Adam Ozimek on Reforming the High-Skilled Immigration Process

Adam Ozimek is the Chief Economist at the Economic Innovation Group. Adam returns to the show to discuss the importance of reforming the high-skilled immigration process, the main bottlenecks with our current green card system, the glory days of economics blogging, how to revitalize the American heartland, Trump’s current trade war, and much more. 

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Read the full episode transcript:

This episode was recorded on April 15th, 2025

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected].

David Beckworth: Welcome to Macro Musings where, each week, we pull back the curtain and take a closer look at the most important macroeconomic issues of the past, present, and future. I am your host, David Beckworth, a senior research fellow with the Mercatus Center at George Mason University. I’m glad you’ve decided to join us.

Our guest today is Adam Ozimek. Adam is chief economist at Economic Innovation Group and the co-author of a new report titled, Exceptional by Design: How to Fix High-Skilled Immigration to Maximize American Interests. Adam joins us today to discuss his report as well as to help us make sense of the ongoing trade war. Adam, welcome back to the podcast.

Adam Ozimek: Thanks for having me. Always glad to be here.

Blogging Days

Beckworth: Well, you are a return guest, but you are actually here for the first time in the official Mercatus podcast studio. We record Macro Musings here. Tyler Cowen sits where we’re sitting now and does Conversations with Tyler. I bring this all up because all of us go way back to the glory days of blogging surrounding the Great Recession, so I believe I started blogging late 2007. I had an obnoxious op-ed that got rejected by The Wall Street Journal, so I said, “What the heck, I’ll blog it.” Terrible time for humanity. Great time for blogging if you love macro. You and Karl Smith had your very prominent blog, Modeled Behavior. In fact, that’s still your handle on Twitter, right?

Ozimek: Yes, still my handle.

Beckworth: Yes, so tell us about your origin story. How did you guys start blogging back then? Because that’s how we first met.

Ozimek: Like, I think a few other people, I started off as a commenter in this world. At Modeled Behavior, I was commenting on Karl’s posts and also commenting other places. I remember leaving a lot of comments at Dean Baker’s blog, spent a lot of time there. Then at some point, Karl and I started emailing about things. He needed to take a break for a little bit. He said, “Do you want to guest post?” That’s how it all started and the rest is history.

Beckworth: Yes, so you were blogging. Now, Tyler and Alex Tabarrok, they were blogging at Marginal Revolution before even 2008, so I followed them. I think also back then, Freakonomics had a blog I followed. Once the Great Recession happened, there’s just a bunch of us that jumped in and had a lot to say. The slow, anemic recovery also contributed to the conversation. I believe that’s how we first met. I believe we met at an AEA meeting. Of course, I’ve followed you ever since. You’ve been hopping around in many great positions. 

How to Fix High-Skilled Immigration

Now, you have this really great paper on a topic that I think is very important for those of us who care about the US economy, how to make high-skilled immigration work. The title is, Exceptional by Design: How to Fix High-Skilled Immigration to Maximize American Interests. Trump should like that last part there, “maximize American interests.” If you’re listening, President Trump, listen closely. Let’s take the big picture. What is the main point of the paper and why write it now?

Ozimek: I think we need to have a plan for high-skilled immigration reform, a plan that is optimized for maximizing the benefit to our country. You might argue that, well, immigration isn’t just about maximizing American benefits. You have concerns about refugees. You might support the diversity visa because you want to give people over the world a chance to come here, family unification.

I don’t disagree that all those are other priorities for other immigration policies. If we’re going to have a high-skilled immigration policy, this is what it is for. It is for maximizing American self-interest. Otherwise, don’t have it. Just have it maximize something else, refugee welfare, or something like that. If we’re going to have it, this is what it should be focused on.

Something we notice is that a lot of high-skilled immigration plans are very piecemeal in the sense that they’ll just propose one tweak or they will be based on uneconomic arguments, ideas about addressing shortages. As we argue in the paper, it’s not a very economical way or economics-justified way to think about immigration. This gets people in trouble too. This gets immigration in trouble because people will rationalize immigration based on, “Well, these are jobs Americans won’t do,” for example. Then someone will say, “Well, an American would do this job.” 

When you have these bad rationales, it opens up weaknesses for attacks. What we wanted to do is really state what we thought was the core argument for high-skilled immigration. How does it affect the economy? Then actually design a full policy based on that understanding. A really big picture, from scratch, attack on how do we do this and why, and to have all of the pieces of the puzzle together, and have the whole high-skilled immigration system work together.

Beckworth: Now, Trump has expressed some interest in this, right? He’s talked about college graduates being able to stay and better immigration reform. On one hand, he’s viewed as anti-immigration. On the other hand, he does seem open. Is that fair?

Ozimek: Yes, I think that’s true. Certainly, there are types of immigration that he’s very against. Even when it comes to high-skilled immigration, you can point to rules that they implemented in the first Trump administration that were not friendly to high-skilled immigrants. There’s the technocratic implementation of things. There’s the big picture, what does he think? I think he has said plenty of positive things about high-skilled immigration.

He says he wants a big, beautiful door, right? He wants a big wall but with a big, beautiful door. He actually very specifically stated a very nuanced description of how immigration affects the economy. He was talking about temporary work visas. He said, “The temporary workers, they come here, but then the firm revenue grows and the firm expands. That takes care of everyone else.” It’s a very dynamism-focused view that I thought was pretty nuanced.

It’s much smarter than people who say, “Oh, well, they’re just doing stuff Americans wouldn’t do,” which is the standard argument, but I don’t think as smart as the way President Trump described it. I think that there are glimmers of hope you can see in there. You have to have a plan for if a door opens. That’s part of the motivation here is that you don’t know when a door is going to open. There is no consensus high-skilled immigration plan.

