Tag Archives: economics

Maybe We Should Take Socialism Seriously

My Comments: To me, it’s both pathetic and amusing to hear political candidates rail against the idea of ‘socialism’ and declare it’s mankind’s greatest threat.

Like so many of the ‘…isms” applied to economic models of all stripes, socialism is no more a threat to the health and welfare of any society than is capitalism or communism. Well, maybe communism, but certainly not capitalism.

Unfettered capitalism, as some would have it today, is not far from the feudalism of long ago in that the masses would be under the thumb of a wealthy elite whose only motivation is the preservation of their power. Does any of that sound familiar to you?

by Noah Smith \ October 26, 2018

When President Donald Trump’s Council of Economic Advisers released a 55-page report called “The Opportunity Costs of Socialism,” many economists scoffed. But the report is important, because it shows that big, systemic economic issues are again being considered. And it provides an interesting jumping-off point for those important discussions.

Two decades ago, it seemed as if capitalism had decisively won the battle of ideas. The collapse of the Soviet Union and the grinding poverty of Mao’s China and communist Vietnam and North Korea clearly demonstrated that the most extreme versions of socialism were disastrous. But even in non-communist countries, attempts at regulation, nationalization and redistribution suffered big setbacks. The License Raj, a system of heavy-handed business regulations in India, was repealed, and the country’s growth leapt ahead. Privatizations and other market-oriented reforms in the U.K. helped the British economy make up ground it had lost. Sweden made its fiscal system much less progressive, and North European countries deeply reformed their labor market regulations.

But as inequality of income and wealth steadily rise in countries like the U.S., and as populism and political discontent roil nations across the globe, some are beginning to question the consensus that emerged at the end of the Cold War. Polls show an increasing number of young Americans responding favorably to the word “socialism”:
Openly socialist candidates are starting to win a few elections in the U.S., and calls to end capitalism are starting to appear in the mainstream news media with increasing frequency.

The CEA’s new report should be seen in this light. It’s an indication that both socialism’s proponents and its opponents have begun to take the idea seriously again. With the world troubled not just by inequality but also by productivity stagnation and the threat of climate change, it’s time to ask whether there are big systemic improvements that could be made.

The CEA report shows just how long it has been since such a discussion was held. A key explanation of socialism is taken from “Free to Choose,” a 1980 book by Milton and Rose Friedman. The economics profession has shifted decidedly to the left since those days, but most economists now concern themselves with highly specific topics rather than the grand sweep of political-economic systems. The people spending their time thinking about socialism, capitalism and other really big ideas are now more likely to be the writers of Teen Vogue or activists on Twitter. Let’s hope the CEA report will prod more economists, who tend to have more empirical knowledge and theoretical depth, to think bigger.

But although it’s an important conversation starter, the report doesn’t do a good job of comprehensively debunking socialism in all its forms. Some of the examples it invokes are particularly inapplicable to the modern day, and it overlooks much of the evidence in favor of an expanded role for government.

For instance, the report highlights collectivized agriculture as a prominent example of a socialist failure. Collectivized farming is indeed a disastrous policy, failing essentially everywhere it has been tried, and leading to widespread famine and death. But modern-day socialists in Western countries are — wisely — not calling for this. Instead, the industries they want to nationalize are health care and (possibly) finance.

Socialized health insurance exists in many countries — for example, France, Canada, and Japan. The costs and benefits of government health insurance systems don’t have to be assumed — they can be observed. The U.S., with its unique hybrid of public and private insurance, pays much more than other rich countries for the exact same medical services — and achieves similar health outcomes. Meanwhile, the U.S. biggest government health insurance system, Medicare, holds down prices much more effectively than its private counterparts:

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Higher Tariffs Won’t Work Now Because They Never Did

My Comments: At the national level, if we want more money to spend, both on ourselves as citizens and at the Federal level on things that require money to finance, please tell me why this administration insists on doing things that will result in less money.

