inez an incentive and opportunity to invest in her skills. So rather than hiding in the shadows, she has a much clearer path forward.

            Thus, as with the case of Jakelin, the issue is not enforcement or compliance primarily, but of a system design which reduces risk and pathology as an integral aspect of how the system operates.

          5. Steven Kopits

            “i think you have commoditized the immigrant too much. part of the issue is economics-we need workers and they are willing to work. you have priced those economics. but the usa is also the land of dreams, the light on the hill, and people desire to come here to make their lives better-and the nation better in the process. these are not always wealthy people, but they are good people. your approach completely ignores this aspect of immigration.”

            I have no problem with people liking the US. I think, however, that you are suggesting that an MBV program should provide some kind of path to permanent residency or citizenship.

            It can’t. It would destroy the system.

            I’ve stated that the market wage is probably around $10, the Relocation Wage is around $6.50; and about $3.50 goes to the government for nothing more than the right to work (and maybe some basic health insurance). Now, how much is it worth if, say, 20 years in the MBV program guaranteed citizenship? If you do the math, it comes out around $5 / hour. This would reduce the realized wages to $1.50 / hour. That’s not viable. It means migrants will be choosing between eating and becoming citizens at some future date. Right now, the MBV program should be essentially benign on average. We’re just replacing one set of costs with another.

            But if you add an option on citizenship, you will be encouraging migrants to make extreme trade-offs between the present and the future, and the program will ultimately be judged as cruel and exploitative and will fail as a result.

            The MBV program fills a certain niche. It will eviscerate the human smuggling business, bring dignity to migrants and order to the market. It will end the civil war regarding sanctuary cities. It will reduce the animosity towards migrants and Hispanics more generally. It will end the predation in the desert. It will do all these things, but it is not a panacea.

            It is not an asylum program.

            It is not an immigration program.

            It is not a social welfare program.

            It is not a path towards establishing permanent residency in the US.

            It is not an economic development or anti-poverty program for Central America (although it will be transformative as a by-product)

            It is what it is, and will bring great results for its intended purposes. But it is not all things to all people.

          6. baffling

            “The MBV program fills a certain niche…”
            “It is not an asylum program.
            It is not an immigration program.
            It is not a social welfare program.
            It is not a path towards establishing permanent residency in the US.”
            steven, i understand your economic arguments here. but you need to quit selling this as an immigration solution. it is not. the families that are crossing the border, and getting the media attention, are not solved by your solution. because they are after the items listed above, which you admit you are not solving. your approach may be beneficial to some folks, but it is not going to be a great reduction in those who are risking their lives to cross the border for a better life. these folks are dreaming bigger than a one year work visa. as i said, you have a solution in search of a problem. but it will not markedly improve upon the issues at hand. can it be part of an overhaul of immigration? certainly. but i will warn you, just like current employers can circumvent the existing laws to abuse immigrants, don’t be surprised if they are able to do the same thing to your system. they are creeps, with rules and norms not being important to their way of life.

          7. Steven Kopits

            That’s not right, Baffs.

            Surveys show that 80-90% of those MCA migrants coming to the US are looking for work.

            Historically, Mexicans round-tripped in the US for centuries (well, for some of that, it was still Mexico). Until modern border control was installed in 1965, the migrants came and went seasonally. It is border enforcement which is principally responsible for the large number of illegal immigrants in the country. (See Massey, for example.)

            But let’s consider those family units coming in.

            Under an MBV system, they can get background checked and come and go whenever they like for as long as they like. A round trip air ticket on United Airlines from Guatemala City to Houston today is $187. Add to that $1800 for a three month visa (renewable on demand). So $2000 puts you on the ground work-ready in Houston.

            Alternatively, you can try to walk up the spine of Mexico and fight through the Mexican police and the border cartels. And that will cost $7,000 – $12,000 / person. Why would anyone do that?

            When markets are legalized, the black market stuff inevitably disappears. When teenagers are looking to buy booze, do they seek out the local still or distill some in their bathtub? Or do they go to the local liquor store and try to convince an older customer to buy some Budweiser for them? It’s the latter, obviously.

