Sunday, July 15, 2007

Why Federalization Now?

This Federal Takeover business has been hanging over the CNMI's head for well over a decade. Of course we could have done something about it by raising the minimum wage and actually doing more to stop the abuses...but the time for that conversation has long passed.

So why Federalization now?

Well, this was in the Marianas Variety today:

Stayman: Military build-up a factor in drafting federalization bill
By Gemma Q. Casas
Variety News Staff

THE anticipated U.S. military build-up in Guam and the Pacific Region was among the major considerations in the drafting of the CNMI immigration federalization bill, according to Allen Stayman, senior staff member in-charge of insular affairs of the U.S. Senate Committee on Energy and Natural Resources.

In an e-mail, Stayman said the increased military activity in the Pacific region was seriously considered in drafting S. 1634, or the Northern Mariana Islands Covenant Implementation Act.

“Increased military activity in the region is one of several considerations supporting federal legislation,” he said.
When the buildup in Guam begins in the next few years, the military is going to need thousands of workers. Federalization allows the Feds to kill two birds with one stone.

First, Guam gets thousands of workers. If you are one of the tens of thousands of foreign workers currently working in Saipan, are you going to prefer working in Saipan for $3.05/hour (soon to be $3.55/hour) for only 32 hours/week (due to the economy) or in Guam for probably more than $7.00/hour including overtime hours? I don't think the choice is hard. As soon as the workers get their non-immigrant visa, I'm sure they'll ship off to Guam (or Hawaii, California, or New York).

Second, the Feds get to say they actually did something about the abuses in the CNMI. It will mean that American citizen children won't have to return to the Philippines when their parents' contract runs out. It will also silence George Miller and Nancy Pelosi. Guam, Hawaii, and the Mainland are big enough to absorb these workers when they leave the CNMI, so who really cares if a measly ten thousand people get a visa?

I will make a few predictions if Federalization occurs:

There will be a period where the number of foreign workers leaving the CNMI will outnumber the number of foreign workers coming in. The locals will become the majority. The economy will be in shambles. Gas prices will be through the roof.

Basically, it will be 1975 again.

What will we do? Will we take that opportunity to invest in human and social capital or will we allow our leaders to blow it on lap dances in Manila (again)?

The CNMI has an opportunity to reinvent itself. Hopefully we will pull out of the Third World economy that we currently have (huge gap between rich and poor, no hope of social advancement, etc.) and we will start to grow our service sector and our knowledge sector. Like I said, Hopefully.


Jeffrey C. Turbitt said...

Payroll taxes are a pretty big chunk of net taxes. Companies find ways not to make a profit somehow. The movie Forrest Gump never made a profit in the famous example. Higher wages will mean more taxes paid and good workers will be more valued and better paid. We have so many useless businesses anyway with the poker rooms and pawn shops and tire shops and so on. The good ones will survive. I don't see the gloom everyone else does, at least over the long haul. Short term there might be issues, but the sooner there is a real private economy with living wages, the better. The scads of unemployed might shape up now, and there are scads upon scads of them. The days of living off the backs of lowly paid immigrant workers has to end.

bigsoxfan said...

How about adding military paranoia to your list. They aren't exactly Rhodes scholars, but I can't imagine they are too happy about having a few thousand un- or poorly documented aliens running around a short boat trip away. Hard to imagine my taxi driving, dog ranching neighbors from Chinatown strapping on the belt, but I'm not them. Who controls customs after federalization?

Rick Jones said...


You might be interested to know that it has recently been decided by the IRS that guest workers are not subject to payroll withholding tax, since they can not benefit from social security.

As far as a living wage, I don't think people understand that while employers might be paying $3.05 an hour to guest workers, the actual cost is much higher. With housing, labor department costs, medical expenses, etc., we are actually paying closer to $5.00/hour or more for these workers.

Anyone who thinks that $0.50/hour is no big deal never had to worry about paying it.

Jeffrey C. Turbitt said...

Withholding tax completely or just social security? I can't imagine it is the former.

Frankly, $5.00 per hour still doesn't sound like a particularly large labor cost in 2007. I made $6 to pump gas in high school 1988. I umpired little league baseball games for twice that at the same time. People get accountants and computer experts for that kind of wage as well.

We all know that minimum wage had to go up. What didn't have to happen was our power rates doubling and more and still sucking, and I think when we talked Rick you said that was a bigger deal than the minimum wage talk. Alternative methods of energy could have been applied. They could have maintained the power plant, and W didn't have to steal the election, start a needless war to enrich his oil buddies, but that is all a different story I don't want to rehash.

bradinthesand said...

what will that mean for all of the foreign hotties? Will they have to go back? Will my dating life suffer? Will I just be another average white boy? Nooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo!
Stop the insanity. Stop it right now!

Anonymous said...

Rick Jones said...

"You might be interested to know that it has recently been decided by the IRS that guest workers are not subject to payroll withholding tax, since they can not benefit from social security."

Employers and their lawyers have been claiming that for years. Have you got a Revenue Ruling or Treasury Decision that says that? Or is this just the view of an attorney seeking to round up clients?!