Yes, I know, the old and wealthy white cadre somehow feel threatened by those with brown and black skin, but come on!

We’ve pulled out of the Trans Pacific Partnership, effectively ceding global economic supremacy to China, we’ve enacted tax rules that will effectively bankrupt the middle class, what’s left of it, over the next two decades and beyond, and as these comments about tariffs show, will result in slower economic growth in this country.

How does any of this Make America Great Again ?????

By Al Root \ Oct. 26, 2018

Smoot-Hawley is a dirty word in economics. That law, named for its congressional sponsors, raised tariff rates significantly as the global economy was weakening. It was passed in January 1930, just weeks after the stock market crashed on Oct. 24, 1929—Black Thursday. That’s the ultimate in pro-cyclical policy making—kicking the economy when it’s down. We still are taught about the Great Depression in American schools, but the impact of the Smoot-Hawley tariffs may be forgotten by the general public.

After all, the current generation of investors only knows a world with declining trade barriers. The General Agreement on Trade and Tariffs (GATT) was signed after World War II in 1948. That was the precursor to the World Trade Organization (WTO), which was formed in 1995. China joined the WTO in 2001 which helped usher in the boom in fixed-asset investment witnessed there in the early 2000s.

Don’t forget the European Union was also formed in 1993. That improved personal mobility on the continent and then the euro was adopted in 1999. Closer to home, the North American Free Trade Agreement (Nafta) was finalized in 1992.

The story of trade liberalization over the last 130 years can be seen by looking at U.S. customs receipts versus the size of the American economy. This is a proxy on tariff rates and, importantly, it pre-dates the global institutions that most of us have grown up with.

Tariffs were higher in the past, but don’t forget the federal government used to fund itself with customs duties. The U.S. didn’t have federal income tax until 1913. The first tax bracket was a levy of 1%. Talk about a different era.

That chart also shows that tariff rates were persistently high in the 1930s. The U.S. government was, apparently, slow to change its thinking on trade. The Barron’s forecast, shown with the blue bars, tries to imagine a worst-case scenario where all Chinese product imported to America is taxed at 25%. The level of trade-taxation looks significant, but predicting how long this era of trade readjustment will last is more important for understanding the long-term impacts.

Barron’s spoke with Gian Maria Milesi-Ferretti, deputy director of the research department at the International Monetary Fund, to talk about tariff distortions. The IMF is still using its influence to promote open markets – “no (trade) agreement is perfect, things can be tweaked, but we believe strongly in multilateral cooperation.”

Milesi-Ferretti talked in detail about the impacts of tariffs, some of which are harder to characterize than others, and added “global supply chains are highly integrated,” a fact that is different today versus other prior eras.

Clearly, the world is worried about trade tensions. The doctrine of trade liberalization appears to be under siege and companies are talking about higher procurement costs impacting 2019 profits. Presently, the short-term impact of higher costs may be well understood, but the bigger question remains. What impact will trade conflict have in 2020 and beyond?

Source article : https://www.barrons.com/articles/higher-tarriffs-taxes-wont-work-now-because-they-never-did-1540566408

This Data Visualization Shows What’s Really Responsible For Our Current Bull Market

My Comments: Apart from my concern that many of us will wake up one day soon and discover much of our money has disappeared, it is helpful to understand where all the gains have come from since the last significant crash in 2008.

By Nicolas Rapp and Clifton Leaf September 25, 2018

Who’s responsible for the bull market: Trump, Obama, Bernanke, Yellen? Answer: Tech companies. Here’s a look at what’s really driving growth.

As Wall Street’s raging bull continues its historic charge, there has been plenty of chatter about who deserves the credit: Mr. Trump? Mr. Obama? Former Fed chairs Ben Bernanke or Janet Yellen, perhaps? But the answer seems not to be a “who” but rather a “what”: tech companies. From the market bottom in 2009 to now, the capitalization of companies listed in the S&P 500 index grew by more than $18 trillion. But three of every 10 dollars in gain came from the 73 tech companies in the index. And the true bull market of the past decade was even narrower than that. Nearly 16% of the market cap growth derived from just four stocks: Apple, Alphabet, Microsoft, and Facebook. Their combined valuations soared from just over $300 billion to more than $3 trillion.

