Immigration Reform Is Pro-Growth

Posted: May 10, 2013 4:12 PM

At the end of the day, the battle over immigration reform is not about dollars and cents. It’s about the soul of a nation. President Reagan reminded us that America must remain a “beacon” and a “shining city on a hill” for immigrants who renew our great country with their energy while adding to economic growth and prosperity.
And here’s a quote from Jack Kemp: “Americans and immigrants share the same value of work, family, and opportunity. There is no reason to fear the newcomers arriving on our shores today. If anything, they will energize what is best about our country.”
It strikes me that the Republican party has lost its growth-and-opportunity message in recent years, and has replaced it with a very austere vision. Debt, deficits, and budget-cutting all have their place in the economic-policy debate. But the GOP has forgotten that strong economic growth leads to a balanced budget, not the other way around.

The GOP must reclaim the growth-and-optimism message of Reagan and Kemp. Immigration reform is part of that message.
Too often, President Obama has the better growth-and-optimism message, even though he hasn’t the foggiest idea about free-market incentives, free-enterprise innovation, and the private-sector animal spirits that make the great American economic engine run. And while the GOP knows the difference between big government and private free-enterprise, its messaging is often confused, ambiguous, and rather negative.
Immigration-reform proposals from Senator Marco Rubio and others land squarely on the growth side of the debate. And I do find it interesting that the Congressional Budget Office -- no friend of supply-siders -- is touting the dynamic impacts of immigration on economic growth. In a letter to budget chair Paul Ryan, CBO said the failed 2006 immigration effort would have increased federal revenues more than direct spending. The Joint Tax Committee agreed. The dynamic idea is that immigration significantly increases the size of the U.S. labor force, and that more workers mean more growth.
Former acting CBO director Donald Marron made the same point in a recent blog post: “The direct economic effects of expanded immigration -- bigger population, bigger workforce, more wages -- were so straightforward, that folks accepted this exception from the standard [static] protocol.” (Static is my word, with my italics.)
Former CBO director Douglas Holtz-Eakin similarly argued that “immigration reform can raise population growth, labor-force growth, and thus growth in gross domestic product. In addition, immigrants have displayed entrepreneurial rates above that of the native-born population.”
Holtz-Eakin estimates that reform lifts GDP growth by a percentage point and reduces the federal budget deficit by more than $2.5 trillion.
So if the budget establishment is willing to score immigration reform in dynamic terms, why won’t the Heritage Foundation? I have great respect for this free-market think tank, so I’m not going to parse through all the arguments against its $6.3 trillion lifetime net-deficit price tag for immigration reform. But they have the story wrong. Former Bush economist Keith Hennessey’s view that the Heritage analysis is more a critique of tax-and-spend redistribution than of illegal immigration is correct.
And let us not forget the economic benefits of opening the door to more brainiacs -- foreigners who will boost American technology by filling engineering vacancies. Then there are the immigrant students who get advanced degrees at our best universities. They’ll make enormous contributions to economic growth and innovation if we let them.
And if we’re talking 50-year periods, the next Google or Apple or Amazon can employ so many and pay such good wages -- creating massive wealth through capital and consumer goods -- that the economic dynamism of new immigrants could cover all the costs of immigration reform and then some.
Like most everyone, I’d like the borders to be tightened as much as possible. And the whole immigration process must be streamlined and reformed. But bringing millions out of the shadows and into the tax-paying workforce, allowing for an orderly flow of immigrants each year, and raising the limit on foreign brainiacs and students would be a massive economic-growth-producing reform. That’s the history of immigrants coming to the United States.
At a time when the U.S. labor force has stopped growing, and anemic economic growth has become the new normal, now is the moment to promote pro-growth immigration reform.
“Opportunity is magic. . . . Often with nothing but their dreams and hopes for the future, immigrations have enriched our land, creating abundance beyond measure for America.” That was Congressman Jack Kemp speaking to the League of United Latin American Citizens on June 25, 1987. His words were right then and they’re right today.