            So, I think not illegal immigrant will sign up initially, at least of those who already live in the US. But in short order, very few people coming over the border will do so illegally if a legal — and more economical — and convenient — option is available.

          8. Steven Kopits

            It’s not an immigration solution. It’s a guest worker (H2 class visa) solution.

            Undocumented MCA US residents are put in this pool, because that’s functionally what they are. Now, if the government wants to give them a different status — green cards, for example — that’ the government’s prerogative.

            But is the government doing that? Not that I can see. Meanwhile, we can put the undocumented into this MBV program and give them status without the government having to concede permanent residency. It’s not optimal, but it’s a heck of a lot better than the situation now or as it is likely to be in the foreseeable future.

      3. Steven Kopits

        Rick –

        It is US policy which has created the cartels at the border. Black markets are an iterative process, with a move from one side followed by a counter-move from the other side. Enhanced US enforcement at the border created the need for economies of scale — professional guides, bribes, etc. — which essentially delivered the human smuggling business into the cartel’s hands. Human smuggling and trafficking is the response to border enforcement, not some unanticipated and unfortunate development.

        By the way, we can size this business and anticipate counter-moves to, for example, the construction of a wall. The human smuggling business for 2019 will look something like this: 1.2 million attempts x 80% using a guide (could be as high as 90%) x $4,000 per head = $4 bn gross human smuggling market.

        In a black market, the gross margin is typically 80%, in this case $3.6 bn, and of this, typically half will be budgeted to suborn the government (the ‘Capone Ratio’). Thus, the budget available for counter-measures to human smuggling amounts to about $1.8 bn.

        A team of three agents will cost probably $300 / day (maybe half that) and 40 lbs of C4 costs about $2,000. If we assume that the cartels can source Mexican army artillery shells at a fraction of that cost, then a hole in the wall would cost not more than $3,000. For $30 million, the cartels could put a hole in the wall every thousand feet from the Pacific to the Gulf of Mexico with a team of 100 guys working in groups of three for a year. That looks like a bargain to protect a $4 bn business, so we should anticipate that the cartels would take some analogous sort of step were the wall constructed. The wall is not the final step, the check-mate move, that stops illegal border crossings. It is merely the next step, which will prompt a counter-step from the cartels, and a quick economic analysis suggests the cartels have plenty of options to take down the wall as an effective border, explosives being just one of the them.

    2. pgl

      Peddling market based visas again? Of course poor people dying in Mexico do not help your greedy business so once again Princeton Steven could care less.

        1. pgl

          Proposal? You do not even know what the issue is. Run along as NO ONE is going to read your stupid blog.

  4. 2slugbaits

    Rick Stryker Over the last few days Trump has been talking about using emergency powers to direct the military to construct a wall without benefit of Congressional authorization. But prior to that Trump also promised that Mexico would pay for the wall. My reading of Menzie’s post is that he was referring to a particular way in which Trump could build the wall and have Mexico pay for it. The fact that there might be other emergency powers available to Trump is true but, for purposes of Menzie’s post, irrelevant. But if Trump believes he has those emergency powers, then why doesn’t he just agree to the funding bill approved by the House sans wall funding and then build the wall through his emergency powers? Why put the country through all of this if it is within Trump’s power to build the wall without Congressional approval?

    As to those emergency powers, is there anyone who seriously believes the lack of a complete wall along the southern border constitutes a national emergency? It smacks of the kind of thing we’d expect from some third world tinhorn dictator. Do you seriously believe Trump should let the emergency powers genie out of the bottle? if so, let me recommend a cautionary book: Rome’s Revolution: Death of the Republic & Birth of the Empire by Richard Alston.

    Spoiler alert. It doesn’t end well.

    1. Rick Stryker


      My point is that Menzie is inventing a policy that Trump does not have and then lamenting that this fictitious policy could catapult the world into recession. Why not talk about Trump’s real policies? What he’s actually looking at, but may not do, is to use the military to construct the wall. There are of course significant legal challenges with that strategy, which is why he hasn’t just done it.