[ FORTUNE ]

We’re underestimating China’s economic power. Here’s why

My Comments: By first choosing to opt out of participating in the Trans Pacific Partnership (TPP) and then inviting a trade war with China, the US has effectively ceded global economic supremacy to China. The expressed logic behind these moves was in the guise of ‘Make America Great Again”. Hah!

In turn, China is attempting to match their new found economic supremacy with military supremacy. It’s only a matter of time before we find ourselves in a conflict or “Cold War” with echoes of what we lived with years ago and the Soviet Union.

September 27, 2018 Knowledge@Wharton

China’s economy is so large – and growing so rapidly – that it’s difficult to get a true read on the size of its influence on the world stage, according to this opinion piece by David Erickson, a senior fellow and lecturer in finance at Wharton. Before he taught at Wharton, Erickson was on Wall Street for more than 25 years, working with private and public companies to raise equity strategically.

Some of the rhetoric out of Washington recently has been suggesting that the U.S. is “winning” the trade war because the U.S. stock market is near all-time highs as China’s domestic equity markets have declined significantly. While the domestic Chinese equity markets have suffered since the trade tensions started earlier this year, I think that premise underestimates the economic power of the rapidly growing number-two economy in the world and really needs a bit of context.

The Chinese equity stock market — as represented by Shanghai stock market — actually peaked in 2015. This is not too dissimilar from the market cycles we have experienced in the U.S. in the last 20 years. This includes what we saw in the Dow Jones Industrial Average (DJIA), which reached 11,000 in May of 1999 but took more than seven years to reach 12,000. While the DJIA advanced from October 2006 to July 2007 from 12,000 to 14,000, it took almost six years, until May 7, 2013, before it advanced to the 15,000 milestone. For the NASDAQ market, the cycle was even more dramatic where it took 15 years to reach new highs in 2015. Markets do go through cycles.

But hasn’t the Shanghai stock market been quite volatile since the trade war started? Yes, it has. This is not surprising with much of the domestic Chinese equity market activity largely being from retail investors, especially with many having very limited experience in Chinese equity investing (which I will address shortly). With the uncertainty of the trade rhetoric over the last few months, there was likely to be some significant volatility. However, by way of comparison, the U.S. equity markets went through significant volatility earlier this year after a significant run since the 2016 U.S. election. If you go back a bit further, the U.S. equity markets, which are largely institutionally driven, had significant periods of volatility during the 2008 Financial Crisis, where the DJIA fell almost 800 points on September 29th; the technology “bubble” in 2000, where on April 14th the NASDAQ fell 9% and for the week 25% (and the NASDAQ 100 index lost 78% of its value in two years); and when the Dow Jones fell almost 23% in one day on “Black Monday” of 1987.

Why do I go back to 1987 for context? Because in 1987, while a Wharton finance student could study “Black Monday” in the context of previous crashes in the U.S. stock market, the Chinese domestic equity market didn’t exist and wouldn’t until 1990. That’s right, a Chinese student studying finance on mainland China at the same time couldn’t learn about investing in the Chinese equity markets because it did not exist until a few years later. The Shanghai Stock Exchange was founded in 1990 (and Shenzhen around a similar time) creating a domestic equity market for both mainland Chinese companies to list and finance, and for Chinese institutions to invest. Today, it is estimated that the Shanghai Stock Exchange has over 200 million retail investors — total U.S. population is just 327 million — and for the full year 2017 was the number-two IPO market globally in terms of proceeds raised. So, while the Chinese equity market has suffered significant losses this year, given the “rapidity” of its evolution, these changes need to be put in context.

