Forbes Magazine: ‘Public Charge’ Immigration Rule Is Bad for Economic Growth

A woman and her daughter arrive at the office of the immigrants rights group CASA in Langl
CABALLERO-REYNOLDS/AFP via Getty
Neil Munro

President Donald Trump’s “Public Charge” reform to exclude legal but unskilled and unhealthy migrants is being denounced by progressives and business groups as a damaging change in federal economic policy — amid evidence it will nudge wages upward for most Americans.

“Estimates indicate the administration’s public charge rule will reduce legal immigration to the United States by hundreds of thousands of people a year,” says Stuart Anderson, a pro-migration writer at Forbes magazine. His article for Forbes‘ wealthy readers is headlined “Supreme Court Approves Most Consequential Economic Policy Of Trump Era,” and it says:

Given how much this will lower labor force growth in America, the public charge rule will likely have a more negative impact on future economic growth than anything positive the Trump administration has done or probably could do in the coming years.

The new Public Charge reform was given conditional approval by the U.S. Supreme Court on January 27. It allows immigration officials to exclude poor and unskilled people who want to become migrants, in favor of people who are healthy, younger and more skilled, and so less likely to rely on government welfare and aid. It is not clear if the policy will significantly reduce immigration, but Anderson says it can cut 350,000 people from the annual legal inflow of 1.1 million people:

Given the administration has reduced refugee admissions by more than 80% and enacted highly restrictive asylum policies, one should expect going forward that 100,000 to 150,000 fewer refugees and asylees will gain permanent residence each year when compared to FY 2018.

The number of Immediate Relatives of U.S. Citizens – the spouses, children and parents of U.S. citizens – already declined by 87,745, or 15.5%, between FY 2016 and FY 2018, after two years of administration policies. With the public charge rule in effect for the next few years or possibly much longer, depending on future court rulings and the results of the 2020 presidential election, one can foresee a reduction of 200,000 or more immigrants a year in the Immediate Relatives of U.S. Citizens category from the FY 2016 level.

Any immigration reduction is likely bad for the companies and stock investors who gain extra revenue once the imported workers, consumers, renters, and homebuyers expand the overall economy.

But any reduction in the federal supply of workers, renters, and homebuyers is a financial bonanza for Americans who earn their incomes via wages and salaries — even if the nation’s overall economy grows at a slower pace. The reduced inflow of migrants will likely also be good for heartland states because it can shift some investment and wealth away from the coasts towards the inland states.

In 2016, Breitbart News reported Wall Street analyst Mark Zandi predicted Trump’s cutbacks to immigration would reduce Americans’ housing costs and raise Americans’ wages:

“As the immigrants leave, the already-tight labor market will get tighter, pushing up labor costs as employers struggle to fill the open job positions,” the report acknowledged. “Mr. Trump’s immigration policies will thus result in … potentially severe labor shortages, and higher labor costs,” the critical report promises.

The formal unemployment rate would immediately drop by a third, from 5 percent in 2016 to 3.5 percent in 2017, the report predicts. Housing prices would drop by almost 4 percent in 2018 and 2019, says the Moody’s report.

Zandi’s prediction was based on his study of Arizona’s economy after 2004 sharply reduced the population of illegals.

The Public Charge reform may not help American college graduates, who will likely face additional competition from additional immigrant graduates.

But Trump’s reform is likely to be very popular among voters. For example, in January 2018, 79 percent of 908 registered voters polled by the Harvard-Harris poll, said immigration rules should favor skilled people over family connections. The question asked: “Do you think immigration priority for those coming to the U.S. should be based on a person’s ability to contribute to America as measured by their education and skills or based on a person having relatives in the U.S.?”

In response, Anderson argues the reduced inflow will slow the expansion and growth of the nation’s overall economy. He wrote:

To give a sense of the impact: Joel Prakken of Macroeconomic Advisers estimates if America cut legal immigration in half that would reduce the rate of economic growth in the United States by about 12.5%. “The effect gets bigger over time because the Census assumptions for immigration keep growing,” said Prakken.

A 12.5 percent reduction is roughly the same as a reduction by one-eighth, so an average national economic growth of two percent per year would drop to 1.75 percent per year. That would be bad for investors and banks who make much of their money amid a growing economy.

But Anderson does not discuss Zandi’s prediction that cutbacks could deliver rising wages and cheaper housing to ordinary Americans.

Any trend of rising wages has various benefits — it boosts the consumer economy, it builds public confidence, and it helps incumbent politicians, including Trump. Rising wages also pressure companies to buy more productivity-boosting, labor-saving technology that allows ordinary Americans to produce more wealth in less time.

The link between rising wages and fewer workers is Economics 101. It is recognized by independent academics, the National Academies of Science, the Congressional Budget Office, executives, more academics, New York Times reporters, state officials, unions, more business executives, lobbyists, employees, the Wall Street Journal, federal economists, Goldman Sachs, oil drillers, Wall Street analysts, fired professionals, legislators, construction workers, NYT subscribers, plus Robert Rubin, and even the Bank of Ireland. In Trump’s “Hire American” economy, more companies are raising blue-collar salaries — and are also buying labor-saving machines to boost Americans’ productivity.

But rising wages and high-tech spending are a threat to company profits and investors’ stock values.

Trump’s public charge rule has attracted intense opposition from lobbyists and politicians who are eager to blend investors’ economic goals with progressives’ support for immigrants. The public charge reform is a “wealth tax” for immigrants, said Todd Schulte, who runs the FWD.us advocacy group for wealthy investors, including Mark Zuckerberg and Bill Gates. “The Trump administration’s changes to public charge are a backdoor effort to cut legal immigration, essentially creating a wealth test for individuals looking to come to the U.S. to contribute to our country and build a better life for themselves,” Schulte said via Twitter.

California Governor Gavin Newsome posted a Tweet implying Americans live in a “Nation of Immigrants” and have a duty to welcome poor and unhealthy immigrants – despite the economic costs imposed by lower-skilled immigration on California’s voters:

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