Dave Brat, Right On Free-Market Economics

Larry Kudlow Senior Contributor, CNBC
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Listening to David Brat on election night, following his upset win over Eric Cantor in Virginia’s seventh congressional district, I heard a principled, free-market, pro-growth individual who is going to make an excellent Republican House member.

Mr. Brat, the Randolph-Macon economics professor, talked about pro-growth tax reform, spending limits, and entitlement reform. He wants to end the congressional bailout of Fannie Mae and Freddie Mac and return them to the private sector. He opposes corporate cronyism in Washington. He’ll have no more special favors for the K Street crowd. He emphasizes the importance of the rule of law and property rights, which are so essential to our free-market system.

In other words, Brat seems to be saying that free-market capitalism is the best path to prosperity. My kinda guy.

However, during the late stages of his primary campaign, Brat railed against immigration reform and hammered Cantor on the issue. On this subject, he’s not my kinda guy. He is violating his free-market economic principles.

Breitbart reporter Jonathan Strong writes, “The story about how David Brat pulled off such a monumental surprise win starts, and almost ends, with immigration.” Strong details how Brat engaged in wild hyperbole, paraphrasing Brat as saying, “No member of Congress had done more to enact amnesty than Cantor.”

NRO contributor Fred Bauer reports that “Brat emphasized the effects of the White House immigration agenda on average working Americans, saying that a vote for Cantor was ‘a vote for open borders and lower wages.'”

And Robert Costa of the Washington Post reports that Brat hammered Cantor for championing a Republican version of the DREAM Act, which would enable some illegal immigrants who entered the country as children to qualify for in-state college tuition rates.

So while Mr. Brat’s free-market economics message sounds perfect, his anti-immigration-reform message is quite troublesome. This kind of rhetoric suggests that the Eric Cantor defeat might doom any immigration reform and the GOP effort to become the Big Tent party in the run-up to 2016.

Many conservatives disagree with me on this, and I respect that. However, I still believe that harsh language on illegals turns off legal Hispanic voters. It also turns off Asians, African Americans, young people, and women.

As I have written, in order to capture the presidency, the Republican party must follow the lead of Ronald Reagan and Jack Kemp and return to its Big Tent roots. The GOP must become inclusive by reaching out to everybody.

And as an economist, in fact a free-market economist, Mr. Brat surely knows that immigration reform will not lower wages and eliminate jobs for native Americans. Other immigration opponents routinely use this argument. But it is false. It is unproven.

A new study from the University of California-Davis and Colgate University strongly rebuts this position. The researchers write: “A lot of people have the idea there are a fixed number of jobs. But immigrants can boost productivity of the overall economy, because then the pie grows and there are more jobs for other people as well, and there is not a zero-sum tradeoff between natives and immigrants.”

In fact, the study points out how there are rising wages for college- and non-college-educated native workers along with increased immigration. The study’s authors argue that science, technology, engineering, and mathematics — the so called STEM professions — raise wages for college-educated workers by 7 to 8 percentage points and non-college-educated laborers by 3 to 4 percentage points.

Another study, from the Financial Services Forum and Standard & Poor’s, shows that immigrants represent 13 percent of the U.S. population, but account for nearly 20 percent of small-business owners; immigrant-owned small businesses employed nearly 5 million Americans in 2010; more than 40 percent of Fortune 500 companies were founded by immigrants or the children of immigrants; and immigrants launched half of the nation’s top start-ups, which account for virtually all net new-job creation, according to the Kauffman Foundation.

We live in an era of labor and capital globalization. That is why we need these immigrant entrepreneurs, both skilled and unskilled. Millions of immigrants came to America in the past and helped grow our economy at rapid rates. It is no different today.

And if the 11 million illegals who live here obey the law, pay taxes, learn English, and understand the Constitution, they deserve legal status. Citizenship is an issue way down the road. And yes, we must include border security, where unfortunately Obama’s lax policies have contributed to the calamitous surge in illegal-immigrant children. But temporary visas or work permits should be part of a sensible reform package. The E-Verify system can work.

So, Mr. Brat, as a free-market economist, surely you know there’s no reason why all this cannot be done. Hopefully you will come to believe that sensible immigration reform is pro-growth and pro-GOP.​