David North is a fellow at CIS. He is grateful to Kathleen Sharkey, a CIS intern, for her research assistance.
In response to the border crisis, President Biden has pledged to address the "root causes" of illegal immigration from El Salvador, Guatemala, and Honduras, the so-called Northern Triangle nations of Central America. It’s important to note that this would be a long-term project which, even if successful, would not address the immediate border crisis.
The president has promised $4 billion in additional economic assistance to the region, but a detailed plan has not been made public for what the funds will target, how funds will be allocated, what regions will be emphasized, and how long it will take before migration will be impacted.
In this report, we explore how the proposed economic assistance funds could be best used to target the root causes of illegal immigration, emphasizing the need for a data-driven plan that would include a Covid-19 vaccination program, an export-expansion program, crime control and family-planning efforts, and a cash payment program for people who agree, on pain of imprisonment, not to go to the U.S. We also put forth a funding idea: A wire transfer fee paid only by those who subsequently fail to file complete tax returns.
5. Birth Control and the Infrastructure
1. A Shot in the Arm
The Biden administration is struggling with mass incursions on the southern border as many from the Northern Triangle countries of El Salvador, Guatemala, and Honduras seek to improve their own lives (but not the lives of others) by breaking our immigration laws.
I leave the current immediate challenge at the southern border to my colleagues and suggest that the new administration — which is happy to throw public dollars at major problems — should adopt a big, but thoughtful, attempt to reduce the misery in those countries that is causing, or at least is used as an excuse for, the surges at the Mexican border.
Let’s start with four basic truths that are seldom mentioned:
- Only a minority of people leave their nations of origin: We do not see migration applications filed by members of the House of Lords, at one extreme, or the homeless, at the other. We need to know much more about the characteristics of those fleeing the Northern Triangle than we do now so that we can tailor our efforts in the most cost-effective way.
- Traditional USAID programs are not designed to head off migration flows.
- The basic model for assisting the Northern Triangle should not follow the pattern of the great Marshall Plan of the 1940s, as it pumped American money into the war-torn, but fundamentally sound democracies, of Western Europe. Central American governments are very different from those of France and Norway.
- Central America needs a long-term reform in its law enforcement and penal systems, and we have some suggestions that may help in that regard.
Further, the U.S. has the means to change the picture immediately, and positively. We can, if we want, give a Covid-19 shot to all adults in the Northern Triangle in a matter of months, if we put our minds to it. That would be the opening effort in the Biden Plan, which we will outline subsequently.
It would Make America look generous again.
In this, the first of seven sections, we explore the utility of a massive vaccination program in the three nations of the Northern Triangle, and then in subsequent ones we will deal with each of the four subjects outlined above.
The Vaccinations. Apparently the U.S. has gobbled up more vaccine than it needs, and a few days ago the White House announced that it was “lending” 2.5 million shots to Mexico and 1.5 million to Canada, with another 3.0 million units uncommitted, according to the Washington Post.
Meanwhile, in addition to the Pfizer and Moderna vaccines, widely used in the U.S., approvals of different kinds have arrived for the AstraZeneca and Johnson & Johnson vaccines, and others are in the pipeline. Rather than spreading our excess vaccines around the world, let’s focus these kinds of resources on the places where it will do America the most good: in the Northern Triangle.
The population of these three nations is about 30 million, less than 10 percent of that of the U.S. About two-thirds are 16 or older. None of the three have any vaccines under development.
The U.S. would need to help fund the distribution of the vaccines in these nations, as their public health systems are weak.
One approach would be to simply vaccinate everyone over the age of 16 in these nations, with no money changing hands. Another would be to pay people $50 to $75 each to receive the vaccine, pumping an immediate $1 billion to $1.5 billion into these nations’ economies, with the thought being that these payments would reduce or postpone the surge.
A third approach — and I do not know how this would turn out — would be to offer the shots and the dollars in exchange for a pledge on the part of the recipients that they would make no effort to come to the U.S., legally or illegally, in the following two or three years. In exchange for these benefits, they would sign a piece of paper permitting their immediate deportation should they be found in the U.S.
