Sunday, July 11, 2010

Central banks start to abandon the U.S. dollar

There's mounting evidence that central bankers have little faith in the greenback these days. Can we blame them?

by Heidi N. Moore, contributor

There are those who would argue that the financial crisis was caused by over-enthusiastic worship of the Almighty Dollar. Call it brutal financial karma, but that church is looking pretty empty these days.

A new report from Morgan Stanley analyst Emma Lawson confirms what many had suspected: the dollar is firmly on its way to losing its status as the reserve currency of the world. We already knew that central banks have preferred gold to dollars, and that they're even selling their gold for cash; now, according to Lawson's data, it seems that those central banks prefer almost anything to dollars.

Lawson found that central banks have dropped their allocation to U.S. dollars by nearly a full percentage point to 57.3% from 58.1%, and calls this "unexpected given the global environment." She adds, "over time we anticipate that reserve managers may reduce their holdings further."

What is surprising is that the managers of those central banks aren't buying traditional fall-backs like the euro, the British pound or the Japanese yen. Instead, she suggests they're putting their faith in other dollars - the kind that come from Australia and Canada. The allocation to those currencies, which fall under "other" in the data, rose by a full percentage point to 8.5%, accounting almost exactly for the drop in the U.S. dollar allocation.

Call it diversification, if you must, but the trendline indicates that central banks are finally putting their money where their anti-dollar mouths are. The dollar has been in free-fall since 2007.

Last year, both China and Russia have questioned why the dollar should be the world's reserve currency. (Naturally, they were advocating for the ruble and yuan).

And just last week, the United Nations released a report concluding that the dollar should no longer be the world's reserve currency because it is not stable enough. The dollar is down 5% over the past month, and even currency traders don't see it as a safe haven any more.

There is certainly an element of economic competitiveness in those statements from foreign bodies and governments, but at the same time, Americans shouldn't be surprised that, in these touchy times, central banks want more of a measure of security than the dollar can afford right now - particularly when we're running up an enormous deficit through the costs of stimulus programs and two simultaneous wars.

Just last week, America's debt lept $166 billion in a single day. That one-day run-up is greater than the entire U.S. annual deficit in 2007. And Americans, the world's consumers, continue much of the behavior that helped the U.S savings rate drop so low.

The other options that reserve managers seem to be taking are also not a surprise. Canada's rude financial health - and robust banks - were bound to draw more attention. The Australian dollar is near a nine-month high because employment numbers there are strong.

The steady fall of the U.S. dollar is, while understandable, certainly nothing to be celebrated at home. The U.S. just has to make a stronger case - both to buyers and to its citizens - that it is on the right path.

 Breaking! Katla - 14 earthquakes in 48 hours!

9 Jul 10 - Fourteen earthquakes have occurred below Iceland's Mýrdalsjökull glacier during the past 48 hours - one within the last 4 hours. Katla Volcano lies beneath the Mýrdalsjökull glacier.

Katla Volcano usually erupts every century, says Iceland's President Olafur Grimsson. and the last eruption was in 1918. "The time for Katla to erupt is coming close."

"I don't say if, but I say when Katla will erupt," Grimsson says. "We have been waiting for that eruption for several years."

"It can create, for a long period, extraordinary damage to modern advanced society."

Dead zone in gulf linked to ethanol production

(07-06) 04:00 PDT Washington - -- While the BP oil spill has been labeled the worst environmental catastrophe in recent U.S. history, a biofuel is contributing to a Gulf of Mexico "dead zone" the size of New Jersey that scientists say could be every bit as harmful to the gulf.

Each year, nitrogen used to fertilize corn, about a third of which is made into ethanol, leaches from Midwest croplands into the Mississippi River and out into the gulf, where the fertilizer feeds giant algae blooms. As the algae dies, it settles to the ocean floor and decays, consuming oxygen and suffocating marine life.

Known as hypoxia, the oxygen depletion kills shrimp, crabs, worms and anything else that cannot escape. The dead zone has doubled since the 1980s and is expected this year to grow as large as 8,500 square miles and hug the Gulf Coast from Alabama to Texas.

As to which is worse, the oil spill or the hypoxia, "it's a really tough call," said Nathaniel Ostrom, a zoologist at Michigan State University. "There's no real answer to that question."

Some scientists fear the oil spill will worsen the dead zone, because when oil decomposes, it also consumes oxygen. New government estimates on Thursday indicated that the BP oil spill had gushed as much as 141 million gallons since an oil-rig explosion and well blowout on April 20 that killed 11 workers.

Corn is biggest culprit

The gulf dead zone is the second-largest in the world, after one in the Baltic Sea. Scientists say the biggest culprit is industrial-scale corn production. Corn growers are heavy users of both nitrogen and pesticides. Vast monocultures of corn and soybeans, both subsidized by the federal government, have displaced diversified farms and grasslands throughout the Mississippi Basin.

"The subsidies are driving farmers toward more corn," said Gene Turner, a zoologist at Louisiana State University. "More nitrate comes off corn fields than it does off of any other crop by far. And nitrogen is driving the formation of the dead zone."

The dead zone, he said, is "a symptom of the homogenization of the landscape. We just have a few crops on what used to have all kinds of different vegetation."

In 2007, Congress passed a renewable fuels standard that requires ethanol production to triple in the next 12 years. The Department of Agriculture has just rolled out a plan to meet that goal, including building ethanol refineries in every state. The Environmental Protection Agency will decide soon whether to increase the amount of ethanol in gasoline blends from 10 percent to 15 percent.

A 2008 National Research Council report warned of a "considerable" increase in damage to the gulf if ethanol production is increased.

Pet cause of Congress

One of the authors of that report, agricultural economist Otto Doering at Purdue University, said that a 50 percent boost in the ethanol blend in gasoline will significantly raise corn prices, driving farmers to pull land out of conservation and pastureland and into corn production. They are also likely to add more nitrogen fertilizers to boost yields.

Corn ethanol has been heavily subsidized since the Arab oil embargo in the 1970s. Viewed by the corn industry as a lucrative market, ethanol is a perennial favorite in Congress.

Ethanol consumes two-thirds of all federal subsidies for renewable fuels, said Ken Cook, president of the Environmental Working Group, an advocacy group, leaving solar, wind and the rest to fight over the remaining third. Corn ethanol cost taxpayers $17 billion from 2005 to 2009, his group estimates.

"This is another industry that's entirely a creature of the government, even more so than corn growing per se," Cook said. "The production of ethanol wouldn't happen at all without government subsidies and protection."

The National Corn Growers Association ran a media blitz in Washington last week to press for the renewal of the 51-cents-a-gallon tax credit for ethanol. With pictures of the BP oil spill looming in the background, the Corn Growers' video announces, "Ethanol: Now is the time."

Conservation plan hurt

The ethanol boom over the past decade has lured farmers to withdraw millions of acres from the Conservation Reserve Program, which pays farms not to plant fragile land. Much of this land has been returned to native prairie grasses, at taxpayer expense. Millions more acres are up for renewal over the next few years.

"There's been a very large-scale conversion of these CRP lands to biofuel production," Ostrom said. Those soils have accumulated carbon from the atmosphere and stored it, becoming "a pretty significant sink for atmospheric CO2," he said. "If we suddenly start farming those soils, we basically release all of the carbon that's been sequestered for decades, and that may more than offset any carbon benefit of switching to biofuels."

To meet its goal of tripling ethanol production, Congress called for more cellulosic ethanol, which is made from wood, crop waste, perennial grasses such as switchgrass, and even native prairie grasses. Perennial grasses are considered far less damaging to the environment than corn because they require less fertilizer and their roots remain in the ground, helping to stabilize the soil and reduce runoff.

