Tag Archives: immigration reform

Does the Economy Need More Spending Now?

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In today’s Wall Street Journal the economist Alan Blinder writes, “The Economy Needs More Spending Now”, that the tax hikes and spending cuts agreed to in January and before are reducing GDP growth by 1.5% – 2% annually.  Mr. Blinder claims that it would be easy to design a new fiscal stimulus package that adds 2% to GDP per year as long as it lasts.  He also claims that a fundamental change like tax reform might only add a much smaller .2% to GDP per year although this much smaller annual effect would repeat indefinitely and therefore eventually amount to a large cumulative effect.  This is a sensible argument as far as it goes but is incomplete.
In the last five years there has been almost $6 trillion in (deficit) stimulus spending, coupled with a $3 trillion quantitative easing program by the Federal Reserve.  This represents an unprecedented fiscal and monetary stimulus to the economy by the federal government.  And the result has been a tepid although steady 2% annual growth in GDP, much slower than usually follows a recession.
After all of this enormous stimulus, which is having only a meager effect, what makes more sense:  to try even more stimulus or to try something different?  What else is there to try?  Immigration reform will boost the economy by drawing our 11,000,000 illegal immigrants into the main stream economy.  Note that citizenship (amnesty) is not required to accomplish this, only legal status.  Also, requiring many people receiving welfare (food stamps, disability benefits, etc.) to work would boost the economy by increasing the size of the labor force.
Broad based tax reform, greatly curtailing most, if not all, tax preferences, would be so attractive that it should not be put on a back burner, as Mr. Blinder suggests.  In fact, completely repealing the ACA’s Employer Mandate, now that it’s been postponed for a year, would give a big boost to many medium sized companies for which required health insurance is a big impediment to growth.
The point is that there are many ways to boost the economy besides even more artificial deficit stimulus, whose effect would be at most temporary anyway, as Mr. Blinder suggests.  It really is important to shrink our still very large annual deficits down to zero fairly quickly so that we stop adding to the huge burden which we have already placed on future generations.  In other words, we can likely have stronger economic growth and fiscal restraint at the same time, the best of all possible worlds!

Immigration Reform is Pro-Growth

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The lead editorial in today’s Wall Street Journal, “A Pro-Growth Reform”, is right on the money.  It challenges the GOP House to improve the Senate immigration bill, not kill it.  The emphasis in the Senate bill is to provide an eventual path to citizenship for the approximately 11,000,000 illegal immigrants currently in the US.  To offset the charge that this is amnesty, the Senate bill greatly increases enforcement by doubling the size of the border patrol, at a cost of $4 billion per year, and increasing the criminal penalties for employers who mistakenly hire an illegal.  The Senate bill also increases the quota for skilled workers from the current 65,000 per year limit to 120,000 per year but it only barely increases the annual quotas for construction and agricultural guest workers, which doesn’t nearly meet current needs.
What is needed is less emphasis on eventual citizenship (coupled with stronger enforcement) but rather more emphasis on simply having an adequate supply of both skilled and unskilled legal guest workers.  This presents an opportunity for the House of Representatives to produce a better bill.
First of all, raising the quotas for both skilled and unskilled guest workers should be the first priority for the House.  An adequate supply of legal guest workers means there will be much less demand for illegals, which, in turn, means less need for the increased enforcement measures of the Senate bill.
Secondly, what immigrant workers need most is legal status rather than a guaranteed path to citizenship.  It is the constant risk of deportation and separation from their families which adversely affects their quality of life, rather than the lack of US citizenship.
More immigrants, both skilled and unskilled, will help our economy grow faster and recover more quickly from the Great Recession.  We should provide immigrants with the legal status they need to come to our country and succeed and prosper!

Is Faster Growth Under Our Control?

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In today’s Wall Street Journal, columnist David Wessel declares that “Faster growth relies on a bump free road”.  Mr. Wessel cites a new forecast from the International Monetary Fund that sees a “three speed recovery” with the U.S. lagging behind emerging markets and developing economies but doing much better than the no-growth Euro zone.  According to Mr. Wessel our own economic growth is so closely tied in with the rest of the world, and especially Europe’s floundering economy, that the best we can do is to avoid “overly strong deficit reduction” and hope that there are no major bumps in the road.
It is pessimistic indeed to assume that there is little if anything we can do to boost economic output.  We can lower both individual and corporate tax rates, offset by eliminating deductions and closing loopholes, in order to stimulate more private investment.  We can help small businesses grow by removing the huge burden of having to provide health insurance to their employees (this can be accomplished by changing the tax treatment of health care insurance).  We can encourage more entrepreneurial activity with targeted (but temporary) tax exemptions. Immigration reform, hopefully now in the works, will boost the productivity of our 11,000,000 illegal immigrants by giving them more economic freedom.
Twenty million U.S. citizens are either unemployed or underemployed.  Our national leaders should consider it to be their moral duty to adopt measures to put more of them back to productive employment.  In addition, as the strongest economy in the world by far, we will boost the entire world economy if we can speed up our own growth.  The benefits of faster growth are so obvious that it should be the first priority of Congress and the President to work together to get this done!

What are the Economic Effects of Immigration Reform?

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Mr Argeo Cellucci and Stephen Kelly have recently (WSJ on March 10, 2013) made a very interesting proposal for immigration reform: “Taking a Nafta Approach to Immigration”.  The North American Free Trade Agreement, starting in 1994, has boosted trade between Canada, Mexico and the United States by over 400%.  Their proposal is to give unrestricted visas to all American, Canadian and Mexican citizens to live and work anywhere within the borders of our three countries.

Enacting such a plan would mostly solve our long simmering immigration problem overnight.  It does not offer citizenship for illegals in the U.S. and therefore is not amnesty.  Our current illegals with Mexican citizenship would attain legal status with visas but would still have to apply for, and wait for, citizenship through ordinary channels.

But the main reason for making such a change in immigration policy is economic, rather than to ease law enforcement or border control problems.  The scholar Raul Hinojosa-Ojeda has recently demonstrated in “The Economic Benefits of Comprehensive Immigration Reform”  the huge benefits that would ensue from such a policy change.  It would boost U.S. GDP by at least .84% annually which means that our slow recovery from the recession of about 2% GDP growth per year would increase by 50%.

Faster economic growth is the elixir our country badly needs to not only provide more jobs but to enable us to rapidly shrink deficit spending at the federal level and restore our national government to sound fiscal health.  Here’s how we can do it!