CTH reader “Charles” asked a great question yesterday that deserves some expansion:
CHARLES: “I’m having some trouble parsing how exfiltrating [deporting] illegal alien workers thereby pushing American wages upward can cause a decrease in inflation. Conventional wisdom for my whole life (73 years) has held that increasing labor costs drive inflation upwards.”
It’s a great question because Charles is essentially correct from a historical reference. However, we are in uncharted territory due to the scale of illegal aliens within the U.S. economy in this modern era. The answer is a commonsense theory currently playing out in real time.
ANSWER: A much larger percentage of illegal aliens live on various subsidies and govt spending programs than our native American population. As a result, it’s like govt spending, except we have ten million people spending excessive govt money instead of one big spending bill.
The underlying economy is inorganic and detached from traditional cause and effect. In this dynamic when you deport the illegals, we are reducing the govt spending. Less govt spending actually tames inflation and lowers housing costs at a greater rate than the upward pressure on wages.
Removing the ‘free govt money” from the economy, creates less upward price pressure. Additionally, deporting the govt spender reinstalls a more authentic supply and demand economy, because the current demand is skewed by all the ‘free money’ subsidy spending.
Charles is correct in that within his 73-years this was not evident. That’s because we have an unprecedented number of illegal aliens spending govt money without any economic productivity. Those subsidies, extra non-productive money in the economy, creates upward price pressure. Take the money away and prices drop.
It’s the same issue we have always had with supplemental food assistance programs, and entirely the reason why Barack Obama exploded the number of people eligible for food stamps and SNAP benefits.
This is also why Big Ag and big corporate food conglomerates always lobby for increases in food subsidy programs. It enables them to charge more money and make bigger profits.
Think of it like shopping in a grocery store. Perhaps 50% of the customers pay for their purchases with wages, 50% of the customers pay with govt subsidy. Everyone from the field to the store can charge more money. The retailer can charge more for the products because half of the customers are essentially disconnected from feeling any impact.
Take away or lower the ‘free money’ subsidy, and food prices start to return to a more traditional supply/demand scenario.
Take the “free money” illegal aliens out of the spending economy and you increase the percentage of authentic, actually productive money earned from wages being spent.
Now, to be fair, there is a point at which the price pressure from the rate of spending drops below the upward pressure from the rate of wage growth. Once that apex is crossed, the wage growth can naturally drive inflation; Charle’s traditional frame of reference. However, due to the scale of spending by illegal aliens, we are a long way from the point at which that happens.
Right now, my best guess is we can likely remove 10 to 15 million subsidized illegal alien spenders, before we reach the point where upward worker wage pressure starts to exceed the downward price pressure created by removing ‘free money’ spending.
And yes, we are in uncharted territory. Traditional economic references don’t work. This is one reason why America-First MAGAnomics is defying all the traditional economic analysis. Tariffs do not increase consumer prices; at scale they decrease producer margins. Deportation doesn’t drive inflation; at scale removal actually lowers prices.
Hope that helps.
~ Sundance
More sad news for libertarians. Their first order thinking reminds of climate “science”. The actual details of a more complicated world make them unable to predict much of anything. The Koch Network fought to maintain welfare benefits for illegals.
I don’t like Libertarians any better than I like the Lefties.. they are different flavors of the same crazy.
theres a sect of libertarians that certainly support globalism because they have a blind spot to the natural right of self governance. theres also a sect of republicans that are very controlly and anti-liberty in their support for any bag of crap with the word “law” scribbled on it.
Good explanation
Great explanation.
Thank you!!!
I would like to point out that illegals purchase valid SSN for people no longer in the work force. They then apply for Cash, Food, Medical and housing assistance. They do not provide the stolen SSN when they apply. They report no income. The States pretend they can verify the illegal has no income. Meanwhile, the husband and wife work and collect benefits or the woman claims she stays home to care for the children and her husband has returned to Mexico. Americans can’t really get a job without a valid SSN and most are not willing to work under a stolen SSN because they will not get credit for paying into Social Security.
Americans have a high bar when it comes to getting hired for a job. Your best bet is to be certified in some skill or trade.
But, if you have ever been on the wrong side of the law and then straightened out your life, your internet persona still will say things about you that make getting a good job almost impossible.
I suspect that there are millions of Americans out of work due to a drug charge, felony served, or felony pending charge. I looked yesterday at the arrest made in one small county over the past three days and there were 150 mug shots. I don’t doubt they may be guilty but thats another 150 that will be forgotten and most possibly rot in jail or prison. As they await time in front of some judge, they will be subject to court fees and limited travel and then end up repeating the process again.