Economists tend to write about this. They say, “Therefore, we should just expand H-1B visas,” or, “we should have more green cards,” very narrow things. There’s no big-picture plan. My concern is that the opportunity will arrive someday, potentially very rapidly. We’ll end up doing something very suboptimal. You hear politicians on both sides of the aisle talk about stapling green cards to diplomas. I think that is an extremely suboptimal solution that could come back to bite us in the butt in the long run.

Really, you see this in a few other countries as well where they lean too much on their higher education system. Then all of a sudden, you have these ghost schools arising. Really, all they are is green card factories, visa factories. You have to think very carefully about getting it right because the system, it will try to be gamed. 

Think about H-1Bs. The lottery seemed like this perfect, unbiased way to allocate H-1Bs, but then you find all these companies that are abusing the lottery, that are figuring out how to game the lottery. They’re submitting 10,000 applicants and just trying to get as many as they can. It ends up leaning toward more rote work. The details really matter. 

I feel like way too often, economists and policy people just tend to think, “We’ll take what we can get.” Green cards to diplomas, we’ll take it. They don’t think hard enough about the limitations. I worry that that would lead to backlash when it doesn’t work out as well as it could.

Beckworth: Thankfully, you have the whole package for us. You’ve got everything covered from the beginning to the end. Who are your co-authors on this?

Ozimek: Connor O’Brien and John Lettieri.

Beckworth: All right, so kudos to them as well for putting this together. As you know, there is an appetite for this. It’s important we talk about it. As you said, we have a complete package ready to go that’s consistent based on good theory, takes care of all the problems and challenges in this debate. You mentioned that the US underutilizes high-skilled immigration.

It’s also one of the policies that can raise wages for everyone. It can help the deficit. There’s, again, support on both sides to do something. This should be a win-win for everyone. You go ahead in the paper and make a case for reform. Why do we need to do it? You’ve already touched on some of it. Let’s dig in a little bit deeper here. You note that the US caps employment-based green cards at 140,000 a year, and it’s been unchanged since 1990?

Ozimek: Yes, and so you have this huge backlog. We let people in on temporary work visas like the H-1B and then they have to wait for their green card. You end up with people on 10-year, 20-year wait lists for the green card. We put the bottleneck in the wrong place. Rather than putting the bottleneck on how many people we let in, we put the bottleneck on how many people do we give green cards to. That’s a part of the problem. My argument there is that green cards for high-skilled workers should be just completely merit-based.

If you’ve been here for six years and you’re earning over some income threshold like we suggest, 85%, for example, if you’re in the top 15% of earners in this country for six years and you’re staying out of trouble for those six years, that should be an automatic pathway to a green card. Why would we tell someone who is a top earner, who’s contributing so much to the fiscal deficit and generating all these spillovers, “You have to wait until this piece of paper becomes available”? Just let them stay. That’s how I would fix that part of it.

Beckworth: Right. I didn’t realize, man, 10 years, that’s a long time to hope and cross your fingers that you get your green card. Again, this is reasons for reform. You also note there’s geographic imbalance.

Ozimek: Yes. Right now, the majority of high-skilled workers go to a handful of superstar cities: New York, San Francisco. It’s a bit of a paradox. High-skilled immigrants create so much economic spillover value, productivity, patenting, positive fiscal impacts, entrepreneurship. They’re such a huge driver that high-skilled immigration actually contributes to regional disparities in the country.

Parts of the country that are left behind, one of the reasons that they’re falling behind other parts of the country that are succeeding is because high-skilled immigrants don’t go there. We make the case for expanding the amount of immigration, creating a new visa, which we call the Heartland Visa, that would let people come here if they’re skilled workers, if they move to parts of the country that are suffering from demographic declines, so population loss, low house prices, lack of labor force, that sort of thing.

That should catalyze growth in those places. If someone’s willing to come here and live in those places and work in those places for six years, it’s a temporary visa, then they get a green card, and then they can live wherever they want. It’s really about doing your tour of duty in those places. What’s nice is that we have plenty of empirical evidence that immigration populations tend to be sticky.

What we believe you’ll end up doing is seeding these communities of high-skilled immigrants, which then not only create productivity growth, innovation, positive fiscal impacts but, in the future, are alluring immigrants in their own right in these communities. It becomes a magnet and a strength for the places that manage to make use of the program. It’s a dual opt-in in the sense that we argue for particular qualifications for how a county can qualify, but they have to vote to participate in the program. The immigrant obviously has to select that community as well. 

A lot of people are concerned about, “What about the political pushback sending immigrants into maybe very red parts of the country that aren’t welcoming to them?” Yes, great. Those places won’t opt in, right? There are plenty of post-industrial cities. There are plenty of parts of the country that would be very, very welcoming to more high-skilled immigrants and we should let them in.

Beckworth: They’re raising their hand, “Please come here.”

Ozimek: Yes, absolutely.

Beckworth: Just to be clear, this Heartland Visa idea would be for high-skilled immigrants, not just run-of-the-mill immigrants but high-skilled immigrants who bring education, skills. They’re risk lovers. They’re entrepreneurs. That’s what you want. That’s what makes immigrants great is they give up everything, leave it behind. They come to the US and ones with high skill even more so.

I guess a great example of the disparity you mentioned would be Silicon Valley, right? Filled with immigrants. They’re super achievers. They’re also super wealthy. It’s very hard for an average person to move there because housing, which is maybe a separate issue. It’s just it’s a concentration of achievement and wealth that makes some red states look at them like, “What’s going on?” They’re getting the wrong message, I think, often.

Ozimek: Yes, absolutely. I think the more that we can see the alternative clusters of innovation, that’s really helpful as an escape hatch to the superstar cities that aren’t building enough, that are letting costs go so high, that are making it difficult. There’s a paradox where the highest-skilled people want to locate in these superstar cities where there are positive agglomeration benefits, historical immigration communities, high relative wages, especially relative to other countries where they’re sending their remittances. That has value to them as well. 

