By John Rackell

I have been assured by a very knowing American of my acquaintance in London, that a young healthy child well nursed is at a year old a most delicious, nourishing, and wholesome food, whether stewed, roasted, baked, or boiled, and I make no doubt that it will equally serve in a fricassee, or a ragout.

Jonathan Swift: A Modest Proposal for Preventing the Children of Ireland from being a Burden to their Parents or Country, 1729.

Some proposals for solving particular problems of the day may have all the merits of logic on their side, assuming one acquiesces to facile assumptions and glib premises, but their conclusions are so outrageous that the proposal must be treated as satire.  Or God help us.

In our current circumstance of economic crisis – housing bubble burst, busted banks, bankrupt states and municipalities, exploding government liabilities, depression waiting in the wings (or hyperinflation or hyperinflationary-depression) – and those are only the manageable problems, to say nothing of the trashing of the West’s 500 year hegemony and the transfer of wealth and power to Asia, and China in particular – various proposals are being mooted that formerly would have been whispered only by conspiracy theorists or dismissed by sober minded people, or treated as satire.

To wit, the ones I’m familiar with, that the (US) government will force all holders of 401k and IRA plans (private, ‘self-directed’ pension plans for non-US readers) to accept zero-coupon government bonds in exchange for the assets in their accounts; these plans representing perhaps the single largest untapped source of wealth for the US government.

The other modest proposal, and the subject here, is the idea that the US should solve the problems of housing (primarily the vast excess supply of housing relative to current demand – the supply ‘overhang’ ) by giving any foreign person a US green card – i.e. an immigration visa – in exchange for their purchase of a housing unit.

One house, one immigrant – and his extended family.  Very neat.

Richard LeFrak and A. Gary Shilling have discussed the idea in a concise article in the WSJ (“Immigrants can help fix the housing bubble”) and two white papers.  John Mauldin, a respected financial commenter, has also discussed the idea here, taking off from Shilling piece with his own permutations.  The links to Shilling’s white papers and the WSJ editorial are at the end of Mauldin’s piece.

Mauldin is urging everyone – presumably anyone whose house has been sitting unsold on the market – to contact their own congressional representatives and urge them to implement his proposal.

That really is my intention here:  to notify any MR readers, not already apprised, of what may be coming down the pass.  It has received some blog attention, eg Steve Sailer here.  Really any MR reader can supply their own commentary – and expletives. Perhaps Mr. Mauldin will have inspired you to contact your own congressman to discuss the shortcomings of the plan.

Job done.  The remainder is my own enhancement of the S&M proposal.

The S&M proposal may reek of the final take-over of the US government by the FIRE economy (Finance, Insurance and Real Estate – read: the banking system), Goldman Sachs (GS) in particular.  Having already wormed its way into the Treasury and Federal Reserve, (for example, the billions granted to AIG and then passed directly through to AIG’s counter parties, GS in particular), you could say GS has now set its sights on the Naturalization and Immigration Service, or the ICS Department as it is now known.

That’s not to say that Shilling, Mauldin et al (S&M) are directly in cahoots with Goldman Sachs, obviously, anymore than, say, the credit rating agencies were in cahoots as they gave AAA ratings to collections of subprime mortgages.  On the other hand the game has to be stage-managed somehow, which takes a messenger of some sort.

I have two modest proposals of my own, along the lines of S&M’s, that deserve the attention of, among sundry, ‘serious’ economists (Mauldin’s term – presumably like the most serious one of all who advised getting adjustable rate mortgages just before he started cranking up interest rates), people with a stake in a rigged game, and anybody who’s easily gulled.

Tossing some numbers out – which in order of magnitude at least are credible:  China has a trillion dollars in US reserves in various debts – Treasurys, and Fannie and Freddie debt; current budget deficits are a trillion; outstanding government debt is about 10 trillion; US liabilities (Social Security, Medicare, government pensions etc) are 50 trillion plus in net presence value; trade deficits are on the order of one trillion (granted, they’ve come down a lot since the debacle hit).