No, I don’t support letting guilty people run free, but they have no solid stepping stone back into a productive work life. Always a stain on their character. Don’t buy into that “court appointed attorney” and “quick prosecution myth” either. In my state, it takes two years to appear before a judge and if you haven’t hired a private attorney, you will not win!
Another lesson learned. Thank you, SD.
Illegal alien labor is cheap for the farmers and contractors that use it, but very expensive for the rest of us that are forced to subsidize it.
Not to mention the plethora of other issues it causes….strain on schools, medical services, additional crime, dilution of American culture, and….worst of all, the voter fraud!
If all illegal aliens left California, Democrats would lose 5-10 seats in Congress. Not to mention the other blue areas.
“This is also why Big Ag and big corporate food conglomerates always lobby for increases in food subsidy programs. It enables them to charge more money and make bigger profits.”
This is an example of why so much of the traditional Republican big business hoopla is just crap. It is why we label so many Repubs as RINOs.
It is not so much that they lost their way. It is because it is human nature for people to try to take advantage of a situation — or of others — if no one is paying attention.
PT Barnum has disciples in both parties. I’m sure he always has. This just happens to be a time when a Republican President seems to be the best way out of our problems.
I’ll say it again. My hunch is that the Republicans do as much damage to the country as the Dems, and have for a long time. (Remember Eisenhower’s warning.) The Democrats are just so much more spectacularly in your face about it.
You wrote: “This is also why Big Ag and big corporate food conglomerates always lobby for increases in food subsidy programs. It enables them to charge more money and make bigger profits.”
I wonder how this plays out where political contributions are concerned?
I suspect Big Ag and the food conglomerates make nice campaign contributions to certain elected officials.
I suspect that your suspicion is right.
I need to point out that the original quote was from Sundance.
Not also to campaigns but to advisory agencies. Coca-Cola funding American Diabetes association and American heart association.
American heart association allowing food companies to pay to get the red heart with the check mark instead of them meeting the AHA guidelines.
That’s just scratching the surface. We haven’t even started talking about Big Pharma influencing ADA, AHA guidelines and Congress 😠
Oh, you can bet good money on that one.
“Big Ag” on a nationwide level is like the car dealer who gets the government – the local government – on their side to take YOUR property under eminent domain because the city really, really needs that sales tax income and you are just chopped liver and your property rights are meaningless to them.
I especially like how money disappears from many (all) programs. Yet, Social Security they know the year, hour and nanosecond, to the penny, when it runs dry.
It’s no coincidence that the flood of illegals coincided with the offshoring of manufacturing jobs… AAAAND the dawn of the digital age.
I take it as a compliment when I’m accused of being a conspiracy nut (the Founders would have preferred an electorate of paranoids rather than a trusting electorate that sleeps soundly to the lullaby of “Leader of the Free World”).
The ruling class has wanted to crush the middle and working class for a long long time. And digital technology is every tyrant’s dream come true.
They made their move during the Papa Bush/Clinton era. Unfortunately, the masses were so infatuated by all the shiny new gadgets and relentless chatter about “getting in on the ground floor” of the digital job marketplace (“it’s the future” is a line I’ve grown to despise more and more with each passing year), that nobody ever dreamed of what our wonderful leaders had planned for us.
There’s a false assumption behind illegals, which is that they are actually working. Some do, but many more do not.
The ones that don’t clog up our schools dragging American kids down. Or they collect welfare subsidies. Or they’re engaged in organized crime and otherwise ripping apart the social fabric of the country. Those are massive almost unmeasurable drains on the productive economy.
If a boa constrictor is slowly squeezing you to death, then it lets go, sure, your lungs will inflate. But I doubt that inflation would upset you because you’ve inflated your lungs to where they’re supposed to be.
That’s the reason why deporting the worst criminals is so popular with the public. People understand that the violent criminals, organized crime, drug smugglers, murderers and rapists are strangling the country.
People like that don’t displace American workers.
Anyway, it’s important to understand the labor market impact.
Now, in the productive economy, and industries like home building, hotels, and agriculture, there is a chance that booting illegals will raise prices. But it’s elastic because illegals only make up a portion of the labor market, and frequently one that can be offset by entry level employees and legal migrant workers.
A hotel owner might employ some illegals, but it’s not ALL of his employees. It’s probably not even all of his housekeepers. Deport 2 of 8 workers and replace them with two Americans, the hotel will absorb that due to local price pressure from other hotels.
