White House Oversells Economic Benefits of Immigration Reform

White House Oversells Economic Benefits of Immigration Reform

On Saturday, President Obama used his weekly radio address to tout the economic benefits of passing the Senate immigration reform bill. On Wednesday, the White House issued a report saying the the immigration reform bill would both trim the deficit and boost the economy over the next two decades. Even accepting the Administration’s numbers at face-value, the report shows how little would be gained economically from reform in the long-term. In the short-term, however, there are some very real costs ignored by the White House.

The White House report draws heavily from a CBO analysis on the economic impact of the Senate bill, released in mid-June. The CBO estimates that, under the Senate bill, in 20 years, the nation’s GDP would be $1.4 trillion higher than it otherwise would be if the bill didn’t pass. The Administration claims the bill will grow the economy by 5.4% in that time-frame. 

Which sounds impressive, until one realizes that we are talking about a 20 year window here. An incremental growth of 5% over two decades isn’t exactly an economic bonanza. In that time-span the US economy will generate $300-500 trillion in total economic impact. An extra few trillion is at the margins or the margins.

Worse, the economic benefits the CBO estimates will accrue only begin at least a decade after enactment. Through 2031, Gross National Product, which measures the output of US residents and firms, would be lower than it otherwise would be. In ten years, the per capita GNP would be almost 1% lower than without the Senate bill. 

The CBO analysis also shows that average wages of American workers would be lower than they otherwise would be through at least the first 10 years of the law’s enactment. The unemployment rate would also rise for the first decade, due to a large increase in the labor force.

Supporters and opponents of immigration reform both overstate its economic impact. In a nation of more than 300 million people and a $16 trillion economy, any economic impact is going to be felt at the margins. The CBO, however, finds that, for at least a decade, the economic effects of the Senate bill are negative at the margins. After 2 decades, the CBO says the effects become positive at the margin. 

A decade of relatively worse economic performance to secure marginally better performance 20 years from now is not an obviously good bargain. One can make many argument in favor of immigration reform. Economic growth, however, seems a very weak one.