“Now, markets in Hong Kong, Shanghai and Shenzhen collectively represent the largest IPO market in the world….”

These are just a couple of the things we learned on our recent trip to Hong Kong, Shanghai and Shenzhen as part of Wharton’s MBA course called Strategically Investing in the Growth of China. A delegation of 58 Wharton Executive MBA students, along with three faculty members, met with prominent Chinese companies, leading Chinese public equity and private equity investors, as well as representatives of the Hong Kong and Shanghai Stock Exchanges, and explored how they strategically invest in the growth of China. While I had been to China many times during my previous investment banking career (though the last time was in 2013 before I retired), about 85% of our students had never been to Hong Kong or mainland China.

When we started our trip, given that many of our students had never been before, I wanted to give them a few numbers to provide some context as to the size and scope of the Chinese economic opportunity. Here are some of them — all approximations:
• a population of 1.4 billion people;
• 620 million mobile internet users as of 2015, according to China’s Mobile Economy: Opportunities in the Largest and Fastest Information Consumption Boom;
• 400 million in the middle class.

And to get some sense of the rapidity of the change:
• Exports have grown for the last 30 years at a 17% compound annual growth rate (CAGR), making China the world’s largest exporter at $2.3 trillion in 2015, according to The China Questions – Critical Insights into the Rising Power;
• In 1980 about 70% of Chinese labor force was in agriculture; by 2016 only 30% was in agriculture;
• In 1980 only 2% were university educated; by 2016, approximately 30%;
• In 1980 Shenzhen had a population of 30,000; by 2016, Shenzhen had a population of some 12 million.

What I realized as we progressed through our visits to these companies and investors was that these numbers were understated, and significantly under-estimate the economic power of China. Let me outline three of the specific attributes that we learned about and discussed as part of our trip:

Money Confession: I have $30,000 sitting in my checking account, but I’m too scared to touch it

Tony’s Friday Blog = Random Thoughts: This advice from Kaitlin Menza applies not only to millenials but to baby boomers and earlier (of which I am one). But especially to those of you with many years to live.

Inertia is an insidious problem for many of us. We have money in a ‘safe’ place and with all the uncertainty we face, it comforts us to know it. But we are perhaps trading a present benefit for future drama.

So what should you do? I have some thoughts but I’d like to hear from some of you before I answer.

By Kaitlin Menza | Sept. 19, 2018

In this ongoing series, Mic readers submit their money confessions — and we’ll ask experts how to help solve these difficult financial issues. Send your own anonymous confession to moneyconfession@mic.com to get advice on your situation here.

The confession

“I have a stupid amount of money in my checking account. I inherited a bunch of family money that I truly wasn’t expecting, and now there’s around $30,000 in there, in the same spot where my paychecks come in and out. I haven’t touched it because I’m frozen by all of the options and by my fear of losing it. Help!”

Why this is an issue

It sounds like a great problem, right? So great that many people might not feel so bad for this week’s Money Confessor. But it’s not necessarily the dream scenario it might sound like, Ashley Johnson, chief operating officer and chief financial officer at Wealthfront, an investment app and website, said.

“Sometimes we have these windfall events,” Johnson said in a phone interview. “The company we’re working at goes public, or because your company does well one year, you get a bonus. The bottom line is good financial habits apply to everyone. Whether it’s a onetime windfall or if someone is squirreling away 15% of their paycheck, the same rules apply.”

The advice that follows, then, isn’t just for those who are suddenly gifted five figures. It applies to anyone who is paralyzed by extra funds sitting in a savings or checking account doing nothing for them — an occurrence that is incredibly common for millennials, especially millennial women. A SoFi and Levo League study published in April found that while over half of millennial women have the means to invest, 56% don’t due to fear.

“For the Millennial generation in general or anyone who’s lived through [the financial crisis], it’s natural to be inherently skeptical of putting money into the market,” Johnson said. “I also understand that women tend to have this confidence gap to investing their money. Either they feel they don’t have enough knowledge or they don’t have enough expertise to do it.”

