Housing Market Fiasco and American Retirements not Helped by Republican
Administration's Immigration Raids Terrorizing Illegal Immigrant
Potential Homebuyers
By Alan Lee, Esq.†‡
Do you know why I'm not voting for the Republicans this year? It's
because of their failure to connect the dots. There are many reasons
for the financial meltdown and the subprime mortgage mess that we
find ourselves in, but the Republicans have not helped when they
could have by doing nothing against the illegal workers. Besides
the President's inability to focus on the problem during his watch
until it was too late, I specifically refer to the Administration's
setting U.S.I.C.E. loose on the undocumented immigrants in highly
publicized raids netting hundreds of illegal workers and terrorizing
millions with threats of deportation and criminal prosecution. Scenes
of shackled people being herded like cattle and reports of predawn
raids on illegal immigrants in their homes (even in million dollar
houses) struck deep fear. There are an estimated 11-12 million undocumented
immigrants in the country. Up to 45% of them had valid visas and
have overstayed according to the Pew Hispanic Center. Many have
been here for years, own homes, or are potential homebuyers. Those
who were interested are no longer thinking of buying. They are fearful
that they will be picked up at any time and deported. They are not
making long-range plans, especially not involving a house. As an
immigration lawyer, I see many situations in which our illegal clients
own their own homes and in many cases their own businesses. Common
questions that I used to hear were whether they could buy homes
and if so, whether they would be able to obtain mortgages. I don't
hear those questions anymore. Now the more common questions are
whether they will forfeit their houses if they are caught by Immigration
or should they transfer their homes or businesses to others now
or how they can transfer ownership if they are in jail.
The Republican Administration hatched a plan in early 2007 to sell
the large immigration legalization package by emphasizing a tough
enforcement policy to go along with the immigration benefits. The
tough enforcement side of the plan may also have been a devious
way to convince illegal immigrants that the consequences of refusing
to participate in the plan which was eventually titled "The
Grand Bargain" would be harsh. The Grand Bargain failed mainly
because of conservative Republican opposition, but the Administration's
green light to enhanced U.S.I.C.E. actions against undocumented
immigrants continued and even stepped up in scope after June 2007.
In cracking down on this class, the Administration eliminated a
potential market to buy homes. Illegal immigrants are by and large
a good market for home buying. In many cultures, wealth is defined
by land and home, not by the stock-market. This class of individuals
is usually unable to obtain mortgages without large down payments
and significant collateralization of loans. Many of the situations
that we have seen are illegal immigrants obtaining loans and/or
pooling money together from other family members or close friends
to finance home purchases. Their ability to buy houses under these
traditional methods would have helped clear up at least some of
the mess involving housing with troubled loans. A recent study from
the Joint Center for Housing Studies of Harvard University, "The
State of the Nation's Housing 2008," based its optimistic forecast
of a housing demand increase over the next decade despite the current
weak housing market on among other chief factors projected annual
immigration of 1.2 million. Yet this opportunity to help stabilize
the situation was lost for the short-term goal of showing the American
public and the Republicans' conservative base that the Administration
was getting tough on illegal immigration.
Alan Greenspan, the former Chairman of the Federal Reserve, said
in an interview to The Wall Street Journal in August that the problem
was approximately 800,000 units of excess supply housing for sale
in the U.S., and that the housing market would not recover until
the houses were sold. His solution was a major expansion in quotas
for skilled immigrants to accelerate the absorption of unsold housing
inventory for sale and hence help stabilize prices. In looking at
Mr. Greenspan's figures, it should be apparent that the loss of
a large market of potential purchasers with already built-in mortgage
restrictions has exacerbated the overall housing problems of America.
Another consequence of the shortsightedness of the Administration's
policy are reports from the Pew Hispanic Center and the Center for
Immigration Studies that immigration is slowing and that undocumented
immigrants are leaving the country. For many anti-immigrationists,
this is a blessing. Unfortunately this is also a shortsighted view
as most of the undocumented workers that come from other countries
are among their countries' most ambitious young people with the
will to leave familiar surroundings and carve out livings for themselves
in a foreign country. They are the population that is needed now
and in the future to stand at the base of the pyramid to support
the retirement of the huge class of baby boomers born after World
War II that is now starting to retire.
The baby boomer generation is loosely defined as persons who were
born during the sudden large increase in the birth rate in the U.S.
from 1946 through the early 1960's. The oldest are 62 and now able
to draw limited Social Security benefits until their full retirement
ages of 66-67. With a meltdown in the real estate and stock markets
because of the subprime loans, many have had their retirement nest
eggs shattered or significantly damaged. Many may have to eventually
rely solely upon Social Security and other entitlement programs
of the federal government. That is why persons in this generation
should be shutting the country's door not to prevent the illegal
workers from entering, but from leaving. The U.S. birth rate alone
will not provide enough replacement workers to support the estimated
83.7 million U.S. residents who will reach the age of 55 by 2014,
and the 101.4 million by 2024. The financial noose that was already
apparent to many experts looking at the ticking time bomb of the
baby boomers before this crisis but which many hoped could be partly
staved off by retirement savings has now become tighter. Even those
whose savings were not in the stock market and 401(k) accounts have
seen their savings eroded by higher gas and food prices and healthcare
costs, and face the twin prospects of soaring heating oil prices
and property taxes by local municipalities having limited sources
of income.
To illustrate the dire straits in which the Social Security system
finds itself today, one has to look no further than President Bush's
February 10, 2005, discussion in Raleigh, North Carolina, in which
he stated that, "In 1950, there were 16 workers per one putting
money into the system-which means that when somebody retired, there's
16 workers contributing to that person's retirement. Today there's
3.3 workers contributing for each beneficiary. And when youngsters
retire, it's going to be 2.1-two workers per beneficiary. In other
words, the burden of paying for retirees is increasing on workers."
According to the Pew Research Center, the number of persons of nonworking
age (below 18 and over 64) will increase to 72 per 100 by 2050 from
59 per 100 in 2005, but that the ratio will be even higher if immigration
levels subside. Unless we wish to see many of our baby boomer generation
eating out of garbage cans in later years, the next President is
left with the options of either taxing the next generation more
heavily to pay for the entitlement programs (FICA alone currently
15.3% including employer contribution of the first $102,000 of earnings),
reducing benefits, increasing the retirement age for benefits, or
expanding the base support of the triangle through an immigration
package. Needless to say, one of the first actions of the new President
should be the reining-in of U.S.I.C.E. raids.
Inability to connect the dots and see the ramifications of certain
actions is not the mark of good leadership, and is the reason for
me not to trust the Republicans with another four years.
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