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The Economic Case For Legalizing Illegals

When the office of Senator Arlen Specter (R-PA.) rang up in April with an invitation to testify before Congress on immigration, David Card turned the offer down flat. "Those guys are just interested in grandstanding," says the University of California at Berkeley professor. "I don't have much respect for politicians."

Yet at a moment when immigration is the big hot button, the diffident 50-year-old Canadian is the top pro-immigration economist in the U.S. Based on his research, Card argues that the influx of foreigners in recent decades has had little effect on the wages of unskilled U.S. workers -- a finding that helps justify the latest proposals to legalize illegal aliens. If he's right, fears of immigrant workers are overblown. "It's a scare tactic," he says.

Unlike some other labor economists, Card knows firsthand about physical work. The eldest of five growing up on a dairy farm in Guelph, Ont., he got up at 5:30 every morning to milk the cows and attended a one-room schoolhouse in the elementary grades, never meeting professionals' kids until high school. To pay his way through college he worked at a research farm. "I've probably cut more grass than anyone you've ever met," he says.

Even as a seventh-generation Canadian, Card empathizes with immigrants. "If someone had cut immigration in 1820 when my family left England for Canada, my family would have starved to death," he says. "Poor people around the world deserve a shot to share in wealth and opportunity."

Card's stature as an immigration economist comes from the power of his empirical research. He studied the 1980 Mariel boat lift, which brought thousands of Cuban political refugees to Miami. Economists expected this influx to hurt unskilled workers there. But his 1990 paper showed that wages barely budged. "Everyone had to deal with the study because it was so persuasive," says economist Orley Ashenfelter, Card's PhD adviser at Princeton University. In 1995, Card won the John Bates Clark Medal for best U.S. economist under 40.

Strong Disagreement

In a 2004 study he looked at big U.S. cities and found that the surge in unskilled immigrants had little impact on high school dropouts' wages relative to more-educated workers.

Other economists disagree. "What David is saying is insane," says Cuban-born Harvard economist George Borjas, the leading immigration skeptic. "To say a [big] influx of high school dropouts has no impact on wages is a strange way of looking at the labor market."

In a 2005 study, Borjas and fellow Harvard economist Lawrence Katz calculated that the arrival of unskilled immigrants from 1980 to 2000 depressed wages of high school dropouts relative to those of educated workers by 8%. But in a less noticed part of the study, they found that wages of high school dropouts fell only by 3% to 4% if employers installed new machinery to make more productive use of workers. That's an "almost undetectable" difference from his own results, says Card.

While Borjas has become a darling of immigration foes, Card believes that getting too close to politics endangers scholarly objectivity. He also worries that "most people cannot be assuaged by the evidence" on emotional issues. But still, Card keeps trying.

Lawmakers are getting an earful from voters furious about high gasoline prices. Democrats and some Republicans want to whack oil and gas producers with a windfall-profits tax. But if politicians think levies on energy companies are too low, they could look back to a tax break they quietly O.K.'d just two years ago. That provision has already cut taxes paid by oil companies by hundreds of millions of dollars and could be worth as much as $10 billion over the next decade.

The tax breaks were part of a 2004 law intended to benefit U.S. manufacturers. But oil producers, along with many other businesses, got in on the action. Profits from both oil produced domestically and foreign crude refined in the U.S. are eligible. "There is no reason why they should have this deduction, except they have very effective lobbyists," says Leonard E. Burman, co-director of the Urban-Brookings Tax Policy Center.

But Mark Kibbe of the American Petroleum Institute, an industry group, says the tax break will boost domestic energy production: "The idea was to promote U.S. refining and extraction jobs and build more capacity here."

ConocoPhillips (COP) reported that the provision cut its taxes by $106 million for last year alone. And while Congress figured the total break would be worth $3.6 billion, that assumed oil prices below $30 a barrel. They now top $70.

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