But commercial production of cellulosic ethanol remains a pipe dream. It would require large subsidies to dislodge corn ethanol.

There is no experience with commercial production of switchgrass. Purdue's Doering said it will require fertilizer and is likely to be planted on conservation lands and pasture instead of displacing corn.

Joan Nassauer, a professor at the University of Michigan who has studied how alternative agricultural policies could alleviate the dead zone, said cellulosic ethanol could work.

"It might be one of those win-wins, but it's not in production yet," she said. "What we've got now all over the Corn Belt is corn, and that's definitely not a win-win."

E-mail Carolyn Lochhead at

This article appeared on page A - 1 of the San Francisco Chronicle

Six months on, Haiti earthquake victims wait for billions in aid

British charity Save the Children warns that the hurricane season could bring disaster for the thousands of people still left homeless after reconstruction has virtually come to a halt

Reconstruction of earthquake ravaged buildings has virtually ground to a halt as aid is stalled. Photograph: Peter Beaumont for the Observer

The reconstruction of Haiti has virtually ground to a halt, six months after a devastating earthquake killed 230,000 people and made 1.5 million more homeless in the most impoverished country in the Americas.

Despite pledges of $5.3bn from the international community over the next two years to rebuild Haiti's ruined infrastructure, only a tiny fraction has so far been delivered, as aid agencies and donor countries complain that Haiti's government has not provided the necessary blueprint for recovery.

The reconstruction effort was described in a report by Senator John Kerry to Congress last month as "stalled" amid a lack of leadership and disagreements among donors and disorganisation. That verdict has been confirmed by a series of reports from major aid agencies, delivered in the last week ahead of the six-month anniversary tomorrow, painting a bleak picture of conditions in Haiti.

The British charity Save the Children, which has described the aftermath of the earthquake in Haiti as the most challenging and complex emergency in its history, said last week: "Most people have little access to safe shelter, drinking water, electricity or healthcare."

It warned that, given the conditions that so many are still living in, a major storm in the hurricane season could spell another disaster for the country and its people, requiring a renewed surge of humanitarian aid. The complaints – both public and private – over the stalling of the recovery effort confirm the Observer's own observations in three trips to Haiti over five months.

While some aspects of normal life have returned, rubble appears to have been untouched in large areas of the most badly affected neighbourhoods, survivors have been hit by escalating rent and food prices and, most worrying, those made homeless are steadily trickling back from temporary shanties in Port-au-Prince to live among the rat-infested ruins in areas like Fort National – encouraged to move, they say, by Haiti's government.

The dire state of affairs was underlined by a second report last week from the International Federation of Red Cross and Red Crescent Societies. "The current situation," it reported, "is not sustainable. The Red Cross and other agencies providing water and sanitation services are currently supplying services on behalf of the Haitian authorities and are stretched beyond their collective capacity and mandate. The current approach is of buying time while longer-term decisions are made. This situation cannot continue for ever."

ActionAid declared on Friday that the country's reconstruction plans were flawed and in need of an urgent rethink. It was harshly critical of how even the rebuilding that was being undertaken did not take into account the needs of the earthquake victims.

"The rebuilding, overseen by a special commission led by Bill Clinton and Haitian prime minister Jean-Max Bellerive, reflects the wishes of donor countries – mainly the US and the EU – rather than the needs of Haitians themselves."

Describing the deadlock, one major UK charity told the Observer yesterday: "It is a serious crisis. The Haitian government has been paralysed by inertia since the earthquake. There is a strong feeling that it is inappropriate to repeat the errors of the past decades of aid provision – by-passing Haiti's government. The major donors who usually give money are not going to throw more money at Haiti without a coherent plan and for that the government needs to stand up quickly."

Presenting The Wall Of Worry: The 50 Ugliest Facts About The US eCONomy

As we close on another week replete with ugly economic data and the usual bizarro counterintuitive market, here is a summary of the 50 most underreported facts about the state of the US economy, courtesy of the Coto report. After reading these it almost makes sense that the market has become completely desensitized to the sad reality now pervasive in this country. Readers are encouraged to add their own observations to this list. Surely if the list is doubled, the market will go up to 72,000 instead of just 36,000.

#50) In 2010 the U.S. government is projected to issue almost as much new debt as the rest of the governments of the world combined.

#49) It is being projected that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars in 2010.

#48) If you went out and spent one dollar every single second, it would take you more than 31,000 years to spend a trillion dollars.

#47) In fact, if you spent one million dollars every single day since the birth of Christ, you still would not have spent one trillion dollars by now.

#46) Total U.S. government debt is now up to 90 percent of gross domestic product.

#45) Total credit market debt in the United States, including government, corporate and personal debt, has reached 360 percent of GDP.

#44) U.S. corporate income tax receipts were down 55% (to $138 billion) for the year ending September 30th, 2009.

#43) There are now 8 counties in the state of California that have unemployment rates of over 20 percent.

#42) In the area around Sacramento, California there is one closed business for every six that are still open.

#41) In February, there were 5.5 unemployed Americans for every job opening.

#40) According to a Pew Research Center study, approximately 37% of all Americans between the ages of 18 and 29 have either been unemployed or underemployed at some point during the recession.

#39) More than 40% of those employed in the United States are now working in low-wage service jobs.

#38) According to one new survey, 24% of American workers say that they have postponed their planned retirement age in the past year.

#37) Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008. Not only that, more Americans filed for bankruptcy in March 2010 than during any month since U.S. bankruptcy law was tightened in October 2005.

#36) Mortgage purchase applications in the United States are down nearly 40 percent from a month ago to their lowest level since April of 1997.

#35) RealtyTrac has announced that foreclosure filings in the U.S. established an all time record for the second consecutive year in 2009.

#34) According to RealtyTrac, foreclosure filings were reported on 367,056 properties in March 2010, an increase of nearly 19 percent from February, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.

#33) In Pinellas and Pasco counties, which include St. Petersburg, Florida and the suburbs to the north, there are 34,000 open foreclosure cases. Ten years ago, there were only about 4,000.

#32) In California’s Central Valley, 1 out of every 16 homes is in some phase of foreclosure.

#31) The Mortgage Bankers Association recently announced that more than 10 percent of all U.S. homeowners with a mortgage had missed at least one payment during the January to March time period. That was a record high and up from 9.1 percent a year ago.

#30) U.S. banks repossessed nearly 258,000 homes nationwide in the first quarter of 2010, a 35 percent jump from the first quarter of 2009.

#29) For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.

#28) More than 24% of all homes with mortgages in the United States were underwater as of the end of 2009.

#27) U.S. commercial property values are down approximately 40 percent since 2007 and currently 18 percent of all office space in the United States is sitting vacant.

#26) Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010. That was almost twice the level of a year earlier.

#25) In 2009, U.S. banks posted their sharpest decline in private lending since 1942.

#24) New York state has delayed paying bills totalling $2.5 billion as a short-term way of staying solvent but officials are warning that its cash crunch could soon get even worse.

#23) To make up for a projected 2010 budget shortfall of $280 million, Detroit issued $250 million of 20-year municipal notes in March. The bond issuance followed on the heels of a warning from Detroit officials that if its financial state didn’t improve, it could be forced to declare bankruptcy.

#22) The National League of Cities says that municipal governments will probably come up between $56 billion and $83 billion short between now and 2012.

#21) Half a dozen cash-poor U.S. states have announced that they are delaying their tax refund checks.

#20) Two university professors recently calculated that the combined unfunded pension liability for all 50 U.S. states is 3.2 trillion dollars.