Bingo! Construction, hotels and restaurants are or can be very elastic. Millions of young American citizens should be happy to put down their electronic devices and go to work. Once they discover pride in doing a good job and being rewarded for their efforts, a new (old, actually) paradigm emerges.
Most States allow you to apply for benefits online and you can complete a phone interview. They provide an address of a legal immigrant or illegal immigrant that is in the State they are applying in. All the cash and food benefits are downloaded on the Electronic Benefits Transfer card. Food Assistance is supposed to be spent in the State you report you are living in. The friend uses the Food Assistance and withdrawals the cash assistance and wires it to their friend in Mexico.
Thank you Charles, and thank you Sundance! I have had the same question for years (56)… I’ll be sure to pass along this excellent analysis!
This has been going on for longer than most of us have been alive.
Maybe its been mentioned already & I didn’t see it. 50/50 of those who don’t pay anything for food compared to normal citizens who pay out of pocket is probably a little low. I’ve been in big box grocery stores in the checkout lane and Im the only one paying out of 20 or 30 also in checkout lanes. It is beyond disgusting to see the quantity and quality of food in the invaders and welfare queen’s carts. Can’t really stomach it frankly. They’re all grossly overweight and usually dirty. Hopefully PDT’s administration will win some of those court challenges and cut the SNAP, total BS, funding. I know Im only seeing the food part of the scams, but just taking the fraud out of that mess would save billions.
Amen. Standing in line , 2o plus years ago. Well dressed land whale plunked down steaks, ice cream,
high end cut meat. Paid for it with EBT card, loaded it all into her 2 year old Jeep Grand Cherokee.
Was REALLY fuming, because had just paid out homeowner’s (not in house note), and had literally
rolled change for about 1/2 hour prior to going Krogering.
We are also in unchartered territory with regards to H1B visa holders. And that situation is NOT getting better…..
In a word: Parasites.
What if I told you that the entire National Debt was a result of fraudulent looting of the US Treasury?
correct. whatever requires govt spending to survive cannot float on its own.
I would absolutely believe you.
If it moves tax it – if it keeps moving regulate it – if it stops moving subsidize it.
New Jersey is almost a Sanctuary state as it has a “Limited Trust Directive” that limits local cooperation with ICE removal of illegal criminals, pedophiles, murderers etcThese crimes they like to bury like they did with the gruesome murder of 3 Black College kids in Newark NJ by MS-13 Illegal vermin. They buried it as they cannot have their Democrat policies of assisting Brown Illegals revealed as murderous to their Black democrat constitutents.
Man arrested for slashing taxi driver’s face, leading to ICE custody for 2 others
https://www.nj.com/monmouth/2026/02/arrest-of-man-accused-of-slashing-taxi-drivers-face-near-nj-park-leads-to-ice-custody-for-2-others.html
“On Tuesday, detectives from the department and members of the FBI located Cruz-Salmoran inside a Neptune Township home despite others at the home trying to hide him from police, authorities said.
As a result, two other foreign nationals from Mexico, Jose Luis Acevedo Jimenez, 27, and Jovanni Cruz-Salmoran, 29, were arrested by the FBI, police said. Jimenez was charged with immigration offenses for lying to federal agents and Jovanni Cruz-Salmoran was arrested on a warrant of removal after the FBI contacted ICE and confirmed his alleged illegal status.
Acevedo Jimenez and Jovanni Cruz-Salmoran were transported to the U.S. Immigration & Customs Enforcement Newark Field Office for processing, the department said.”
The MS-13 Massacre Corey Booker Does Not Want Black America to Remember
When Illegal Immigrants Kill Black People, The Media Look Away
https://jackcashill.substack.com/p/the-ms-13-massacre-corey-booker-does
Currently decreasing rents is another good example of “lowering inflation” by reducing the subsidized.
It’s kind of a scary thing when you have bought a home that WAS in a decent neighborhood but then the owner of the property next door rents out the house to I don’t know how many people milling around in the front yard with cans of beer – that was way back in 1989! What of the regular people striving to save to buy a home finding themselves next door to what seems to be a literal gang and you have a wife and children, so vulnerable –
keep asking St. Joseph for help!
The development of all the illegals leaving and causing these vacancies is glorious plus what President Trump did regarding the purchase of places by “institutional owners” (eg, Black Rock) – it is glorious indeed!
I always looked at it this way. Deporting people reduces demand. Less demand for housing, food, etc. This puts downward pressure on prices, but allows some increases in wages. There is some balance there. The issue Sundance mentions is the other inflationary measure where tax money is spent with no productivity. Let’s just hope we reduce spending with less welfare rather than politicians trying to find other ways to waste our tax dollars.