You may think just sitting on tens of thousands of dollars isn’t hurting anything — at least you’re not losing it, right? — but that’s technically wrong, Paco de Leon, founder of the Hell Yeah Group, a financial firm geared at creatives, said.

“The reason why people believe that you should not just let a ‘certain amount of money sit in your account and do nothing’ is because of the reality of inflation,” de Leon said in an email interview. “Inflation is when things cost more over time. So let’s just say this young woman leaves the $30,000 in her checking account for 20 years. Twenty years later, the $30,000 won’t be as valuable. Her purchasing power has decreased.”

One way to combat this erosion of purchasing power is by getting a return on the cash through investing, de Leon said. “When you invest in the market, your money grows exponentially through the magic of compounding,” he added.

“One of the hardest concepts for people to wrap their minds around is the power of compounding,” Johnson said.

Here’s a great way to visualize compounding with regard to investments: It means your money multiples while you do literally nothing. Sounds awesome, right?

The advice

You might think a random windfall should be used to pay off a major debt, like student loans, credit cards or a mortgage. But both Johnson and de Leon recommend establishing an emergency fund instead.

“General financial wisdom says that the first thing you should have saved for is an emergency fund,” de Leon said.

Johnson said you should do the math on your monthly expenses. “Take rent, utilities, car payments, whatever that might be, and multiply that by three to six depending on your comfort level,” she said. “First and foremost, I’d make sure that money’s set aside in a high-yield savings account.”

From there, she suggests paying down high-interest debts like credit cards — “debt is a guaranteed negative rate of return,” Johnson said — before setting up a payment plan for debts like student loans or mortgages. “Then the third thing is investing in a 401(k) or IRA. These are tax-efficient and set you up for the future.”

At that point, the Money Confessor is a financially solid individual — and then the fun starts. Well, a type of fun.

“How she distributes the rest of the cash is entirely up to her and should be dictated by her goals,” de Leon said. “The question of whether or not to invest and what to invest in is easily answered once you determine what your goals are. Some people have a goal of retiring by 40, some people have a goal of buying a Tesla and some have a goal of aggressively trying to get out of debt. Different goals will determine what you do with your cash.”

If buying a home or paying off loans is a medium-term goal, for example, one might want to keep the cash liquid for easier access. Otherwise, Johnson recommends hiring a low-cost money manager — here’s more information on finding one — to help figure out how to diversify your investment portfolio based on “age, income and risk appetite.”

In short, a random inheritance, gift, bonus or even lottery win is hardly an excuse to go on a spending spree. It’s an opportunity to finally establish a solid plan so you don’t have to fear medical emergencies, getting laid off or the million other anxieties life might hold. The worst thing is to stay afraid and to do nothing.

“Empower yourself to use money as a tool to formulate your future,” de Leon said. “The financial industry, just like any other industry, leverages your anxiety so they can continue to hold the power and so that you have to pay for advice or knowledge or access.”

If the alternative is your money actually decreasing in value, well, perhaps that’s enough motivation to finally get moving.

In Defense Of Playing Defense (Part 3)

My Comments: On Wednesday I usually talk about Globla Economics. Today, however, I’m less concerned about emerging markets than I am the evolution of ideas that influence what is happening on Wall Street. Yes, it’s influenced by the hiccups we see in emerging markets globally but the political and economic forces at work in this country suggest the potential for something dramatic.

That’s a mouthful to absorb. What I hope you will get from these comments from Erik Conley is that being defensive right now with respect to your money is a good thing. I know I am with my money.

by Erik Conley, 9/18/2018

Summary
I lay out the case for playing smart defense in order to fill the hole that’s left open with the Buy & Hold approach.

When the stakes are high, it makes sense to have a contingency plan in place.

It is reasonable to expect that a solid Plan B could reduce the downside of these bear markets by at least 50%, which would have the effect of shortening the time it would take to reach one’s goals.

