Want To Reduce the National Debt? Find More Workers

By James Kwak

Why do some people oppose immigration reform? One conservative objection is that we should follow rules and punish lawbreakers (not to mention all the other arguments that have to do with protecting a white, Protestant, English-speaking nation). That fits nicely with the Strict Father worldview identified by George Lakoff. Another common conservative objection is that we can’t afford more immigration because it would increase deficits and the national debt; that also fits with the tough-minded, austerity-loving ethos of modern conservatism. The little problem is that more immigrants, and more legal immigrants, are unambiguously good for the economy and for the federal budget deficit.

This is the conclusion of two reports put out by the Congressional Budget Office this week: one a cost estimate of the bill currently in the Senate, the other an expanded estimate incorporating additional economic impacts of the bill. The bottom line is that the bill would make the economy 5.4 percent bigger in 2033 than it would be otherwise; per capita GNP would be 0.2 percent higher and wages would be 0.5 percent higher in 2033. Finally, immigration reform would reduce aggregate deficits by about $200 billion* over the first decade and about $1 trillion in the second decade.

A lot of this is simply obvious. More immigrants mean more workers mean more economic output. Legalizing undocumented immigrants means higher tax revenues from existing output. Some is slightly less obvious. Relaxing caps on immigration means more skilled workers, leading to technological innovation and higher productivity (hence higher average wages).

But what about the costs? Conservative Republicans have been painting the picture of people who come to the United States simply to live off of government programs without contributing tax revenues to fund those programs. In fact,the CBO went ahead and did a cost estimate for the second decade specifically because Republicans were arguing that the true costs wouldn’t show up until then, once immigrants qualified for benefits.

But that’s not how our current social insurance programs work. The two major programs, Social Security and Medicare, require ten years of qualifying work, with accompanying payroll tax contributions.** So for the most part, you can’t qualify for benefits without paying into the system for some period of time.

More importantly, most people immigrating to the United States are working age (or their children: they come here looking for jobs. (And if they are already retired, they won’t qualify for Social Security or Medicare.) From the standpoint of our social insurance programs, this is what we want. For example, I am paying into Social Security, but my father is benefiting from it; that’s how it works in a pay-as-you-go system. But new immigrants represent a one-time bonus: they pay in for decades before anyone in their family benefits. For the more than forty years that my immigrant father worked, he paid payroll taxes, while his parents were not collecting benefits.

Once the immigrants retire and start collecting benefits, their families become nor better and nor worse, from a fiscal standpoint, than all the families that were here already. But social insurance programs never have to pay back the net benefit they gain from that first immigrant generation. It’s free money.

More immigration is not just what our society and our economy need. It’s what the federal government’s balance sheet needs. If people want to oppose immigration reform because they don’t want to sanction past rule-breaking, that’s up to them. But they can’t oppose it on fiscal grounds.

* This amount could be reduced by $22 billion in discretionary spending required by the bill. However, under current law that discretionary spending would have to be offset someplace else because of the spending caps set by the Budget Control Act of 2011 (the debt ceiling compromise).

** The number is less for disability insurance,but in any case is not zero.

 

33 responses to “Want To Reduce the National Debt? Find More Workers

  1. How did the pro and con arguments work out the last time we went thru this debate? That was the Immigration Reform and Control Act of 1986. What is the plan for illegals that enter after this new plan is enacted? That will tell us how much time we have until we do this again…

  2. oh, please, rinse and repeat scam for the next gen of serfs….real stupid ones, too, since they don’t seem to be able to bear witness to how the WWII LEGAL non-fascist immigrants who actually CONTRIBUTED to the building of USA now live on the streets, dying in full view….

  3. ‘One conservative objection is that we should follow rules and punish lawbreakers (not to mention all the other arguments that have to do with protecting a white, Protestant, English-speaking nation).’

    Why is it that liberals with multiple East Coast degrees like Kwak are allowed to spew racist cant, while lesser souls such as we here in Flyover America are scolded and accused of hiding home-made wardrobes made from bedsheets in our closets?