#19) According to, 32 U.S. states have already run out of funds to make unemployment benefit payments and so the federal government has been supplying these states with funds so that they can make their payments to the unemployed.

#18) This most recession has erased 8 million private sector jobs in the United States.

#17) Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of 2010.

#16) U.S. government-provided benefits (including Social Security, unemployment insurance, food stamps and other programs) rose to a record high during the first three months of 2010.

#15) 39.68 million Americans are now on food stamps, which represents a new all-time record. But things look like they are going to get even worse. The U.S. Department of Agriculture is forecasting that enrollment in the food stamp program will exceed 43 million Americans in 2011.

#14) Phoenix, Arizona features an astounding annual car theft rate of 57,000 vehicles and has become the new “Car Theft Capital of the World”.

#13) U.S. law enforcement authorities claim that there are now over 1 million members of criminal gangs inside the country. These 1 million gang members are responsible for up to 80% of the crimes committed in the United States each year.

#12) The U.S. health care system was already facing a shortage of approximately 150,000 doctors in the next decade or so, but thanks to the health care “reform” bill passed by Congress, that number could swell by several hundred thousand more.

#11) According to an analysis by the Congressional Joint Committee on Taxation the health care “reform” bill will generate $409.2 billion in additional taxes on the American people by 2019.

#10) The Dow Jones Industrial Average just experienced the worst May it has seen since 1940.

#9) In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.

#8) Approximately 40% of all retail spending currently comes from the 20% of American households that have the highest incomes.

#7) According to economists Thomas Piketty and Emmanuel Saez, two-thirds of income increases in the U.S. between 2002 and 2007 went to the wealthiest 1% of all Americans.

#6) The bottom 40 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

#5) If you only make the minimum payment each and every time, a $6,000 credit card bill can end up costing you over $30,000 (depending on the interest rate).

#4) According to a new report based on U.S. Census Bureau data, only 26 percent of American teens between the ages of 16 and 19 had jobs in late 2009 which represents a record low since statistics began to be kept back in 1948.

#3) According to a National Foundation for Credit Counseling survey, only 58% of those in “Generation Y” pay their monthly bills on time.

#2) During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.

#1) According to the Tax Foundation’s Microsimulation Model, to erase the 2010 U.S. budget deficit, the U.S. Congress would have to multiply each tax rate by 2.4. Thus, the 10 percent rate would be 24 percent, the 15 percent rate would be 36 percent, and the 35 percent rate would have to be 85 percent.

h/t Teddy KGB

More and more Americans preparing for social unrest

From the outside, Jerry Erwin's home in the northwestern US state of Oregon is a nondescript house with a manicured front lawn and little to differentiate it from those of his neighbors.

But tucked away out of sight in his backyard are the signs of his preparations for doomsday, a catastrophic societal collapse that Erwin, 45, now believes is likely within his lifetime.

"I've got, under an awning, stacks of firewood, rain catching in barrels, I've got a shed with barbed concertina wire, like the military uses," he told AFP.

He and his wife also have also stockpiled thousands of rounds of ammunition and enough food for about six months.

"Several years ago I worked on paying off the house, replacing all the windows, and just very recently, I'm proud to say, we've replaced all our exterior doors with more energy-efficient ones, with as much built-in security features as I could get," he told AFP

"Plus I'm going to be adding some more structural improvements to the door frames to make it hopefully virtually impossible to take a battering ram to them."

Erwin and others like him in the United States and elsewhere see political upheaval and natural disasters as clear signs that civilization is doomed.

"We're hitting on all cylinders as far as symptoms that have led other great powers to decline or collapse: resource depletion, damage to the environment, climate change, those are the same things that affected other great societies," he said.

For Erwin, the decline is irreversible and the best approach is to prepare for the inevitable.

His pessimism is shared by a wide range of people, from left-wing environmentalists who believe climate change and capitalist greed will doom human society to Christian fundamentalists who think sin will do the same.

They label themselves "preppers," "doomers," and "survivalists," and take a variety of different approaches to the same question: How best to prepare for the coming apocalypse?

Jim Rawles, who Erwin describes as "the patron saint of survivalism," prefers an isolationist, Christian-influenced approach.

He homeschooled his children, declines to say where he lives, and advises readers of his website to "relocate to a safe area and live there year-round."

"When planning your retreat house, think: medieval castle," he adds, extolling the benefits of using sandbags to protect any new home.

Rawles, like many on the most conservative end of the survivalist spectrum, is also anti-tax, pro-gun rights, and suspicious of anything that smacks of socialism.

But the survivalist movement also includes left-wing community activists, who are devoted to living off the land and have never fired a weapon, and people like Chris Martenson, who quit a job with a six-figure salary that he felt was "an unnecessary diversion from the real tasks at hand."

He began growing his own food and developed a "Crash Course" that urges people to better prepare for societal instability. He also took over management of his investments and boasts of a 166 percent return on his portfolio.

For Martenson, the wake-up call was the September 11, 2001 attacks, when he felt gripped by uncertainty and totally unprepared.

Erwin had always felt that society would eventually disintegrate, but he and many other US survivalists say the dysfunctional response to the 2005 Hurricane Katrina was what spurred them to action.

"I thought, okay, things are not going to get better... maybe this society, our civilization, the American empire, will collapse during my lifetime," Erwin said.

For John Milandred, no single event pushed him to leave his suburban home and set up a farm in Oklahoma.

"We just got fed up of working all the time to pay bills and not accomplishing anything," he said.

A member of the American Preppers Network, Milandred said he and his wife aspired to "grow our own foods and be self sufficient... to live like the pioneers, like our great-grandparents."

It is unclear how many people subscribe to the lifestyle, but there are hundreds of websites devoted to the movement, and Erwin's attracts visitors from around the world.

The global financial crisis has increased interest in survivalism "bigtime," Erwin said, but he feels sorry for latecomers to the movement.

"We'll help them if we can," he said. "But a lot of people are climbing on board at the last minute and its going to be hard for them."

Oil Spill Footage from CNN looks like a Hoax Video

First take a look at the shrimp situation: HERE - from the article:

" Though much of the Gulf of Mexico remains open to commercial fishing, Louisiana's biggest seafood item, shrimp, is down to just 30 percent of normal production, according to the Louisiana Seafood Promotion & Marketing Board.

... later in the article

John Hartshorne, store manager at Hill's Quality Seafood Exton location, said retailers like Hill's are currently selling frozen shrimp from the Gulf that were caught six to eight months ago.

"You'll see the impact six to eight months down the road," Hartshorne said. As for right now, "we're playing it by ear

Who can tell what to believe anymore? I don't rely on CNN for any direct truth - so any information coming from them is highly suspect. Truth from CNN must be gleaned by finding contradictions, anomalies, and always asking: "Who benefits?"

The oil spill is certainly keeping lots of important stuff off the radar - and subsequently out of the public mind - like the Israelis recently shooting an American citizen four times in the head. Two wars based on lies. Lots of other stuff.

Any way you look at this it is frustrating to live in a time of such deceit that we must no longer "trust but verify" but "distrust till verified."

Now watch this CNN video for comparison:

Note: Thanks Don for sending this interesting video.

46 US Warships In Costa Rican Waters

Legislators Appeal To Constitutional Court To Stop U.S Warships From Entering Costa Rican Waters

The decision authorizing the patrol of Costa Rican waters by U.S. warships is being contested by a group of legislators, headed by Gloria Bejarano, who filed an action of unconstitutionality with the Sala Constitucional (Costa Rica’s constitutional court).

The legislators believe the authorization that was voted on and granted last week for the entry of 46 naval warships, 200 helicopters, war planes and 7.000 Marines as confirmed by the president of the LegislativeAssembly, Gerardo Villanueva, violates Costa Rica’s Political Constitution.

