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Posts Tagged ‘Immigration’

Immigration policy poses an unusual challenge for the Congressional Budget Office and the Joint Committee on Taxation. If Congress allows more people into the United States, our population, labor force, and economy will all get bigger. But CBO and JCT usually hold employment, gross domestic product (GDP), and other macroeconomic variables constant when making their budget estimates. In Beltway jargon, CBO and JCT don’t do macro-dynamic scoring.

That non-dynamic approach works well for most legislation CBO and JCT consider, with occasional concerns when large tax or spending proposals might have material macroeconomic impacts.

That approach makes no sense, however, for immigration reforms that would directly increase the population and labor force. Consider, for example, an immigration policy that would boost the U.S. population by 8 million over ten years and add 3.5 million new workers. If CBO and JCT tried to hold population constant in their estimates, they’d have to assume that 8 million existing residents would leave to make room for the newcomers. That makes no sense. If they allowed the population to rise, but kept employment constant, they’d have to assume a 3.5 million increase in unemployment. That makes no sense. And if they allowed employment to expand, but kept GDP constant, they’d have to assume a sharp drop in U.S. productivity and wages. That makes no sense.

Because increased immigration has such a direct economic effect, the only logical thing to do is explicitly score the budget impacts of increased population and employment. And that’s exactly what CBO and JCT intend to do. In a letter to House Budget Committee Chairman Paul Ryan on Thursday, CBO Director Doug Elmendorf explained that the two agencies would follow the same approach they used back in 2006, the last time Congress considered (but did not pass) major immigration reforms.

In scoring the 2006 legislation, JCT estimated how higher employment would boost total wages and thus increase income and payroll taxes, and CBO estimated how a bigger population would boost spending on programs like Medicaid, Food Stamps, and Social Security. They found that the legislation would boost revenues by $66 billion over the 2007-2016 budget window and would boost mandatory spending by $54 billion; various provisions also authorized another $25 billion in discretionary spending subject to future appropriations decisions.

I remember that estimate well since I was then CBO’s acting director. At the time, I thought this was a pretty big deal, doing a dynamic score of a major piece of legislation. I expected some reaction or controversy. Instead, we got crickets. It just wasn’t a big deal. The direct economic effects of expanded immigration—bigger population, bigger work force, more wages—were so straightforward that folks accepted this exception from standard protocol. I hope the same is true this time around.

Note: The approach CBO and JCT will use in scoring immigration legislation is only partially dynamic. It accounts for the direct effects of increased immigration, such as a bigger population and labor force, but not indirect effects such as changing investment. In other words, it follows the standard convention of excluding indirect changes in the macroeconomy; the innovation is accounting for the direct effects. We used the same approach in 2006, analyzing indirect effects in a companion report separate from the official budget score. CBO and JCT will take the same approach this time around.

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Economists are often criticized for a worldview that emphasizes, and sometimes encourages, selfishness. In today’s NYT, Tyler Cowen highlights another, less-discussed aspect of that worldview, its deep tradition of egalitarianism:

If you treat all individuals as fundamentally the same in your theoretical constructs, it would be odd to insist that the law should suddenly start treating them differently.

As I’ve argued before, one way this manifests itself is in economists’ generally cosmopolitan view of immigration. As Tyler explains:

A distressingly large portion of the debate in many countries analyzes the effects of higher immigration on domestic citizens alone and seeks to restrict immigration to protect a national culture or existing economic interests. The obvious but too-often-underemphasized reality is that immigration is a significant gain for most people who move to a new country.

Michael Clemens, a senior fellow at the Center for Global Development in Washington, quantified these gains in a 2011 paper, “Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?” He found that unrestricted immigration could create tens of trillions of dollars in economic value, as captured by the migrants themselves in the form of higher wages in their new countries and by those who hire the migrants or consume the products of their labor. For a profession concerned with precision, it is remarkable how infrequently we economists talk about those rather large numbers.

Truly open borders might prove unworkable, especially in countries with welfare states, and kill the goose laying the proverbial golden eggs; in this regard Mr. Clemens’s analysis may require some modification. Still, we should be obsessing over how many of those trillions can actually be realized.

IN any case, there is an overriding moral issue. Imagine that it is your professional duty to report a cost-benefit analysis of liberalizing immigration policy. You wouldn’t dream of producing a study that counted “men only” or “whites only,” at least not without specific, clearly stated reasons for dividing the data.