      1. Menzie Chinn Post author

        Don: Once again, how do we know what Trump is thinking? I never thought he’d try to put in a Muslim ban, but he did. His original promise was to build a wall, and make Mexico pay for it. Invoking Section 1701 would do the trick.

        1. Rick Stryker

          We know because Trump asked the DOD well over 6 months ago to look into how military construction funds could be moved to have the military construct the wall. Democrats became sufficiently alarmed that Senators Reed and Durbin wrote a letter to Mattis going through the reasons why such a move would be illegal. Trump obviously disagrees.

          Warning: Type II error alert

          1. 2slugbaits

            The normal way to reprogram monies is that have the Component department (i.e., Army, Navy, etc.) prepare a request that goes to the DoD Comptroller. The Comptroller than forwards the request to OMB. OMB then forwards it to Congress, which has five calendar days to deny the reprogramming request. But that procedure only applies to reprogramming across similar projects within point accounts. The kind of thing that Trump is proposing would require reprogramming within Military Construction & Housing (OMB Table 3.2, subfunction 051 line 10). Note that Trump could not reprogram out of procurement, operations & maintenance, military pay or RDT&E. He could only move monies within MC&H. But that account only has an authorization of ~$10B, although unobligated funds from FY2018, FY2017, FY2016 & FY2015 could be used. The Pentagon could also deobligate (i.e., terminate contracts) from prior years, but those monies would be tied up in courts for years since the contractor can appeal. Any attempt to redirect MC&H dollars would be politically unpopular in a lot of red states. Notice that ever the Trump loyalist Sen. Richard Shelby from Alabama said that he would oppose any effort to reprogram MC&H dollars to build the wall. If you don’t know why he feels that way, then I suggest you take a drive across Alabama and count the number of MC&H projects that have Shelby’s name all over them.

            I know the folks in the DoD Comptroller’s shop…over the years I worked a lot of econ analysis projects for them. I’m having a hard time believing that any of them want to have their name on any order to reprogram MC&H dollars considering how legally dubious all of this is. No one wants to be fitted for an orange jump suit at Ft. Leavenworth.

          2. Dave

            > Trump obviously disagrees.

            That doesn’t change the fact that it is indeed illegal to use military funds to construct the wall without congressional approval.

      2. 2slugbaits

        Rick Stryker Reread the title and the first line of Menzie’s post, and read it as one continuous thought. Nowhere does it say that this is what Trump plans to do. It simply says this is one way that Trump could make good on both promises; viz., to build the wall and to have Mexico pay for it. Trump’s proposal to invoke emergency powers, which he has explicitly floated, would only satisfy one of those two promises. So if he wants to keep both promises, then he would probably have to do something along the lines of what Menzie proposed. And since you’re the one who insists Trump is honest and doesn’t lie, presumably you don’t want him to violate his pledge to make Mexico pay for the wall. So unless you’ve suddenly decided that Trump shouldn’t keep his promises, then I would expect you to embrace the approach outlined by Menzie. And if you don’t agree with Menzie’s approach, please tell us why you think Trump should break his promise to make Mexico pay for the wall.

        BTW, even if Trump invoked the emergency powers approach that he has openly talked about, do you think the effect on financial markets would be any less disruptive? Especially in light of the fact that Trump has openly wondered why the US Treasury doesn’t just renegotiate some of its existing debt at a discount.

        1. Rick Stryker


          Well another way Trump could do it would be to invade Mexico. Why not have a post on that and its effects on the world economy? The fact that Trump has not announced such a policy shouldn’t stop Menzie right? It’s just one way Trump could keep his promise, right?

          1. Menzie Chinn Post author

            Don: Trump has said (1) he’ll build a wall, and (2) he’ll get the Mexicans to pay for it. Section 1701 allows for a way to implement this without an invasion. I don’t rule out Trump invading a country, although he seems more directed to exiting countries, both in rhetoric and directives (we’ll see if we ever exit Syria).

          2. pgl

            Maybe you should start your own blog. That way you can choose your favorite topics. And we can just ignore your incessant Trump worshipping!

