The Immigration Effect

Source: Lena Groeger, ProPublica, July 19, 2017

There’s a Way for President Trump to Boost the Economy by Four Percent, But He Probably Won’t Like It.

President Trump has promised to increase U.S. economic growth – in fact, he’s banking on it. The budget he proposed to Congress in May assumes a 3 percent growth rate, and the White House website promises a return to 4 percent annual economic growth. Both predictions are far higher than the roughly 2 percent growth rate assumed by the Congressional Budget Office or the Federal Reserve.

In fact, most economists doubt that a 3 to 4 percent growth rate is possible at all without some fundamental policy shift. Sustained periods of such high growth haven’t occurred since the tech boom of the 1990’s and, before that, the baby boomers entering the workforce in the 1960’s. But according to a new analysis, there is a quick route to high growth: a massive increase in immigration.

In an analysis for ProPublica, Adam Ozimek and Mark Zandi at Moody’s Analytics, an independent economics firm, estimated that for every 1 percent increase in U.S. population made of immigrants, GDP rises 1.15 percent. So a simple way to get to Trump’s 4 percent GDP bump? Take in about 8 million net immigrants per year. To show you what that really looks like, we’ve charted the effect below. You can see for yourself what might happen to the economy if we increased immigration to the highest rates in history or dropped it to zero – and everything in between….