Villanueva confirmed that there are errors in the authorization, explaining that the co-operation agreement between the United States and Costa Rica signed 11 years ago was never published in La Gaceta.

The legislators argue in their filing that since the decree was never published it is null and void and in addition was for a 10 year period and would have expired in 2009.

Villanueva, however, argues that the agreement does not have an expiry date and the publication of the decree can be made any time.

The agreement signed in 2009 establishes a joint patrol of Costa Rican waters by the United States and Costa Rican Coast Guards.

Last week the United States, as is customary and required under the agreement, filed for authorization of the U.S. warships and personnel, that would be under the control of the Costa Rican Coast Guard, to enter Costa Rican waters to combat drug trafficking in the country and the region.

BP's new cap. A ruse?

Click this link ......

The Amount Of Neurotoxin Pesticide Corexit Sprayed By BP Tops 1 Million Gallons

BP’s latest oil spill response update for June 4th says the total amount of the dispersant used in the Gulf of Mexico more than 1,021,000 gallons.

But what most people don’t know is that the active ingredient of the toxic chemical dispersant, which is up to 60% by volume, being sprayed by BP to fight the Gulf oil spill is a neurotoxin pesticide that is acutely toxic to both human and aquatic life, causes cancer, causes damage to internal organs such as the liver and kidneys simply by absorbing it through the skin and may cause reproductive side effects.

In fact the neurotoxin pesticide that is lethal to 50% of life in concentrations as little as 2.6 parts per million has been banned for use in the UK since 1998 because it failed the UK “Rocky shore test” which assures that the dispersant does not cause a “significant deleterious ecological change” – or to put that in layman’s terms it can kill off the entire food chain.

Corexit has also earned the highest EPA warning label for toxicity which means the effects of the toxic chemicals to the eye are corrosive resulting in irreversible destruction of ocular tissue and other tissue with corneal involvement along with an burning that can persist for more than 21 days and effects to human skin are corrosive resulting in tissue destruction into the dermis and/or scarring.

Corexit was widely used after the 1989 Exxon Valdez spill and according to a literature review performed by the group the Alaska Community Action on Toxics was later linked with widespread long lasting health impacts in people including respiratory, nervous system, liver, kidney and blood disorders.

The “Human Health Hazards” are said to be “Chronic” for Corexit EC9527A according to the EPA.

So What Are These Dispersants Made Of That Makes Them Such a Powerful Neurotoxin Pesticide?

The main ingredients of Corexit is 2-Butoxyethanol which can make up to 60% of the dispersant and is known to be toxic to blood, kidneys, liver, and the central nervous system (CNS).

2-Butoxyethanol is also known to cause cancer, birth defects and has been found to cause genetic mutations and is a delayed chronic health hazard as well as an environmental hazardous material

Corexit also contains Arsenic, Cadmium, Chromium, Mercury, and Cyanide.

How effective is Corexit in dispersing Gulf crude?

Corexit 9500 is only 54.7% effective and Corexit 9527A is 63.4% effective in dispersing the crude oil found off the shores of South Louisiana.

BP has sprayed both Corexit 9500 and Corexit 9527 into the Gulf of Mexico to disperse the oil both of which have been banned in the UK since 1998 for failure to pass the Rocky Shores Test.

By BP’s own admission Corexit has the potential for bioaccumulation meaning it has the potential to accumulate in the tissues of organism beginning with the first organism in a food chain.

Why allow the use of these toxic dispersants?

Well the EPA has ordered BP to stop using the dispersants but BP has refused

Instead BP replied with its justification for using Corexit which the EPA responded to saying BP’s response “lacked sufficient analysis and focused more defending your initial decision” .

In general, the EPA justifies the use of dispersants because they are less toxic than oil and the cause less of an environment impact that oil along the coastline calling dispersants an environmental trade off which is the lesser of two evils.

However the choice of using Corexit contradicts both of those justifications.

Corexit is lethal in as little as 2.6 parts per million where oil is lethal in 11 parts per million meaning that Corexit is over 4 times more toxic than oil.

Furthermore scientific studies show that oil dispersed with Corexit is 11 times more lethal than oil alone.

In fact the study referenced showed that crude oil was lethal at 4250 parts per million to killifish but combination of oil mixed with Corexit was lethal in as little as 317.7 ppm.

“Dispersed oils were more toxic than crude oils,” noted the report.

The other justification of lessening the environmental impact along the shoreline doesn’t hold up either as the reason Corexit was banned in the UK is because it was in fact shown to have a “significant deleterious ecological change” on the shoreline.

The fact Corexit is 4 times as toxic as oil and up to 11 times as toxic when combined with oil it literally makes no sense to allow the use of such a toxic chemical that can “delete” the ecological systems along the Gulf coast.

A report in the journal Environmental Toxicology a decade ago concluded that lethality levels in “dispersed oil combinations were significantly more toxic to these organisms than .. crude oil.” Another study, this time of snails and amphipods reached exactly the same conclusion.

What are the long term effects of Corexit?

The EPA has stated over and over that the long term effects of the use of Corexit are unknown yet there is plenty of data documenting the long term effects on humans (see below).

Further making the EPA claims questionable is EPA’s Deepwater horizon response sites site clearly states that between 1 million and 2.5 million gallons of the neurotoxin pesticide Corexit was used in the 1979 ixtoc oil spill which makes it unfathomable that the EPA doesn’t know what the long term effects are of a chemical that has been widely used, and eventually banned in certain countries, over a period of 30 years.

To the contrary of the EPA’s statement scientific studies widely state Corexit 9527 has been tested extensively in the laboratory and used on oil spills since 1978 and a considerable number of toxicity reports exist concerning a wide variety of species.

So why does the Federal Government continue to tell us the the long term effects of the dispersant usage are unknown?

Why does the Federal Government continue to pretend like they know so little about the dispersant BP is being used?

What are the chemical components of the dispersants COREXIT 9500 and COREXIT 9527?

While the main ingredient which makes up to 60% of Corexit is reason enough to cause concern.

If you dig any more dirt on these let me know.

The components of COREXIT 9500 and 9527 are:

CAS Registry Number Chemical Name
Butanedioic acid, 2-sulfo-, 1,4-bis(2-ethylhexyl) ester, sodium salt (1:1)
Sorbitan, mono-(9Z)-9-octadecenoate
Sorbitan, mono-(9Z)-9-octadecenoate, poly(oxy-1,2-ethanediyl) derivs.
Sorbitan, tri-(9Z)-9-octadecenoate, poly(oxy-1,2-ethanediyl) derivs
2-Propanol, 1-(2-butoxy-1-methylethoxy)-
Distillates (petroleum), hydrotreated light
The have also been found to contain Arsenic, Cadmium, Chromium, Mercury, and Cyanide among other heavy metals

What are the Chronic Health effects of Corexit?

