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Unfettered illegal immigration boosts inflation

by Bonnie Erbe

I usually try to be timely, but this week in this column I admit I'm way behind. I unearthed a report released more than two years ago, but which contains such informational dynamite, its contents are worth dissecting even two years hence. So here goes.

I've often wondered why inflation is so clearly rampaging well beyond levels reported by the federal government. Case in point: On a fairly regular basis I buy 10-pound bags of carrots at my local Harris Teeter grocery store. When I started buying them two summers ago, a 10-pound bag was retailing for $3.99. It is now selling for $5.99.

I'm sure each and every one of you has a similar story. Or many, many, many such stories. How did we get to the point where $4 isn't shocking as the tab for a cup of coffee (or a coffee drink, as renamed by Starbucks). How is it that when regular gas drops from $3.50 per gallon to $2.85 (as it recently did at my local gas station in suburban Washington, D.C.) we feel as if we're getting a bargain?

I've racked my brain trying to reconcile Labor Department reports of inflation running in the 2-3 percent range, while watching as housing, food, clothing and transportation costs rise by double digits each quarter. Is the government hiding something? I'm no conspiracy theorist, so that explanation seems not to fit.

Here's one explanation, however, that might. In January 2005, Bear Stearns issued a report on America's growing underground labor force. It said in relevant part:

"The growing extralegal system in the United States has distorted economic statistics and government budget projections. The stealth labor force has enhanced many of the economic releases that investors follow closely.

Payroll numbers understate true job growth and inflation has been artificially dampened by this seemingly endless supply of low-wage workers...Real estate prices have been boosted by the foreign population infusion.

The productivity miracle may be exaggerated because the government is incorporating the output of millions of illegal immigrants but not counting their full labor input."

In other words, illegal immigration and the underground, cash economy it creates has become so powerful a force, it artificially dampens inflation rates, boosts real estate inflation (putting home ownership beyond the ken of young Americans) and reduces the wages of the average American.

Wow, that's blockbuster news. This part of the report was barely publicized when it came out two years ago. Reporters noted its finding that there are something like 20 million illegal immigrants in the United States, compared with the popularly cited 10 million figure. A Google search on the Internet revealed references to the inflation finding in Barron's and the Wall Street Journal.

The inflation finding should have been trumpeted on the front pages of the nation's major newspapers, on cable networks and on news Web sites. Instead, it was fairly buried. Did major news outlets bury this angle fearing its contents were not politically correct? Perhaps. But the American public may be getting the message nonetheless.

The U.S. Senate recently killed President Bush's signature effort at immigration reform that would have, in essence, granted amnesty over time to those here illegally.

Senators reacted to polls showing the legislation was wildly unpopular with the American public. Perhaps the public is beginning to wake up to the U.S. environmental destruction wrought by unfettered illegal immigration. The equation is simple. More people equals more development and consumption, more pollution and less open space.

Now we have another, this time financial, equation to contemplate. Unfettered illegal immigration boosts inflation while hiding the effects from the general public. Bear Stearns' experts could be wrong. But I doubt it. By "outing" this hidden impact of illegal immigration, let's hope we build the political will to end it, or at least slow it down.

July 13, 2007

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