I know this idea is bound to infuriate some people, but it could do more to stimulate the economy than anything the Obama administration -- or the Republicans -- have come up with so far. There's no question that the depressed housing market is a major factor stalling the economic recovery. Most Americans' wealth is tied up in their homes; housing prices have continued to fall precipitously, and largely because of the huge inventory of unsold houses. Many of those houses are foreclosures.
The Obama administration has tried a number of solutions to the problem, all of which have failed. Now they have a new idea that might help individuals who already own homes from losing them, but it won't do much to deal with the existing inventory of unsold homes. According to news reports, the administration is considering a plan that would allow all homeowners whose mortgages are guaranteed by Fannie Mae or Freddie Mac to refinance at current interest rates.
Currently, more than $1.5 trillion in government-backed mortgages involve interest rates above 5 percent, when the current rate is about 4 percent. These higher interest rates cost homeowners hundreds of dollars in higher payments each month. But even if the plan were to be approved, it's only a partial solution -- and one with some unintended consequences: possibly depressing the value of mortgage-backed securities, for example.
Increasing the country's population with affluent newcomers, however, would have few drawbacks and many benefits. First, it would stabilize home prices by drying up inventory, which would benefit every American who owns a home. Second, it would infuse the population with up to a million additional taxpayers, increasing government revenues. Third, it would help create new jobs, especially in construction, home renovation and ancillary sectors.
Since the mid-1980s, Canada has had a similar program in effect. It lets in various categories of immigrants with high net worth who would either invest in existing businesses or start new ones that would employ Canadian workers. As a result, Canada has welcomed many job-creating entrepreneurs, mostly from Hong Kong and Taiwan, who have contributed enormously to Canada's relative economic health.
But what about the effect of such a program on the job prospects of unemployed Americans? One of the biggest anti-immigrant canards is that immigrants steal American jobs. In fact, immigrants create jobs. Studies consistently demonstrate that for every job an immigrant "takes" from someone who is native-born, more than one additional new job is created -- to the benefit of everyone. The only downside is when immigrants also receive government transfers through participation in various welfare programs or through using government-provided services such as schools and health care.
But a program limited to affluent immigrants would not carry with it this disadvantage. In fact, depending on how it was structured, an immigrant lottery could alleviate these pressures by limiting the social services in which such entrepreneurial or investment-immigrants would be eligible to participate as they age.
There is no question that this approach to dealing with our current economic mess would be controversial. But the fact is that what we need now is real stimulus in the form of economic growth. And the one way to guarantee economic growth is to grow the population with affluent newcomers.
Millions of people worldwide want to come to the United States to experience our promise of political freedom and economic opportunity. Immigrants are a self-selected group of ambitious individuals who prosper because of their willingness to take risks and work hard. If we were to welcome not just the huddled masses yearning to breathe free but also the well-to-do individuals yearning to own an American home, we could help both the newcomers and ourselves.
It's an idea at least worth debating. It sure beats raising taxes or borrowing more money. The administration has exhausted its current options.
The housing depression is a drag on the entire economy. Until it's resolved, we won't see a full recovery. And I can't think of a better way to shed the current inventory of unsold homes than to let in people who can buy them with their own cash.