At time that the vaccine is taken, we would take a photo and a fingerprint or two of the individuals, together with other biometric information, all to be loaded on a system to be used at our borders.
Deporting those who took the shots and took the money, but later broke their pledge to us, would be politically easier for the Biden administration than simply deporting illegal entrants.
2. We Need More Data
Before the president's proposed economic assistance plan for the three nations producing the would-be migrants at the southern border can be devised, we need to know more about the people who have made the trek across the length of Mexico.
What are their characteristics and motivations, and above all, where are they from geographically?
In this, the second part on what the administration might do to increase the prosperity of the nations of the Northern Triangle (El Salvador, Guatemala, and Honduras) and thus discourage illegal migration, we outline some of the data needs for planning such assistance.
It should be obvious that America’s investments in the Northern Triangle should not be simply spread evenly over the Northern Triangle geography. That would waste money. Some parts of these nations are more likely to produce migrants than others; one of these three nations, similarly, is probably producing more of the problem than the other two.
So, as a first step, we should do a quick sampling of, say, 1,000 of the people encountered by the Border Patrol. The migrants would be asked a few questions, such as their home areas, their work histories (rural or urban occupations), and their motivations. How many of them when asked why they came mention crime when asked an open-ended question? How many of them are simply seeking a more prosperous life?
My suspicion is that the people at our southern border may well be in the lower-middle part of the nations’ income spectrums. They are not so disadvantaged that they cannot migrate, that’s obvious. If they could not collect or borrow the money for the trip, they would not be here, and if they were comfortable they would not have made the journey. But are we talking about a broad chunk of the Northern Triangle population, or a niche group drawn from the middle of it?
We might also find out the comparative percentages of the migrants on an ethnic basis: How many are from the indigenous groups? How many of them can speak Spanish? Are the indigenous people in the Northern Triangle providing an average proportion of the migrants, or a smaller or larger percentage of them? And how do these percentages vary by nation? And, perhaps, from tribe to tribe? (Teaching Spanish to the mono-lingual indigenous population might be a good way to keep them at home, as it would open now-closed opportunities for them locally.)
We don’t need a long, splendidly designed study full of regression analyses, or a comprehensive census, such as we conduct every 10 years. The study should be done quickly, and the interviewers should be Spanish-speakers who are not wearing uniforms, to encourage the most open and honest responses to the questions. It could be done in a matter of weeks.
Other Datasets. The study just described would produce, among other things, a map of the three nations, showing the extent of illegal migration by city and countryside, and province by province. This would be a basic, location-of-the-problem map.
The next step would be to construct or utilize existing maps based on in-country data. When using such indices as murder-rate or crime-rate per 100,000 inhabitants, or wage levels by locality, one could see if the distribution of emigration and these other measures overlap. To what extent is emigration related positively to crime rates and negatively to wage levels, or is it more complex? How evenly or unevenly are emigration-causing factors distributed around the three countries?
For example, the U.S. State Department map below shows the relative incidence of crime (murder, disappearances, and extortion) reported by El Salvador’s police; the high reporting rates are mostly in the southwestern sixth of the nation, south of the Pan American Highway, and west of the capital city. The rest of the nation has much lower rates of crime, including the apparently peaceful islands at the nation’s eastern extreme.
Uneven Distribution of Crime in El Salvador
Source: “Northern Triangle Country Conditions”, Bureau of Conflict and Stabilization Operations, U.S. Department of State, Washington, DC, May 2019, p. 4.
Note: Areas in yellow are at the high range of crime reports per 100,000 people; areas in blue are at the other extreme, with most of the country being in between. Crime is defined as murders, disappearances, and extortion.
The third step would be, again using existing data, to show economic activity and potential economic activity, province by province. What are the options for expanding coffee, banana, or shrimp production, for example, and how do these opportunities mesh with the incidence of emigration?
