If 10 guests of The Heritage Foundation each bought a bag of popcorn during one visit, and 20 guests bought the same size bag at a later date, Heritage would sell more popcorn the second time.
Bill Beach, chief economist on the minority staff of the Senate Budget Committee, used this economic illustration June 19 in front of a Heritage audience. He was here to explain the findings of the new Congressional Budget Office’s (CBO) report on S. 744, the “comprehensive” Senate immigration bill.
“When you increase the population,” Beach noted, “the economy grows—it’s bigger.” But, Beach stressed, there is an important difference between a bigger economy (higher gross national product [GNP]) and a better economy (higher GNP per capita). A bigger economy by itself, he explained, doesn’t mean that people are more prosperous; expanding the size of the economy by including more people doesn’t mean each person is better off.
Also analyzing CBO’s numbers at the event was Robert Rector, author of Heritage’s recent report on the fiscal cost of granting amnesty to illegal immigrants. Among other points, Rector noted the surprise CBO prediction that, if S. 744 is enacted into law, America would see only 25 percent less illegal immigration than if we did nothing.
The CBO deserves credit for attempting to estimate the economic effect of the Senate bill, Beach said, though he would have liked to see “more transparent” methodology.
Beach, director of Heritage’s Center for Data Analysis before leaving this year to take the Senate Budget Committee post, began by stressing that he was not giving his own interpretation but simply stating what the report says. He eventually moved from popcorn to cars in talking about supposed benefits to the economy:
If I were selling a growth plan, I would lead with the growth chart. I wouldn’t just say that the car is bigger, I also would say it’s faster. Because if I have a bigger car and it goes slower than my old rattletrap, then I have not actually improved things at all. And one of the reasons why we have a slower economy [according to CBO’s report] is that amazingly—amazingly—we have slower wage growth. Average wages for the first 12 years are below current law projections.
Beach concluded that, personally, he would rather not have the bigger economy offered by S. 744, because most Americans would not be better off.
We have had below-average growth in wages for the past seven years. If we have another 12, does that mean that America has to wait for 19 years before we get back to wage growth that is positive? Is this what this bill is saying? Is this…analysis saying that if we didn’t pass 744, we would have a stronger economy? Yes. The analysis speaks for itself.
As Heritage has pointed out repeatedly, the best way to measure the effect of an immigration reform (even more to the point than per capita GNP) is to compare the post-tax income of those lawfully present before and after a reform.
Households headed by low-skilled workers will, on average, receive more in government services and benefits than they pay in taxes, as Rector has written about at length. That means a higher tax burden on everyone else if our policies significantly increase the number of households that are eligible for means-tested welfare and entitlement programs, as would be the case under the amnesty provisions of S. 744.
Watch Beach’s entire 18-minute presentation, which begins at 21:10.
