Immigration
Trends or Trading Places 2.0
Former
New York City Mayor Ed Koch used to constantly ask the
residents of that city: How am I doing? In
fact he became somewhat famous and well known for it, even
internationally. We will borrow that from him and
ask in general: How are you doing? How is the
country doing? In terms of the economy and job
market, from what we have heard in general and from some
clients, there is some angst or uncertainty out there, and
there probably should be. But we think the angst,
anxiety, uncertainty or whatever you want to call it comes
from trying to reconcile what is reported versus what is
real. Average incomes for a large number of people
in the so-called modern, wealthy, industrialized world has
come down, that is very real. In the US and now in
the UK as well, young people are graduating university
with mortgage sized student loans on their backs with a
difficult time finding a job, that is also quite
real. And the response, the solutions from the
learned high priests of politics and finance? Unreal
is the only word we can think of.
If you believe as we do, you probably already know that
much of what is offered by the mainstream press as news is
either sanitized or out of touch with reality. Happy
news I guess they call it, but we would call it
cowardice. I mean, how can anyone in their right
mind believe a writer that simply mimics official
government statistics that claim there is no inflation,
that unemployment has really come down by half and that
many of these government money printing – debt buying
programs were an astounding success? What ever
happened to investigative reporting, speaking truth to
power and all the other noble functions of the fourth
estate (the free press in a democracy)?
There certainly are opportunities out there (many of our
clients have already had some successes), plus there are
methods you can employ to stay ahead of the anti-business
welfare state hydra that is doing everything it can to
stay alive (and make you broke in the process). But, you
need to realize that this is not your grandpa's economy
and it probably never will be again. And maybe that
is the problem. You are playing and thinking by the
rules, but they did not tell you the rules have
changed. Are you ready for the new ones?
Immigration
Issues: Trading Places Reloaded
What is probably coming up to what
will be a decade ago now at least, we wrote an article
that we titled Trading Places. The article was
mainly about what we saw as the coming economic and
political shift from the so-called wealthy first world
nations to the emerging or developing market
countries. Stated another way and to be more
specific regarding how the term trading places ties in, we
basically opined that the well educated, middle class and
small business owners would start to move themselves and
their assets out of the developed nations (read North
America and Western Europe) and into the emerging
markets. All the while of course, the less well
educated and the unemployed from these less developed (of
what was often called the Third World) nations still
trying to get into the European and North American
countries that they believed continued to offer the myth
of prosperity. Ergo our trading places
paradigm. The result of course being that the
growing markets get new residency and citizens who are
usually educated and solvent. The developed or
so-called wealthy countries continue to get an influx of
the world's less well off, financially and
academically. Now there are exceptions to this
theory or concept, and specifically some people will cite
companies in Silicon Valley actively soliciting well
educated computer science graduates from countries like
India. But, we tend to think that was a reverse
outsourcing play, whereby US companies were attempting to
import lower cost educated labor from abroad. And
interesting enough, many of those highly skilled temporary
workers ended up going back to their home country and
creating start ups to compete with their former employers
in the US. But then the real question is why would
they want to do that? Why would anyone want to go
back to a supposed poor emerging or Third World
economy? What did they know that you do not?
In terms of this
human capital exchange paradigm (trading places), we think
it appropriate and timely to touch upon this theme once
again as many of the results or symptoms are now starting
to make themselves quite obvious. In terms of the
so-called wealthy industrialized welfare state nations, we
are starting to see chronic unemployment (see
our article about US unemployment here),
higher and exponentially increasing national government
debt, debasement of some currencies due to inflation and
money expansion, stagnant GDP in the previous group of G-7
nations while many of the emerging markets still post
positive GDP (albeit with a global slowing down over the
past 24 months), and a litany of other issues as
well. If you reply to this comment that government
statistics show unemployment down or the stock market up
or economy improving, you are not looking hard enough at
why. Artificial stimulus or the electronic
equivalent of money printing (plus various QE type of
activities) may have created the facade of economic
improvement, but it is just that – a mirage. No
amount of government spending or artificial market
manipulation can substitute for real investments, or real
business activity. Just like a terminally ill
patient, pain killers can take away the pain temporarily
and make the patient think he is better (or he certainly
will feel less pain), but that does not mean the illness
has been cured.
