Memo to President Obama: Add Immigration Moratorium to the Economic Stimulus Package

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By Edwin S. Rubenstein
Memo to President Obama: Add Immigration Moratorium to the Economic Stimulus Package

Dear Mr. President: What if government spending can’t turn things around? What if the banks continue hoarding TARP funds, and deny loans to deserving companies and individuals? Now think: what would happen if after years of monstrous fiscal deficits the U.S. is still mired in unemployment and slow growth?
The last time that happened—in the 1930s – the outcome was…. Well, you know how that played out. But even without Smoot-Hawley and beggar–thy-neighbor policy mistakes, the U.S. could face a similar fate today.
Consider this: Two to three percent GDP growth is needed just to absorb new entrants to the labor force.
In times of buoyant demand, this is no problem. In times of collapsing private spending, as now—it is a huge one. Even unbelievably large fiscal deficits—10 percent of GDP or more –will not stimulate enough growth to prevent unemployment from continuing to rise through the next two years. [Choices made in 2009 will shape the globe’s destiny, By Martin Wolf, Financial Times, January 7, 2009.]
One reason for our predicament: immigration is swelling the U.S. labor force beyond the ability of fiscal policy to generate jobs.
During the decade of the 1990s, 47 percent of U.S. civilian labor force growth was due to immigration. This represented the largest influx of foreign workers ever to enter the U.S. in a given decade—substantially exceeding the number who came here during the Great Wave of 1890 to 1910. [Andrew Sum, et al., Foreign Immigration and the Labor Force of the U.S., [PDF] Center for Labor Market Studies, Northeastern University, July 2004.]
But records are made to be broken, and nowhere more so than in immigration. Over the period 2000 to 2007 foreign-born individuals accounted for:
38 percent of U.S. population growth
51 percent of U.S. labor force growth
56 percent of U.S. employment growth. (In other words, immigrants displaced Americans).
(Please see Chart 1 for the underlying numbers.)
All of which raises an obvious question: Why not impose a moratorium on immigration? By cutting labor force growth in half, this would allow our weakened economy to absorb a greater fraction of new—native-born American—entrants.
The unemployment rate would fall. And, equally important, average incomes would rise as jobs currently going to low wage immigrants would be filled by U.S.-born workers.
What would an immediate moratorium do? I have run the numbers for 2008.
You will recall that the unemployment rate was 7.2 percent in December 2008, up from 4.9 percent in December of 2007. Over that period unemployment rose by 3.6 million, swelled by job losers as well as new labor force entrants.
The civilian labor force grew by 611,000 last year, from 153.836 million in December 2007 to 154.447 million December 2008. Had a moratorium been in effect, about 305,000 fewer people would be looking for jobs.
That may not sound like a lot at a time when jobs are disappearing by more than 500,000 per month. But 305,000 fewer job seekers is equal to about 9 percent of last year’s stunning unemployment increase, the biggest for 22 years.
Implication: a one-year moratorium would reduce by at least 9 percent the stimulus spending required to restore the economy to its pre-meltdown state. That translates to $90 billion of federal savings.
Of course, if the moratorium were extended for several years, its effects would compound.
Plus, when (and if) the economy bounces back, employment of native-born Americans would increase that much faster.
You might consider a more sweeping change in immigration policy: enforcing the immigration laws. Neglecting them has permitted from 8 to 10 million illegal aliens to work in the United States. (That’s the official estimate. Private estimates are as high as double that).
Escort just half of them to the border and you will have rolled-back last year’s entire unemployment spike—and then some...
Their employers will squeal like stuck pigs. So will the ethnic lobbies and the religious Left.
But in this economy, no one can say the illegals are doing jobs that Americans won’t do.
Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.