This idea was discussed in more depth with members of my private investing community, The ZenInvestor Top 7.

In part 1 of this series I posed the following question:
What would you do if you found out that your entire approach to investing was wrong? I said that this happens more often than you might think, and for a good reason. The investment advice industry, and the major financial media outlets, work hard to create the impression that the Buy & Hold method is far superior to any other approach that an investor can choose. But is this true?

In part 2 I closed with this thought:
The solution to managing risk with a B-H approach is to play smart defense. What’s that? My version is having a rules-based Plan B that is designed with one purpose in mind – shortening the amount of unproductive time that is wasted with a B-H approach.

Today in part 3, I will lay out the case for playing smart defense in order to fill the hole that’s left open with the B-H approach. Note that I’m not calling for anyone to abandon their B-H approach, especially if it’s been working well for them. What I’m proposing is adding a defensive piece to the B-H approach. Here’s how.

When the threat of a new recession, or a new bear market, is sufficiently high – turn to your Plan B.

Fans of the comedy show It’s Always Sunny in Philadelphia have come to know how the gang operates. After sitting around their (empty) bar and tossing around ideas about how to get people to come in and spend money, they finally agree on a Plan.

Each week the plan that the gang dreams up is more outrageous than the last one, and the plans never seem to work. What’s missing is that they never have a Plan B in case Plan A blows up, as it inevitably does. Maybe if they took the time and effort to make a backup plan, they could someday fill the bar with paying customers.

Here’s another couple of examples. Football coaches always have a Plan B ready to go if their original game plan isn’t working. Soldiers on the battlefield would never think about venturing beyond the compound without having a Plan B and a Plan C in place.

You get the idea. When the stakes are high, it makes sense to have a contingency plan in place. So what would a Plan B look like for a B-H investor?

Plan B. A rules-based, systematic procedure that is clear and concise – leaving nothing to chance.

Here are some of the steps that a B-H investor can take to manage downside risk.
• Sell your worst-performing holdings, and allow your best-performing ones to run. Review this monthly or quarterly.
• Set up news alerts on your main holdings. At the first sign of a regulatory body asking questions about accounting irregularities, misbehavior in the C-Suite, or a bad miss on an earnings report, sell first and ask questions later.
• If one of your companies announces a dividend cut, sell first and ask questions later.
• If you catch wind that the company may not be able to meet a loan recall, or roll over a line of credit, head for the door.
• If the company brings in a new CEO who has no experience in the business involved, leave quietly.
• If the CFO gives evasive or confusing answers to analyst questions on a conference call, sneak out the back door.

Macro signals
As I said earlier, recessions and bear markets are killers, especially when looked at from the perspective of time lost. The B-H promoters claim that there has never been a 20-year period in the market when investors lost money. This is true. But is it relevant? I think not, and here’s why.

We invest to grow our purchasing power. It’s that simple. But we don’t have an unlimited amount of time to accomplish this. There have been 4 really bad bear markets in the last century, and each one of them brought pain and suffering to investors. None of them suffered more than the true believers in B-H.

The investment business will tell you that bear markets are just part of the game, and if you are patient, you will recoup your losses in due time. This is another example of the mythology of B-H. It’s partly true, but it’s irrelevant. This approach requires you to sit back and watch as your life savings spend 10, 15, 20 years or more “under water.” When you finally get back to even, there is no getting around the fact that you have just wasted a significant amount of time getting to your ultimate goal, which is financial independence and security.

“Time is the one resource that can never be renewed. Once it’s gone you can never get it back.”

Major bull & bear markets throughout history
The table below shows all of the major bull and bear markets since the Great Crash of 1929. It shows what was happening at the time to cause the bear markets, the losses suffered by investors, the loss of time, the macro environment that was present during each event, and the bull market recoveries that followed.

According to my analysis, a B-H investor would have earned an average annual return of about 9.7% throughout this entire period. That’s not bad at all. But it would have taken much longer to reach her investing goals if she simply rode out all of the ups and downs along the way.