    Enough, already. This whole article is arrogant BS, and argues for the defeat of this poisonous piece of legislation. It also argues for the need to send soulless types like Obama, Pelosi, Holder and Kwak out the door posthaste.

  4. Bob Siegfried

    Were one first to raise wages for jobs immigrants typically do, to the level that citizens would work at them, increasing lower class income would be a stimulus in itself for some industries. Innovation and capital investment consequent from higher labor costs would put domestic industry on a more competitive footing. Check the Dutch cut flower industry’s history.

  5. Um, wow. I hardly want to side with the ignorant bile already on display here.

    But I do feel the need to point out that shuffling in more competition to undercut wages in skilled industries is not going to improve “innovation.” It will just improve corporate bottom lines. If you want innovation, you need to do two things: 1) ensure that highly skilled workers have light enough work-schedule demands that they can take care of family stuff and still have time to do non-work projects (creative tech people are creative–innovate–because that’s what they love, but they can only do it if they aren’t so overworked they never see their families and constantly function on five hours of sleep) and 2) have the government intervene in the market to force larger R&D budgets among major private companies, so that our existing highly skilled workers–who face needlessly high unemployment due to bargaining power imbalances with our corporate citizens–can spend their day jobs innovating in addition to their nights and weekends.

    I agree that more open immigration is, ceteris paribus, probably going to help our society. But our society is still going to be in very dire straits indeed so long as we refuse to level the playing field between the productive classes and the boardroom.

  6. Are distributional concerns irrelavent? That .5 average increase in wages is the AVERAGE. If the distribution follows the pattern of the last 30 years then the rich will see a big benefit, the middle a small change either up or down, and the poor will get a massive cut.

  7. Edward Ericson Jr.

    As per usual, efcdons. Prof. Kwak, I’m a fan. i bought (and touted) 13 Bankers. But I can’t understand how those, like yourself, moderating the immigration reform debate continually gloss over–or misses entirely–the most obvious, on-view facts.

    Reform, now and as ever, means creating a system in which immigrants’ legal status will be put in limbo–the more confusing and bureaucratically tangled, the better–so that big industries will continue to be able to exploit their labor without concern about unions forming or lawsuits appearing. This is as true now in the software and medical industries as it has always been in agriculture, fish and meet processing, and other handwork industries.

    It is true also regarding domestic service–a fact that simply must be known to the majority of the six-figure professionals blogging about these warm and reassuring macro studies.

    Republicans (in general) want big business to get more cheap labor, but they don’t want Democrats to get more brown voters.

    Democrats (in general) also want big business to get more cheap labor. But they want–and arguably, absolutely need–those additional voters.

    Neither party has any substantial interest in increasing the stagnating wages of ordinary Americans, down last quarter in the largest amount since the statistic has been kept by the BLS.

    Can anyone show me any other way to explain and understand the legislation as drafted, or the way the players are aligned?

  8. bob siegfried,you are an ignorant slut!

  9. edward ericson jr. thank you for you input I am uneducated and I am not able to state the facts as eloquently as you do.

  10. My understanding is that the average age of an immigrant is around 30, so they will be (and have been in the past) adults ready to have families and work a career. The country does need these people as the Greatest Generation and the Boomer Generation fade, but my problem with your idea is that the Boomer Generation needs to work, too. Our recent economic collapse took a heavy toll on what used to be the middle class. If you think it’s easy to find a job when you’re over 50, well, welcome to Walmart. I don’t have an answer on how to reconcile the need to increase vibrant families and the need to provide jobs for our existing people. It does seem as though greater regulation of US financial institutions, improved access to education, and a social safety net that makes it possible for Americans to take the risks that build companies would be the place to start.

    It’s more than an issue of “big business” getting “more cheap labor” as Mr. Ericson suggests. It’s about evolving new technologies, new industries, and growth that increases the wealth of the nation. To do that we need an educated population, eager to pursue science and technology. We’d all like to live in an era with the potential this country had from 1950 through to maybe 1990. We need a new “new thing” on which to build the future. Computers and mobile are in place now. What’s next? I think a lot of growth could come from pushing alternate energy, rebuilding internal infrastructure, encouraging modification of the American diet and way of life. I don’t see how our political system could possibly promote any of this.