But then those high-cost places are not really great places to scale a business, right? I think that there’s an interesting argument here that this could be helpful to seed more centers of agglomeration and innovation in places with relatively low cost of living is something that I think can be a positive for the US as a whole, because to have innovation alongside low costs is not very common in the US. I think that probably has important industrial implications. It’d be good if we had more of that.

Beckworth: Let’s talk a little bit more about that because the argument you’re making is that these high-skilled immigrants can actually reduce inequality. Parts of the country that felt left behind, maybe parts of the country that suffered from the China shock, they would actually pull ahead. This would be a way for them to pull ahead without actually having to leave home.

I think there are other issues. Housing is a big part of the story. You’re providing a solution that even if housing is still a problem, this might be a way to work around it. Let’s walk through some scenarios here. You mentioned the term “agglomeration.” What is agglomeration economies? How does high-skilled immigrants moving to an area create agglomeration economies? What does it do to the wages in general in that area?

Ozimek: Agglomeration is part of it. It’s much broader than that. What a high-skilled immigrant brings to a community is, first, a much higher level of entrepreneurship. They’re 80% more likely to start businesses. That’s not just about small businesses. It’s not just about the corner bodega. It’s companies of all sizes. High-skilled immigrants are more likely to start them. That’s a big part of how you get revitalization and how you get dynamism in a community and growth.

The other thing they bring with them is positive fiscal impacts. The average H-1B worker contributes something like $40,000 just in their direct wages, not including their spillover effects, to the federal government. Then there’s positive state and local effects as well. 

In a lot of these struggling places, they get into a very dangerous downward spiral where population declines, tax base declines. They cut back services. Population declines even more. Outmigration is skill bias. They’re losing the people who are most capable for helping them revitalize. This can help turn that around. Help give them money so that they don’t have to cut back on their school districts, on their basic services, things like that. That’s part of it. 

Patenting. High-skilled immigrants are substantially more likely to patent. Something like a third of the total innovation output in the economy over the last few decades is due to immigrants. That’s massive. If you can direct some of that innovation output to these places, all this adds up to a pretty substantial impact. 

I think that part of this is also recognizing that a lot of left-behind places do have assets. I think there’s an economist-centric view that says, “Well, look, the relative wages here have fallen below the wages in another place.” We need people to leave to equalize wages, right? It’s a very simple supply-and-demand framework. This place has suffered a negative productivity shock, the end. They’ve lost a key industry. That’s the end. The solution is people leave. 

I think a lot of these places have assets. They have workers who are available to work and underemployed and that’s an asset to a particular business. They often have lots of physical assets that are going underutilized. They also have one important asset, which is that they’re located in the richest country in the world, right? That makes them a pretty competitive place to start.

I think that allowing more high-skilled immigrants to come in who have that human capital and entrepreneurship to find next-best uses for the assets and capital that places do have. That’s a little bit more complicated a story than just like we need to equalize relative wages between places. It’s a more dynamism-centric focus, an idea that new companies and new businesses can find higher, best uses for the assets and the capital in a place. I think that is one of the things that sets apart places that recover from loss of industry from places that don’t recover. You look at the places that were China shocked, right?

Beckworth: Yes.

Ozimek: They didn’t all collapse. Two of the top China-shock places in the country are Raleigh, North Carolina and San Jose, California. They’re in the top 5% of China-shock places. They lost a lot of import-supporting and import-competing employment, but they bounced back. We have to think about, what is it that makes a place bounce back from those shocks? I think entrepreneurship, human capital, human capital spillovers, people who can find next-best uses is a huge part of the story.

Beckworth: Again, your story is the role high-skilled immigrants can play. Just in general, having more people extends the market. Adam Smith famously said, “The amount of labor specialization which leads to greater productivity, depends on the size of the market.” Even if you just have more people in general, more specialization.

 A real simple example, again, this is not the point you’re making, but, if you go to a town with very few people, you might have one dentist. If you build more and more people, you can have an orthodontist, you can have an oral surgeon, you can have many specialties. As they’re there, they get better, they learn. You’re saying there’s that plus the added advantage of having high skill that can help use the existing stock of capital. It’s a win-win for Americans and for the immigrants.

Ozimek: Yes, for sure. Thinking of it in a pure population sense, I do think that one of the things that matters is having those centers of population in a region and thinking of them as sort of like tent poles of agglomeration. If you think of a rural area with a bunch of small towns, if they have a relatively successful small city holding that economy together, doing lots of trade between places, lots of migration between places, you move to the city, you learn skills, you build connections, you move back to a small town.

Having those centers of population that are successful and innovative and thriving is really important for the more regional economy. You might say, what hope is there for a small town in the Midwest? They’re never going to have agglomeration. If they’re 45 minutes from Columbus, Ohio, they have access to agglomeration. They have access to those networks. They have access to the back-and-forth movement of capital, exports and imports with those economies. I think that’s an important way to think of it, building more of those tent poles.

Beckworth: Okay. We want more tent poles. Again, we need an immigration reform package for high-skilled immigrants that can deliver this. Just stepping back for a minute, immigration is important. Again, this is high skill, but immigration’s important because that’s an important input to economic growth. Having labor, having people. One of the big challenges the whole world is facing is declining fertility rates, declining population. We would be wise to get those high-skilled immigrants into the US. There’s going to be a race to get those people, right? And we want them. There are other solutions, we can try to nudge fertility rates higher, but that takes time. That’s a long-term solution at best, if it works. You have an immediate solution that can impact economic growth now. That’s the amazing thing.

