There Is Much More To The Immigration Issue Than Just The GDP Effect

A couple of years ago, in July 2023, I participated in a debate at the Soho Forum on the subject of immigration. The resolution for the debate was: “Resolved: The U.S. should have free immigration except for those who pose a security threat or have a serious contagious disease.” Alex Nowrasteh of the Cato Institute took the affirmative. I took the negative.

Nowrasteh, a Senior Vice President for Policy at Cato, is known as a free immigration absolutist. And to his credit he had some good points to make. The most important one was that nothing increases world GDP so much and so fast as letting poor people immigrate into rich countries. Even working at the lowest-paid jobs in the U.S., their incomes immediately multiply by factors of five or ten or more. How could anyone be against that?

At the time of the debate in 2023, the Somali frauds in Minnesota had begun to come to light, but only to those paying close attention. The frauds were local news in Minnesota, but not national news at all. Among a few others, Scott Johnson at Minnesota-based PowerLine had been posting regularly about ongoing federal prosecutions relating to billing the Minnesota government for providing millions of non-existent meals to children during the pandemic. But the vast extent and pervasiveness of the plundering of the Minnesota and American taxpayers by Somali fraudsters had yet to be revealed.

Even before the current revelations, it was clear that there were problems with unlimited immigration that made the story focusing just on economic gain far too simplistic. The U.S. population, at around 340 million, is about 4% of world population of over 8 billion. With unlimited immigration, we could easily see our population doubling in a very short time. Would those new arrivals, now suddenly the majority of the country, be satisfied accepting jobs at the low end the income distribution (even if paying 10 times what they were paid just a short time previously) and then working their way up the income ladder gradually by hard work? Or would they take the opportunity to seize the much greater wealth around them immediately, either through the democratic process or by force or theft or all three?

The current revelations are making clear, to the extent it was not already, that the institutions and processes that enable Americans to enrich themselves — private property, free exchange, and hard work — are fragile and can be easily undermined and destroyed. If immigrants with no understanding of these institutions and processes get brought in faster than they can be assimilated, the consequences can be catastrophic.

Meanwhile, you may be wondering how a Somali day care center with no children attending gets accounted for in our GDP statistics. The answer is that this is government spending on goods and services, and thus it gets added to GDP at one hundred cents on the dollar of the government spending on the program. A day care center that collects a $3 million per year government grant to provide non-existent day care adds $3 million to GDP. Bring on hundreds of thousands more fake day care centers, and the GDP will soar. Unfortunately, as with much of the rest of GDP based on wasteful government spending, the gain is illusory.

Maybe we can continue to make some progress on this issue in the new year.

Happy New Year to all!