Washington tends to have a narrow view of what counts as “economic policy.” Anything done to the tax code is in. So is any stimulus, or any deficit reduction. But most of this mistakes the federal budget for the economy.
The truth is, the most important piece of economic policy lawmakers pass — or don’t pass — in 2013 may be something we don’t think of as economic policy at all: immigration reform.
Congress certainly doesn’t consider it economic policy, at least not officially. Immigration laws go through the House and Senate judiciary committees. But consider a few facts about immigrants in the American economy, as compiled by the Hamilton Project at the Brookings Institution: About a tenth of the U.S. population is foreign-born. More than a quarter of U.S. technology and engineering businesses started from 1995 to 2005 had a foreign-born owner. In Silicon Valley, half of all tech start-ups had a foreign-born founder. One-quarter of all U.S.-based Nobel laureates of the past 50 years were foreign-born. Right now, about half of the Ph.D.s working in science and technology are foreign born.
Economy dependent on immigrants
Immigrants begin businesses and file patents at a much higher rate than their native-born counterparts, and while there are disputes about the effect immigrants have on the wages of low-income Americans, there’s little dispute about their effect on wages overall: They lift them.
The economic case for immigration is best made by way of analogy. Everyone agrees that aging economies with low birth rates are in trouble; this, for example, is a thoroughly conventional view of Japan. It’s even conventional wisdom about the United States. The retirement of the baby boomers is correctly understood as an economic challenge. The ratio of working Americans to retirees will fall from 5 to 1 today to 3 to 1 in 2050. Fewer workers and more retirees is tough on any economy.
There’s nothing controversial about that analysis. But if that’s not controversial, then immigration shouldn’t be, either. Immigration is essentially the importation of new workers. It’s akin to raising the birth rate, only easier, because most of the newcomers are old enough to work. And because living in the United States is considered such a blessing that even very skilled, very industrious workers are willing to leave their home countries to come here, the United States has an unusual amount to gain from immigration. When it comes to the global draft for talent, we almost always get the first-round picks — at least, if we want them, and if we make it relatively easy for them to come here.
From the vantage of naked self-interest, the wonder isn’t that we might fix our broken immigration system. It’s that we might not.
Few economic problems wouldn’t be improved by more immigration. If you’re worried about deficits, more young, healthy workers paying into Social Security and Medicare are an obvious boon. If you’re concerned about the slowdown in new company formation and its attendant effects on economic growth, more immigrant entrepreneurs should cheer you. If you’re worried about the dearth of science and engineering majors in our universities, an influx of foreign-born students is the most obvious solution.
Politicians of both parties recognize this. “Our goal is to advance policies that make a difference in peoples’ lives, and that means we want to advance pro-growth reforms that are good for the economy,” Republican Rep. Paul Ryan said at a recent Wall Street Journal breakfast. The first pro-growth reform he named? Immigration.