Ozimek: Yes, it’s very rare. There’s not any other policy that can impact economic growth per capita, in particular, in the short run, increase patenting, increase entrepreneurship. It can do so in a way that can raise hundreds of billions, even trillions of dollars over a 10-year period. There’s no other policy like that. It’s also very certain, too. You can argue for things like subsidies for R&D, for example, that probably will move economic growth, probably sometime in the medium term. Those are both probabilities. Also, you have to be very careful about doing it right? Because you don’t know. It costs money.

High-skilled immigration, it’s like a lever you push it and patenting just goes up, right? Yes. These are people who patent. Let in people who patent, and there will be more patents. Let in people who are entrepreneurs, and there will be more entrepreneurship. It’s very automatic. It’s very known. There’s not a lot of people who disagree with this. That this is how the economy works. It’s negative costs, negative costs. We run some simulations in our paper and argue numbers that would give us a trillion dollars in fiscal impact over a 10-year period. Not hard at all.

Beckworth: That’s amazing. Maybe another way to think about this is we like to build capital stock in our country. We think of physical capital, but there’s human capital. These high-skilled immigrants, they were trained overseas. They received great education. Those countries bore the cost, and we’re going to get this free ride, basically. They’re going to come here, bring all this human capital. Someone else bore the cost, and we’re going to benefit from it. It truly is, for us and for the immigrants, a win-win situation. Even those countries back home, they’re going to get remittances. Typically, I think there are studies showing that even the country they leave will tend to be better off at some point because they made the move.

Ozimek: Yes. I think there’s two things to address there. One is the question of what happens to other countries, and the other is thinking of the human capital, the stock of human capital. A lot of high-skilled immigrants do come here and get educated, and they get their education here. Now, it is true that if you look at basically top performers in any field, mathematical competitions, athletic competitions, science competitions, the top performers want to come to the US. We have that magnet still. Like you said earlier, we need to take advantage of that while we still have it. Economic convergence is real, and so you have to think our advantage is going to erode over time. Let’s do it while we can.

A lot of foreign students come here, and they get their education here. While they’re here, they contribute to that college because they pay the full ride. That keeps those higher education systems that otherwise might be failing because of the demographic decline we have in so much of the country, it keeps those colleges there. Those universities are really important parts of the innovation and dynamism contributors of a lot of regional economies in the country. They’re coming here, they’re paying for education, and then ideally we give them a pathway to stay. I’m sorry, there’s one more point you made about—

Beckworth: Oh, the remittances.

Ozimek: The remittances, yes. I think that, again, you have to take a very nuanced view of this, and it’s not as simple as what you might think of as an econ 101 way to think of it. Go back to the tent poles I was talking about. How does having a strong regional economy benefit the small towns in the area? A lot of it is through sort of back and forth, right? Yes. Trade opens up between the two places, and movement of people back and forth between the two places. People can come here to the US, gain skills, knowledge, connections, move back to their home country. The home country benefits from that.

Also, in the home country, you get greater incentive to get that education in the first place. If you think that the US economy is inviting in a lot of high-skilled immigrants, and you might want to do that, and you might be able to do that, that gives you an incentive to get educated. Not all of those people will come. Some of them will stay. Also, in the meanwhile, you’ve overcome the fixed costs of creating educational institutions. That has a positive effect.

I think the thing that’s nice about this is the back and forth really only works if the home country sort of earns it. In the sense that if you’re a totalitarian regime, and we let your high-skilled people come here, and they get an education, and they make connections, and they network, and they learn how to do things, they’re only going to want to come back if the quality of life there is reasonable, if the level of freedom is reasonable. I think of a country that’s increasingly becoming authoritarian, it’s going to be more of a one-way street. I think that immigrants will tend to come here and stay here.

That’s more of a positive, because then you’re more brain-draining someone who might be a global rival, versus, if this is a democratically elected free country, then I think you’re going to get more of that back and forth, which is mutually beneficial. I think that the sort of free movement of high-skilled people tends to benefit us geopolitically, in the sense of home countries, which are positive, democratically elected, free countries, are going to benefit from the back and forth. More totalitarian, unfree countries are going to see relatively less of that. They might experience more of the brain-drain negative effect.

Busting the Myths

Beckworth: I hadn’t thought of the international angle like that. It’s a win-win-win, globally as well as domestically. Let’s go to some of the objections. You have a section on busting the myths. You have a number of myths. Let’s start with probably the most common one. That is there’s a fixed number of jobs.

Ozimek: This is one of the most common myths from critics of immigration, that immigrants are going to come here and take jobs that other people do. I think if it was true there is a fixed number of jobs, then we would have a huge problem in a country where the population has tripled over the last century or so. Because if the population is going up, but jobs aren’t, you’re pretty doomed. Populations go up with jobs. It’s not a fixed pie. People sort of get that, I think. The Malthusian view is sort of left behind. In most senses, people don’t think, well, you’ve got a growing population, that’s bad for your workers.

It’s been a long time since people thought like that. Yet, they bring that Malthusian view to immigration. It’s a very selective use of Malthusian logic. You try to connect the dots there and say, you know how having babies isn’t bad for the labor market? Well, having people isn’t bad for the labor market either.

Beckworth: Again, I go back to the Adam Smith quote. “The more people you have, the more specialization you have, the more dynamism, the market itself grows.” It’s not just for adding a consumer and a producer. We’re adding potential market specialization, which further grows the pie.

Ozimek: There’s the specialization fact, which I think is true. There is growing evidence in the dynamism literature of the relationship between just growth and a lot of positive factors. When your population is growing, it’s a better time to make a capital investment. It’s a better time to start a new business. It’s a better time to hire people. If you’re in a place where the population is falling and you’re thinking of starting a new business, to a loose approximation, you’ve got to steal business from someone else. It’s a harder proposition. You’ve got to steal the workers from someone else. You’ve got to steal the customers from someone else, because you’re in a negative subeconomy that’s shrinking over time.