  11. The national debt can be reduced any time simply by printing money and buying it back. In fact most of the debt incurred in the last years HAS BEEN BOUGHT BACK under the guise of QE. Has nobody noticed?

    As to any inflationary effect of that “print and buy back”, that can be countered by raising taxes. But I suppose it’s no surprise that someone with the name “James Quack” doesn’t understand that simple point.

    But then 99% of the rest of the population don’t understand the point either, so I suppose Quack’s economic illiteracy is no worse than the general population’s, or indeed the economic illiteracy of Reinhart, Rogoff and much of the rest of the economics profession.

  12. There are already millions of workers in America, and many of them unemployed. Reducing the debt means finding more employers, not finding more workers. Did Kwak not notice that the thing that suddenly disappeared in 2008 was employers, who laid workers off when the stock market wouldn’t go their way?

  13. The reason we don’t have ‘more workers’–at least from Mexico–is the sour economy, not the lack of ‘immigration reform’. Many more millions used to come here to work than do now. One reason they were willing to do so was they were not subject to the punishingly high marginal tax rates many legal American workers are. Over 100% in some cases.

    Since the purpose of businesses is to make money (and the side effect is to create jobs) it follows that government policy ought to encourage people to create businesses by making easier for them to make money doing so. That’s how you get more workers. If that’s really what you want.

  14. @Paddy – you completely ignore the problem in the “commons”!

    Say a person figures out a new way to fix the bridge that can’t handle all the gas-guzzling modern SUV traffic. How does that person start a business fixing aging infrastructure when the Patent Assertion Entity is there in the weeds ready to pounce?

  15. Advantaging Mexicans over all others in the 3rd world is as Mr. Obama would say, “not fair” and that trumps all other reasons (especially continued exploitation in the name of fixing our economy) for halting the influx from that country. How uncaring of you to find reason to perpetuate this Mr. Kwak.

  16. There are two fundamental issues at play. First the racist, biggoted, fascist in the gop hate notwhite and notrich people. All of them. If you are notwhite or notrich the gop doesn’t care if you starve, are reduced to slavery serfdom (ie walmart) incarcerated, deported, (ie private prison industrial complex) or murdered by the fascist policestate goon masquerading as law enforcement. We are nothing to the gop fascists and racists but digits.

    Before I go on, – have any of the fiends visited the Statue of Liberty and read the word etched in stone at its base.

    Second – its not about jobs. It’s about manufacturing products the rest of the world wants, needs, and values. And pimping the Ponzi schemes of derivative or collateralized debt products is not what I’m talking about – though these Ponzi scheme products account for 60% of Amerika’s GDP. And they ain’t being sold to poor or middleclass people anywhere. Apple does and hopefully will continue to make outstanding innovative products that are accessible to most of the worlds population. Why would Apple or any spaniel, – I mean politian in Amerika condone or allow the transfer of critical manufacturing and skilled labor to China, India, and whoknowswhere else? Obviously profit and shareholder rewards drive these decision to the horrific detriment of the slavelabor and environmentally unregulated where any oligarch offshore jobs – but more notably to American labor, and American society in general. The gop’s twisted machinations against Tesla Motors is another chilling example of just how far our socalled government will stoop to entrench and enrich predatorclass oligarchs – and also sadly demonstrates how little they care about American citizens! A 16 yea told girl who has a bad night, gets pregnant, chooses to abort a baby she neither wants nor her or anyone in her family can afford is demonized and punished – while CEO in the den of vipers and thieves in the finance igatchs go unpunished for wanton and systemic crimes that collapsed the entire global financial system – and are rewarded with even more otherworldly bonuses than these monsters earned in 2008????

    The gop

  17. Forgive the double post – hit the wrong key – but the gop today is the modern equivalent of the nazi party. Predatory, ruthless, pathological, fascist, and insane. The gop is a mortal enemy of all notwhite notrich people in Amerika, and should be treated as such!!!

