Immigration and Immigration Reform

Today I’d like to talk about immigration, legal immigration.  In the US, we have very strict standards about how many people we admit every year.  While we maintain a fairly steady standard of living this way, we ignore the fact that most people produce a surplus over what they consume.

What do I mean by that?  For employed adults in an economy like ours, each employed person creates more value than she or he consumes.  If you were to model a population for economics, you would quickly realize that a growing population creates growing demand.  If productivity (goods and services) expands at the same rate as population, prices remain flat but GDP (Gross Domestic Product) increases.  If productivity tends to grow at a slower pace, prices increase and GDP still increases. If productivity tends to grow at a faster pace, prices decrease and GDP increases.  So, in all scenarios, GDP increases!  The only negative impact is inflation if productivity fails to keep pace with population.  See the graphs below:

Of course, the numbers are made up, kind of.  Still, all scenarios lead to GDP growth unless productivity decreases to less than half of the original productivity.  This would require allowing immigration of people with no workers.  That scenario is shown in the GDP graph but not the price graph as it would overwhelm the scale.  Obviously, then, we are in great shape as long as the people immigrating are net producers, not net consumers; pretty simple.

So, why do we see all of the hype about immigration and why the quotas?  There are several fears.  The folks who fail to understand the economics envision an influx of welfare recipients that do not work and they fear that the increased population density would alter our standard of living.  If you like the free and open spaces, certainly all growth is bad.  If you have a society with decreasing productivity, you can expect inflation. 

To the last, we need to limit immigrants to those who are net producers, i.e. working families.  To the former point, we need to realize how big the United States really is.

Imagine that the entire world’s population was confined to an urban zone the size of Texas.  The population density would be about half the population density of Paris and about the same as New York City!  I grew up in a rural area and, although currently an urban dweller, I don’t really want to live in places like New York or Paris.  Still, the mental exercise is worthwhile.  Here are the numbers for a few of the world’s denser cities and the new city of Texas (tongue in cheek here):

	Paris	Monaco	NYC	New Delhi	Texas
Population	2,193,031	35,500	8,244,910	13,850,000	7,000,000,000
Area	40.7	0.8	302.6	570.0	268,581.0
Density (People per square mile)	53,883	46,711	27,243	24,298	26,063

While we might not to live in a city the size of Texas, the point is that the US is a very big place and that allowing more legal immigration will not alone degrade our standard of living. 

We need more workers.  We need families that produce more than they consume, and we need to understand that increasing the immigration quotas will not destroy life as we know it.  Of course, immigrants tend to have different political orientation.  For example, my European friends are far more left-leaning than me but the EU (European Union) is a blue state.  

Also, increasing populations require more infrastructure, roads, hospitals, schools, etc.  To the extent that some of these are government-funded, we can expect growth in government but the workers will also produce more revenue if there is a reasonable tax code.  This is a big point because the left’s (Obama and the Democrats) vision that we can continue not to tax the lower 50% and make it up by taxing the top 2% would suggest that we should not allow immigration.  

Me, I am for more growth, more immigration, and a reasonable tax code.  Everyone should pay taxes.  If the lower 50% are not paying taxes, we need to show that they are paying their fair share of the infrastructure costs.