With these three sets of maps, and other data, America would be have a good base for figuring out what kinds of assistance are needed and where.
3. More Exports to the U.S.?
There are four basic ways to bring more prosperity to those who now are leaving the Northern Triangle countries of El Salvador, Guatemala, and Honduras for our southern border. One could (at least theoretically):
- Expand the area’s current exports;
- Create substantial new exports where none now exist;
- Cause a better distribution of income internally; and/or
- Simply send money, like the $1,400 checks Washington is currently distributing within the U.S.
I regard the second and third alternatives as both desirable but, in the short-term, unlikely, approaches. In earlier postings we advocated an immediate round of vaccinations for Covid-19, and a study of the characteristics of those now seeking to cross from Mexico, so as to better target any economic assistance programs to those areas needing it the most. Today, we review what the Northern Triangle countries are now exporting, to see if it would be possible to expand those exports (perhaps by reducing our imports from other parts of the globe).
As a first step, let’s look at what the three nations export; the two larger nations have a strong agricultural base, while the third, El Salvador, is a low wage-industrial nation, competing with similar nations in Latin America and Asia. Using the same data source, TrendEconomy, for all three countries, we have condensed its findings for 2020 exports (to all nations) in U.S. dollars and percentages:
- 23.0 percent ($1.1 billion) clothing;
- 4.3 percent ($215 million) sugar;
- 4.3 percent ($215 million) plastics;
- 3.4 percent ($171 million) paper products;
- 3.2 percent ($160 million) medicaments;
- 2.8 percent ($139 million) electrical products; and
- 2.2 percent ($108 million) coffee.
- 15.4 percent ($1.8 billion) coffee, tea, and spices;
- 11.2 percent ($1.3 billion) edible fruit, including bananas;
- 9.1 percent ($1.1 billion) clothing;
- 6.1 percent ($712 million) sugar;
- 5.0 percent ($578 million) animal or vegetable fats and oils;
- 3.9 percent ($457 million) iron and steel;
- 3.2 percent ($372 million) vegetables;
- 3.2 percent ($367 million) plastics; and
- 2.9 percent ($341 million) paper products.
- 31.0 percent ($963 million) coffee, tea, and spices;
- 12.7 percent ($395 million) edible fruit, including bananas;
- 5.9 percent ($181 million) fish, shrimp, and similar products;
- 5.9 percent ($181 million) animal or vegetable fats and oils;
- 5.1 percent ($156 million) electrical products;
- 4.1 percent ($125 million) jewels, pearls, coins;
- 3.0 percent ($91 million) iron and steel;
- 2.9 percent ($86 million) sugar;
- 2.8 percent ($86 million) paper products; and
- 2.3 percent ($72 million) vegetables.
What does all that tell us in policy terms? It suggests that our earlier suggestions about the U.S. government buying more coffee in the Northern Triangle would be very useful for Honduras, important for Guatemala, and insignificant for El Salvador, whose days as a primarily agricultural nation are clearly over.
Given the political power of U.S. producers of sugar, on one hand, and of iron and steel, on the other, there is little room for maneuver in either field.
Any economic assistance program the nation devises will deal with many more issues (and maybe opportunities) than export expansion, but increasing U.S. purchases of coffee, bananas, and other edibles looks like a reasonable approach to the economies of the two larger jurisdictions.
Specifics: The Proposed Export Enhancement Program (EEP). The EEP will expand existing NT exports, would see to it that at least two-thirds of the extra money goes to workers and farmers, and would be awarded to areas that are producing the most potential illegal migrants. It will be done through U.S. importers who will receive a third of the payments for their (audited) cooperation. Coffee imports will be handled separately because the U.S. government would be a major player as a purchaser, as suggested earlier, and the steel and sugar markets would be left out of the equation because of domestic political pressures in the U.S. EEP will be funded by USAID dollars.