As to the military, they seem perfectly happy to send their valuable ships here to visit. The alarm seems much more redolent of the vendetta fueling the Cohen-Stayman bill than any real concern about homeland security.

If the Department of Homeland Security really cared, they would station a few CBP inspectors here (the way INS used to have an agent here in the CNMI for about a decade) with access to the terrorist watch lists to help out CNMI Immigration.

It can't be that much of a problem, except in the minds of a vengeful Capitol Hill staffer who wants to show the world that some islanders can't push him around.

bigsoxfan said...

Good point on the ships, anon. They aren't even visiting, lots of guys have homes and even a couple of business' in the Cnmi.
Anyone been to Dengre's today? Saipan sucks is looking pretty mild compared to the groundswell, thats building up there.
Forget about all the good work, Angelo and Walt, your feet have been cut out from under you. CNMI is headed the way of Imus., nice buddy, that Dengre.

Bruce A. Bateman said...

There are just a handful of real illegals here. There are thousands here legally, however, who work the underground economy and have learned to play the labor and immigration departments like a bad violin. If they went after those, the legit businesses on island playing by the rules would have a chance of surviving. Let’s hope those are the ones that will be rooted out by the crime stopper program. Doubtful, but it would be a nice bonus.

Payroll taxes are next to zero now. A tiny fraction as a percentage of pay (4%) and most of that is rebated (in practice of course the rebates are years behind). The typical contract worker pays in a couple of hundred for the year. Meanwhile, they have 6 kids in school, 3 jalopies on the road, are hooked to a woefully inadequate water and sewer system and get the equivalent of Hilary heaven…free 100% medical coverage (that, at least, is actually paid for…not by them of course, but by their employers). Lots of benefits, next to none of it paid for by the recipient. So who actually pays? The local private sector (businesses) mostly, with a chunk also wrested from the pockets of mainland taxpayers.

Vengeance is exactly what the immigration hullabaloo is about. We're experiencing the only thing worse than a woman scorned...a politico with a henchman.

Envelop Ideas said...

The sky is not falling yet! Let the merits of this federalization issue be heard. We tried the current system but we failed.

"In a progressive country change is constant; change is inevitable."
Benjamin Disraeli

Have faith with America!

Jeff said...

I think Brad raises a key point. I think we're all pro eye candy. Don't tell Cyn.

Rick Jones said...


I don't personally have a ruling, but I am familiar with the process that the attorney you refer to went through to get the IRS decision.

Yes, Jeff, I did say that the CUC cost would be the biggest problem for me, and it has been. The first $0.50/hour raise won't affect me that much, few of my people are at minimum right now anyway. The problem is that each $0.50/hour represents $1000/year for full-time employees. Multiply that by 7 people next year, and I need to create at least $14,000 in new income to make up for it. Where is that income going to come from in this economy?

The Saipan Blogger アンジェロ・ビラゴメズ said...

Would you like a massage with your Latte, Mr. Turbitt?

Jeff said...

I've been known to eat a few nuggets. That's gotta help.

Rick Jones said...

I never thought of that before - a latte with a happy ending! Good times are on the way, boys.

Jeff said...

JAva Joes is like five minutes from my house. When the kids are acting up and I need to get away, that's my refuge. If you add that to the menu I'm in big trouble.

Bruce A. Bateman said...

It's important to explain that you mean an extra 14K NET, Rick. Most of the folks blogging here don't run a business, they may not realize that to 'make' 14 grand you have to gross (sell) several times that to pay for the consumables, the higher personnel costs, taxes, utilities and other overhead associated with the gross increase and still come out with the 14 in your pocket to pay out. That is what you have to do the first 6 months. Then double it early next year.

It's pretty easy to sit on a salaried job and say to those who employ others...'just pay 'em an extra 4 bucks an hour, should be easy.'

How many of those special lattes will you have to sell to gross the 56K necessary to make the 14?

Better find some Chinese spice to put in those coffees.

Sure, it can be done. And many of the businesses here will slog it out while they can. Many others wont. And , Jeff some of them that won't, would have been selling coffee or books, not poker chips or tires. By the way, tires are useful from time to time. (We need 'em on our cars to go buy the books).

Jeff said...

The price of everything has gone up in the last ten years. Is it even slightly unexpected that labor costs would also go higher after twelve years or whatever it has been?

Bruce, I'm all for tire stores, just not every ten feet, like it seems to be now.

Also Bruce, you're all for private industry. Do you think this place can turn around without private sector jobs of any meaning? Do you think anyone will ever want those jobs at $3.05 who is an American, who can leave? Failing that, do you really think it is fair to pay people $3.05 per hour forever on American soil because they are from poor countries and have no other options, or try to block their freedome to move on to greener pastures? We don't own these people. They deserve a break. This isn't liberal whining, this is just a basic fairness issue.

I wrote a piece, it's on my blog, called Do the Opposite.

It was meant to be humorous, but essentially I'm not kidding. Our economy sucks so bad, can it really hurt to change it?