So why report cost-benefit results only for United States citizens or residents, as is sometimes done in analyses of both international trade and migration? The nation-state is a good practical institution, but it does not provide the final moral delineation of which people count and which do not. So commentators on trade and immigration should stress the cosmopolitan perspective, knowing that the practical imperatives of the nation-state will not be underrepresented in the ensuing debate.

Read his whole piece.

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In today’s New York Times, Greg Mankiw offers a nice explanation for why many economists favor immigration:

First, many economists, especially conservative ones, have a libertarian streak. Ever since Adam Smith taught us about the wonders of free markets and the magic of the invisible hand, we have been loath to prohibit mutually advantageous trades between consenting adults. If an American farmer wants to hire a worker to pick fruits and vegetables, the fact that the worker happens to have been born in Mexico does not seem a compelling reason to stop the transaction.

Second, many economists, especially liberal ones, have an egalitarian streak. They follow the philosopher John Rawls’s theory of justice in believing that policy should be particularly attuned to its impact on the least fortunate. When thinking about immigration, there is little doubt that the least fortunate, and the ones with the most at stake in the outcome, are the poor workers who yearn to come to the United States to make a better life for themselves and their families.

Third, economists of all stripes recognize that our own profession has benefited greatly from an influx of talent from abroad.

I’d add a fourth item to Greg’s list: Many economists, both liberal and conservative, have a cosmopolitan streak. They thus place great weight on the wellbeing of foreigners, not just native Americans. From the libertarian side, that means caring about the liberty of the Mexican worker, not just the American farmer. And from the egalitarian side, that means caring about the poor immigrant worker seeking a better life, not just the person who employs them or the resident worker competing for similar work.

Such cosmopolitanism isn’t universal, of course. For example, some economists oppose greater immigration on the egalitarian, but non-cosmopolitan, concern that it would drive down wages for existing U.S. workers. On average, though, that perspective seems less common among economists than among non-economists.

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Judging by my Twitter feed, the most captivating story of the day is Jose Antonio Vargas’s account, “My Life as an Undocumented Immigrant.” Writing in the NYT Magazine, Vargas recounts how his mother sent him to the United States when he was 12 and how, in the subsequent years, he built a career as a successful journalist. But he never became a legal resident:

I convinced myself that if I worked enough, if I achieved enough, I would be rewarded with citizenship. I felt I could earn it.

I’ve tried. Over the past 14 years, I’ve graduated from high school and college and built a career as a journalist, interviewing some of the most famous people in the country. On the surface, I’ve created a good life. I’ve lived the American dream.

But I am still an undocumented immigrant. And that means living a different kind of reality. It means going about my day in fear of being found out. It means rarely trusting people, even those closest to me, with who I really am. It means keeping my family photos in a shoebox rather than displaying them on shelves in my home, so friends don’t ask about them. It means reluctantly, even painfully, doing things I know are wrong and unlawful. And it has meant relying on a sort of 21st-century underground railroad of supporters, people who took an interest in my future and took risks for me.

Last year I read about four students who walked from Miami to Washington to lobby for the Dream Act, a nearly decade-old immigration bill that would provide a path to legal permanent residency for young people who have been educated in this country. At the risk of deportation — the Obama administration has deported almost 800,000 people in the last two years — they are speaking out. Their courage has inspired me.

There are believed to be 11 million undocumented immigrants in the United States. We’re not always who you think we are. Some pick your strawberries or care for your children. Some are in high school or college. And some, it turns out, write news articles you might read. I grew up here. This is my home. Yet even though I think of myself as an American and consider America my country, my country doesn’t think of me as one of its own.

What should America do with immigrants like Vargas? Deporting him has got to be wrong answer. In almost all regards, he’s behaved like a model citizen, working hard, contributing to society, and playing by most of the rules. America is better for him being here. But, as his account makes clears, he knowingly and repeatedly misled employers and violated employment and documentation laws. Is there some balance by which he can become a legal resident, with hopes one day of becoming a citizen, yet still bear some penalty for breaking the law?

P.S. Vargas first offered his account to his old employer, the Washington Post. As Paul Farhi recounts, the Post gave the story a careful vetting and decided to drop it because Vargas had withheld some information. Vargas then went to the NYT, which rushed the piece into this week’s NYT Magazine. As Farhi notes:

This gave the story a singular distinction: It may be the first published by the New York Times that was developed, fact-checked and substantially edited by editors at The Washington Post.

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