Looking to the future

By Ramesh Ponnuru

Bloomberg View

A new study says that halving legal immigration, as President Donald Trump and Republican Sens. Tom Cotton and David Perdue want to do, will have a negative effect on the size of the economy and the labor force. A lot of journalists are citing the study, with some of them noting that it is associated with the University of Pennsylvania’s Wharton School, which Trump attended.

The business school has more claims to distinction than that. But this study does not really tell us anything important about immigration policy.

That’s not meant as a criticism of the people who produced it so much as it is a caution about interpreting it. The economy, according to the Penn Wharton Budget Model, will be 2 percent smaller in 2040 if the bill passes than if it doesn’t. Also by 2040, the country will have 4.6 million fewer jobs.

Let’s assume that these numbers are right. We still have to ask: So what?

Normally it would be a strong argument against a policy that it reduced the size of the economy and the number of jobs, and a strong argument for it if it had the opposite effects. But a policy that changes the national population has to be evaluated differently.

If someone proposed annexing Canada, we would not think he had made a strong case just by pointing out that the two countries’ combined economic output would be higher than either one alone. A proposal to bring the population of Canada into our country couldn’t be defended that way either.

Smaller economy

Of course the economy is going to be smaller with fewer immigrants. But that could be the case even if reducing immigration did not reduce the income of a single person in the U.S. Nearly as inevitably, fewer immigrants means a smaller number of workers here. But that doesn’t mean that anyone in the country would lose a job (or fail to get one) because of the reduction in immigration.

What we most want to know, in thinking through the economic impact of the bill, is what effect it would have on jobs and income for three groups: native-born Americans, the legal immigrants who are already here, and the immigrants who would still come here if it passes. The analysis does little to answer the question – but what it does tell us suggests that the impact would be positive in some respects and negligible in others.

By 2040, the model projects that the U.S. economy will include 4.6 million fewer jobs because of reduced immigration. But over that same period, we will have brought in around 9 million fewer immigrants. By itself, this does not suggest that the job prospects for the American legal residents of 2040 will have worsened much because of the bill. They may even have improved because of it: The study says that “the domestic worker participation rate won’t increase enough to fill the jobs that would have been held by immigrants who are no longer allowed in the country,” which is an oblique and grudging way of acknowledging that it will increase.

The best argument against the bill based on the model is that per-capita GDP will be 0.3 percent lower in 2040 with it than without it. If that sounds less hair-raising to you than 4.6 million lost jobs, you’re right.

As the debate over the Cotton-Perdue legislation goes forward, keep an eye on how much its opponents lean on economic models like this one. The more they do, the weaker a case they have.

Ramesh Ponnuru is a Bloomberg View columnist. Distributed by Tribune Content Agency, LLC.