The economic windfall of immigration reform

One reason for this immigration windfall is that young immigrants will compensate for the low U.S. birthrate. The average birth rate in the U.S. has fallen to 1.93 children per couple. The replacement fertility rate is 2.1. America risks following Europe and Japan into the trap of a falling population combined with the spiraling entitlement costs of a graying society. A “population-enhancing” immigration policy is the ideal policy response, Mr. Holtz-Eakin concludes.

Immigrants are also generally productive, entrepreneurial and highly motivated. They have a higher labor-participation rate than native-born Americans, and they also create new businesses at a higher rate. Some have specific technical skills the U.S. needs, while even workers with lesser education or lower skills bring a strong work ethic and a willingness to fill low-wage jobs.

Mr. Holtz-Eakin believes the combination of more immigrants with a tilt in immigration visas away from extended-family unification and in favor of those with greater skills or education would spur faster growth. Some 74% of permanent U.S. immigrants in 2010 were for family unification, “greater by far than any” other developed economy, he says. A major goal of the Senate reform is to reduce family-chain immigration in favor of merit-based economic visas.

Faster economic growth would in turn drive down the budget deficit over the next 10 years by at least $2.5 trillion. Think of it this way: A more generous and more skill-based immigration system would lower the budget deficit three times more than President Obama’s fiscal-cliff tax increase enacted in January.