The basic formula is that a U.S. importer, which is already dealing with the NT, would be given a 3 percent bonus for importing as much as 30 percent more product from the NT than in the last two years, on average. The prices to be paid by the importer must be at least 3 percent above the two-year average and must remain above world-wide prices for the commodity in question. In this way there would be both an increase in volume of sales, and in the average price of those sales.
USAID would issue a request for proposals (a government document well known to me from my years as a sometimes-U.S.-government-funded researcher), essentially creating a competition among importers for these funds.
The winners of the RFP process would be the ones that:
- Bring extra money to areas where illegal migration mainly comes from;
- Make the most plausible plans for paying the workforce; and
- Currently buy from existing (and legitimate) NT cooperatives.
The decision-makers would be U.S. officials who know the ground, and know the migration sources. Some of the funding would be new money, and some of it would be siphoned off from USAID projects in the rest of the world. The total amount would be spent in three-year increments, to make this a continuing element, and that total would vary according to the quality of the proposals.
EEP would become part of a larger policy of subsidizing the economies and the tranquility of the Northern Triangle and it would be targeted at reducing pressures to emigrate.
4. Crime Control
Clearly crime and gangs play a major role in motivating people from the Northern Triangle countries of Central America (Guatemala, Honduras, and El Salvador) to seek entry to the U.S. How important this factor is from one place to another remains to be seen, but the basic numbers are worrisome, particularly in El Salvador, which tops the list of all nations in the world with its murder rate per 100,000 residents.
Here are the most recent murder rates:
Murder rates vary by locality as much or more than they do by nation. In the U.S., for instance, the murder rate (a good proxy for crime generally) runs from an almost-Guatemala level in Washington, D.C., of 23.5 per 100,000, down to 1.5 per 100,000 in Maine. While we have not found a full set of locality rates for the Northern Triangle nations, we have seen some of the highs. Honduras, with its 41.7 rate nationally, has a major city, Choloma, with a rate of 91.0, more than twice the national average. (See the map of Honduras, below, showing variations in the crime rate, which includes murders, disappearances, and extortion.)
Uneven Distribution of Crime in Honduras
Source: “Northern Triangle Country Conditions”, Bureau of Conflict and Stabilization Operations, U.S. Department of State, Washington, DC, May 2019, p. 10.
Note: Areas in yellow are at the high range of crime reports per 100,000 people; areas in blue are at the other extreme, with most of the country being in between. Crime is defined as murders, disappearances, and extortion. The greatest incidence of crime is in the northwestern quadrant of the nation; the reference on the State Department report's map to “dro Sula” is to San Pedro Sula, the nation’s second largest city, which has a population of about 490,000, and is a high-crime area. Adjacent to San Pedro Sula is the city of Choloma (population 275,724), which has the nation’s highest murder rate. Murder and crime rates are different measures of the same problem.
Any economic assistance plan for the Northern Triangle should deal with the crime issue, and should do so in a way that most of the crime-fighting resources are deployed in the high-crime locations where they are the most needed.
What Can the U.S. Do? Taming crime, including gang activities, is no easy task, and there is no magic formula known to do it quickly and inexpensively. While one or more of the Northern Triangle nations may be making efforts along these lines, if past is prologue, little help can be expected from that direction. There needs to be major support from outside, but it should look as much as possible like an internal operation.
What’s needed, and would be largely supported by USAID funds, is a three-prong effort to enhance policing, judging, and imprisonment, but all with Central American patterns.
On the first point, we suggest the creation of a new, U.S.-supported gang-related police force, with a catchy Spanish name. The members would be drawn from other Central American nations, would be located in high emigration (and presumably high crime) areas, would be paid about double the wages of the local police, and might well live in fortified villages in the areas that they would serve. They would expected to be honest, vigorous, and enlightened. The force for El Salvador, for example, would be recruited from communities elsewhere in Central America, so that special police would have no family or other ties with the local population, and could thus act in a disinterested manner. They would be trained in local law and in coping with gang practices, and to combat, not tolerate, in-family abuse.
