The Daily Caller

The Daily Caller

Immigration reform is pro-growth

Photo of Larry Kudlow
Larry Kudlow
Host, "The Kudlow Report"

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 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 Committee 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.