Our general prediction was then, as
it is now, that many of these supposedly wealthy social
welfare democracies will find themselves going broke,
reneging on social welfare promises (for retirement
pensions, etc.) and attempting to plug the financial
shortfalls by taxing the remaining solvent citizenry even
further. Of course the result of that is those same
solvent citizens will leave (note the constant yearly
increases of US citizenship renouncement even before FATCA became the new
most talked about acronym of 2014). And again,
who is replacing them in terms of new immigrants?
Those immigrants that are certainly less solvent, more
likely to be qualified for minimum wage type of jobs and
less able to make up for the lost income tax revenue from
those that have left. We do not make this comment to
be rude or demeaning, but rather to simply highlight that
the exchange of human capital (or the trading of places)
is not always equal.
The result of course is that this in turn creates a
negative feedback loop as the tax base goes down in the
previously wealthy industrialized nations, while the
strain and commitments on the social welfare systems goes
up. And we tend to believe the government
politicians already see this or know this, and thus the
push back with initiatives such as FATCA (maybe currency controls will come
next, but obviously that is just speculation). But
human nature being what it is, the more the government
increases taxes or attempt to chase citizens globally for
taxes, the more they attempt to enact draconian policies,
the more the citizenry will look to escape with more
vigor. Adding insult to injury (and insult to the
intelligence of many people) are the almost outright lies
regarding unemployment numbers and inflation statistics
offered up by government in countries such as the United
States. Which is to say, if they must lie about the
true status of the economy, it must be even worse than one
thought – no?
However, and incredibly enough, we also asked the question
in our original Trading Places article: How
will the emerging or developing market countries react
to this new wave of reverse immigration? In
other words, the paradigm (and complaint from the
so-called wealthy developed nations) involved the poor and
unemployed immigrants trying to get into the United States
and Europe from Latin America and other countries around
the world. Obviously the hot topic has been the
illegal immigration problem, meaning those that entered
the country either without passing correct border controls
or entered under the pretense of tourism (with the intent
of something else). And so now what we have
occurring is exactly what we predicted previously:
out of work middle class people from some countries in
Europe (Spain and Portugal mainly) and elsewhere migrating
to the emerging market nations, both legally and illegally
now. And this of course is a brand new problem for
the governments in the emerging market
countries. We think many were quite shocked
and honestly unprepared for it, and some have already
changed their immigration laws and requirements
accordingly.
In Mexico for example, the time line
and requirements for a legal resident to apply for
citizenship was changed a few years back but not because
of unemployed Americans necessarily flooding into the
country but more out of public displeasure with the
gringos tapping into the Mexican public health care system
(which is connected to or part of the Mexican Social
Security bureaucracy). Which is to explain that
Mexico had attempted to attract retirees as new residents
and they successfully implemented a Pensionado or
Retirement Program whereby one of the benefits was free
use of the Mexican public health care system by such
retired residents. However, the program may have
been more of a success that they intended because there
are actually an estimated 850,000 Americans living in
Mexico at the moment (and some estimates put the number at
over one million). And of course all those Americans
are not down there because they had a sudden hankering for
tequila and tacos. No sir. The cost of living
is much lower for them in Mexico, their social security
check buys them a better lifestyle and the Mexican
Government was offering them free public health care as
well. But, poor and working class Mexicans sitting
in public health care waiting rooms were a bit perturbed
to to see what they consider to be wealthy silver haired
gringos getting free health care in Mexico (taking up
space in the waiting room and getting a free government
benefit paid for by taxes local Mexicans have paid).
But wait a minute, isn't that the same argument Americans
have been making all along in terms of illegal Mexican
immigrants in the US getting all sorts of free social
welfare benefits? Funny what the reaction is when
the shoe is on the other foot – no? Maybe all those
gray haired Anglos should get into their rascal motorized
wheel chairs and conduct a convoy in Mexico City with
placards that read: We Are Not illegal. Then again,
maybe not.