They would take their cases to a special judicial system, whose judges would also be recruited from elsewhere in Central America. This notion of moving judges across national boundaries has proven highly successful in the (formerly British) Commonwealth of Nations. Partially supported by United Kingdom funding, former Jamaican judges work in, say, Belize, while former Belizean judges work in, say, Guyana. This allows for a judicial system in which the judges are not overly influenced by local family or ethnic ties. Further, it provides outside judges who look like, and sound like, the local population.
In addition, USAID funds should be used to build and staff new prisons, so that, once convicted, gang members could be separated from the rest of society while, one hopes, learning new, non-criminal skills.
All of these activities would, of course, upset the local governments, but they would be given a choice between accepting these reforms as an integral part of a much larger package of financial aid (to be described subsequently) or doing without billions in aid.
Canada, Costa Rica, and Panama. All too often, the U.S. goes it alone in these kinds of activities. In the case of the Northern Triangle, America should acknowledge and assist other nations that are, or could be, useful partners. Costa Rica and Panama might be good places to recruit some of the special police and judges mentioned above. Canada might be asked to use some of its overseas economic assistance resources to fund export promotion or infrastructure activities.
Some Northern Triangle residents have fled to Costa Rica and, I assume, to Panama. The U.S. might make financial contributions to both nations, in proportion to the numbers of migrants from the Northern Triangle in those places. Costa Rica has a murder rate much closer to that of the U.S. than those of its neighbors; it is about 10 per 100,000.
5. Birth Control and the Infrastructure
This part of our proposed Biden Plan for the Northern Triangle nations of El Salvador, Guatemala, and Honduras relates to the need for more access to birth control in those countries, as well as a brief discussion of other traditional long-term development strategies. The next will deal with a cash payment plan to discourage emigration immediately, and the last with how to fund all of these activities, at minimal cost to law-abiding taxpayers.
The imbalance between resources, on one hand, and birth rates, on the other, is shown below, where we report birth rates for the U.S., the Northern Triangle nations, and Mexico. The further south one ventures from the States, the fewer the resources, and the more births. Also, the less territory, the higher the birthrates. Here are the birth rates per thousand for the five nations:
Mexican birth rates, 20 years ago, were much higher than they are now, and the drop in these rates as well as its continuing relative prosperity, have caused the influx of illegal migrants from that country to stabilize and then decline in recent years.
Part of the problem in the Northern Triangle is that the populations in these nations are heavily tipped toward young people, assuring us of expanding numbers of women in their reproductive years in the decades to come, as the following data shows for the most fertile of these nations, Guatemala.
Guatemala’s Population by Five-Year Cohorts, 2005, Est.
|Subtotal Under 30||4,476,317||4,520,289||8,996,606||70.9%|
Girls under the age of five currently will, 25 years from now, be in their peak years of fertility, and that cohort will be twice as large as that of the 25- to 29-year-olds now. Even with a sharp reduction in the number of births per 1,000 women, the total number of births in the nation will keep on climbing.
Making birth control more available than it is now -- thus giving women in the Northern Triangle more control over childbearing decisions -- and using federal dollars to expand these services, would seem to be a cornerstone for any development assistance strategy.
Traditional Economic Development Strategies. The Biden administration has signaled that it will restore the cuts made in USAID support to these countries by the previous administration and seems willing to expand such activities.
These efforts, by definition, are designed to help increase the prosperity of these countries on a long-term basis. They typically are devoted to such things as building schools, roads, and bridges, and to bringing technical assistance to the nation’s industrial and agricultural sectors, all worthy, if long-term, goals.
While I never played a direct role in USAID operations, for decades my colleagues at the (now defunct) New TransCentury Foundation worked on a variety of USAID projects so I have a sense of how they work. My colleagues there created a factory for inexpensive wheelchairs in Costa Rica, constructed hundreds of simple-to-operate village water systems in what was then North Yemen, and brought technical agricultural assistance to what was then the island of Fernando Po, now Bioko, in Equatorial Guinea.
