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It’s a great question because Charles is essentially correct from a historical reference.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.