    When America starts innovating again, and rewarding innovation (and depriving entrenched oligarchs resisting, subverting, or squashing innovation and innovators) and manufacturing goods and services that are useful and valued (precludes the entire derivatives market which is useless and actually valueless) and when our socalled governments disincentivizes the off shoring of ANY American job, and rewards those companies employing American at a livable wage, and punishes companies that ship valuable jobs over seas to deprive Smericans of work and pays slave wages to foriegners for the obscene profits of the predatorclass – then America may stand a chance of reclaiming her former glory and a prosperous middleclass,

    But this is but a dream. We inhabit a fascist state. Ruthless predatorclass fiends, and oligarchs own and control Amerika today .

    Burn it all down!!! Reset !!!! It’s the only option.

  18. “…But the truth is that we are a deeply divided nation and are likely to remain one for a long time. By all means, let’s listen to each other more carefully; but what we’ll discover, I fear, is how far apart we are. For the great divide in our politics isn’t really about pragmatic issues, about which policies work best; it’s about differences in those very moral imaginations Mr. Obama urges us to expand, about divergent beliefs over what constitutes justice.

    And the real challenge we face is not how to resolve our differences — something that won’t happen any time soon — but how to keep the expression of those differences within bounds.
    What are the differences I’m talking about?”
    - P Krugman January 13, 2011

  19. Mr. Kwak seems a little confused. first lets separate illegals from the rest of immigration reform. the CBO numbers will remain about the same. they are trying to misinform you by mixing the two. most illegal do not work in agriculture only about 2% do. so the others are working in service jobs, housekeeping, warehouse, construction etc. these are jobs that Americans do work in. so the question is what is the benefit to the country of enforcing the law against illegals. first 8 million unemployed Americans will be employed and wages will rise. this is a greater good for the country than legalizing the illegals. the purge will cost little because the same data that allows E-verify identifies the criminal employers. a snitch program with a share of the fines will take care of the under the table employers who face IRS charges as well. to smooth the departure of the illegals we can have a lottery system for legal entry into the country as we reach full employment. until we reach full employment we have no need for additional low skill immigrants.

  20. Advance video to about 50 to 55 minutes: it’s Professor Elizabeth Warren recounting her in-person chat with the then-Senator Hillary Clinton (although Clinton’s rebuttal would be that she is only 1 of 100 senators so don’t blame her (Hillary): http://www.youtube.com/watch?feature=endscreen&NR=1&v=8GHg3GAeQ1Y ;

  21. Moses Herzog

    semi off-topic, but related
    Here my friends, is one of the best editorials that has ever been written inside the state lines of the poor and largely illiterate state of Oklahoma. I think (though I don’t want to put word’s in the author’s mouth) it is not so subtly aimed at the current C U N T of a Governor that state has, or as President Obama sometimes refers to her: “Madam” Fallin. It is worthy to note that over many years (and as far as I know up until today, but I’m not certain) the newspaper this editorial was published in has always leaned to the Republican side: http://journalrecord.com/2013/06/19/prosperity-policy-the-colors-of-money-opinion/

    This woman Mary Fallin has recently been begging for federal government dollars for tornado aid, same as she has over multiple years begged and whined for federal government aid for wild fires in her state. And here Madam Fallin is in two videos celebrating and taking bows for federally funded projects to improve the Interstate where she “governs”:


    I guess Madam Fallin believes that if she waves at enough people they will think she had something (anything!?!?!) to do with this multi-million dollar transportation project provided to her by “Big Government” federal dollars. Only a poll of her state’s sheeple, who she apparently believes she can lead around by the nose (and she probably can), can tell us if all those phony waves and fake smiles really paid off.

  22. Moses Herzog

    You know, when I think about it, I may be being unfair to Madam Fallin. She can be incredibly dynamic and charismatic.

    In the just above video Madam Fallin is talking to her party’s and her state’s Oklahoma Republican Convention. For those that don’t know, Democrat party members are not invited to this. So ALL those people booing are Republicans. What they are booing is the way Republican party hierarchy handled the Oklahoma Republican Convention. They basically bullied Oklahoma Republicans into thinking Ron Paul wasn’t allowed on the ballot. So you can see how much Republicans (and Madam Fallin in particular) believe in “freedom” and individuals’ (even members of their own party) right to vote how they choose.