In the Dominican Republic there has been a wave of
unemployed Spaniards flooding into the country (and all
over Central and South America for that matter as well),
and
they came
specifically looking for work of course. It has been
such a problem and there were so many of them that
Dominican President Danilo Medina wanted to round them all
up and deport them back to Spain (isn't that what Spain
was doing for decades in terms of any illegally migrated
Dominicans they caught there?). Anyway, the Spanish
Government nearly choked on a piece of Jamon Serrano and
pleaded, no begged actually, for the Dominican Government
not to return them and find a solution so they can become
legal residents in the DR. However, the problem
persists in that the Spaniards have an EU Passport which
of course allows them to enter the Dominican Republic
without a visa (as a tourist) and this applies to a number
of other Latin American nations as well. So, the
problem becomes how do you determine or separate people
coming with legitimate tourist interests and those looking
to do something else? Again, this is a new
problem for countries like the Dominican Republic.
The Dominican Republic has responded
to all this by re-enforcing a requirement that persons
wishing to apply for residency status in the country first
apply for a special residency visa from the Dominican
consulate in their home country (this requirement exited
before, but it was not enforced). In addition, they
changed the waiting time for ordinary residents in that
they must now wait 7 years to apply for naturalized
citizenship whereas the waiting time was 3 years
previously. However, this is still a program or a
process in place (by law, not just a fly by night policy)
that allows investors and retirees to obtain a special
class of permanent residency as their first step and such
persons can apply for naturalized citizenship after 6
months. So, in short, this encourages people who
might offer an economic benefit to the country to become
fast tracked (with some other privileges as well) while
slowing down the rest. This is fair, and in fact can
only make Dominican Citizenship more valuable if it is
harder to get (for more information about
becoming a resident in the Dominican Republic under
the new requirements, click here).
But what is really interesting is that in general, while
the US and Europe pretty much ignored their illegal
immigration problems (and in some cases granted amnesty,
thus rewarding bad behavior and people that in essence
broke the law) and have had some very negative effects on
the solvency of social welfare programs as a result (see
also previous news reports why so many hospitals in the US
with high proportion of illegal immigrants as patients has
to close up and go out of business), the emerging market
countries are trying to implement a sensible immigration
policy. They have no choice really as they attempt
to continue with economic growth and develop jobs for
their own citizens. And when you think about it, the
United States was the emerging market country of their
time 150 years ago and also eventually instituted very
strict immigration quotas as well (not to mention tariffs
to protect growing local industries, etc.). So, to
criticize any other nation for trying to use the same
blueprint is very hypocritical, but hypocrisy does seem to
be a tenet of US foreign policy (see the new proposals by
the OECD basically copying FATCA, which would make US
Financial Institutions responsible for reporting all
foreign accounts inside the US to the respective foreign
governments – and make note, as of October 31, 2014 – the
US has NOT signed it). Do as I say, not do as I do?
The
Road To Perdition Is Paved With Good Intentions
First off we think
it important to note that all of this was a long time
coming. It was not created due to the so-called
economic crisis of 2008 alone, as the issues and events
surrounding what lead up to the current day economy were a
result of many previous initiatives that happened
prior. This is actually how we identified this trend
long before this recent economic crisis was on anyone's
radar screen. And we can pinpoint the beginning with
the US assigning most favored nation trading status to
China by then President Bill Clinton back in 1994.
At the time, Ms. Ann Devroy of The Washington Post wrote
an article (May, 1994) whereby she wrote: With China now
the world's fastest growing economy, the United States
exports $8 billion a year there, which sustains up to
150,000 American jobs. Many major American businesses see
even greater potential in Chinese markets, expecting China
to become a massive purchaser over the next decade of the
phones, electronic gadgets and thousands of other products
made in America. Bill Clinton was quoted as saying
at the time: I think we have to see our relations with
China within a broader context than simply human rights
(end of quote). Ironically, the Democratic political
party in the US has always tried to label itself as the
defender of civil liberties, champion of the working man,
and it's historical close ties with large labor unions
would tend to support this comment. So, it is quite
amazing to find out that it was a Democratic US President
that threw both the proverbial working man and the party's
claim to fame as human rights advocate under the bus back
in 1994.