It is important in these operations to use the USAID money as much as possible to create jobs for local residents (rather than in bringing in too many expensive U.S. experts), and to use the funds locally, rather than importing expensive stuff from elsewhere.
For example, if flood control in the NT is to be funded by the U.S., we should avoid massive dams (think of the Hoover dam), which require expensive expertise and high-quality construction, and build instead a series of much smaller dams high in the mountains, with each little dam being made of dirt and stone, and covered with (dam-protecting) local vegetation. Such dams need no staffing, as they have many small pipes stuck through the middle of them, which carry the usual flow of water in usual times, but create backlogs of water in flood times. These little dams can be created with little expertise and much local labor.
Traditional USAID programs can also be used to repair some of the damages done by the recent storms that have been so destructive in parts of the NT.
6. Cash Payments
Virtually everything we have discussed earlier relates to long-term strategies to make the nations of the Northern Triangle (NT: El Salvador, Guatemala, and Honduras) more attractive places to live, thus discouraging illegal migration to the U.S. Earlier posts covered the need for more information about those seeking entry, the planned increases in exports, desired decreases in crime and birth rates, and the better utilization of more USAID dollars.
We now turn to the more immediate challenge of discouraging those who want to, or might want to, come to the U.S. illegally. Clearly a more coherent border policy is needed, as my colleagues Todd Bensman and Andrew Arthur have suggested forcefully, including the humane and careful return of children to the NT who have been sent across our southern border by their NT parents. The U.S. has to send a message that illegal NT migrants are not only not welcome but that they will be repatriated.
In addition to this tough stance (the vinegar approach) we need a sugared approach: Potential migrants of various groupings who agree not to try to come to the U.S., in any way, legal or illegal, for the next five or maybe seven years will be paid in cash. Those who take the money and subsequently seek entrance will be so thoroughly ID’d in the payment process, that they will be immediately visible to our authorities once apprehended; those receiving the payments will have agreed, in writing, when they accepted the money that, should they be found in the U.S., they will experience both time in prison and process-free deportation, with no access to any judicial system.
Those eligible for the payments will be residents of the NT nations between the ages of 15 and 50, with the compensation coming in four layers:
- $2,500 each for those currently in the US. or right across the Mexican border;
- $1,000 each for those now in NT areas with high emigration rates;
- $750 each for those in NT areas with medium emigration rates; and
- $500 each for those in NT areas with low emigration rates.
In addition, those in the U.S. or currently at the Mexican border will get pleasant airplane rides back to their capital city, and a bus ticket to their home area, with the payment being made as they leave the busses. Most of the payments will be immediate, but a portion, say 25 percent, will be made available later, in-country, a year or so after the first installment. That will discourage emigration a little longer.
Each applicant will be recorded in an IT system, which will have photos of their faces, frontal, and in profile, fingerprints, and perhaps some other up-to-the-moment ID system elements, such as perhaps a blood sample. All aliens from the Western Hemisphere who run into U.S. immigration authorities in the future will be screened against this database, and if identified, will be placed in an American prison.
Clearly, this will not be a perfect system. Some will not file for the payments, others will seek the payments and illegal entry in the U.S. a little later. In the payment process, some will lie about their ages, or their residence (e.g., claiming to live in a higher emigration area than they do). These are all regrettable, but tolerable costs; all payments will help boost the economies of the NT nations, if not always exactly where we want them boosted.
It is important that a U.S.-managed system of making the payments should be put in place to minimize waste and fraud. Perhaps it could be run by Spanish-speaking U.S. Peace Corps volunteers.
We assume that the overall data collection, mentioned earlier in this series, can be used to divide each of the nations into three equally populated segments (or collections of segments) — one with the highest risk of emigration, one with the lowest, and a middle one.
There are about 30 million people living in the NT; hence each of the three sets of districts will have about 10 million people in them. About half of the population of each nation is within the 15-50 age range, so payments, of differing sizes, would be offered to some 15 million people.
