Mendoza School of Business

Setting the Bar Too High?

Published: December 4, 2014 / Author: Stan Veuger

President Barack Obama’s recent decision to offer millions of illegal immigrants reprieve from deportation was a charitable one, and a clever one politically. It was also a controversial one: Many on the right decried it as unconstitutional, illegal and king-like, while at least some on the left will not rest until the president does, indeed, stage a coup d’état and stops enforcing any kind of immigration legislation. The president’s behavior made these attitudes understandable. He mocked the separation of powers by suggesting that Congress can just pass legislation approving of his actions if it deems them to be extralegal, denounced criticism of his actions as illegitimate unless it comes from Native Americans and claimed to have usurped Congress’ legislative powers. He also disappointed pro-legalization activists by falsely promising a push for comprehensive immigration reform in the first year of his presidency, now five years ago, and by postponing even his more limited executive actions repeatedly.

The economic impact of the president’s executive actions, while probably positive overall, is unlikely to change these attitudes. It will be small and unevenly distributed, but the administration is portraying it differently, running the risk of creating expectations that will not be met. Its projections may not be as disingenuous as the president’s “[i]f you like your plan, you can keep your plan” lies, but they are skewed in a way that reminds one of the administration’s claims that raising the federal minimum wage will destroy not a single job and lead to a massive consumer spending boom. The Council of Economic Advisers estimates that the president’s executive order will increase gross domestic product by 0.4 percent after 10 years, will not affect the likelihood of employment for native workers while raising their wages and will cut deficits by $25 billion in 2024. Much like the council’s minimum wage increase forecasts, these numbers appear to be based on fairly extreme assumptions, even though it refers to them as “lower-bound” estimates.

For example, about three quarters of the Council of Economic Advisers’ estimate of increased GDP is driven by administrative actions that encourage high-skilled immigration. These actions have not received nearly as much attention as the administrative actions helping undocumented, generally low-skilled immigrants, probably because they affect fewer people and the people affected never broke immigration law. To gauge the impact of this increase in high-skilled immigration, the council relies on parameters from a paper by two economists from the University of California, Davis and one from Colgate University who believe that foreign science, technology, engineering and mathematics workers are responsible for as much as half of the productivity growth in the U.S. over the past couple of decades. That is certainly not an uncontroversial view: For example, in an arguably better identified study, economists at the University of Notre Dame, the Treasury Department and the University of California at Berkeley have found that many of these workers merely replace native workers, and produce no patents that would not have otherwise been produced. Note that this is not a partisan issue: The Berkeley economist who co-authored the second paper, for example, served as a political appointee in the Obama administration.

Read the entire article on the U.S. News website.