If population is growing, there are more new customers every year. There are more new workers every year. It’s a much better environment to start a new business. Empirically, this is becoming, I think, increasingly understood in literature. Hugo Hopenhayn had a great econometrical paper on this, showing that declining labor force growth is one of the main factors driving a higher concentration in the economy, reducing firm formation rates, reducing entrepreneurship, stuff like that.

Obviously, when you have fewer new businesses, you have fewer new startups, now your productivity growth is lower, because those old companies aren’t as innovative as the new companies. It’s a very toxic downward spiral that demographic decline can drive. I think it belongs up there with specialization as a sort of fundamental part of how we think about how population growth relates to prosperity. You’ve got the dynamism, and you’ve got the specialization, both very important.

Beckworth: I’d add a third factor there, a sense of community and being with people. If you have a declining population, there aren’t the sports leagues, the community events, and you begin to think zero sum. There’s this toxic feedback loop that you’ve described there. We lose specialization, we lose dynamism, we lose a sense of community. That gives rise to populism. I think that’s part of the story. Having population growth creates a positive cycle that we want and we need. We need to push for policies like you’re proposing here. A few more myths that you like to push back on. How about point systems or some other approach?

Ozimek: Yes, I think that the point system is one of those things that’s grabbed for as a convenient policy that doesn’t get the level of scrutiny that it deserves. I think that we don’t, in any other context, think we can determine which jobs have the highest best rewards by breaking them out in their characteristics. It’s weird, like we talked about with the Malthusian thing. As soon as you start talking about immigration, people throw out what they know and they grab for these myths. They’ll become more Malthusian. They become central planners to a degree that they would never accept in any other context.

Our argument is the best way to determine which workers are going to have the highest and best value is the way that we do it in our economy overall, which is wages. The highest paid workers are going to have the highest value creation for the economy. That should be the foundation of how we do it. Now, you can make adjustments for other factors. My argument is not to dismiss the concept of points entirely, but a point system really needs to be grounded in wages. You can adjust for a few things that we know are hard to gain and reliable. 

Someone’s age, for example. If you’re making $400,000 at age 25, that is a lot more optimistic about your long-run prospects for the US economy than if you’re making $400,000 at age 50. You’re going to be retired in 15 years. We know that across almost every occupation industry, wages go up with age. The lifetime fiscal impact is higher when they come in younger. You want to make the comparison apples to apples. I’d suggest you make an adjustment for age: age-adjusted wages. In other contexts, you might make other small adjustments. 

In the Heartland Visa case, we argue that if someone is a remote worker, that should earn them points. Because if you’re talking about directing immigration to places where the economy is struggling, if you’re bringing a job with you, that’s an extra benefit. You should put some value in that, because that job becomes an export for the community. Then other things, like if they went to a college in the area, that’s a positive in the sense that someone who already has lived there for four years and maybe more, they’re going to have more attachment to the area. They’re going to have more knowledge about the area. They’re going to be more likely to see the program through.

If you come here straight from India to Kentucky, you might not know what you’re getting into. If you went to a university in Kentucky for four years, six years, eight years, you know what you’re getting into. You’re more likely going to be someone who uses the program all the way through.

Additional Parts of Adam’s Immigration Proposal

Beckworth: Sticks around. The key parts of your proposal, again, a Skilled-Worker Visa replaces the H-1B—and expands. You have the Heartland Visa. You also mentioned a Chipmaker’s Visa. Maybe mention that briefly.

Ozimek: Yes, the Chipmaker’s Visa. In general, we think that immigration should be fairly industry agnostic. Again, for those reasons that we were skeptical of central planning to begin with. When there’s sort of bipartisan and well-substantiated support for a particular industry, human capital policy can be part of the industrial policy there. I think there’s fairly broad agreement that something like the Chips Act is something that the US should pursue, which is obviously subsidizing and trying to catalyze growth in the domestic semiconductor industry.

If we’re going to do that, we should make human capital be part of it. Because there’s a lot of tacit knowledge that workers bring from other countries for the industry. I’ve spoken to people in the semiconductor industry who say that if you have a plumber and a pipe fitter from South Korea, Taiwan, wh o has experience working in a semiconductor fab, they are literally 10 times more productive than if you bring in a plumber and a pipe fitter from the US who doesn’t have that experience or has fairly less of that experience. You have these order of magnitude effects on productivity.

If we’re going to put financial capital behind the semiconductor industry, we should also put human capital behind the semiconductor industry. Let these companies who are generally foreign companies bring their workforces with them and let them know that they’re going to have a high supply of that. To catalyze growth and to create that knowledge, and to create that knowledge that you will be able to bring those workers. You’re not going to have to negotiate with the administration over visas. You’re not going to have to ask for exceptions to the rule. You create a certainty that you will be able to bring whatever workers you need to come here to catalyze this industry. I think it’s something that is important and missing.

Beckworth: All right, a few more parts to your plan, your proposal, an EBX green card. What is that?

Ozimek: We discussed that earlier. This is the idea of getting people out of those waits in line for the green card. If you’re here for six years on your temporary visa, either a Heartland Visa or a Skilled-Worker Visa, the EBX gives you that uncapped access to a green card if your earnings are high.

Beckworth: Okay. Then the recent graduate visa. We want to keep more of these smart graduate students here in the US.

Ozimek: Yes, this is really about providing an on-ramp to the Skilled-Worker, to the longer Skilled-Worker Visas. The Skilled-Worker Visa is sort of our H-1B replacement. Then the Heartland Visa is like that, but for particular parts of the country. Those are the main temporary programs. Then the EBX comes at the end. At the beginning, you need a pathway from foreign-born students to those jobs. They need time to find the jobs. It doesn’t make sense that they graduate on one day and then the next day you either have a job or you’re gone. You give them a little bit of time to find that job. 

