Study: Immigration Reform Would Boost Economy and Cut Deficit

Apr 9, 2013

People repeat an oath of allegiance during a naturalization ceremony in San Diego, CA. Photographer: David Maung/Bloomberg.

Quiz time: What policy change could pull off the trifecta of improving economic growth, raising the level of economic output per person, and lowering the deficit?

If you said immigration reform, you would be correct.

Douglas Holtz-Eakin, President of the American Action Forum and former head of the Congressional Budget Office (CBO) concludes that immigration reform “would raise the pace of economic growth by nearly a percentage point over the near term, raise GDP per capita by over $1,500 and reduce the cumulative federal deficit by over $2.5 trillion.”

Basing his analysis on data from the U.S. Census and the nonpartisan CBO, Holtz-Eakin notes that with immigration reform, “the pace of overall population growth will raise the number of workers, and thus raise GDP.” This economic growth will cause higher quality capital goods—tools, machines, etc.—to replace worn out goods. This will raise worker productivity and the standard of living as measured as GDP per capita.

And beyond simply having more people working in the economy, Holtz-Eakin points out that “the rates of entrepreneurship among immigrants are higher than among the native born population, raising the possibility of greater innovation and productivity growth in the aftermath of immigration reform.”

Holtz-Eakin estimates that after 10 years, GDP per capita would increase $1,800 and the federal deficit would be reduced by $2.7 trillion.

With the mediocre growth post-recession, Holtz-Eakin concludes that immigration “reform should be thought [of] as one additional tool in economic policy.”

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