President Donald Trump is not exactly known for consistent policy positions, but two of his most prominent goals are working against one another: His promise to push economic growth toward the 4% mark while at the same time cracking down harshly on immigration.
On Wednesday, Trump said he backs new legislation that’ll preference visa applicants with higher education or job skills. It has the potential to seriously restrict the flow of legal immigrants into the country, all — ostensibly — in the name of protecting unskilled American workers.
This is bad news for the economy.
Migration is a key ingredient to economic development, and has been central to America’s economic success since the country’s inception. Many economists believe the potential rate of US economic growth has slowed from around 3% to 2% in recent years in part because of demographic changes such as the aging of the US population, a pattern seen in other rich economies.
Part of what has often kept the US economy a step ahead of wealthy counterparts like Europe and Japan has been its welcoming of immigrants, and ability to attract waves of them. The chart below from Deutsche Bank economist Torsten Slok shows just how misguided a more restrictive immigration policy would be from a purely demographic perspective — just imagine the long-run hit to growth. That’s right, the US is facing the same kind of demographic “time-bomb” that beset Europe and Japan for so long, leaving their growth rates well below the US’s. That means the US needs comprehensive immigration reform so that it can welcome, attract and absorb all the new immigrants that will be needed to maintain a healthy economy.
A steady flow of immigrants is also key to sustaining the country’s social safety net, ensuring high tax receipts and funds for Social Security.