Now we have that right now with OPT. That’s really become a Band-Aid for the lack of expansion of H-1B. The program has really ballooned. You have a lot of time here. You can extend it. We want to rationalize that and make it an on-ramp to one of these other programs.

Beckworth: That goes back to your story of someone coming from India to Kentucky. They want to maybe go to college there first, get familiar with the area, develop skills, and then they settle there.

Ozimek: Yes, you give them a year or six months or something to find a job. They can be fairly unconstrained. Because the Skilled-Worker Visa and the Heartland Visa are based on wages; they need to have a job offer at least to participate in this visa. It gives them time to find that job.

Beckworth: Let’s talk about next steps. What’s holding back a proposal like this from going forward and what would you recommend?

Ozimek: What’s really, I think, surprising to a lot of people is that high-skilled immigration is very popular. We ran our own polls on this and the majority of the public, and even the majority of Trump voters, favor more high-skilled immigration. It’s extremely popular. What happens is it all gets lumped together. Especially in DC, you get this idea that we need comprehensive reform. All of this goes together. You do the low-skilled, you do the high-skilled, you do everything.

I think both parties tend to think of high-skilled as sort of their bargaining chip. If you’re on the right, you might say like, oh, you want high-skilled? Okay, give us the border and we’ll give you high-skilled. If you’re on the left, you might say, oh, you want high-skilled? Okay, give us amnesty and we’ll give you high-skilled. The problem is if it’s everyone’s bargaining chip, it’s nobody’s bargaining chip.

It’s also just a totally different policy. What do we do for refugees who want to come to the US is so economically different from what do we do about the most skilled and capable people across the world who want to come here. It’s just a completely different policy. They were weighing different things. We need to separate these issues and address high-skilled immigration reform in a standalone by itself, so that it’s not weighed down by other debates, so people stop using it as a bargaining chip.

What’s crazy is, it’s really popular with both parties. This should be possible. The president says he supports it. Voters say they support it. I think we just need more recognition of the fact that like, if you’re looking for something popular to do, this is it. For whatever reason, we just struggle to get people to wrap their heads around high-skilled immigration is a popular thing to do, because it’s been so burdened with being lumped in with low-skilled immigration or illegal immigration or the border or stuff where it’s genuinely divisive.

My goal, our goal, in this report is really—and in ongoing work—is to separate these two issues. It’s not that the border isn’t important. It’s not that amnesty isn’t important. It’s not that refugees aren’t important. All those things matter. They’re different issues and they’re much tougher and they’re much more complicated and the voters are legitimately divided about what to do. Over here, everyone agrees. It’s win, win, win. It’s free money sitting on the table. It’s free innovation sitting on the table. Let’s focus on that as a separate issue. I think if we got sort of a consensus around that, it’s there for the taking.

Trump’s Trade War

Beckworth: Adam, that’s been a great conversation on your proposal. Let’s hope President Trump and his supporters adopt it. Let’s move to another part of President Trump’s proposals that both of us are less excited about, and that is his trade war.

We are in the midst of an historic trade war. I was telling my children the other day, I didn’t think you’d ever live through something like this. This is truly like something you would read in a history book like the Great Depression or something. Maybe it’s a little over the top when I said that. It does seem very earth-shattering. What is your sense overall of the trade war? Are we living through an important moment in history?

Ozimek: Just numerically, the tariffs—it depends which round you’re talking about—usually, you can say that they are the highest we’ve had since before the 1930s. That’s pushing us back in history by 100 years. That’s a huge shock. I also think it’s historical in the sense of the uncertainty of it. Obviously, when there’s a tax bill, that’s something that comes with a lot of uncertainty. You don’t know what the ultimate shape of it will be. You don’t normally see a government tax going up double digits, and then down, and then up, and then changing, and moving all around.

I think the stock market is speaking about the magnitude of it. It’s not that the stock market is the only indicator that matters or that tells you everything about what a policy is supposed to do. Here, you have a policy that’s supposed to help businesses, supposed to help domestic firms. Nobody is winning from this. You’ve got huge, huge changes. The amount of change is comparable to other major stock market crashes and nothing else. I think that tells you something about where it fits in history so far.

Beckworth: For people like you and me, it’s easy to see this. We follow this closely. It’s part of our job. I talk to everyday Americans. They’re not as tuned in now. Maybe they are now with the stock market and all the things that are happening. I still get the sense that the big tsunami that’s coming, people are still on the beach, so to speak. They don’t see the big wave that’s going to hit them soon.

Ozimek: Well, what’s interesting is that the polls are already turning against tariffs. Echelon Insights just had a poll that showed that their second biggest concern is tariffs, after immigration. It’s already a top concern for people. No one’s paid a dollar yet. I find that to be quite ironic. The intellectual ideas behind protectionism, they come from populism, right?

It’s a populist idea. We should listen more to what people want. People say they want manufacturing. They say they want manufacturing jobs allegedly. We should do more of what’s popular. This is an idea that’s now extremely unpopular. The popularity of it has always been exaggerated and they haven’t even paid a dime. Once they pay a dime, I think it’s going to become an incredibly politically toxic policy. Then what do you have left? It’s unpopulism at that point.

Beckworth: Yes, that’s a good point. People maybe are aware of it already.

Ozimek: I think they are, yes.

Beckworth: Another great data point that goes along with what you said is the surveys that the New York Fed does, the University of Michigan[’s Survey of Consumers], or the Conference Board[’s Consumer Confidence Index], they talk about this issue in terms of inflation expectations. Those are all going up. You really don’t see that so much in the hard data, but they must be anticipating the price increases they’re going to get.

Ozimek: Yes. If they weren’t aware of it, they wouldn’t be changing their inflation expectations, but they clearly are.

