Here is the Economic Report

November 15, 2008

I just read the report, Economic Impact of Federal Laws on the Commonwealth of the Northern Mariana Islands, by Malcolm McPhee and Dick Conway.  The report was commissioned by the Fitial Administration to "use in addressing its federal legislative efforts." Here is a link to the report.  Some of my thoughts on the report:

The report is a piece of politically charged propaganda masked as an economic report. It was crafted to support Fitial's lawsuit against federalization. It won't work, because it echos the false arguments that the federalization fighters promote and anyone who is familiar with the real meaning of PL 110-229, and the issues relating to the CNMI will see right through the politically charged rhetoric.

The authors, like Fitial and the federalization fighters, are promoting the false notion that PL 110-229 will result in the exit of the foreign workforce by 2014. Since this is not true much of the biased report is based on a faulty premise, and is clearly propaganda meant to support the federal lawsuit. Here's an example:
Applying federal immigration laws will result in the deportation of most of the  foreign workers in the CNMI. This will affect not only the visitor industry but every business that employs aliens. At the peak of the economy in 2004, foreign workers accounted for about 70 percent of the CNMI workforce. Starting in 2009,  deportation will proceed in steps until the process is completed in 2014.
The authors apparently have been drinking from the Fital Kool-Aid. As federal officials have pointed out numerous times, this is a false statement.  Unfortunately, since most of the report is based on  this myth, the report is baseless and is not credible.

I found some parts of the report offensive. Like this:
If the federal government deports three out of every four workers in the visitor industry, who will make the beds, serve food, and mow the lawns?
The authors wrote:
On average, local workers earned $24,423 per year, compared to only $7,292 for foreign workers.22 While the incomes of foreign workers were well below the average income, they were high compared to what the workers would have earned back home.
As if making more in a place where commodities and essentials cost far more, and there is no family support system is such a bonus for foreign workers. The authors ignored the fact that thousands were cheated of those paultry wages as the $6.1 million in unpaid judgnments that was collected this year demonstrates.

The report makes the argument that the federal government should pour even more money into the CNMI and also give the CNMI control over their dysfunctional system of labor. They make a weak argument for retaining the dysfunctional local labor system. A system that has allowed thousands of foreign workers to be cheated, abused, and denied justice.  

The report emphasizes the need for a foreign workforce controlled by the local government. It is not a foreign workforce that is needed, as the report claims.  It is a stable workforce that is needed. An objective analysis would also suggest that if the CNMI needs a stable workforce then the U.S.  should grant green card status to the long term guest workers in the CNMI, and provide a pathway to citizenship for any new workers brought into the CNMI. That way a stable workforce would be ensured, and labor abuses so commonly inflicted on the foreign workers in the underclass of the two-tiered society would be eliminated.  This is clearly a politically motivated report that reflects the interests of the party that commissioned it.  

The primary focus of the report is backwards, rather than present or future.  It looks at the history of the garment industry in-depth.  Of course, the authors previously had been commissioned by the Saipan Garment Manufacturers Association (SGMA) to write a report on the industry.  The history and demise of the garment industry is a story that anyone familiar with the CNMI already knows.  The report chastises the federal government for trade agreements that resulted in the exit of greedy factory owners seeking greener pastures,  and for other factors resulting in the crash of the CNMI economy.  It reiterates the claim that the minimum wage is bad while neglecting to mention that most of the population of the CNMI earns minimum wage and is dependent on federal handouts and lives in poverty.

The report praises the garment industry in causing the CNMI's economy to flourish, but does not acknowledge that it was an unstable foreign-owned industry that was built on the back of poorly paid and often unfairly paid foreign workers who were sometimes subjected to less than acceptable working conditions as several lawsuits by the U.S. Department of Labor, OSHA, EEOC,  and private class actions demonstrate.  The report also does not include the fact that the CNMI knew that with new trade agreements the garment industry would leave, but made no real plans to fill the void the exit would leave. 

The authors paint a picture of the economic future of the CNMI based on two scenarios - the Federalization Scenario and the Relief Scenerio. Of course, the Federalization Scenerio is based on propaganda and false interpretations of PL 110-229 and should be dismissed.  The authors write:
The “relief” scenario assumes that the federal government gives back control of the minimum wage and immigration to the CNMI (Tables 13 and 14). With no restrictions on the use of foreign labor, the visitor industry will be able to expand as much as market conditions permit. 
The scene calls for "Congress to reverse its position and returns control of the minimum
wage and immigration to the CNMI. The minimum wage remains at $4.05 per hour,
at least for two or three years." Sounds like a page ripped from the Fitial federalization fighters' play book.

The report lists federalization as an obstacle to economic growth based on misleading arguments and false interpretations of PL 110-229. It also predicts out-migration and claims that there would be no avenue to expand its workforce which are also debatable claims. The authors imply that the visitor industry would grow only under the Relief Scenerio or if federalization would be eliminated:
The return to local control over the minimum wage and immigration would allow the visitor industry to expand, making up for some of the jobs lost during the downturn of the apparel industry. If the visitor industry grew at a 5 percent annual rate between now and 2015, the economy would have close to 32,000 jobs,
about twice the number of jobs in the federalization scenario. The economy would still be about one-fifth smaller than it was at its peak in 2004. But compared to the federalization scenario, the economic and social suffering would be much more manageable.
Federalization will not harm the tourist industry.  The CNMI could attract more tourists by eliminating the sleazy clubs, massage parlors and decaying abandoned factories and buildings. More tourists would come if there were attractions like a cultural center and a Marine Sanctuary.  The CNMI should look to Hawaii as a model.  The attractions in Hawaii are the culture and the natural beauty, and the CNMI has both.

Overall, the bias of the authors was blatant. I resent using tax dollars to fund a report that was written to bolster a political agenda.  Just as I resent that taxpayers' dollars are wasted on lobbyists who promote special interests to the determent of the general public.

On a positive note, the tables and charts are interesting and informative.