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Don Rose as Supply Sider: The Positive Economics of Obama’s Immigration Initiative

Don Rose 25 November 2014 No Comment

More than a year ago, when in my naiveté,  I thought the congress might actually do something about immigration, I added to the discussion one widely overlooked benefit: adding millions of undocumented immigrants to the workforce would have a positive benefit on the economy, especially to the Social Security system.

supply side

To quote myself:  “Contrary to the conservative argument that undocumented residents are a financial burden on the U.S., there are powerful arguments that citizenship and the right to work will bring an ultimate economic benefit and strengthen Social Security.

” Social Security actuaries estimated in 2007 that about two-thirds of undocumented workers paid into the system but many fewer received any benefits. If more were citizens they would receive more benefits but pay in even more, contributing to its overall solvency.”

Guess what? Even with this powerful incentive, congress did nothing. Which is to say, the Republican House did nothing–failing to take up the strongly bipartisan immigration-reform bill passed with something like 68 votes in the Senate.  I held out hope the House would overcome its allergy to giving Obama any legislative victories, even one that would benefit the economy and help ensure the future of Social Security. Silly me.

So, however belatedly, the President took the giant step of executive action, fully aware a volcano  of opposition and legal action would erupt from the right. It’s been raging these past few days and will continue to do so.

There is still an economic benefit here, which I regret he did not introduce in his announcement.  The White House did, however, issue a paper dealing with the economic issues, some of which I will highlight here because no one else has:

“According to an analysis by the President’s Council of Economic Advisers (CEA), the President’s executive actions on immigration would boost economic output by an estimated 0.4 to 0.9 percent over ten years, corresponding to increases in GDP of $90 billion to $210 billion in 2024.

“The President’s actions will grow the economy by increasing the productivity of all American workers…. in part by allowing undocumented workers to come out of the shadows and find jobs that better match their skills and potential. This shift of workers across occupations will also allow more native workers to specialize in the tasks best suited to their abilities. These effects are likely to lead to wage increases for all workers—immigrants and natives alike….

” CEA estimates that the economy will also grow thanks to an expansion of the American labor force by nearly 150,000 people over 10 years…

“… by 2024 annual wages for native workers will rise 0.3 percent, or approximately $170 in today’s dollars. CEA also estimates that the President’s actions would neither increase nor decrease the likelihood of employment for native workers.

“… the higher economic growth associated with executive action on immigration would translate into reductions in the federal deficit by $25 billion in 2024 [and]  will expand the country’s tax base by millions of people and billions of dollars.”

Obama’s action makes sense–and dollars.

Don Rose is a regular columnist for the Chicago Daily Observer

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