The Implications of Differing Immigration Policies
As the 2024 presidential election approaches, immigration has emerged as a central issue, with the two main candidates, Vice President Kamala Harris and former President Donald Trump, offering starkly contrasting visions for the country’s immigration policies. Their proposed approaches would have significant macroeconomic consequences, affecting the size and composition of the labor force, economic growth, and government finances.
In this comprehensive analysis, we examine the potential paths for net migration under each candidate’s agenda and the likely implications for the U.S. economy. By creating high-immigration and low-immigration scenarios for both the Harris and Trump administrations, we can better understand the range of possible outcomes and their economic impacts.
The Harris Administration’s Approach
The Harris, high-immigration scenario envisions a continuation of the relatively permissive immigration policies seen during the post-Title 42 Biden administration. In this scenario, legal immigration would remain near recent levels, with an average of 2.9 million arrivals per year through permanent and temporary visa programs, as well as the refugee resettlement program. The administration would also maintain a relatively hospitable border environment, with 900,000 entries without inspection annually in the first two years.
Conversely, the Harris, low-immigration scenario assumes a somewhat more restrictive approach, with legal immigration levels similar to the lower end of the Biden administration’s experience and somewhat enhanced border enforcement. This scenario would see around 2.3 million legal arrivals per year, along with a 50% reduction in entries without inspection compared to recent levels.
The Trump Administration’s Approach
The Trump, high-immigration scenario reflects a return to the pre-pandemic Trump administration’s immigration policies, with legal immigration levels averaging the 2017-2019 period. This scenario also assumes the termination of the humanitarian parole programs for Cubans, Haitians, Nicaraguans, Venezuelans, and Ukrainians, as well as a more stringent border environment compared to the Trump administration’s first term.
In the Trump, low-immigration scenario, we envision a dramatic shift towards an even more restrictive approach. This scenario incorporates a 5% reduction in legal immigration levels compared to the pre-pandemic Trump era, along with a significant crackdown on both border crossings and interior enforcement. The Trump, low scenario could see net outmigration in the first two years, an extraordinary circumstance not observed in recent history.
The Macroeconomic Implications
These starkly different immigration scenarios have significant implications for the U.S. economy. By affecting the size and composition of the labor force, they would influence economic growth, employment, wages, and government finances.
Labor Force and Population Growth
The cumulative growth in the civilian non-institutionalized population over age 16 (CNIP) from 2025 to 2028 varies widely across the scenarios. In the Harris, high scenario, the CNIP increases by 15 million people, compared to just 5 million in the Trump, low scenario. This reflects the substantial differences in net migration during this period.
The surge in the labor force under the Harris, high scenario would boost economic output, while the more modest growth or outright decline in the labor force under the Trump, low scenario would dampen GDP growth. Our analysis suggests that the gap in GDP growth between these two scenarios could reach half a percentage point in 2025, amounting to a difference of around $130 billion.
Taxes and Government Spending
The varying immigration flows also have significant implications for government finances. Under the Harris, high scenario, the larger labor force and higher incomes would generate an estimated $788 billion in additional tax revenues from 2024 to 2034. Conversely, the Trump, low scenario, with its net outmigration and smaller labor force, would result in $177 billion less in mandatory spending on benefits over the same period.
However, the economic effects of immigration extend beyond just taxes and benefits. The broader macroeconomic impacts, such as changes in interest rates and productivity, would also affect government finances. In the Harris, high scenario, these economic changes are projected to increase revenues by $387 billion and spending by $101 billion from 2024 to 2034, reducing the cumulative deficit by $285 billion.
Longer-Term Considerations
Looking beyond 2034, the immigration scenarios continue to have significant implications. As the surge population ages, their eligibility for Social Security and Medicare would increase, leading to higher government spending in those programs. Conversely, the higher productivity and incomes associated with greater immigration would generate additional tax revenues.
Ultimately, the choice of immigration policy will have far-reaching consequences for the U.S. economy. The Harris, high scenario points to a larger, more productive labor force and a stronger fiscal outlook, while the Trump, low scenario suggests a smaller economy and greater budgetary pressures. These divergent paths underscore the importance of carefully considering the macroeconomic impacts when crafting immigration policies.
Conclusion
As the 2024 election approaches, the candidates’ vastly different visions for immigration policy will shape the future trajectory of the U.S. economy. By examining high- and low-immigration scenarios for each administration, we have illuminated the potential macroeconomic implications of these policy choices.
Ultimately, the decision on immigration reform rests with Congress, which has long grappled with this complex issue. Regardless of the political outcome, policymakers must consider the far-reaching economic consequences of their choices. By understanding the macroeconomic impacts, they can make more informed decisions that balance the needs of the country, the economy, and the American people.
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