Here are some of the highlights from the MSDS for the active ingredient (2-butoxyethanol) – of Corexit (up to 60% by volume)

  • Severe over-exposure can result in death.
  • MUTAGENIC EFFECTS: Mutagenic for bacteria and/or yeast.
  • The substance may be toxic to blood, kidneys, liver, central nervous system (CNS).
  • Repeated or prolonged exposure to the substance can produce target organs damage.
  • Repeated exposure to highly (this) toxic material may produce general deterioration of health by an accumulation in one or many human organs.
  • Hazardous in case of skin contact (permeator), of ingestion, of inhalation.
  • May cause adverse reproductive effects (maternal and paternal fertility, fetoxicity)
  • May cause birth defects (teratogenic)
  • May cause cancer (tumorigenic)
  • Penetrates intact skin easily and can cause systemic effects and central nervous system depression
  • Inhalation: May cause irritation of the respiratory tract. May affect behavior (analgesia), behavior/central nervous system (headache, drowsiness, dizzness, stuttering, coma, weakness, ataxia, slurred speech, loss of coordination and judgement, personality changes, analgesia, blurred vision, tremor, excitement, somnolence), sense organs, the gastrointestinal tract (nausea, vomiting), metabolism (metabolic acidosis), respiration (dyspnea), urinary system (kidneys – hematuria, albuminuria, polyuria, oliguria, renal failure), liver (liver damage).
  • Exposure to high vapor concentration may also cause corneal or lens opacity of the eyes.
  • Ingestion: Causes gastrointestinal tract irritation with nausea, vomiting, diarrhea. May affect behavior/central
    nervous system (see inhalation), respiration (dyspnea), metabolism, cardiovascular system.
  • Chronic Potential Health Effects: Inhalation and Ingestion: Prolonged or repeated inhalation or ingestion may affect the liver, blood (changes in red blood cell count, pigmented or nucleated red blood cells, microcytosis with or without anemia, erythropenia, reticulocytosis, granulocytosis, leukocytosis), urinary system (kidneys -hematuria), metabolism (weight loss), endocrine system (spleen, thymus, pancreas). Prolonged or repeated inhalation of high concentrations may also cause lung hemmorrhage, congestion, bronchopneumonia.
  • Classified in Canada as CLASS D-1A: Material causing immediate and serious toxic effects (VERY TOXIC).
  • Classified in Canada as CLASS D-2B: Material causing other toxic effects (TOXIC)

What does the EPA say about the human health effects expected as a result of using the dispersants?

The EPA warning about human health affects says

People working with dispersants are strongly advised to use a half face filter mask or an air-supplied breathing apparatus to protect their noses, throats, and lungs, and they should wear nitrile or PVC gloves, coveralls, boots, and chemical splash goggles to keep dispersants off skin and out of their eyes. CDC provides more information on reducing occupational exposures while working with dispersants during the Gulf Oil Spill Response.

Hasn’t BP switched over to a new less toxic version of Corexit

BP does claim that since it now using the more environmentally friendly version of Corexit it can not be verified whether or not the newer version contains 2-butoxyethanol or not.

BP and the manufacturer to date have refused to release a list of all of the chemicals contained in Corexit 9500 claiming that the ingredients are proprietary.

It is quite possible that 2-butoxyethanol or an even more hazardous substance is contained in Corexit 9500.

Corexit 9500, like Corexit 9527, also contains Propylene Glycol a substance generally recognized as safe for human consumption.

However, Propylene Glycol depletes oxygen from water 5 times greater than raw sewage and the massive amounts used in the BP Gulf oil spill could help contribute to dead zones in the Gulf where aquatic life can not survive.

What about the effects of Corexit on the oil spill clean up workers

During the Exxon Valdez another version of Corexit was used to clean up the oil.

CNN reports that the average life expectancy of workers who cleaned up the Exxon Valdez is 51 years old and most of those workers are now dead.

Watch this CNN video on how the dispersants are affecting the cleanup workers which claims that BP is putting its public image over the safety of those cleaning up the oil spill.


You can find more information on the toxicity of Corexit here, here and here.

Economic Hitmen Come for Their 'Pound of Flesh' in New Jersey

It was reported today that New Jersey's Governor Christie is proposing privatization of many public services. This is the precise playbook of "Economic Hitmen" aka Banks. First, they loan ridiculous amounts of money to the public sector, knowing full well these loans can never be repaid and when state bankruptcy looms, the public infrastructure is auctioned to pirates of industry for pennies on the dollar.

According to the article on, Christie plans to privatize motor vehicle inspections and other public services:
New Jersey would close its centralized car inspection lanes and motorists would pay for their own emissions tests under a sweeping set of recommendations set to be released by the Christie administration today.
State parks, psychiatric hospitals and even turnpike toll booths could also be run by private operators, according to the 57-page report on privatization obtained by The Star-Ledger. Preschool classrooms would no longer be built at public expense, state employees would pay for parking and private vendors would dish out food, deliver health care and run education programs behind prison walls.
Get ready, as more cash-strapped states will surely follow suit and the fascist takeover of all public services at rock-bottom prices will commence. Wouldn't it be terrific to see Chinese companies buying up California's infrastructure? Welcome to the new world order.

Amnesty Will Cost U.S. Taxpayers at Least $2.6 Trillion

The Senate is currently considering a massive immigration reform bill, the "Secure Borders, Economic Opportunity and immigration Reform Act of 2007" (S. 1348). This bill would grant amnesty to nearly all illegal immigrants currently in the United States.

The fiscal consequences of this amnesty will vary depending on the time period analyzed. It is expected that many illegal immigrants who are currently working "off the books" and paying no direct taxes will begin to work "on the books" after receiving amnesty, and therefore tax payments will rise immediately. By contrast, under S. 1348, benefits to these immigrants from Social Security, Medicare, and most means-tested welfare programs (such as Food Stamps, public housing, and Temporary Assistance to Needy Families) will be delayed for many years. In consequence, then, the increase in taxes and fines paid by amnesty recipients may initially exceed slightly the increase in government benefits received. In the long run, however, the opposite will be true. In particular, the cost of retirement benefits for amnesty recipients is likely to be very large. Overall, the net cost to taxpayers of retirement benefits for amnesty recipients is likely to be at least $2.6 trillion.

Who Are the Illegal Immigrants?

According to the most widely accepted estimates, there were 11.5 million to 12 million illegal immigrants in the United States in the spring of 2006.[1] Because the number of illegal immigrants has, on average, increased by roughly 500,000 each year, the number of illegal immigrants in the U.S. in 2007 is probably around 12 million to 12.5 million; however, these estimates are uncertain, and the actual number of illegal immigrants may be higher.

As Chart 1 shows, some 49 percent of illegal immigrants are adult males, 35 percent are adult females, and 16 percent are foreign-born children. Living in illegal immigrant families are another 3.1 million U.S.-born children of illegal immigrant parents.[2] Because they were born inside the U.S., these children are considered citizens, not illegal immigrants.

Illegal immigrants now make up about 4 percent of the U.S. population, meaning that about one in twenty-five persons currently in the U.S. is here unlawfully. Illegal immigrants make up nearly one-third of the foreign-born population in the U.S.

As Chart 2 shows, more than half (56 percent) of illegal immigrants come from Mexico. Another 22 percent come from other Latin American countries, and 22 percent come from Asia, Europe, and Africa.[3]

education of Illegal Immigrants.Illegal immigrants generally have very low education levels. As Chart 3 shows, 61 percent of illegal immigrant adults lack a high school diploma, 25 percent have only a high school diploma, 5 percent have attended some college, and 9 percent are college graduates, according to the Center for immigration Studies' estimates.[4] The Pew Hispanic Center estimates slightly higher education levels: 49 percent without a high school diploma, 25 percent with a high school diploma only, 10 percent with some college, and 15 percent with college degrees.[5] Overall, 49 to 61 percent of adult illegal immigrants lack a high school diploma, compared to 9 percent of native-born adults.

Illegal Immigrants and poverty. Because of their low education levels, illegal immigrants have a poverty rate that is roughly twice that of native-born Americans. As Chart 4 shows, the poverty rate of children in illegal immigrant families is 37 percent, compared to 17 percent among children in non-immigrant families. The poverty rate among adult illegal immigrants is 27 percent, compared to 13 percent among non-immigrant adults.

