Monday, March 27, 2006

Immigration and Economic Growth: CBO Wrong Again

In 2003, the Congressional Budget Office (CBO), an organization where I worked as a resident scholar in 2004, estimated that the annual growth in U.S. gross domestic product (GDP) would wither to 2.7 percent in 2007. The primary factor driving growth to this unacceptably low (Europeanesque) growth rate was a decline in the expected growth in the U.S. labor force. Go to the following site to see the CBO’s latest forecasts:

During my stay at the CBO, I disagreed with my economist colleagues on this pessimistic prognostication. As you will note they have since moved their expected slowdown out from 2007 to the year 2010. I estimated then, and still maintain, that increasing immigration, especially from our southern neighbors, will in fact swell our labor force to the point that the U.S. gross domestic product will continue to grow at a rate north of 3.3 percent, even beyond 2010.
Most estimates of labor’s contribution to growth, even foreign labor, find that a two percent increase in the labor produces a 1.3 percent to 1.4 percent increase in gross domestic product. Currently there are an estimated 12 million illegal immigrants in the U.S. Pushing these individuals back to their home country would be calamitous to the U.S. economy reducing GDP by a full 6 percent to 7 percent. Moreover, limiting immigration will significantly limit growth of the U.S. economy.


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