Obama's Immigration Distraction

Even immigrants are shunning America's sputtering economy

Even advocates of immigration reform cringed at President Obama's speech last month with its impressive juxtaposition of contradictory vices: sophomoric and professorial; hectoring and plaintive; combative and defensive.

But above all it was one more thing: utterly and completely beside-the-point. There is exactly zero chance that Congress will do anything at all about immigration in the near future.

Of course, Obama knows that. The purpose of this speech had nothing to do with immigration and everything to do with the approaching mid-term elections. The true message of this speech was: Forget about the dismal economy, stupid, and think about immigration and all the nasty things Republicans are doing on this front—which they undoubtedly are.

But the great irony is: If you do think about immigration, it points you right back to the dismal economy. Regardless of whether you believe immigrants drive economic growth or not, no one—not even Lou Dobbs—can deny that they are an economic bellwether. And what both the low-skilled and high-skilled immigrants are saying about the U.S. economy right now is deeply unsettling. They don't want to come here because America is not a land of economic opportunity anymore.

According to a January study by Department of Homeland Security, overall population of unauthorized aliens in the country dropped from 11.8 million in 2007 to 10.8 million in 2009. Opponents of immigration attribute this to tougher border controls. But state-level data from the study show two things: One, this drop has little to do with stepped-up border enforcement; and two, it has a lot to do with the economic health of a state.

Indeed, between 2006 and 2007, one year after President Bush signed into law throwing even more money at heightened border security, the top 10 states with the biggest illegal populations saw a 470,00 jump in this population. It started dropping after that along with the economy—and more in economically distressed states.

In fact, if one sets aside New York, which experienced a drop in the illegal population despite being in the second-highest quintile in terms of economic growth, this pattern is pretty clear. For example, California, whose economy has seen better days, saw an 8.4 percent drop in its illegal population between 2007 and 2009. Florida, which is in the bottom quintile of economic performers, saw a 25 percent drop in the same time period and New Jersey, which is in the second bottom quintile, 23 percent.

Interestingly, Arizona, which is in the lowest quintile, has seen only a 13 percent drop, less than Florida or New Jersey, even though those two don't have Sheriff Joe Arpaio running around harassing their Hispanic population. By contrast, Texas, which is in the second highest quintile, has seen less than a 1.7 percent drop in its illegal population since 2007, even though it has been erecting plenty of miles of high-tech fences, thanks to increased border enforcement dollars from Uncle Sam.

But America's sputtering economy is not just turning off low-skilled immigrants. High-skilled immigrants—who face relatively less hostility—are spurning it too. The clearest evidence of this is the number of applications for H1-B visas or work permits that allow them to legally work in this country. Prior to the recession, the entire 85,000 H1-B quota for the year would be filled within days of its becoming available on April 1. Remember when Microsoft CEO Bill Gates was pleading with Congress to raise this quota because he couldn't hire enough foreign workers? Now these visas are going a begging.

In the 2010 fiscal year, the H-1B quota was reached in December 2009. In the 2011 fiscal year (which starts Oct. 1) it is likely to take even longer, according to Stuart Anderson of the National Foundation for American Policy, a research organization.

Even this does not fully capture the waning interest of foreign techies in America. It's not just that they are not coming to the U.S. as much anymore. The ones who are here are increasingly returning home, producing a reverse brain drain, notes Vivek Wadhwa, a senior research associate at the Harvard Law School who has been studying the phenomenon for years now. The U.S. government does not track returning émigrés, but Wadhwa estimates that about a third of the start-ups in India have been founded by returnees. What's more, at one recent meeting with Indian techies in Silicon Valley, Wadhwa found that about three-quarters of them planned to return home.

And those going back are not just new immigrants who don't have the stomach to negotiate America's senseless green-card labyrinth. Wadhwa polled 1023 returnees and found that 27 percent of Indians and 34 percent of Chinese actually had green cards. And why are they retuning? Many of them cited personal reasons such as the difficulty of being separated from family and friends. But some 84 percent of the Chinese and 69 percent of the Indians—a vast majority with advanced degrees in engineering and management—cited better professional opportunities in their own countries, which have been liberalizing their economies. Many of them felt that America's best days were over whereas in India and China the best was yet to come. In other words, the crème-de-la-crème of the immigrants is telling the U.S.: "Thanks, but no thanks." This was unimaginable two decades ago when I came to this country. If you got a visa to come to the U.S., you bought a one-way ticket and never looked back. Returning home was for losers.

"To this day," President Obama thundered in his immigration speech, "America reaps incredible economic rewards because we remain a magnet for the best and brightest from across the globe." He couldn't have been more out of touch.

Low-skilled immigrants will likely return when the U.S. economy picks up again. But to bring back high-skilled immigrants, America's economy will have to do more than make a comeback. It will have to make a strong comeback. In fact, fixing the immigration system now is like fixing dinner after your guests have left.

Hence, President Obama should forget about "comprehensive immigration reform." It serves neither the interests of immigrants nor Americans. If anything, he should tattoo "It's the economy, stupid" on Rahm Emanuel's forehead to remind himself of the correct order of priorities. This is no time to get distracted.

Shikha Dalmia is a senior analyst at Reason Foundation and a biweekly Forbes columnist. This article originally appeared at Forbes.