S. 1348 and the amnesty Process

The Senate's immigration reform bill would offer amnesty and a path to citizenship to the 12 million to 12.5 million illegal immigrants currently in the U.S. In addition, its lax evidentiary standards would encourage millions more to apply for amnesty fraudulently. Because there is no numeric limit on the number of amnesties that could be granted under the bill, the actual number who would receive amnesty under the bill could be far higher.

In general, under S. 1348, any person who was illegally present inside U.S. borders on January 1, 2007, is eligible for Z visa status, amnesty, and ultimately citizenship. Excluded from this rule are illegal immigrants subject to a formal deportation order issued prior to enactment of the legislation and illegal immigrants convicted of a felony or three misdemeanors prior to enactment. The amnesty process consists of four stages leading to citizenship.

Stage One: Probationary Z Visas. Within 180 days of enactment of the bill, the Secretary of Homeland Security would begin accepting applications for Z visa status from illegal immigrants. The Secretary can accept applications for up to two years. The Secretary must grant "probationary Z visa" status to all amnesty applicants who pass a background check that must be completed within one business day. Except for those failing the one-day background check, applicants will automatically be granted probationary status and issued appropriate documents on the day after their application, even if the background check has not been completed.[6]

Stage Two: Permanent Z Visas. The Secretary must issue a permanent Z visa to every applicant who is determined to have met four conditions: the individual was inside the U.S. unlawfully on January 1, 2007; has not left the U.S. for more than six months since then; is employed or is the spouse or child of an employed applicant; and has passed more thorough criminal background checks that may be required. Each Z visa is good for four years and can be renewed indefinitely for the rest of the Z visa holder's life.[7] The Secretary cannot grant permanent Z visas unless the modest enforcement trigger provisions of S. 1348 have been met.[8]

Stage Three: legal Permanent Residence (LPR).All Z visa holders who pay a $4,000 fine and pass an English test would become eligible for legal permanent residence (also known as green card status). Z visa holders must go abroad to apply for LPR status but may return to the U.S. the same day. No later than 8 years after enactment, the Secretary of Homeland Security must determine the number of Z visa holders who are eligible for legal permanent residence and grant LPR status to all such persons over the following five years at a rate of 20 percent per year.[9]

During this process, Z visa holders would be granted their own special "supplemental allocation" of green cards and would not be required to compete with other visa seekers.[10] In the 13th year after enactment, the Secretary must provide an additional allotment of green cards to Z visa holders who are qualified for Z visa status.

Stage Four: Expanded Eligibility for Government Benefits. During the initial years an immigrant is in LPR status, access to government welfare programs may be limited; however, after five years in LPR status, individuals become eligible for nearly all welfare programs. legal permanent residents may also apply for U.S. citizenship at this point.

Eligibility for Government Benefits

The following outlines eligibility for government benefits at each stage of the amnesty process. In each case in the following text, eligibility for a benefit means that the former illegal immigrant or his family member obtains the same eligibility for that program as a U.S. citizen would have; that is, he will receive the benefits if income limits and other normal eligibility standards applying to U.S. citizens are met.

Probationary and Permanent Z Visa Status. All children born within U.S. borders to illegal immigrants, Z visa holders, or legal permanent residents are automatically U.S. citizens. As such, these children are potentially eligible for all U.S. welfare benefits from the moment of birth through the rest of their lives. All children of Z visa holders (both foreign- and native-born) have the right to attend U.S. public schools and to receive Head Start and daycare assistance.[11] In addition, adult Z visa holders and their foreign-born children will be eligible for medical care under the Medicaid Disproportionate Share Program.

All individuals placed in probationary Z visa status will be given lawful Social Security numbers,[12] which makes the Z visa holder immediately eligible for two refundable tax credits: the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). These credits provide cash welfare assistance to low-income parents. Upon receipt of a lawful Social Security number, Z visa holders will also be granted the right to earn entitlement to future Social Security and Medicare benefits. After 10 years of employment, they will become fully eligible for Social Security and Medicare benefits, although in most cases the benefits will not commence until the individual reaches age 67.

legal Permanent Residence. Upon obtaining LPR status, the non-citizen children of former Z visa holders will become eligible for Food Stamp benefits.[13] All legal permanent residents who have a 10-year work history in the U.S. are automatically eligible for Food Stamps, Medicaid, Supplemental Security Income, Temporary Assistance for Needy Families (TANF), and other welfare programs.[14] Many legal residents without a work history are eligible for Medicaid in 22 states, including California and New York.[15] Irrespective of employment history, amnesty recipients will become eligible for 60 different federal welfare programs five years after receiving legal permanent residence.

Citizenship. After obtaining citizenship, individuals become eligible for Supplemental Security Income, a means-tested cash aid program for disabled and elderly persons.

To summarize this process, all Z visa holders will be eligible for medical care benefits under the Medicaid Disproportionate Share Program. Foreign-born children of Z visa holders will be eligible to attend public schools and receive Head Start and daycare assistance. Children born inside the U.S. to illegal immigrant parents and Z visa holders will be eligible for public schooling and all means-tested welfare programs. Many state and local governments may also provide benefits and services to Z visa holders.

Upon obtaining a probationary Z visa, amnesty applicants will receive a lawful Social Security number, which makes Z visa holders potentially eligible for the EITC and the ACTC. In addition, they will begin to earn entitlement to Social Security and Medicare benefits. Roughly eight years after enactment, amnesty recipients will begin to enter LPR status and non-citizen children will become eligible for Food Stamps. legal permanent residents with a 10-year work history in the U.S. will be eligible for most federal welfare programs subject to income limits and other admission criteria. No later than five years after receiving LPR status, amnesty recipients will be eligible for nearly all means-tested welfare programs.

The initial limitation on receipt of means-tested welfare will have only a small effect on governmental costs. welfare is only part of the benefits received by immigrant families. Moreover, the average adult amnesty recipient can be expected to live more than 50 years after receiving his Z visa. While recipients' eligibility for means-tested welfare will be constrained for the first 10 to 15 years, they will be fully eligible for welfare during the last 30 to 40 years of their lives. Use of welfare during these years is likely to be heavy.[16]

In addition, if S. 1348 is enacted, many state and local governments are likely to begin giving benefits and services to Z visa holders that are greater than those currently provided to illegal immigrants. State governors of both parties will pressure Congress to relax the eligibility restrictions barring Z visa holders from receiving most federal means-tested benefits as a way of relieving fiscal pressure on state and local governments. In the present political climate, these efforts are likely to prove successful.

The Net Retirement Costs of amnesty

Giving amnesty to illegal immigrants will greatly increase long-term costs to the taxpayer. Granting amnesty to illegal immigrants would, over time, increase their use of means-tested welfare, Social Security, and Medicare. Fiscal costs would rise in the intermediate term and increase dramatically when amnesty recipients reach retirement. Although it is difficult to provide a precise estimate, it seems likely that if 10 million adult illegal immigrants currently in the U.S. were granted amnesty, the net retirement cost to government (benefits minus taxes) could be over $2.6 trillion.

The calculation of this figure is as follows. As noted above, in 2007 there were, by the most commonly used estimates, roughly 10 million adult illegal immigrants in the U.S. Most illegal immigrants are low-skilled. On average, each elderly low-skill immigrant imposes a net cost (benefits minus taxes) on the taxpayers of about $17,000 per year. The major elements of this cost are Social Security, Medicare, and Medicaid benefits. (The figure includes federal state and local government costs.) If the government gave amnesty to 10 million adult illegal immigrants, most of them would eventually become eligible for Social Security and Medicare benefits or Supplemental Security Income and Medicaid benefits.

However, not all of the 10 million adults given amnesty would survive until retirement at age 67. Normal mortality rates would reduce the population by roughly 15 percent before age 67. That would mean 8.5 million individuals would reach age 67 and enter retirement.