I’m so sick of supporting foreigners in MY country! 😡
Brilliant, SD. Thanks again and as always.
Illegal immigrant workers are concentrated in low-wage jobs. Their payroll costs are only a small fraction of the total retail costs you pay for the goods and services they produce.
Take housing-construction for example. That’s one of the highest-paying jobs that employs a lot of illegals. How much of the $350,000 cost of that new house actually went to wages collected by illegals? Probably not very much, a few percent at most. The land, raw materials, permits/fees, financing costs, marketing/sales, builder’s profits, etc. combine to represent a much larger portion of the costs than whatever was paid to the off-the-books laborers. All those other costs didn’t change, except maybe the builder’s profits might be slightly smaller if they had to hire Americans instead.
Another big employer of illegals is farming. How much of the cost of that cucumber or dozen eggs at the supermarket went into wages for illegal farm workers? Probably very little. Most of the costs were probably the land, fuel, feed/fertilizer, taxes, transportation, processing/packaging, etc. Again, those other costs didn’t change much if at all.
Hospitality, Restaurants and Hotels is another big employer. How much did the illegal immigrant housekeeper get from the $250 hotel room stay? Again, very little. Most of the costs were real-estate, taxes, energy, non-immigrant employees (front desk, back office,) marketing/advertising, etc. How much does the illegal busboy’s paycheck impact the cost of a $50 restaurant meal?
Those illegal immigrants drive up costs for housing & food by the housing they and their families use and eat. Drive up costs of auto insurance as they are uninsured and don’t register their cars and have far more auto accidents than natural citizens. They clog our freeways, overwhelm schools, overwhelm medical services ….. So your measure of “costs of illegal immigrants” is not flushed out completely
I am 64 relatively healthy. Never had a major issues other than an arthroscopic procedure on my knee 22 years ago and an appendectomy about 5 years ago. My wife is in her 50’s and in very good health with zero negative history.
Our silver Florida Blue health insurance premiums went from $2400 to $3400 on January 1st. This is simply unsustainable and we are going to have to make some hard choices.
Do I run the risk for 11 months to 65? A catastrophic policy is still $2200 a month.
I have an employee that is a legal resident from Mexico. He cut himself on the job, went to emergency room, got treated, stitched, tetanus shot, antibiotics for $42.
My agent told me that I am not alone. The average Florida Blue increase was 40%.
I am enraged at how unfair this is. I have worked hard all my life. I’ve paid taxes and been a productive member of my community.
That I am paying for 30 million illegals emergency room visits is just so wrong.
I hear President Trump talk about a lot of things but not about health insurance. I know he is doing all he can, but I should not have to go without insurance at this point of my life.
I moved to my wife’s policy as she is still working.
Your wife is in her fifties,is she still working?
“Christian Healthcare Ministries (CHM) is a nonprofit, faith-based health cost-sharing ministry founded in 1981, recognized as America’s first and longest-serving health sharing program.
It operates as a Christian ministry, not an insurance company, where members voluntarily contribute monthly “shares” to help cover eligible medical expenses for other members, guided by biblical principles of mutual care and shared responsibility.
Christian Health, a separate organization based in northern New Jersey, is a non-profit healthcare provider offering senior living, rehabilitation, and mental health services since 1911.
It is not affiliated with CHM. “
In light of our disenchantment with the medical profession in general and hospitals since Covid and the vaccine debacle, we have lowered our health insurance dramatically.
We are much older than you both but we are on almost no medicine. We do take lots of supplements as recommended by the few doctors we trust Drs.Pierse Kory, Paul Marik Peter McCullough, Robert Malone and so on. Our food intake is governed by RFK Jr. we exercise and read a lot of Midwestern Doctor Substack.
Following this regime we have been healthier than at other times in our life.
You can up your med pay on your auto policy so there’s that. You can also access nurse practitioners through telehealth. And go to Mexico for drugs, dentistry etc. That is what seniors have long done here in Arizona.
Thats just the housing, subsidized income, and food. There is 20% percent of the GDP in health care. Because government pays for a huge portion of health care, the price is artificially inflated for everyone, but the people who feel the cost the most are employers and people who have to buy their own insurance.
Getting illegal immigrants off the health care rolls will be a huge savings. Controlling the profiteers in health care: Insurance, large hospital systems, Big Pharma, disability, inappropriate services, fraud and abuse: Will cut the remainder by at least third .
