The minute immigrants touch land in the United States, their economic value soars. That’s because the workers, machinery and training that they get to match their talents with in the U.S. well exceeds what was previously available to them. Only for the immigration story to get even better.
U.S. Immigrants are abnormal, in a very good way. By migrating to the U.S., they’re revealing ambition. Frequently risking their lives in pursuit of opportunity, they’re bringing American values into the U.S.
David Bier, Cato’s immigration expert, might agree with most of what you’ve just read. Where he would disagree is with the coming analysis of a study he recently completed with colleagues Michael Howard and Julian Salazar.
Bier, Howard and Salazar calculate that “Without immigrants, U.S. government public debt at all levels would be at least 205% of GDP.” That’s not true, and the reason why it’s not true can be found in how correct Bier, Howard and Salazar are about the positive impact immigrants have on the U.S. economy.
It’s Adam Smith’s pin factory, albeit at all levels of production. More work divided among workers rendered much more valuable by more “hands” powers a great deal of economic growth in the United States. In 2023 alone, remittances ($63 billion) back to Mexico from Mexicans working in the U.S. had a bigger consumptive economic impact on Mexico’s economy than did tourism and oil.
The U.S. economy without immigrants would be smaller, and by extension Treasury couldn’t borrow as much. Without defending Treasury’s borrowing, and without asserting what’s mindless (that budget deficits boost economic growth), it can be said with ease that Treasury borrowing is an effect of investor trust in Treasury being able to pay monies borrowed back. Translated, the bigger the U.S. economy, the greater the ease of borrowing. See U.S. borrowing history since 1980 amid skyrocketing economic growth, if you’re confused.
Without immigrants, Treasury couldn’t borrow as easily, thus rendering their 205% of GDP figure moot. Economic growth isn’t static, and by extension neither is government borrowing.
Which briefly brings us to the Manhattan Institute’s Daniel di Martino. He contends through his own research that “low skilled immigrants are a huge drag on the federal budget,” that Bier et al are incorrect. Di Martino might admit to some conceit as he calls for “high-skilled immigration.”
He would wisely scoff at Chuck Schumer or Donald Trump deciding how many computer chips to import, so why the willingness to give politicians central planning powers over something much more important: human capital. From there, and as the rising value of immigrant labor once in the U.S. attests, “low skilled” versus “high skilled” can’t be reasonably assessed upon exit of economically struggling countries as Di Martino contends. Say it repeatedly that once immigrants reach the U.S., they’re transformed in an economic sense.
All that, plus Di Martino incorrectly imagines as do Bier and colleagues that the debt springs from too much spending, as opposed to investor trust in the future incomings of the borrower. By that thinking, all nations can borrow as the U.S. does. Except they can’t. We have a too much tax revenue problem, with the debt a symptom of it.
Bier and his colleagues are right about immigration, while Bier and his critics on the right are incorrect about the budgetary implications of immigration. All concerned would share this view by merely analyzing bonds, who can issue them, how much issuers can borrow, and the rates of interest issuers pay out.
