Let Them In! A New Immigration Policy Can Reduce U.S. Debt
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The Fiscal Times
July 14, 2010

We Americans are engaged in two Great Emotional Debates in domestic politics right now. They have more to do with each other than you might think.

The first is the debate about America’s fiscal choices, of which there are no good ones. The Republicans apparently have just realized that the deficit is over a trillion dollars and, oh my God, there are all these baby boomers who will want Social Security and Medicare soon, and it’s time for government to stop spending RIGHT NOW, never mind that the economy would almost surely skid back into recession if it did.

The Democrats, for their part, seem to believe that only more, more, more government borrowing can end recession, even if that brings U.S. debt to Sodom and Gomorrah levels. Either way, we face higher taxes and smaller government benefits. The only question is when to take our punishment: now, before the debt levels get too high, or later, after we’ve borrowed our way out of recession — if we can.

In light of these unpleasant choices, then, you’d think we’d be open to any solution that offered less punishment in the first place. And there is one: If the economy grows healthily, paying down debt will be a little easier. That, after all, was how the country dug out of the deficits created during World War II and the Cold War. According to Congressional Budget Office projections, increasing annual growth in GDP by a tenth of a point each year would cut a trillion from the national debt by 2020. That doesn’t close the gap, but it helps.

Which brings us to the second Great Emotional Debate: immigration. The politics of the topic are poisonous, laced as they are with fear that foreigners will take our jobs, smuggle in terrorists or enter illegally and abuse our resources. But the fiscal arithmetic couldn’t be simpler. To grow GDP you need a net increase in the size of the labor force, hours worked and productivity. Encouraging legal immigration, particularly of skilled workers, lifts all three.

Darrell West, a Brookings Institution scholar makes the economic case for relaxing our immigration policy in a new book, Brain Gain. It isn’t hard:

  • Foreign born Americans accounted for 25 percent of technology and engineering startups between 1995 and 2005. In Silicon Valley in particular, immigrants founded more than half the tech companies started in that time. By 2005, tech companies started by immigrants employed 450,000 American workers. 
  • Today, foreign born workers hold 65 percent of PhDs in computer science. Technology accounted for most of the surge in productivity over the past two decades and figures to continue to be the source of productivity gains in the future.
  • In fact, far from stealing income from native-born American workers, the economic contributions of immigrants make most of us richer. According to a 2007 study by the White House Council of Economic Advisors, 90 percent of American-born workers with at least a high school education experienced wage gains of 0.7 to 3.4 percent a year, depending on education level, from the economic contributions of immigrants.
  • The same study concluded that immigrants overall add $37 billion to GDP per year.

Rather than welcoming such people, however, U.S. policy since the attack on the World Trade Center in September 2001 has done almost everything it could to keep them out. In 2004, Congress allowed the number of H1-B visas — the special permits for highly skilled workers — to drop from 115,000 per year to 65,000. That’s turning our back on 50,000 potential scientists, engineers and physicians. A broken bureaucracy makes obtaining one of those visas an ordeal better-suited to the old Soviet Union than the bastion of free enterprise.

“A Chinese engineer coming out of a university here might wait 10 years here to get a green card,” says Edward Alden, a senior fellow at the Council on Foreign Relations. “In the U.K. the process might take a year or two. In Alberta, anyone with oil industry skills can get citizenship immediately.” That gives highly trained people an excuse to take their skills to a country that competes with us.

With millions unemployed here, a bit of xenophobia is understandable, emotionally.  Politically, it’s impossible to resist. “It’s easier for politicians to play on people’s fears of job loss than it is to explain the complexities of global labor markets,” says Adolofo Laurenti, an economist at Chicago’s Mesirow Financial, and himself an immigrant from Italy.

Still, at a time when home countries are increasingly competitive, U.S. immigration policy is close to masochistic. “There’s no question in my mind that over the past decade the U.S. has become a less attractive place for highly educated immigrants to settle,”  says AnnaLee Saxenian,  dean of the School of Information at Berkeley and an expert on immigration into Silicon Valley. “My foreign graduate students used to assume that they would stay here after graduation … Now they say, ‘I can go home and live like a king in India.’” 

President Obama’s speech this month on immigration reform stressed the moral obligation to fix a system that causes anguish for immigrant families and native-born Americans. He might have mentioned, but didn’t, that reform could also help the country deal with another rapidly multiplying set of obligations. Amid all the unattractive alternatives we face for attacking our debt, welcoming the scientists and engineers that we are not producing at home seems like the easiest decision in the world. But these are emotional issues. “To get our debt under control, you’d think we’d put everything on the table,” says Laurenti. “But we’re doing exactly the wrong thing.”

Reporter: Temma Ehrenfeld
Eric Schurenberg is Editor-in-Chief of the CBS Interactive Business Network

Eric Schurenberg
is editor-in-chief of BNET and CBS MoneyWatch.com. Previously, he was managing editor of Money and deputy editor of Business 2.0. Schurenberg was also managing editor of goldman.com, a site for Goldman Sachs Group's personal wealth management business.