But, we all know how that eventually worked out.
Whereas the US sold US$8 Billion worth of stuff to China
(Made in America) back in 1994, it is also true that in
2013 the US sold China US$120 Billion worth of American
made stuff. However, the US imported from China
US$440 Billion worth of products in 2013, leaving yet
another new annual trade deficit of about US$320
Billion. But what about those 150,000 US jobs
mentioned in 1994 that were to be sustained and
protected? The Economic Policy Institute (www.epi.org) calculated back in
2010 that almost 500,000 US jobs were lost to China due to
relocation of US manufacturing to lower wage Chinese
facilities between 2001 and 2008. A more recent 2013
article by Mr. Robert E. Scott tells us that a total of
2.7 Million US jobs were lost with about 1 Million higher
paying jobs requiring at least a bachelors degree as part
of that mix (http://www.epi.org/publication/trading-manufacturing-advantage-china-trade/).
Of course, also during that same year (January 1, 1994) NAFTA or The North
America Free Trade Agreement went into effect as
well. Many of you will remember Ross Perot's
television rant about the sucking sound of US jobs going
down to lower wage workers in Mexico, and there were those
that belittled Mr. Perot as being some kind of conspiracy
nut. However, Public Citizen issued a report whereby
they claim that 20 years after NAFTA was implemented,
close to 1 Million US Jobs were lost and there exists a
US$180 US Trade deficit with Mexico and Canada because of
the agreement. To be fair, there are those that have
presented their own set of statistics and arguments that
the US economy and employment situation was improved by
NAFTA, not made worse. With that said, I am reminded
of an old saying: When your neighbor looses his job, it is
a recession. When you loose yours, it is a
depression.
But, while all of this was going on, during the relocation
of manufacturing jobs abroad, it certainly was true that
those people still gainfully employed enjoyed either lower
prices for manufactured products or in the least prices
that appeared to be frozen despite any domestic US
inflation. In other words, the US$29.99 coffee maker
from 1998 was still perhaps US$29.99 in 2004 because the
manufacturer could hold the price and still make a profit
using lower production costs abroad. And this lead
to the comment that the short term beneficiaries of all
these free trade initiatives and resulting outsourcing
were the better educated holding white color (read non
manufacturing) jobs, who did not see their own
employment prospects in jeopardy. In fact, it was
touted that even though US manufacturing had gone to low
wage jurisdictions abroad that the design and engineering
work would stay in the US. In other words, the
brainy work would theoretically still be done by Americans
while the uneducated poor foreign devils would do all of
the tedious grunt work somewhere else – for a much lower
wage of course. But the good citizens of China and
other emerging market nations have had some other ideas
about all this.
International
Social and Economic Inequality Rises Due To Education
A
recent 2014 news item reported that US University
graduates are graduating school with a now collective
US$1.2 Trillion Dollars worth of debt, in the form of
student loans. From an article originally appearing
in The Chronicle For Higher Education by Mr. Lance Lambert
(October 24, 2014) we hear that two researchers working
with the Federal Reserve Bank of New York claim that a
bachelor degree for a 2013 American graduate was worth on
average US$272,693. They also claim that the wages
of high school graduates has been FALLING, and even
though the wages for University Graduates are NOT
increasing either, the comforting factor for the well
educated is that there is a ever widening earnings gap
between the college educate and those who are not.
The OECD also recently produced a 2014 report titled
Education At A Glance whereby they essentially come to the
same conclusion looking at ALL the OECD member
nations. The report also supports the claim that the
modestly educated (those without higher level degrees) are
falling down to the same income levels as those with
nothing more than a basic education level. In other
words, unless you have a MBA, PHD and maybe more than one,
chances are your future income possibilities are less than
stellar. But hold on, because there is more.