(For those whose eyes glaze over at these numbers in the sense of “pretty soon you’ll be talking real money,”  it behooves me to say that a trillion dollars is really a gargantuan number. I like to concretize the number by listening to the justified hand-wringing over California’s budget problems, which are on the order of only 40 billion,  with all it means for real people: redundancies, pay freezes, scaling back of all services.  40 billion against a trillion dollars is an ant’s piss worth of debt compared to getting hosed by an elephant which is the assorted federal liabilities.  It is truly staggering, up-to-your eyeballs stuff.)

There is no way we are going to pay it off from the sweat of our brows.  And remember, a lot of this is old debt (except, say, for the 50 trillion of unfunded liabilities) to say nothing of any new debt we need to maintain our current standard of living.

So we’re in a pickle.  It’s not just the housing over supply.  S&M make a good presentation of how that particular problem depresses the entire financial system and traps millions in houses worth less than the outstanding debt on them. 

(One can ask why the proposal of a government plan such as theirs is necessary to support what appears to be private debt.  But the public versus the private nature of the debt is somewhat a moot point.  Housing in particular has become public debt, directly, with the government guaranteeing the mortgate companies Fannie and Freddie etc.  It is a tangent away from my own proposal to come to grips with why private debt has become public debt, and the distinction is nebulous.  Ultimately any government is run by and for the people who control the political means (in contrast to what Alfred Jay Nock referred to as the ‘economic means’ in his book Our Enemy, the State).  The public owes that public debt to private parties, the oligopoly, if you will, which will try to make the debts that are owed to it whole, either through inflation (as they are best able to cope with the ravages of inflation), or using the public purse to guarantee and/or buy their debt, or even through prostituting the US government in green card swaps.  It is the last of these that is the topic here.  Regardless of how these debts were incurred, they exist and must be reckoned with.  The main point is that S&M’s proposal is of like kind:  It is a swapping of private debts – the whole panoply of housing debts – with a public tax, which is the selling of our commonweal to foreigners without just compensation to us, the public.  Just another charge against the taxpayer with some hand-waving about the merits of unlimited immigration.  By the way, Mauldin does disavow that his plan would increase the intake, just change the mix. 

(Parenthetically, it may have confused you why S&M confined themselves to bailing out only the housing industry with this plan.  Why not GM, where annual US sales of cars is off by, like, 9 million?  Why not let foreigners come if they’ll by a couple of Chryslers and park them on their front lawn?  Or even the US Milk Board – with the US becoming more lactose intolerant why not give green cards to foreign consumers who’ll promise to drink lots of milk.  Well, okay, scratch that – you’d have to bring in lactose tolerant ones and we know who those are. But the general point is that all consumption activities or whatever ails the US economy could be enhanced by the ‘swap’ in the manner advocated by S&M, not just housing.)

The previous has been backgrounder to my modest proposal; that the housing problem is but the tip of the iceberg; that all these problems of US debt – and thereby preserving the oligopoly’s wealth held in the form of debt – are amenable to the same outstanding solutions of S&M.  In fact, we are indebted to S&M for showing us the way.

The proposal is this:  Let a green card be granted to any foreigner who purchases $100,000 worth of US government debt.

Prostituting the US commonweal to get out of a sticky jamb you say, aghast.  Well, yes and no.  My second modest proposal will deal more directly with prostitution.  But my proposal has the hallmark of the S&M proposal and the arguments adduced for it are exactly the same proffered by S&M:  that we are a Propostion Nation (what proposition exactly? Surplus housing.  No, let’s be expansive and apply to all forms of debt); that immigrants who can pony up for a house are a priori the caliber of immigrants the US needs, and so it is for anybody who can pony up 100 grand of Treasurys.  And we also get a ‘call option’ on the entrepreneurial talents of those same immigrants who raise the feckless Americans standard of living by inventing all those neat gadgets, like the one I’m typing on (the cynic might say that these talents are a mixed blessing; presumably they also contributed to the financial engineering debacle unfolding.)

Ultimately the foreigner interested in the housing for green card deal would be exactly the same immigrant pre-qualified for the US Treasury debt for a green card deal.  And it’s probably a better deal for him – how smart would he be for buying an overpriced house from a foreclosed American which is nothing but the essence of the S&M plan, to wit, to arrest the decline in housing.

