America Can't Afford to Offer Open Arms or Cold Shoulders on Balance, Immigration Is an Economic Drag on the US Economy, Rather Than an Engine of Growth

Article excerpt

'IMMIGRANTS built America." You can't get very far into any discussion of immigration before someone brings up this old chestnut. Even former Texas Democratic Rep. Barbara Jordan paid lip service to it recently when introducing the recommendations of the US Commission on Immigration Reform, which she chairs. But her commission stunned official Washington by conceding, in effect, that the legal immigration system created by the epochal 1965 Immigration Act is broke and needs fixing - including a 30 percent cutback in influx levels.

Looked at more closely, the Jordan commission's findings make clear what its staff has been saying privately for some time: Immigration is probably at best neutral in its economic effects. One of the commissions lesser-noticed recommendations: reducing the number of slots specifically reserved for skilled immigrants - and punishing employers with a sort of tax for hiring them. Why? Because the economy does not particularly need skilled immigrants.

Of course, the economy has even less need of the continued annual influx that the commission envisions, at least half a million who will be mostly relatives of immigrants already here. But this "family reunification" is apparently politically sacrosanct.

Immigration is an emotional issue and concerns about it are often bitten back for fear of appearing racist. Thus Americans hear a lot about Vietnamese valedictorians (to choose an example at random) but not much about Vietnamese crime gangs or the 25 percent Vietnamese welfare participation rate - five times that of American whites. Yet immigration is something that absolutely needs to be judged on balance.

The debate about immigration's economic impact usually focuses on the fiscal issue - whether or not immigrants cost government more than they pay in taxes. Immigration enthusiasts, a distinct American type, have been steadily driven backward as successive Census reports have made it increasingly clear that the post-1965 immigrants are doing worse in the economy than earlier waves. Immigrants are now over 9 percent into welfare, on average, with some national-origin groups (for example, Dominicans - 28 percent into welfare) showing ominous signs of constituting a new underclass.

This issue of immigration's fiscal impact was more or less settled last fall by the leading scholar in the field, George Borjas of the University of California at San Diego, himself a Cuban immigrant. In a major article in December's Journal of Economic Literature, Mr. Borjas demonstrated that the current immigrant presence imposes a net cost on government of more than $16 billion annually.

The fiscal impact of immigration, however, is only part of the story. The real issue: Is immigration benefiting native-born Americans?

Currently, the foreign-born earn 6 percent of GDP (Gross Domestic Product). But how much do native-born Americans benefit from this immigrant presence? No one seems to have asked. Again, however, George Borjas, using a standard econometric technique, has come up with an answer (published in this spring's Journal of Economic Perspectives): perhaps 0.1 percent of GDP - maybe $7 billion. In other words, the native-born don't benefit much at all.

Nor is this result a surprise, actually, to anyone aware of the obscure "accounting for growth" literature, generated by economists trying to figure out why economies grow. The key finding: Increases in labor and capital together never explain more than half, and sometimes as little as a tenth, of economic growth.

What matters is innovation - which is why Japan has been able to outstrip the US in terms of economic growth by a factor of three since 1955, with no immigration at all. …