The offer at the border will be time-constrained, so that people will not make the trek through Mexico to get the benefits. Once the announcement of the program has been made, those on the Mexican side of the border would be given no more than a week to sign up. The acceptance of those applications would take a longer period of time.
We should be aware that while the dollar figures suggested would be modest by U.S. standards, the dollar goes further in the NT than in the U.S. If a family of two parents and a 15-year-old, now at our border accepted the $7,500 offer, it could mean life-changing benefits back home, such as the purchase of a herd of sheep, or equipping and opening a shoe repair shop, or buying a car and starting a taxi service, or funding a year or two of college. (These are, of course, rough-and-ready, but realistic, cost estimates.)
Assuming the population figures above and a guess of 50,000 adults at the border or in the U.S., and assuming that all would accept the offer (which they won’t), we have the following back-of-the envelope estimates of the maximum, one-time cost of this program:
|At the border or in the U.S.||50,000||x||$2,500||=||$1.25 billion|
|In high emigration areas||5 million||x||$1,000||=||$5 billlion|
|In medium emigration areas||5 million||x||$750||=||$3.75 billion|
|In low emigration areas||5 million||x||$500||=||$2.5 billion|
|Totals||15.05 million||$12.5 billion|
This is both a lot of money, and peanuts compared to the new $1.9 trillion Covid-19 relief package that was signed into law recently. The suggestion above is less than two-thirds of 1 percent of the virus package (0.6579 percent).
Moreover, the next section will include a suggestion about how much of this money could be raised in a way that impacts no law-abiding taxpayers, and virtually no voters. It is a hidden tax resource that has been tapped by only a single state, Oklahoma.
7. Helping to Fund It
We have outlined a series of programs designed to make the three countries in Central America's Northern Triangle more attractive places to live, thus easing the current pressure on the southern border. The program as a whole, by recent standards of government expenditures, is not costly, but we have a suggestion as to how to meet the Biden Plan’s continuing costs.
The one-time series of non-emigration payments to some individual residents of El Salvador, Guatemala, and Honduras, equaling something like $12 billion, suggested in our last post, will have to be met by the Treasury, but the ongoing economic aid, presumably running at the $2 to $3 billion a year level, can and should be, met from other sources.
The Major Source. The potential major source we have in mind has a number of attractive qualities: It will cost nothing to any law-abiding, tax-paying person; it will be paid largely by non-voters; and it will, to some extent, tap into the profits of the nation’s drug dealers. And we know it will work because it has been tested for a decade by one state, Oklahoma.
We are proposing a wire-transfer fee for all funds sent overseas from individuals in the U.S. Corporations are not covered by the suggestion, so there would be no hiccups in world trade.
In normal years, such as 2014, the flow of remittances from the U.S. to the rest of the world was in the neighborhood of $131 billion (according to Forbes), but that has slipped a bit because of Covid-19.
Our proposal is to establish a 2 percent fee on all outgoing wire-transfers made by individuals; these fees would come to about $2.6 billion a year. But this will cost nothing to tax-paying, law-abiding people because the fees will be credits against one’s federal income taxes, just like a deduction for taxes made by an employer. The payment of the wire-transfer fee would lead to a dollar-by-dollar reduction in what one would owe in federal income taxes.
But the experience of Oklahoma, which has a 1 percent wire transfer fee that can be used vis-a-vis that state’s own income tax, is that few fees are so used, meaning that most of the fees represent the collection of a tax on what is otherwise un-taxed income.
In addition to getting 2 percent from the new, untapped source of a tax on remittances, an unknown amount could be raised from the fees being paid for wire-transfers by drug dealers. This would be a very attractive source of funding.
Minor Sources. In addition, in an instance of robbing Peter to pay Paul, we suggest that some sliver of the massive USAID money flows to Afghanistan, Israel, Jordan, Egypt, etc. be siphoned off to the Northern Triangle countries. Similarly, to the extent that USAID funds currently go to the Northern Triangle nations’ militaries, some of these resources should be reprogrammed to meet economic development goals.