Back of the envelope numbers to give you an idea of what we’re talking about.  A trillion dollars is 1000 billion, which is 10^12..  So 10^12 dollars divided by $100,000 per green card is (10^12 divided by 10^5) 10^7 green cards.  That’s 10 million new Americans, or green cards, for one trillion dollars.  The entire unfunded liabilities of the US, for instance, could be wiped clean at the ‘price’ of 500 million new Americans.  This says nothing of the benefits accruing from the immigrants own economic activity and the infusion of new blood into the current 300 billion or so.  If 500 million Americans seems unwieldy, then take any current or future debt obligation, say the 600 billion dollars of budget deficit and calculate its ‘green card price.’  Mutatis Mutandis.

A merit of my proposal is that my proposal is a meta-proposal.  And the meta-analysis of all these proposals is that the US is a consumption society.  And what a consumption society needs most of all is consumers who can pay cash on the barrel.  And I’ve got a plan to bring them in droves.  S&M’s plan provide the “consumers” for the nation’s misallocated resources in the housing stock – consumers who can finance their own consumption without incurring debt and can pay off the principal of existing debt – in exchange for a green card.  My plan goes further and provides the consumers for all the US consumption activities – the accumulated public and private debt being a proxy for all our past and ongoing consumption.

The merit of my plan is that it could be accomplished on a government to government basis.  For instance, the Chinese government could ask for green cards for the entire province of Fujian in exchange for writing off some of China’s reserve holdings of US Treasury debt.  The benefit for the Chinese is that it would reduce population pressures in China and other ecological capacity constraints; for the US, it facilitates green card swaps for all manner of public debt and we get the unmitigated blessing of millions of new Americans.  The S&M plan is entirely carried out in the private sphere and has many drawbacks including some difficult to enforce policing arrangements, eg, the house purchased for a green card may not be rented for two years.  Try and enforce that!

My opening this commentary with the quotation from Swift my have led you to believe I was embarking on a satire.  But by now, if you’ve got this far, and you’ve read the original S&M articles you know that this is a jolly good idea and not satirical at all.  Tell me where the satire is?

But if you want satire, may I offer you a second proposal, albeit even more modest.  The up and coming dynamic nations of the East, owing to certain cultural practices are running a demographic deficit of the nation’s female population.  Basically, there should be slightly more females than male in the populaiton.  Apparently this is not the case. In fact there is a dramatic shortfall of females in the population, especially in the all important fertile years; a supply deficit, to bring the discussion back on hallowed economic ground.  The West, in its relative decline vis a vis the East, and having an abundance of females – not in any absolute sense, but really, what American woman in her right mind wants to date an unemployed American programmer (pick a profession of your own).  There won’t be an abundance of nubile young women but there will be an abundance of unemployed or never employed American men who are not marriage potential.  So there will be a relative abundance of American women.  This is a resource that under current proposals will be woefully under utilized.

I am proposing that American women be encouraged, cajoled and ultimately, if inducements and blandishments don’t have the desired effect, to be coerced into marrying foreign men – at a price.  Those foreign men who can afford the ‘bride price,’ payable to the US Treasury, say on the order of $100,000, would be desirable mates anyway, having been successful in their own countries and would be desirable mate choices both to the American wife individually and the US genome collectively in view of the implantation of successful entrepreneurial genes into the American population (presuming some type of residency is also obtained.)  Not to mention the US population will become a nice cafe-au-lait color, not that hideous white.

For those who say there is no historical precedent for such a coercion, then I would say they need to expand their historical scope.  In ancient times, whole provinces were enslaved by the Romans, not merely as a one-off result of conquest but as a result of tax farming by the Empire’s tax collectors.  Slaves being a commodity in the Roman Empire, a provinces accrued debt to the Empire could be expunged by turning the population over to slavery; the boys to become eunuchs; the girls concubines.  Less tendentiously, the entire population of the Roman Empire was turned over into a de facto servitude or serfdom by Diocletian’s tax code that confined people to hereditary occupations for ease of tax collection; and some people voluntarily consigned themselves to slavery because they were at wit’s end as to how to pay their taxes.

Drastic times require drastic measures.  It’s quite possible that some of these proposals will come to pass.  God help us.