It is reasonable to expect that a solid Plan B could reduce the downside of these bear markets by at least 50%, which would have the effect of shortening the time it would take to reach one’s goals.

For example, an investor who used a simple moving average crossover system as a way to reduce equity exposure would increase their returns from 9.7% to 11.6% per year, over the entire time frame.

An investor who systematically avoided the worst parts of economic recessions, and the bear markets that accompany them, would have achieved an annual return of 12.22%.
And an investor who used both the recession warning model and the bear market probability model would have achieved an annual return of 14.10%.

The reason for these better outcomes is based on the fact that markets go through long periods of over-valuation and under-valuation, and an astute investor will pay attention to which environment is in play at all times. Today the market is somewhat overvalued, so it makes sense to reduce exposure to the riskiest parts of the capital markets.

Likewise, in 2003 and 2009, the markets were very undervalued, and it made sense at that time to increase exposure to the risky end of the market. This is not rocket science. It’s just common sense.

Everybody is a Buy & Hold investor until their account value starts going down.

Where do we go from here?

In the next installment, I will present a few options for playing smart defense. Moving average crossovers are one. Mean Reversion is another. Sector rotation is a third. They are all defensive strategies that can be part of a solid Plan B.

See you next time.

Note from TK: Read Mr. Conley’s original article HERE.

Check your math, central banker says: less immigration equals less growth

My Comments: I have an interest in the immigration debate. I’m an immigrant, granted US citizenship on May 1, 1959. As I read horror stories about parents and others being deported, it has crossed my mind that I’m at risk. Probably not, but with ICE nosing about, who knows?

It’s not just the New York Times that’s publishing articles on immigration. This one comes from Reuters, the global news agency. (Disclosure: my great-great grandmother, Anna Mathilde Kraul married Peter William Reuter on August 10, 1857. Same family as the news agency.)

Anyway, if the administration continues to insist on restricted immigration, and Congress goes along with it, we can expect a slow but pervasive decline in our economy of the next few decades. Talk about ceding global economic supremacy to China, this is the way to make that happen.

Ann Saphir \ August 7, 2017

(Reuters) – Less than week after a U.S. President Donald Trump embraced legislation to reduce immigration, Minneapolis Federal Reserve Bank President Neel Kashkari urged residents of South Dakota to embrace newcomers instead.

“Just going to math, if a big source of economic growth is population growth, and your population growth slows, either because you restrict immigration or because you have fewer babies, your economic growth is going to slow,” Kashkari said at the Rotary Club of Downtown Sioux Falls, responding to a question about a Trump-backed bill to cut legal immigration by 50 percent over the next 10 years. “Do we want economic growth, or not? That’s what it comes down to.”

Kashkari not alone in seeing immigration as key to U.S. economic growth.

Dallas Fed President Robert Kaplan routinely points out that immigrants have historically boosted U.S. workforce growth, and therefore economic growth, and has warned that the crackdown on illegal immigration could hurt consumer spending. Fed Chair Janet Yellen told U.S. lawmakers earlier this year that slowing immigration could probably hurt growth.

Most economic research suggests that immigration has little effect on wages of U.S. workers, and one recent study of what happened after the U.S. ended a guest-worker program for Mexican farm workers in the 1960s showed that growers, instead of raising wages to attract more workers, simply automated more of their field work.

The U.S. economy has been stuck at about 2-percent growth in recent years, and appears unlikely to break to out of that pattern anytime soon, St. Louis Fed President Bullard said earlier Monday.

“You can either accept slower growth; you can spend a lot of money to subsidize fertility – child care etc, very expensive – or you can embrace immigration. That’s math,” Kashkari told the audience in Sioux Falls, where the foreign-born population grew by more than a third from 2010 to 2014, figures from the U.S. census show.

“You guys have done a pretty good job of embracing immigration and that is a source of economic growth vibrancy.”