There will be an estimated 900,000 foreign students
enrolled in US Universities in 2014, with about 30 percent
coming from China. This enrollment amount represents
an
increase from 10
years ago whereby there were about 600,000 foreign student
in US Universities. However (and
pay attention to this) – it is reported that
foreign students contribute about $24 billion annually to
the U.S. economy, and about two-thirds of them primarily
pay their own way or their families do. This means
that while American university graduates are drowning in
debt, their foreign counterparts studying in the US could
conceivably graduate debt free (most Americans cannot
afford to pay cash for their children's US university
education but many foreigners can, and do – regardless if
they feign something else to tap into grants or
aid). Meanwhile, China has been very pro-actively
trying to attract foreign universities to set up campuses
in China and foreign university professors to teach at
China's various universities. China has also doubled
the number of universities inside of China during the past
10 years, spending about US$250 Billion Dollars annually
on education, which we are told comes out to 4 percent of
their national GDP. But, it still is not enough, and
there are not enough spaces for all the Chinese that do
want to attend college. Ergo, they are coming to
America and other foreign nations as well in order to
attend university. Since the year 2000 the number of
Chinese with university degrees has doubled and the
Chinese government would like to double it yet again over
the next decade. So much for the Chinese doing the
factory work with the well educated Lords of the Universe
doing all the higher function work in the US.
Here is another twist to
all this. China has been actively trying to
lure foreign students to it's own universities and they
are giving scholarships accordingly. In fact, in
China's Jiangsu province, there has been a spark of local
anger over scholarships (up to US$15,000) being given to
so-called wealthy foreigners, not to mention the Chinese
students are ticked off because they say foreign students
are given better housing accommodations. The
statistics from 2012 indicate that China was the fifth
most popular study destination for US students and there
were 320,000 overseas students in China as well. So,
it is interesting to see the shoe on the other foot as it
were.
Go
Where The Money Is: The Emerging Markets
A 2013
report from Euromonitor
International, written by Ms.
Sarah Boumphrey and Ms.
Eileen Bevis, indicates that the Emerging Markets
as a group accounted for 37 percent of global GDP in the
year 2000, and it was expected that these same group of
countries collectively would account for 50 percent (or
more) of global GDP by the close of 2013. The report
goes on to say that while much ado has been made about the
BRICS (Brazil, Russia, India, China and South Africa), the
other smaller emerging markets (like the Dominican
Republic, Singapore, Malaysia, Vietnam, Mexico, etc.) are
garnering attention because they are experiencing even
faster economic and demographic growth. Consumer
spending is up in many of these markets (as we can attest
to if you look at the new stores and malls opened within
that last 3 years in the Dominican Republic alone).
The title of the report was actually Reaching The Emerging Middle Classes Beyond
BRIC, and the study was meant to show where the
next new consumer growth markets will be. In fact,
the report tells us that the emerging markets collectively
were home to 85% of the world’s population, and 90% of
those under age 30. Their total population is expected to
grow at three times the rate of developed economies
between 2013 and 2020. Consumer spending growth in
emerging markets has outpaced that of developed countries
every year since 2000 and is expected to continue to do
so.
What does that mean to you? Well, while it might be
quite noble for a captain to go down with his ship, I tend
to think the overwhelming majority of people reading this
are not seafarers. And even if you happen to own
your own sailing vessel of some sort, we think most will
radio the coast guard and man the life raft
regardless. So, of course the analogy is that to
stay on board while political leaders continue to send the
country down the proverbial straits of destruction might
be noble and patriotic, it will not yield a favorable
outcome for your children's nor your own economic
welfare. With that said, there are a number of
criticisms to the concept of expatriation, and of course
the relocation of Facebook co-founder Eduardo Saverin to
Singapore resulted in all kinds of palpitations from
Senator Chuck Schumer, the esteemed gentleman from New
York always looking for a new cause to get some media
coverage.