          3. 2slugbaits

            Rick Stryker I think we can all agree that publicly Trump is only talking about diverting MC&H funds to build the wall. But that only fulfills one of his two major campaign promises on this issue. He didn’t just promise to build a wall; he promised that Mexico would pay for it. The uncomfortable fact that you keep trying to avoid is how Trump keeps both promises without doing something like Menzie proposed or even the invasion alternative that you mentioned. Remember, you’re the one who insisted that Trump was honest and that he was the rare politician who does what he says he would do. So it looks like you’re stuck having to choose between the option Menzie discussed, your invasion option, or Trump breaking his promise to have Mexico pay for the wall. So which is it?

            Wouldn’t it be a lot easier and a lot less embarrassing to just admit that Trump is a con man with an oversized ego?

  5. CoRev

    Menzie says: “… (we’ll see if we ever exit Syria).” Or Korea, Germany, etc. etc. History shows us that it is highly unlikely that we will completely exit Syria, and recent history (Obama’s exit from Iraq) shows why it is a poor policy for the ME.

    1. Menzie Chinn Post author

      CoRev: Do we have troops in Vietnam? Do we have troops in Mexico? Do we have troops in Russia (intervention during Russian civil war)? Do we have troops in Grenada? Do we have troops in Lebanon? Do we have troops in the former Yugoslavian states?

      1. CoRev

        Menzie, your assumption is naive. Your question should have been when last did we have troops in …, and for how long? As for having “…troops in the former Yugoslavian states?”, the answer is yes. Mostly on a temporary basis, but nearly every year since the was we have been performing some sort of peace keeping mission. We are now in Albania, which we have, AFAIR, never been invited to assist.

        I think you would be surprised at the number of permanent locations where our troops are deployed, and you will never know where they have been temporarily deployed.

        1. 2slugbaits

          CoRev We are now in Albania, which we have, AFAIR, never been invited to assist.

          Actually, the Albanian Defense Minister invited US troops last spring. And for the same reason that other former Yugoslav countries wanted US troops present; i.e., to send a “Keep Out” message to Putin. The Kremlin had been working to destabilize almost all of the Balkan countries ever since Trump “won” the Electoral College. Of course, we’re talking very small numbers of US troops in the region. Their main duties appear to be enjoying the beaches along the Adriatic. Tough duty. Even the KFOR numbers aren’t much more than one or two company units with the biggest mission being rescuing bears for a Kosovo zoo:

        2. ilsm


          Check out Camp Bondsteel….. permanent Kosovo base for rotating a US army mechanized brigade.



          Great Albania invited US force! Sort of like those invitations Stalin got for the Red Army?

          It would be great (except it is all TDS) if the centrist war party aka democrats would apply these (not so unique NRA type) arguments against the wall to the 100’s of systems and innumerable little wars mostly insane ‘projects’ squandering trillions in the pentagon.

          :Lately Kosovo is organizing their own army to deal with Serbs……..

          I need more popcorn.

          1. CoRev

            2slugs, instead of downplaying the ACTUAL deployments, why not point out Menzie’s naive assumptions.

            ILSM, having studied Albania, an invitation never the less. The had previously invited Russia and China mostly for economic purposes. I am sure it is the also main reason they invited US to improve their existing bases and perhaps getting a shiny new US built military base.

            Ajo që mbaron mirë është e mirë, mirupafshim.

          2. 2slugbaits

            CoRev instead of downplaying the ACTUAL deployments, why not point out Menzie’s naive assumptions.

            Because it was clear from the context that Menzie was referring to significant deployments of combat troops. We also have troops deployed along the Italian Riviera, but I don’t think people would consider that in quite the same light as, say Kabul or Baghdad. Until 20 years ago we had troops based at Ft Clayton in Panama. Why? Because it had a couple of nice golf courses for officers on their terminal assignment. The only pieces of military equipment at Ft Clayton were four inoperable M551 Sheridan vehicles. Now there was a time when SFOR, KFOR and Balkan duties were both dangerous and unpleasant. But today it’s mostly skiing in the winter and bikinis along the Adriatic during the summer. I don’t think too many single, 19 year old males would consider that a hardship.

