KIPLINGER BUSINESS REPORT

March 26, 2007

Immigration Dance: Two Steps Forward, Two Steps Back

Bush wants it badly -- so do business leaders -- and many Democrats and Republicans are on board. So what's the problem?

by Mark Willen

Efforts to reform U.S. immigration laws are foundering. Just hours after the 2006 elections, an overhaul was trumpeted as one issue that President Bush and Democrats could cooperate on. But agreement is proving elusive. Although Bush and key lawmakers in both parties remain firmly committed to a large guest worker program to give businesses a legal, dependable supply of affordable labor, they're not making much progress in creating one.

The odds still favor legislation this year, but it's clearly going to take longer and be much harder than the politicians expected just a few weeks ago.

What to do about the 12 million illegal immigrants here is the biggest sticking point. All sides agree they should be eligible for guest worker status, but under what conditions? Conservative Republicans insist that they must go home and apply to return for a limited worker visa (probably of five years' duration). Most Democrats say that won't work because immigrants will be afraid to leave and forcibly deporting them would be impossible. Democrats favor allowing them to become guest workers if illegals already here, with no criminal record, come forward, pay a fine and back taxes. Democrats also want to let them eventually become citizens, probably after 15 to 20 years' residence. Opponents say that's just another form of amnesty, which would encourage other foreigners to sneak in.

The White House hasn't taken a clear position on how the guest worker plan should work. Most Democrats say unless he makes it clear that illegals already here can't be kicked out and persuades a few dozen reluctant Republicans to join him, Bush can forget about having an immigration bill while he's president.

The best hope for resolution lies with an effort by Democrat Edward Kennedy of Massachusetts and Republican John McCain of Arizona, who are trying to hammer out agreement on a specific proposal in the Senate. At one point, they seemed close, but tentative agreements didn't hold. Part of the problem is the looming shadow of next year's presidential election and the Iowa caucuses in January. Immigration is a big issue in Iowa, where meat-packing plants employ thousands of foreign workers, much to the chagrin of GOP conservatives in the state. So while McCain prefers a more moderate approach, he's under great pressure to insist that illegals leave the country. If McCain and Kennedy don't come to an agreement soon, Kennedy may decide to go it alone. Meanwhile, the White House is negotiating with GOP Sen. Arlen Specter of Pennsylvania and other Republicans to try to write a competing bill.

If the Senate doesn't move soon, the House may move forward with its own proposals. But the most promising option there -- legislation recently proposed by Rep. Jeff Flake, a Republican from Arizona, and Democrat Luis Gutierrez of Illinois -- has been denounced as a form of amnesty as well. It would let illegal immigrants become guest workers without leaving the country, but require them to leave briefly in order to gain citizenship. Flake and Gutierrez were working closely with McCain and Kennedy, but got tired of waiting for them.

Another troublesome issue is figuring out what role employers should play in determining job applicants' immigration status. Most legislative proposals would require them to check with the government to at least verify Social Security numbers and guest worker status. But the Department of Homeland Security is nowhere near ready to handle hundreds of thousands of checks. And employers worry about miles of red tape that would leave them caught in the middle -- unable to verify, but held responsible if they hire an illegal immigrant.

Still, there's reason for optimism about reform -- at least eventually. There's simply no way around it. Nearly everyone agrees that the current system is broken and must be fixed. Even the legal immigration system is a mess, with backlogs stretching many months. The bottom line is the U.S. economy needs laborers -- legal or otherwise -- and that will force a resolution.

In the meantime, employers face both growing worker shortages as tighter borders reduce the number of immigrants coming in and more pressure from federal and state governments to do a better job of verifying applicants. They have to expect more raids. Some will be random, hitting firms doing their best to comply with the law. Others will be triggered when the government believes an employer is intentionally looking the other way, or worse, encouraging illegal activity.