However, in the case of Mr. Saverin, one must remember he
was a Brazilian citizen by birth who lived in the US from
1992 to 2009, obtained US citizenship during that time and
eventually renounced US Citizenship effective September
2011. Of course that alone did not make him
noteworthy nor newsworthy. Rather, he apparently
obtained some very good and proper legal advice and was
able to save an estimated US$67 Million in capital gains
taxes on his Facebook shares, once the company went
public. Mind you that while he was permanently
living in Singapore between 2009 and 2011 he continued to
pay US taxes. Of course Senator Schumer was so
worked up that he presented the Ex-Patriot Act bill in
2012, or what was formally called the: Expatriation Prevention by Abolishing Tax-Related
Incentives for Offshore Tenancy Act (try
saying that fast with a mouth full of cheerios cereal, I
dare you). But not satisfied that the
original bill died a Dr. Kevorkian like death in the US
Congress, Chuck tried again to slip it in onto another
bill in June of 2013, whereby it was quietly lanced away
yet again – that is until now.
Round about August of 2014 (why does this stuff always
seem to happen during the summertime?), we come to learn
that the tax saving shenanigans of a Brazilian young man
were not the only crease in Chuck Schumer's shorts.
He was also experiencing what appeared to be emotional
chronic jock itch from the number of US corporations that
were planning to expatriate as well, or what has been
coined an inversion (is this a synonym of out-vestment?)
. Now for those of you not familiar with the term,
an inversion simply means that the US corporation changes
it's tax domicile or tax home by either buying or merging
with a foreign company. In some cases, they can form
a new company of their own abroad and bust a move (as they
used to say back in the 80's). Regardless of how
they do it, the benefit usually is a lower corporate
income tax rate for the company. Sort of like say a
US company moving corporate headquarters and state of
incorporation from maybe New York to Delaware or Nevada,
but we digress.
Apparently there have already been a number of US
companies that have left in this manner, with a reported
47 firms within the last 10 years and a number of others
in the wings waiting to do so before this year is
out. Interestingly enough while the theme of
renouncing citizenship (corporate or otherwise) invokes
images of tax havens such as Panama, Belize or the Cayman
Islands, a number of US companies have actually been going
to Ireland in particular (Ireland has a corporate tax rate
of 12.5 percent). The US drug store chain Walgreen's
was apparently planning a move to Switzerland, that is
until they were shamed out of it by some negative feedback
(word has it they were really, really big fans of Ricola
cough drops).
For
more about this you can read an article from the
Washington Post below:
http://www.washingtonpost.com/business/economy/us-policymakers-gird-for-rash-of-corporate-expatriations/2014/08/05/4898ca5e-18d9-11e4-9349-84d4a85be981_story.html
Not to be outdone, we now have Senator Elizabeth Warren
joining the fray (former professor from Harvard and
outspoken critic of the banking industry). Senator
Warren steps it up a notch from Senator Schumer whereby
she proclaims: They are taking advantage of all the good
things that our government helps provide, and then running
out on the bill. She goes on to also say: For a
person who doesn't want to pay a fair share, our message
is clear: you can renounce your citizenship, but don't
come back and expect the rest of us to pick up your tab
(end quote). Two other congressional thespians,
Senators Dick Durbin and Jack Reed went on to opine that
the United States Government could lose billions of
dollars in tax revenue if the U.S. government does not
take action soon. They point to an estimate by the
congressional joint Committee of Taxation which claims
that the nation could lose nearly $20 billion over the
next decade (due to corporation inversions, which comes
out to US$2 Billion PER YEAR just to be clear on the
math). However, we do wish to remind these good
gentlemen that the 2015 fiscal year budget for the US
military is now in, and US$85 Billion (Billion with a B)
has been set aside for US military operations in
Afghanistan alone (the entire US Military budget for 2015
is US$756 Billion, with a B). Just one year mind
you. If they want to save some money, I have a few
ideas (US$2 Billion versus US$85 Billion or US$756 Billion
– we think the source of a balance sheet adjustment is
obvious to anyone with a grammar school understanding of
mathematics, and the theatrics of the US Congress on the
subject of corporate expatriation a tad
unwarranted).
