Bryan Caplan  

But Voters Might Run With Their Feet

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I'm convinced that in case of fiscal crisis, voters will indeed "sit on their hands."  I'm willing to believe, however, that voters might still run with their feet.  As Tim Kane puts it, "What if they had a fiscal crisis, and nobody came?"
The consequences of U.S. fiscal calamity will go hand-in-hand with globalization. The world is in the early stages of globalization, but already member states in the EU are feeling the effects of combining tax competition with the right of movement. A 2006 BBC report noted that nearly 10 percent of Britons lived aborad, a million in Spain.  Two emigrant types dominate: retirees and workers!

[...]

The threat America faces is a world that competes for our greatest natural resource: it's young. If we make the tax climate hellish, the U.S. is going to suffer outmigration as places like Canada, Australia, Brazil, Mexico, Chile realize what an opportunity they have to cream our entrepreneurial talent...

Go ahead and worry about the fiscal crisis of 2020, and worry about its implications across the generations. Just make sure you worry on a big enough scale. We all know that globalization will deepen, and the national borders that seem so tall and vital today will look more and more like borders among the 50 states of yesterday. Remind me again, how difficult does Texas make it on fleeing Californians to move in to their state?

Of course, there is one obvious response to "youth drain," but it's so awful that even the benighted median voter would rather cut spending than resort to it.  Right?!



COMMENTS (12 to date)
Bob Murphy writes:

Of course they will eventually use all the border patrols, fences, etc. to keep people in. That's one of the reasons the people who use "illegal" as a noun annoy me so much.

Andrew writes:

"If we make the tax climate hellish, the U.S. is going to suffer outmigration as places like Canada, Australia, Brazil, Mexico, Chile realize what an opportunity they have to cream our entrepreneurial talent..."

It doesn't matter. US citizens are still liable for income tax on all their worldwide income even if they live abroad. You can only escape your tax liability by renouncing US citizenship, but it's actually illegal to renounce your citizenship for the sole purpose of tax evasion!

H. Protagonist writes:

I'm thirty-one, highly educated, just started a family, and I've already got one eye on the exit. I have a network of contacts in various industries in my target country, and it is one that has significantly easier immigration and naturalization rules than the US does. Our time horizon to departure is about 5 years at this point.

@Andrew: If true, then we'll be moving for "cultural" reasons.

Doc Merlin writes:

The awful response often, eventually gets used by socialist countries as they run out of money and people.

In the past they would have to be pretty fiscally irresponsible to run out of people, but modern birth control means that people in western countries are extremely valuable. So, european countries now import people from countries with high birth rates and very bad institutions, at a very right rate. This isn't sustainable either, because if the rate is too high, and native birth rates too low, eventually they will bring their institutions with them and the country begins mirroring their home country.

Kurbla writes:

I think that other possible response is more in capitalist tradition: slave import.

MernaMoose writes:

Kurbla,

You took the words right out of my mouth. Only thing is, we may have to update the concept a little if we want them to actually think for us, instead of just doing hard manual labor.

Doc Merlin writes:

Also, I have to agree with Block, I don't think the US is that bad when it comes to taxes and regulation. There are better places, but they are few and far in-between. "Canada, Australia, Brazil, Mexico" are most definitely not on that list.

MernaMoose writes:

Nonetheless, this sounds like so much wishful thinking.

If we make the tax climate hellish, the U.S. is going to suffer outmigration as places like Canada, Australia, Brazil, Mexico, Chile realize what an opportunity they have to cream our entrepreneurial talent...

I haven't seen vast herds of people with a strong desire to move right up there next to the North Pole. Snow banks and ice bergs look much better in pictures.

And somehow, I have a hard time believing that Mexico will become a destination of choice any time soon. The drug wars are driving away even the tourists.

Australia might have something, but they're not going to become a huge population absorber any time soon (way to liberal in attitude). Brazil? Chile? Maybe, if they actually got their act together. Which will assuredly happen any minute now.


To what extent is the rest of the global economy dependent on, and/or driven by, the US economy? How this all plays out will depend much on the answer.

In any case, when Rome collapses this time it will probably be a rather different story. I don't see many countries having the wit to actively try sucking off US talent. But at least this time, there's something besides utter darkness beyond the gates of Rome.

JPIrving writes:

Doc Merlin

I wouldn't be so sure, Canada and Australia both rank higher on the economic freedom index than the U.S., as imperfect as that measure is. Both have awesome cities for young people, and Brazil seems serious about economic reform, and Mexico...has nice beaches...

It is just a matter of time before taxes in the U.S. are 50% of GDP, it is a country of children governed by children. When that 50% GDP day comes, the U.S. will be just a big France full of ugly buildings and fat people. Small countries are more serious about liberalization.

Tom West writes:

I think you will find that there are many factors that are far more significant for migration than economic freedom and tax rates.

Example: New York City

NYC has been a Mecca for young people from abroad for centuries over any other part of the United States, yet it has higher taxes, more bureaucracy, etc.

Simply put, being the center of the world is worth an awful lot, and it's highly unlikely that any smaller center (Canada/Australia) is going to overcome that advantage with somewhat greater economic freedom.

That, and as the world becomes less young, older people become proportionally more valuable, and they (in general) tend to prefer the amenities provided by a higher tax lifestyle.

8 writes:

You can't discount other costs. In many countries, it is far cheaper to set up a household. Taxes may be higher, but in the end, a person may come out ahead. Also, consider from a man's perspective, to get divorced in America will often reduce his living standard farther than the accepted decline made by moving overseas.

Also, most of the people who are considering moves such as this are very long-term thinkers. The point isn't relative taxes and demographics today, it's where these factors will be in 10-20 years.

Yes, Americans are supposed to pay taxes on their world income. What happens if country X says it will no longer comply with U.S. tax treaties?

ray l love writes:

If for instance the Democrats use amnesty for illegals as bait to influence the Hispanic vote in 2012, and if Obama were then re-elected, and if Congress were also controlled by the Democrats, the White Conservative bloc which has traditionally had vast influence could then be somewhat marginalized in regards to political power. The economic conditions in 2011 and 2012 will dictate just how much tension arises out of this 'racial power shift' although if conditions worsen from the current circumstances things will almost certainly become more 'territorial'. Many of our cities already have clusters of neighborhoods that are off limits to outsiders, and, a nation divided into a patchwork of semi-hostile areas is very possible. If for example the working-class Whites were to become as territorial as some Blacks, Hispanics, and Asians currently are, or as territorial as some White immigrant groups have been in the past, but with the political parties divided semi-racially, the potential for an outward migration of human capital could be very significant.

"History never repeats but it does rhyme now and then." ~ Mark Twain

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