  23. Moses Herzog

    Notice how Madam Fallin doesn’t address President Obama by his earned and proper title??? You might also find it fascinating how she says “Obama ‘lovers’ “. If you know something about the South, you might know that in past years another noun was commonly used before the word “lovers” as in “N____r lovers” to describe anyone who acted halfway civilized or courteous to blacks. Thank about it. Have you ever heard anyone say “we may have some ‘Bush lovers’ out there”. Why does she drop the word “lovers” there?? I think it speaks volumes about this woman.

  24. ‘Say a person figures out a new way to fix the bridge that can’t handle all the gas-guzzling modern SUV traffic. How does that person start a business fixing aging infrastructure when the Patent Assertion Entity is there in the weeds ready to pounce?’

    The way we did it was to demonstrate to state DOTs that we had systems that could repair their bridges that, while costly in the short term, saved tremendous amounts of taxpayer money in the long term.

    Never had any trouble with any Patent Assertion Entity…in fact, didn’t know any such thing existed. Did have some trouble with unionized work crews who didn’t want to change their ways though.

  25. I haven’t read the latest bills now traversing the hallowed halls of Congress, but, I must say that the present immigration system is so broke that it is truly pathetic. We presently have somewhere in the neighborhood of 12 million people who have no legal claim to citizenship. Most of them work or go to school. Most of them pay taxes. But, even though most are truly upstanding citizens who are mostly forced to work for menial wages, it seems a disgrace that we continue to keep them living without rights. Many came on legal visas and simply didn’t leave upon the expiry of these visas, a factor that is the fault of our own INS or ICE (or whatever acronym now applies) because it failed to require a reapplication or deportation. Many of their children were born here, and are, for that reason, de facto citizens. Congress needs to get its crap together and resolve this absurd issue. I think that the ones who came here on legal visas should be given amnesty, and those who snuck in should be given some kind of path to citizenship. This is the right thing to do, and will make us a better, stronger nation. Hopefully the prospect of getting new constituants will attract the Republicans to find a way to do the right thing.

  26. @Paddy – why am I not surprised that you would have problems with people who do more than shoot their mouths off – like HONEST WORK people?

    And if you were in any way involved with the DOT to make repairs happen, than I’m the Queen of England. You may call me “Your Royalnetski”

  27. @Waterbury – the facts DO NOT support your generalization that “….MOST are truly upstanding citizens….”.

  28. @Paddy – there IS a bottom to cheap manufacturing which can’t be tolerated. You’d think that the FDA could have hired the same ILLEGAL ALIEN crews that banksters had at their beck and call when they used FRAUDULENT documents to go knock down the door and throw everything in the home out on the street to go put a padlock on these non-union small business owners operation:

    http://www.pharmalive.com/fda-attempts-to-shutter-a-compounding-pharmacy-for-good

    “most” of the identity thefts, “most” of the people on the other end of the bankster phone calls, and definitely “most” of the crews doing the hurling of possessions and then hauling the stuff to their own homes where the “upstanding ILLEGAL citizens” – and that IS a FACT.

    Not what the post WWII LEGAL immigrants did by the millions….but then that’s the demographic that were so uniform in how they saved and pulled themselves up through their bootstraps that that is why it was so easy to pop in a “word search” and get it all from 40 million in the same HONEST WORK boat…

    3 empires gunning for USA – they see the facts differently, I guess, because they are not using the same excel spreadsheet…and they sure don’t like what happened to the Middle Class in USA, because as you all keep saying, it will just keep happening the same way globally from here on in – right?

  29. Annie, I get the impression you do think you are the Queen of England.

  30. @Paddy – here we go – follow da $$$$

    RT.com notes Russia has NO military personnel left in Syria….all withdrawn…next roll of the dice in game of Risk goes to Saudimerica…bend your knee to your “queen”, Paddy – I know it’s not me :-)

  31. We don’t have a debt problem in the short to medium term and we certainly do not have a shortage of workers. Maybe the worst post you have ever made.

    This is Heritage material. “debt threat and worker shortage” all in one! Yawn.