Not one to let a good crisis go to waste (and who would
not want to get in on a photo opportunity with Chuck and
Liz?) , President Obama chimes in with the following (and you might want to write this one down, as it
is sure to become a classic): My
attitude is, I don’t care if it’s legal. It’s wrong
(end of Presidential quote, but not to be
forgotten). On that note, let us also review some of
the good things Senator Warren wants to remind us that the
US Federal Government provides all it's faithful
citizens. Allowing illegal immigrants to obtain
driving licenses and vote in US Presidential Elections is
apparently legal, but wrong. Allowing the national
debt to increase to such proportions that the nation's
children and grand-children might be paying it off is
legal, but wrong. Permitting airport personnel to
grab and poke the genitalia of airline passengers (in
search of mustard gas and other armaments prone to hide in
the nether regions of frequent fliers) is legal but wrong
on so many levels, we do not have enough space to list
them all. In fact, there are so many things that are
legal but wrong, there is not enough reams of paper in the
local Office Max store to write them all down, but let's
get back on topic.
In defense of
corporate citizenship renouncement we have Mr. John
Engler, president of the Business Round-Table, who
asserts: We’re the proverbial frog that’s being boiled in
the water, and a few frogs have decided to jump out.
Mr. Daniel Mitchell at the Cato Institute calls the whole
thing a fiscal version of blaming the victim. And
how right he is. Politicians continue to do outright
foolish things with tax-payer money, including spending
the US$2.7 Trillion Dollars that was (and we would like to
emphasis was, as in no longer is) in the Social Security
Trust Fund, and then they have the nerve to call anyone
who expatriates unpatriotic. Freeloader was one term
used by the esteemed elected officials in the US, but is
that truly accurate?
Regardless of whether we are talking about individual
citizens or corporate entities, the truth of the matter is
that right up until the time of citizenship renouncement,
taxes has been paid year in and year out. Income
taxes, payroll taxes, employer portion of FICA, sales
taxes, gasoline taxes, real estate or property taxes, fees
in the form of tolls to cross bridges and drive on certain
highways, and the list goes on. So, to claim that
someone or some entity such as a company is freeloading is
disingenuous. Of course that never stopped a
politician from using this argument because it plays well
to an audience that may not be too astute as to what is
really going on when it comes to government finances, and
all the shenanigans that have taken place.
Expatriate
Is The Answer (Not The Question)
The term expatriate, often condensed to
simply expat, is a person temporarily or permanently
residing in a country other than that of the person's
upbringing, according to Wikipedia. Many people do
confuse the definition and believe it means someone that
has renounced citizenship, which of course is something
they may or may not do eventually. However, because of
this confusion there are still those that will throw
around the term even though many people might have moved
to another country to take advantage of employment
opportunities, business opportunities, or lower cost of
living in retirement – and not necessarily to renounce
citizenship. But, as politicians in the high tax
welfare state nations continue to attack such persons
living abroad through various taxation or other kinds of
initiatives (FATCA comes to mind), they are pushing these
people to renounce citizenship whereas it may not have
been their intent previously.
Regardless, considering the long term trajectory of the
state of affairs in the United States and countries that
constitute Western Europe (France, Italy, Greece, Spain,
The UK, etc.) we have doubts as to the opportunity and
growth prospects for those that make up the middle class
and small business owners in these nations. Aside
from the fact that these economies are considered to be
mature, and that the tendency is for much lower economic
growth rates in general because of it, the levels of
federal government debt and unfunded social welfare
program benefits that still have not been resolved, we
contend that better prospects are going to be found
elsewhere (and specifically in the emerging markets that
do not have these kinds of problems). The cost of
living is yet another theme as well, as governments often
choose the low road of currency debasement and
inflation. As it stands now there already is
tremendous interest in relocation to lower cost emerging
market nations by the baby boom generations in all of the
above mentioned mature economies simply because they have
no choice. As governments devalue their national
currencies, retirees and savers are always hurt the
most. However it is not just the retirees, but also
younger families who might have school age children that
are finding out good quality bi-lingual education costs
are a fraction of the cost in many of the emerging market
countries as well. So, generally speaking,
expatriation is a matter of economic survival, and not
some act of betrayal as some would like for you to
believe.