          3. CoRev

            2slugs also assumes naively and incorrectly, ” I don’t think too many single, 19 year old males would consider that a hardship.” says someone who evidently was never deployed in a foreign remote location.

    2. 2slugbaits

      CoRev Wasn’t it Donald Trump who floated the idea of pulling troops from the Korean peninsula? Wasn’t it Donald Trump who suggested that the US should reduce its commitment to NATO? Wasn’t it candidate Donald Trump who (following Putin’s lead) suggested that we should shut down our forward SSAs in the Baltics and Romania? Wasn’t it Donald Trump who waffled about NATO Article 5? Wasn’t it Donald Trump who described the people of Montenegro as aggressive and dangerous (again, following Putin’s lead)? Wasn’t it Donald Trump who rudely and brusquely shoved the prime minister of Montenegro out of his way during the NATO conference…again, following Putin’s comments in the advent of Montenegro formally joining NATO a few days after the NATO conference? Given Trump’s willingness (make that eagerness) to be Putin’s Poodle, maybe you shouldn’t be so certain that Trump won’t pull out of Syria…but in keeping with the spirit of Kissinger, only after a decent interval.

      1. ilsm

        2 Slugs,

        What do you and I, aside from good jobs, get from all those outposts of empire D. Trump Is questioning?

        I am a contingency planning loggie’ who ‘defected to weapon system acquisition for better pay grades! Some one needed to try and give the soldier a provisioned weapon!

        The aspect that scares “allies” and military industry complex ‘adult authorities on war making’ is Trump is looking for pay back from those escapades going on since 1947.

        Liz Warren, soon to be ‘not taken seriously’, may be going down the cost benefit rabbit hole as well.

    1. pgl

      driking? Oh you mean drinking as in a Modelo beer.

      Now if Trump puts a 10% tariff on Mexican beer and continue drinking it anyway – how much of the wall will this bring in. Let’s see. Census says we paid Mexico $3.33 billion per year for their beers. So after 15 years, the tariffs would pay us $5 billion.

      That’s the plan – tax beer drinkers to pay for that stupid wall. Dilly, dilly!

  6. pgl

    Is this shut down saving the Federal government enough in payroll costs to pay for Trump’s wall? Is that his plan?

    Check this out:


    President Donald Trump said Sunday that he “can relate” the hundreds of thousands of federal workers who have been without paychecks since the government entered a partial shutdown over two weeks ago. “I can relate and I’m sure the people that are on the receiving end will make adjustments, they always do,” Trump said to reporters as he left the White House for Camp David. Trump’s comments came after more than two weeks of tense gridlock with Democratic lawmakers over his desired $5 billion for a border wall, a back-and-forth with which he said “many” of those people agree. “People understand exactly what’s going on,” Trump said. “But many of those people that won’t be receiving a paycheck, many of those people agree 100 percent with what I’m doing.”

    Where to start with this arrogant BS? A billionaire can related to someone living pay check to pay check? They will make adjustments? He has no clue. The adjustment is not to feed one’s kids, not pay the rent, and eventually lose one’s place of residence. But yea – these people agree 100% with what he is doing? Unbelievable!

  7. joseph

    The latest in Trump’s outright lying: “this [the wall] is national security we’re talking about. We’re not talking about games. We’re talking about national security. This should have been done by all of the presidents that preceded me, and they all know it. Some of them have told me that we should have done it.”

    So now we know that Trump is just flat out lying. Jimmy Carter has denied it. Bill Clinton has denied it. G.W. Bush has denied it. Barrack Obama has denied it. G.H.W. Bush is now dead but a spokesman has said that he has never spoken with Trump.

    So once again the man that Rick Stryker has called “the most honest politician that we have seen, or are likely to see, in our lifetime” is seen to be a bald faced liar.

    1. 2slugbaits

      joseph In all fairness to Trump, I believe he was referring to President Vladimir Putin having told him we should have done it. It’s an understandable mistake.

      1. pgl

        I bet Putin wants to rebuild the Berlin Wall. I suspect he is asking Trump for advice on the design.

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