Beckworth: The public is becoming uneasy. They’re unsettled. They’re worrying about it, and for good reason. We started off with the tariffs on Canada, Mexico, and that was like a yo-yo, a rollercoaster ride, on/off, 25%. There was no good reason to tariff Canada or Mexico. It makes no sense in terms of economics, but even in terms of treaties, we just signed in 2020. In fact, President Trump signed the new version of NAFTA with them. Now, he’s ripping up his own treaty, right?

Ozimek: Yes, there’s not really much of a theory here. You can make something of a case for tariffs having some historical positive impact at one point or another, pointing to one industry or another, particular examples. I don’t agree with that read of history, but there’s an argument to be had there. There are a million miles between here and the smartest case for protectionism, the smartest case for tariffs. There’s no clear asks.

The ways in which we’re arguing that countries are blocking us from trading with them, the calculations that they’re using to demonstrate a problem are incoherent. The ask of Canada is to become the 51st state. I don’t know what I would do if I was Canada. It’s that and then dairy. This is what we’re tearing up, what’s called “factory North America,” this well-oiled machine of production. We’re going to tear that up over dairy exports? The irony is, of course, our agriculture sector is highly protected, right?

Beckworth: Yes.

Ozimek: We give a lot of handouts and subsidies to the dairy industry and others. It’s just weird. Then there’s this 10% tariff that applies to everybody. We’re arguing to other countries, “Hey, you need to reduce your tariffs and nontariff barriers down to zero,” while at the same time, we are implementing a permanent, allegedly, 10% tariff. I just don’t think you can have a wildly incoherent and hypocritical trade policy on a permanent basis, as a permanent ask of other countries, and to think that’s going to work.

They’re going to form trading blocs without us. They’re going to reduce investment in our country. Those countries have voters too. I think the populace here are very attuned to the fact that you need to do what the voters want, or else they’re going to turn against you eventually. That’s a huge part of their theory of change. They’re not really considering populism elsewhere. What’s it going to mean if anti-American parties get elected all over the world as a result of this hypocritical, incoherent trade policy?

Beckworth: Yes, absolutely. It’d be one thing if they had just set the tariffs, they had laid out their plans, been thoughtful. I suspect that’s what Stephen Miran, the CEA chair, had in mind. It’s been very ad hoc. That’s the thing. It’s ad hoc. In fact, the China case, I think, is particularly telling. We had Liberation Day. Markets went crazy. Finally, it was the Treasury market that caused Trump to blink, which is interesting in itself.

Then the next day, he says, “Okay, we’re going to give a reprieve to the reciprocal tariffs. 10% still stands. China, we’re going to hit you with 125% because you came back against us.” Now, I think it’s 145%. Then we find out over the weekend, “Well, but we’re going to exempt consumer electronics.” It’s just make it up as we go along. There’s nothing systematic here. That’s the uncertainty, the lack of planning. Lots of reports coming out.

Manufacturers are hesitant to invest in new plants. I even read an article that Wall Street itself is having problems thinking about doing financial deals. Multiple industries. Again, I think even to the extent, we are aware of it. There’s a big wave coming that’s going to hit us. I tell people back home, this is something that we should be very concerned about because this is unemployment. This is going to be bad. The irony is President Trump inherited a good economy, right?

Ozimek: Yes, there are certainly challenges there. Interest rates are high. Inflation hadn’t been brought down to target. What’s interesting is he chose a path that specifically interacted with maximum negativity to the problems that we did have, right? If you want the Fed to help you out, the worst possible environment for that is when inflation is still elevated, coming down slowly.

There’s uncertainty about how fast it’s going to continue to come down. There’s uncertainty about what the neutral rate is. Interest rates are already high. You have a Fed that’s been burned by being too dovish for a few years, or at least being wrong for a few years. I think that that’s the worst possible time to have this price-level shock. You hear a lot of defenders say, “Well, it’s not going to cause inflation to go up. It’s going to cause a price-level shock.”

First off, that’s a very funny dichotomy for a populace to be making because good luck telling the voters that, right? “Everyone, calm down. It’s just a price-level shock.” This isn’t inflation. Your groceries went up, but it’s not inflation. It’s a price-level shock. It’s true. That’s a factual thing. That’s going to go very poorly, especially for people who are literally telling the president coming into this presidency is they’re most concerned about cost of living. You’re hitting the cost of living there. 

They’re going to have a hard time getting help from the Fed. They’re going to have a really hard time getting help from the Fed, given that, yes, the Biden administration handed them an economy at full employment. They handed them an economy with fast growth, high productivity growth. I’m not diminishing all those things. That’s certainly true. There’s a weird overlap of the risks and problems and what the Trump administration is choosing to do that’s not helpful.

Beckworth: It is ironic that one of the reasons Trump got elected was the inflation, the price-level shock that everyone claimed happened with the pandemic and stuff because inflation was coming down, but the price level was permanently higher. That didn’t matter, right? People still felt that their budgets tightened because everything was more expensive. You’re right. Some might say it’s semantics, but it’s real economic lives for many people. This is going to be ironic if it comes back and affects them in 2026 in the midterm election for the very same reason it affected the 2024 presidential election.

The ad hocness, the burning bridges with allies, Treasury Secretary Scott Bessent said, “Let’s go to China with a group of allies and let’s do something to make them cooperate.” That’s TPP, which President Trump could have done in his last administration. It’s also not possible now, is it? We’ve just scorned, burned, mocked. Not only that, but we’re not sure. We’re on, we’re off, we’re on, we’re off. I don’t know how we can build alliances with that.

Ozimek: It’s very frustrating, as someone who’s been a longtime advocate of free trade, to hear people who are the most diehard anti-free traders in the world say that, “Well, what we’re really trying to do is get more free trade. We want other countries to lower their tariff barriers.” We’ve had plenty of opportunities for this. TPP was one, continuing to sign individual free trade agreements with other countries. There’s a path forward. Trade barriers have come down drastically over the last 100 years.