Of those reaching 67, their average remaining life expectancy would be around 18 years.[17] The net cost to taxpayers of these elderly individuals would be around $17,000 per year.[18] Over 18 years, the cost would equal $306,000 per elderly amnesty recipient. A cost of $306,000 per amnesty recipient multiplied by 8.5 million amnesty recipients results in a total net cost of $2.6 trillion.

These costs would not occur immediately. The average adult illegal immigrant is now in his early thirties; thus, it will be 25 to 30 years before the bulk of amnesty recipients reaches retirement. At their peak level, it appears the amnesty recipients will expand the number of beneficiaries under Social Security by 5 to 10 percent. This will occur at a point when Social Security will already be running deficits of over $200 billion annually.

This is a rough estimate. More research should be performed, but policymakers should examine these potential costs very carefully before rushing to grant amnesty, "Z visas," or "earned citizenship" to the current illegal immigrant population.

Factors That Could Increase Future Costs

The $2.6 trillion figure is a rough estimate of future costs that would result from putting 10 million adult illegal immigrants on a guaranteed pathway to citizenship. There are a number of factors that could raise or lower these future costs. Among the factors that could increase the net cost (benefits received minus taxes paid) well above $2.6 trillion are the following:

  1. The actual number of illegal immigrants may be greater than 12 million. The estimated cost of $2.6 trillion in future retirement costs outlined above assumes that the number of illegal immigrants in the U.S. in 2007 was around 12 million, based on data from the Pew Hispanic Center. While the Pew Hispanic Center is the most widely used source for demographic information about illegal immigrants, its data assume that some 90 percent of illegal immigrants appear in the Census Bureau's Current Population Survey (CPS).[19] It is possible that many illegal immigrants do not appear in the CPS and that the total number of illegal immigrants is substantially higher than 12 million. Some estimates place the number of illegal immigrants as high as 20 million. Clearly, if the illegal immigrant population is greater than 12 million, then the net retirement costs resulting from amnesty would be, ceteris paribus, higher as well.
  1. There is a huge potential for amnesty fraud. In order to receive amnesty and a Z visa and be put on a pathway to citizenship, an illegal immigrant must demonstrate that he or she was in the U.S. illegally and employed on January 1, 2007. However, the standard to demonstrate residence is very loose. The illegal immigrant need merely produce two affidavits from non-relatives asserting that he or she was working in the U.S. on the appropriate date. The affidavits could even come from other illegal immigrants. It is doubtful that the Department of Homeland Security has any real capacity to separate true affidavits from bogus ones, especially in the crush of processing millions of applications in the space of a year or two. Consequently, the potential for amnesty based on fraudulent documents is very high. In the 1986 amnesty, an estimated 25 percent of the amnesties granted were fraudulent.[20] In the last 20 years, the underground industry producing fraudulent documents has grown vastly larger and more sophisticated. In this round of amnesty, the fraud rate could be as high as or higher than in 1986, resulting in millions of additional amnesties.
  1. Spouses and children living abroad may be added to the amnesty population. In its present form, the bill grants amnesty to employed illegal immigrants who were in the U.S. on January 1, 2007. Any spouses, children, and parents of employed illegal immigrants who were residing in the U.S. on that date will also receive Z visas and amnesty. However, many illegal immigrants have spouses and children living abroad; under S. 1348, while illegal immigrants and their families inside the U.S. are put on a path to citizenship, families living abroad are not. family members living abroad would be denied Z visas and would not be permitted to reside in the U.S. for the foreseeable future. Presumably, the Z visa holder could have his family join him when he achieves legal permanent residence, but this would not occur until eight years after he is initially given the Z visa.

    The designers of the bill appear to have excluded spouses and children living abroad from eligibility for Z visas in order to lower the apparent number of amnesty recipients, but pressure will build to eliminate this exclusion. At some point, either before or after the bill's passage, a "technical correction" will almost certainly be introduced allowing spouses and children living abroad to obtain Z visas and get on the pathway to citizenship. For every 10 illegal immigrants living in the U.S., there may be four dependents living abroad; if the current illegal population is 12 million, the number of additional dependents who could be brought permanently into the country should the exclusion be eliminated may be as high as five million.[21] The overall number of amnesty recipients and dependents could easily reach 17 million.
  1. Medicaid and Medicare costs are likely to rise faster than the rate of general inflation. To project the future governmental costs of amnesty recipients during retirement, this paper has used the current net governmental costs for elderly immigrants with skill levels similar to the amnesty population. These net governmental costs amount to $17,000 per person per year in 2004; half of this cost was medical care expenditures under the Medicare and Medicaid programs. The cost of government Medicaid and Medicare benefits has tended to escalate rapidly both because medical cost inflation has been greater than the general rate of inflation in the economy and because the range of medical services provided by these programs has expanded. The cost of Medicare and Medicaid services is likely to continue to increase more rapidly than inflation for the foreseeable future. As a consequence, the actual retirement costs for amnesty recipients will almost certainly be greater than $2.6 trillion, even after adjusting for general inflation.

Factors That Could Reduce Future Costs

By contrast, three factors could reduce the future costs estimated in this paper:

  1. Not all illegal immigrants will get amnesty. The cost estimate in this paper assumes that all illegal immigrants residing in the U.S. will receive amnesty. In reality, not every illegal immigrant who was present in the U.S. on January 1, 2007, will actually receive amnesty. Some will not apply for a Z visa. Some will be found ineligible due to lack of proof of residence, despite the lax evidentiary standards. Some illegal immigrants will fail the criminal background checks and be rejected.
  1. Some amnesty recipients will return to their native countries. Granting amnesty and creating a pathway to citizenship creates powerful financial incentives for illegal immigrants to remain in the U.S. permanently. Nonetheless, some Z visa holders and legal permanent residents will return to their native countries before reaching old age. Even in this case, some amnesty recipients will have earned eligibility for Social Security benefits and thereby will impose governmental costs even after leaving the nation. To the extent that amnesty recipients leave the U.S. at some point in the future rather than living out their full lives in the U.S., future governmental costs will be reduced. This, however, simply underscores the fact that illegal immigrants, on average, are a fiscal burden. The longer they remain in the U.S., the greater the burden.
  1. The net taxes paid by second-generation immigrants may offset some costs. The average amnesty recipient will reach retirement age in 30 to 35 years. By that time, many of the children of amnesty recipients will have reached adulthood and will be receiving benefits in their own right and paying taxes. This second generation will have better education and higher incomes than their parents. In consequence, their government benefits will be lower and their tax payments will be higher than those of their parents. It is possible that, on average, these second-generation immigrants will be net fiscal contributors; the taxes they pay could exceed the benefits they receive. If this is the case, their net tax payments may offset some the government retirement costs of their parents; however, in calculating the fiscal contributions of second-generation families, it is essential to count more than Social Security taxes paid. A family that pays $3,000 in Social Security taxes while receiving $30,000 in a variety of government benefits does not contribute to governmental solvency. At present, it is uncertain to what extent, if any, the children of potential amnesty recipients will be net fiscal contributors (paying taxes exceeding total benefits). Further, even if they are net contributors, these second-generation families would have to make very large contributions in order to significantly offset the $17,000 per year net cost of their parents.

One final factor should be considered: Some illegal immigrants may become citizens, and thereby impose costs on taxpayers, even without amnesty. Under current law, a child born inside the U.S. to illegal immigrant parents is deemed a U.S. citizen. Upon reaching age 21, this child can petition for his illegal immigrant parents to be given legal permanent residence. In most cases, the petition is automatically accepted. Upon receiving LPR, the parents could begin to gain eligibility to Social Security and Medicare; within five years, the parents would become eligible for most means-tested welfare programs.

