I know it’s legal to favor a U.S. citizen over an alien, but it’s illegal to discriminate against an immigrant who has obtained citizenship. But is it legal to hire an alien over a U.S. citizen simply because you prefer foreigners?
We are assuming that you’ll be absolutely honest if someone asks you why you hired the alien rather than the American right?
If that’s the case someone else will have to answer… but there are a million ways to present your side of the story in a favorable manner and get away with shady things.
If for example I have an accounting business and prefer hiring young single Thai girls due to my own, uhm, “preferences” 
rather than middle aged married American men I think it would be fairly easy to say the reason I hire them is because I feel they deserve a chance due to the predjustice and sexism in their native country, and the fact that they tend to have a better work ethic and demeanor than the native workpool.
I think you would want to avoid describing any hiring choice along these lines. The whole point of prohibiting discrimination against “national origin” is to prohibit stereotypical classifications such as you present above (i.e. Lebanese have a better “work ethic” than Brazilians, Germans have a better “demeanor” than Koreans, etc). In the perfect world envisioned by the civil rights statutes, all hiring decisions should be made *without considering * national origin. This is not to say that employers cannot consider citizenship status, but rather that between two citizens, you can’t pick one over the other over a perception that one ethnic group or the other “usually” or “typically” has certain characteristics.
I don’t know how it works in the States but in my experience, there are loop holes that allow employers to do just this in some parts of Europe. Ethnic restaruants, for example, are exempt from EOE nationality regulations. If you’re running a curry house and want only Indians working there, no problem. Howerver, the laws allow for this are usually phrased something like: “employees must demonstrate a unique skill that nationals do not posess”, and I’d think it’d be difficult to, in essence, take advandage of cheap labour and fill the curry house with a bunch of Nigerian refugees.
And know that I think about it, I’ve seen a couple ads in the local papers seeking Irish folks to work at Irish pubs in the States. And though the motivation may be similar, I don’t know what’s done to deal with the legal issues.
I’m only speaking of the anti-discrimination laws in the U.S. Generally speaking, it is illegal for a company to make hiring decisions based on national origin. However, there are some exceptions, such as a bona fide occupational qualification (for instance, if you are making a movie and want someone to play the part of a samurai, you could discriminate against non-Japanese actors.)
<<…it would be fairly easy to say the reason I hire them is because I feel they deserve a chance due to the predjustice and sexism in their native country, and the fact that they tend to have a better work ethic and demeanor than the native workpool. >>
While you could say that, it wouldn’t be much use in a suit brought against you for discriminatory practices. The law in the U.S. is that you need to hire individuals based on their individual qualifications, not because you think Asians are harder workers or blacks are lazy or Swedes are stupid or whatever.
I do not know, off the top of my head, whether you could discriminate in hiring to re-dress past imbalances in hiring. Under the law, an employer is not required to do so, so I assume there is implicaiton that an employer could.