Yes, they do not get physicians that they go to for routine care and they go to the ER for all manner of routine problems. This is more expensive than outpatient office visits, and they don’t pay their bills, passing them to you and me. Some major trauma centers have had to close due to unreimbursed medical care for indigents, including illegals.
Metro Atlanta has tripled in size since when I moved here in 1984. Two million has
increased to 6.4 million. In all that time, we’ve added about 4 new hospitals in outlying
counties, while closing down about 7 in various locations closer in. The last one closed
(Atlanta Medical Center) was over 600 beds.
An addition for you Doc:
Since the majority of health care is paid for by the taxpayers via Medicare and Medicaid, government rules and regulations that likely led to the enormous growth in administrative costs. To a lesser extent, the general concept of “managed health care” also added to the administrative burden.
Federal Laws and Regulations Impacting Healthcare Administration (1990-1992)
Key Legislation
Omnibus Budget Reconciliation Act of 1990 (OBRA 1990)
Aimed to reduce federal spending on healthcare.
Introduced changes in Medicare and Medicaid, increasing administrative oversight.
Regulatory Changes
Medicare and Medicaid Reforms
Adjustments in reimbursement policies led to increased administrative roles to manage compliance and billing.
Growth in managed care organizations required more administrative staff to handle complex networks.
Increased Reporting Requirements
New regulations mandated detailed reporting and documentation, necessitating more administrative personnel.
Note how those legal and regulatory changes “just happen to coincide” with the explosion in the medical administrative state.
Welfare state, open borders
Choose one
(actually, we’d rather choose “neither”, but when do we ever get what we want?)
Deportations also lower housing costs because the subsidized people are no longer occupying the residences which resolves the induced housing shortage and generally returns the rental economy to a balanced supply and demand scenario.
Unless your area is receiving Blue State refugees. In that case, supply and demand econ is going the other way for you.
There should be a significant increase in productivity from all the new Trump tarif factories mostly using the most modern equipment which will futher dampen inflation
I think there is also a correction or “wage catch-up” going on within the middle class. Our wages have been depressed, in part, by the illegals and the offshoring of our manufacturing base. With illegals departing and manufacturing returning, the middle class gets to recover some of it losses over the last 30 years or so.
Longer then that. My dad is a die hard dem, but he has told me that in real world dollars that his income basically
hasn’t gone up since 1969.
I would think it would be even simpler than that… If you take a product that went from $1.99 to $4.99 because you have 10 people that want the item, 8 which don’t care how much they spend and are willing to pay $4.99 for that item, (because it’s not their money anyway and they will get more subsidies to pay for their electricity, etc.), the store is going to charge the $4.99. If you suddenly take the 8 people willing to pay $4.99 for an item, out of the equation you have 2 people that can’t/won’t pay $4.99 for an item left. The store sits on the product until it goes bad or they lower the price to be able to sell it. Even if the store had paid a little more for that item because there WAS a larger demand for that item, they will lower it to a price that they will at least break even.
It’s the old “things get really expensive when you make them free” scenario.
In addition to that analysis, a higher level of inflation is tolerable if wages (for Americans) are increasing. The buzzword of affordability is the product of prices and wages.
Wages go up when production goes up. In the go-go nineties, wages rose precipitously, while the big worry for economists then was deflation, not inflation.
Case in point: PepsiCo announced they are decreasing the price of their junk foods by 10-15% to increase chip sales that were lost when RFK Jr mandated that SNAP cards couldn’t be used to buy junk food.
Thank you SD. Another thought/parallel that clicked as I read this:
The costs of a “higher education”.
As govt subsidies, free money and guaranteed student loan programs have increased, costs have skyrocketed. I don’t know if anyone actually believes most Yale, MIT, or Harvard degrees are worth what they’re charging. But if a lower tier university raises prices because the money is easy for students to get, the higher end has to go up as well. There would similarly be a massive correction in university tuition rates if the Govt money dried up.
Sundance,
A BIG THANK YOU for the rational explanation which up to this point I did not understand!
So…if deporting illegals increases inflation, importing illegals should decrease inflation. But…illegals entering the US and inflation skyrocketed during the Biden era, simultaneously. Hmm…as the infamous Colonel Klink would respond, “Very Interesting”.
The history of the policies in Obama, Trump and Biden administration’s of deporting an illegal who has been in the country for years, has a family with children is difficult and is not easily found. It is a political lightening rod and not clearly messaged to public, often incorrectly reported as separating children from family. What are facts and how has each administration addressed these cases.