This means that, even without amnesty, some current illegal immigrants could become eligible in their retirement years for the type of benefits described in this study. Consequently, some of the costs estimated in this paper may occur without amnesty. How many illegal immigrant parents would, under current law, be placed on the pathway to citizenship by the petitions of their native-born children is unknown. Certainly the path to entitlement through the amnesty provided in S. 1348 is easier and more attractive. Nonetheless, the fact that some illegal immigrants can obtain access to government benefits under current law does not reduce the fiscal costs estimated in this paper; it simply means that a portion of these costs may occur even if S. 1348 is not enacted.

Congressional Budget Office Estimate of S. 1348

At first glance, the figures presented in this paper appear to differ from the cost estimates of S. 1348 by the Congressional Budget Office (CBO).[22] However, the CBO has estimated only the changes in benefits and revenues that would occur in the first 10 years after enactment of S. 1348. By contrast, the retirement costs analyzed in this paper will not really begin until 25 to 30 years after passage of the legislation. The current paper and the CBO study thus analyze very different impacts from the bill.

Currently, very few illegal immigrants are elderly, and virtually none receive Social Security and Medicare. A major result of S. 1348 would be to make illegal immigrants eligible for Medicare, Medicaid, and Social Security during their retirement years. CBO does not address these retirement costs at all.

The CBO report does conclude that in the first 10 years after enactment of S. 1348, federal taxes and other revenues paid by Z visa holders would increase by $63 billion while federal benefits would increase by $33 billion. This should not be surprising since, as this paper has pointed out, under S. 1348, increases in tax revenues would occur immediately while increases in benefits, for the most part, would not begin for 10 years or more. However, in subsequent decades, benefits received by amnesty recipients would increase significantly. When the amnesty recipients reach retirement age, total benefits received will outstrip taxes paid by roughly seven to one. Thus, while amnesty may reduce government net costs slightly in the short run, in the long run, the fiscal effects will be substantially negative.

There are other limitations to the CBO study. First, it covers only federal benefits and revenues and ignores state and local government costs. Second, it covers only changes in spending and revenue that would result from S. 1348 and ignores the government benefits currently received by illegal immigrant families. Finally, the CBO report does not analyze the total fiscal balance of amnesty recipient families either before or after amnesty. (The total fiscal balance of a family equals total federal state and local benefits received by the family minus total taxes paid.) Similarly, it does not analyze the total fiscal balance of amnesty recipients either before or after retirement.

Policy Discussion: Reducing the Costs of immigration Reform

amnesty is not only very expensive, but it also violates the rule of law and is manifestly unfair. It gives the inestimable gift of U.S. citizenship to millions of individuals whose sole qualification for receiving citizenship is that they broke U.S. laws. Consider that on January 1, 2007, there were hundreds of thousands of foreigners in the U.S. on a variety of temporary visas. Because these individuals were here lawfully, none will be granted citizenship under S. 1348. By contrast those who were in the U.S. illegally on that same day will be given the privilege of citizenship.

Consider two foreigners who were in the U.S. on temporary visas that expired in December 2006. One of these individuals lawfully returned home upon expiration of his visa; the other chose to remain in the U.S. unlawfully. Under S. 1348, which of these individuals will be granted the privileges and benefits of citizenship? The one who broke the laws, while the individual who respected the law will have little chance for citizenship. Is this fair? Of all the people in the world who wish to come to America, why should any American feel compelled to place those who broke the laws on a guaranteed path to citizenship?

It is often argued that it is unfair to expect illegal immigrants who have spent years in the U.S. and have begun to raise families here to uproot their families and return home. But S. 1348 makes no distinction between illegal immigrants who have been in the U.S. for decades and those that have been here only a few days. Everyone who was here illegally on January 1, 2007, is potentially eligible for citizenship.

In order to constrain fiscal costs, immigration reform should include three policies:

  1. Emphasize enforcement. In 1986, the U.S. granted amnesty to some three million illegal immigrants as a quid pro quo for a prohibition on the future hiring of illegal immigrants. The amnesty was granted, but the prohibition on the future hiring of illegal immigrants was never enforced. S. 1348 repeats the same mistake; mass amnesty will be granted, but the border and employment enforcement provisions of the act are hollow and will probably never be enforced. To avoid repeating the mistakes of 1986, enforcement must come first.[23]
  1. Do not grant amnesty. amnesty is unfair and would be very expensive. Proponents of S. 1348 will argue that there is no feasible alternative to giving citizenship to all the illegal immigrants in the U.S. But serious, phased enforcement of a ban on hiring illegal immigrants would cause many, if not most, illegal immigrants to voluntarily leave the U.S. and return to their native countries. To minimize economic disruption, it might be possible to give some current illegal immigrants temporary work visas, with the explicit provision that they must return home over time. Such temporary visas would not grant access to welfare, Social Security, Medicare, or citizenship. If necessary, the exiting illegal workers could be replaced by legitimate temporary workers or by permanent immigrants who have never violated U.S. laws.[24]
  1. Close the "anchor baby" loophole. As explained above, under current law, when U.S.-born children of illegal immigrants turn 21, they can petition the government to grant their illegal immigrant parents legal permanent residence, thereby conferring an automatic path to welfare entitlements and citizenship upon the parents (hence the term "anchor baby"). The popular concept of "birthright citi­zenship"-that anyone born in the United States is automatically a U.S. citizen-is historically and legally inaccurate and ought to be corrected by Congress.[25] Regardless, this backdoor path to citizenship for illegal immigrant parents should be closed.[26]


There are currently at least 12 million illegal immigrants in the U.S. The immigration reform bill currently being debated in the Senate would grant amnesty to these individuals and would likely result in the entry of 4 to 5 million dependents living abroad into the U.S. as permanent residents. Illegal immigrants receiving amnesty will immediately begin earning eligibility for Social Security and Medicare benefits and, after approximately 10 years, gain access to a wide variety of means-tested welfare programs, such as Medicaid, Food Stamps, and public housing.

Because amnesty recipients have very low education levels (75 to 85 percent have only a high school diploma or less), they are likely to receive more in government benefits than they pay in taxes through most of their lives. When they reach retirement age, amnesty recipients will impose a large net cost on taxpayers, receiving each year at least $17,000 more per person in benefits than they pay in taxes. The illegal immigrants granted amnesty under S. 1348 are likely to impose a net cost of at least $2.6 trillion on U.S. taxpayers during their retirement years. Policymakers should carefully consider the potential long-term fiscal costs before enacting the amnesty provisions of this bill.

Proponents of S. 1348 will emphasize that amnesty recipients will pay Social Security taxes during their working years, thereby presumably helping to alleviate the great burden already on the government retirement system. Given their low skill levels, the Social Security tax payments of amnesty recipients will, on average, be modest. More important is the fact that, in future years, Social Security benefits will be funded by both Social Security taxes and general revenue. What matters is not the small amount of Social Security taxes that will be paid but the overall fiscal balance (total federal state and local benefits received minus all taxes paid) of amnesty recipients. If the net benefits taken by amnesty recipients and their families exceed the Social Security and other taxes paid, the amnesty recipients will undermine rather than strengthen the financial support for U.S. retirees, even before they reach retirement age themselves.

Finally, if S. 1348 is enacted, the public should expect to see a broad array of new spending proposals and programs designed to help amnesty recipients move upward economically and socially. Many of these programs are likely to be enacted into law, further increasing fiscal pressures.

Robert Rector is Senior Research Fellow in Domestic Policy Studies at The Heritage Foundation.