Some Unknown Economic Impacts of this Nation’s “Enforcement Only” Approach to Immigration?

The following is basewd on a story from a reader.  What do our other readers think?

Immigration law practices receive a fair amount of cash payments. Historically, one practice once received something on the average of 20-25% of it’s payments in cash. Recently the percentage of cash payments has been trending higher. Last quarter, the practice mentioned above received over 55% of its payments in cash. Is this attributable to the increase in the “enforcement only” approach of the U.S. government?

Assuming that this trend is generalizable, it may be that (1) more undocumented immigrants are being paid under the table, as part of the underground economy: and/or (2) they are afraid of popping up on the grid, and are avoiding the banking system altogether by using check cashing services instead of depositing their paychecks into a bank. Perhaps it is a combination of both.

Either way, it is alarming, and points to the negative impact of “enforcement only” on the overall U.S. economy. If more people are being paid under the table, then the U.S. is losing out on much need tax revenue. If more people are avoiding the banks, it is contributing to the credit crunch or squeeze that we are slowly working our way through, since banks can only lend out a multiple of their deposits. If the percentage of cash that the law practice receives is any indication, then perhaps as many as 30% more of the undocumented are now avoiding banks due to the enforcement only environment. Even using the conservative figure of 12,000,000 undocumented, and assuming a relatively low average salary of $20,000 per worker, then we might be talking about over $50 billion dollars that is not showing up as deposits in banks due to the enforcement only situation that we now are in.Considering that the “stimulus package” that congress passed this year was $150 billion, the loss of $50 billion in annual deposits to the U.S. banking industry is in no small way contributing to the credit squeeze that is crippling our mortgage industry.

KJ