There’s a system and the system was working. All you had to do was ask for more of it. There’s complexities. There’s challenges. I’m not denying that China presents unique geopolitical challenges. On the asks of lower tariff and nontariff barriers from other countries, we had a way forward. These people absolutely did not want that. Anyone who is arguing for high tariffs now, the overlap between them and people who have argued for free trade agreements over the last 10, 15 years is zero.

Beckworth: Yes, for sure. Going forward, there are some concerns for the Fed as you mentioned. We’re in a place where inflation has not come down completely. We’ve already mentioned that consumer inflation expectations are inching up. I think a way of saying this is that consumers are very price-sensitive, more so than they were before 2020. I wrote a post, “Once Bitten, Twice Shy.”

It was very different in 2018, 2020 during the first trade war. Trump could have some degrees of freedom that he doesn’t have now because inflation expectations were well anchored. Now, people are very sensitive, not only for political reasons, but if you continue to run big budget deficits—and that’s the other thing, looks like that’s going to blow up. If we have a recession, even more so, so you’ve got those pressures, you’ve got households that are very sensitive. They’re going to panic.

Then you’ve got chaos. Man, you’re prescribing, in my view at least, a prescription for stagflation. Inflation is going to go up. Unemployment is going to go up. We know from the 1970s, that didn’t end well either. I want to use that to circle back to the Fed, though. This is a concern you’ve had. I know I do too. Tell me your concern. Why does this jeopardize the Fed’s independence?

Ozimek: If you think back to 2018, Chair Powell was raising rates. Trump was engaging in his much smaller-scale trade war. He was hammering Powell over rates and telling him to stop raising rates, “You need to cut rates,” and already showing far less respect for Fed independence than previous presidents had done. That’s coming. The problems of the economy, if they begin to manifest, he’s going to be placing tremendous pressure on the Fed. That’s risk number one.

The harder part, though, is that the Fed is in a legitimately hard spot. In 2018, Trump actually happened to be right on the merits, which I think is probably going to embolden him. The Fed did end up cutting rates. The Fed was raising rates too fast. Trump called the situation better at that point. That’s probably emboldening him. That’s not the case this time. The Fed’s in a much tougher position now than they were then. All they had to do then was put rates where they should have been. Now, they have a bunch of problems to deal with. 

I think that the risk becomes that the Fed becomes a scapegoat for problems that arise because of the trade war. There’s increasing pressure on him. You also have discussions about whether the president can remove Chair Powell. You hear that more and more. You can see it in Steve Miran’s writings as well, the idea that the Fed should be under more democratic control. I think that’s dangerous.

That would be very dangerous for the president to remove Powell because he’s blaming him for everything and put in someone who is more under his control. We played this game before. It doesn’t end well. I think it would create so much additional risk for investing in the US economy. I don’t think we need to go down the litany of problems that would come if the Fed lost independence. I think that that’s a real risk given the tight spot that the Fed is in, in the way that the specific nature of their challenges interact with the problems that the trade war will cause.

Beckworth: I’ll mention a paper by Thomas Drechsel. He’s at the University of Maryland. He came on the podcast not too long ago. He looked back at the 1970s. He found that if there is monetary policy easing that’s driven by politics versus just by policy choices made by the Fed, there’s a big difference in terms of inflation. When the public knows this is a decision driven by the politicization of the Fed, it has much worse effects on the price level and inflation. Something else to keep in mind. 

Okay, let’s end this discussion here with one last question about the trade war. How do you see this ending? How do you see it playing out? Is there a natural check on Trump? We saw the Treasury market jitters caused him to blink, then backed down. Do you foresee his entire term being this chaotic and this much uncertainty?

Ozimek: This is one of those moments where I’m glad to not be a professional forecaster anymore because I believe that’s truly unknowable. For the exact reason you laid out earlier, which is that there is no underlying theory here. When you are trying to, as a forecaster, anticipate, for example, the Fed’s reaction function, you try to model, how does the Fed see the economy? What are they going to do in response to this or in response to that? You have some underlying theory, maybe it’s the Taylor rule or something like that about how the Fed’s going to react. 

Because the policy so far has been so incoherent, chaotic, contradictory, and you have various people in the administration telling completely different stories about what they want—some want a strong dollar; some want a weak dollar—I think that lack of an underlying model makes it truly unforecastable, combined with the president seemingly feeling very unconstrained. He’s not feeling the normal sorts of constraints that a president would feel.

Normal president, 10% correction in the stock market based on policies that he implemented, would back away pretty quick and pretty substantially. Trump’s just pushing through it. That suggests to you that just because this would arise in the economy, you can’t predict what his policy reaction would be. It’s a complete black box. That makes it really hard to say, “What conditions would need to arise to end this? What would he need to see in order to end this?” It’s impossible to say.

Beckworth: I doubt anyone predicted where we are today, say, two, three weeks ago. There’s been so much change so fast. In fact, I should say this podcast is being recorded on April 15. By the time it comes out, it’ll be a whole lot more change.

Ozimek: It could be over. It could be doubled. We don’t know.

Beckworth: We don’t know, yes. The principles, the concerns will still stand. Where the actual status of the trade war is could be very different by then.

Okay. With that, our time is up. Our guest today has been Adam Ozimek. His paper is Exceptional by Design, How to Fix High-Skilled Immigration to Maximize American Interest. We will have it in the transcript and the show notes. Adam, thank you for coming on the program again.

Ozimek: Thanks for having me.

Beckworth: Macro Musings is produced by the Mercatus Center at George Mason University. Dive deeper into our research at Mercatus.org/monetarypolicy. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other thoughtful people like you find the show. Find me on Twitter @DavidBeckworth and follow the show @Macro_Musings.