Daniel Griswold is a senior affiliated scholar at the Mercatus Center and a nationally recognized expert on trade and immigration policy. Dan is also a returning guest is to the podcast, and joins Macro Musings to talk about immigration policy and the outlook for trade policy with the new Biden Administration. Specifically, David and Dan discuss the major demographic decline in the US, and how greater levels of immigration and can solve many of America’s economic concerns.
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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: Dan, welcome back to the show.
Daniel Griswold: David, great to be with you as always.
Beckworth: Great to have you on. Now, this is your fourth appearance, so you are one of the top guests on the show. George Selgin and a few others have you beat out, but you've made quite a few appearances. That means you have a nominal GDP targeting mug among other things, and also a lot of great conversations. If listeners have not heard Dan before, I encourage you to go back, but Dan has been our in-house resident expert on all things, trade and immigration. As I joked with you before in previous shows, President Trump was your full employment act, right? You were always busy. Something always was coming up.
Griswold: That, or my worst nightmare, or both.
Beckworth: Now, it was great you were, I think, always busy when I saw you in the office, moving around, doing interviews, writing pieces, responding to the latest tweets. I imagine at some level, trade policy has slowed down. It's still very busy and important, consequential and we'll talk about it, but at some level, maybe it's dialed back a bit in terms of being on edge every day to see what the latest tweet will be. It's great to have you back on and we want to talk about immigration. I want to motivate it today, Dan, by referencing a piece that you've written on America's demographic decline.
Beckworth: The title of the piece is, "More Immigration Needed to Offset COVID-19 and America's Demographic Decline." Let's first start with the facts. What has been happening to US demographics? Let's begin with maybe the longer trend.
The Long-Term Trends of US Demographics
Griswold: Yeah, the US population growth, we're still growing. The Census Bureau just a few weeks ago came out with estimates for 2020. The population grew a little bit over 2019, but that growth has been slowing and very steadily growing over the past decades. David, in some way that's normal and to be expected, as countries get richer the birth rate falls. There's perfectly legitimate reasons behind that, as women become more educated, more access to birth control, also it becomes more expensive to raise kids.
Griswold: They aren't just hands to work on the farm the way they used to be. They're kids that need to be educated and college is getting more and more expensive. But if you look at the US trends, there has been a pretty rapid decline in the growth of the population, and there's three and only three variables that determine the population growth. It's the birth rate, the death rate and net immigration. Basically people are born, people die or they come and go. There's no other way to change a population than those.
Griswold: All three of them have been turning in a negative direction over the last several decades. Immigration over the last 20 years or so, but David, what motivated me to write the paper is that in the last three or four years, and particularly last year, the COVID year, the demographic factors plunged, to where the Census Bureau just announced that last year we had the slowest population growth in US history. They didn't do annual estimates back in the 1800s. But we're pretty sure it was the slowest growth, 0.35%. This has all sorts of negative implications, long-term implications for our economy, economic dynamism, our influence in the world. I walked through some of those, all of those in the paper.
In the last three or four years, and particularly last year, the COVID year, the demographic factors plunged, to where the Census Bureau just announced that last year we had the slowest population growth in US history.
Beckworth: Yeah, we want to come back to those in a minute. That's the reason you're on this show, because this demographic decline does affect macroeconomic outcomes in a serious way. We've talked about some of these on the show before, but I want to go back and flesh out these facts. Population growth rate has been trending down and it's now averaging around half a percent. Is that right or somewhere near there?
Griswold: Correct. If you go back to the '50s and '60s during the baby boom, it was 2% a year. As recently as the '90s when the birth rate was still gradually declining, but immigration took a bump up, it was about one and a half percent. Now it's half percent. Last year as I pointed out, it was 0.35%. You just see an inexorable downward trend.
Beckworth: The pandemic worsened what we were already seeing. To put those numbers into absolute number perspective, so in terms of actual people, in 2019 in your article, there were a one and a half million new people in the US, that was the increase in population, whereas between 2001 and 2010, the annual average was 2.69 million, so quite a dramatic decline. Why don't you mention some of the forecasts? You mentioned the numbers, the fertility rate has fallen to 1.71, is that right? Or 1.7 in there somewhere?
Griswold: Correct, and of course you need 2.1 to sustain the natural population over the foreseeable future. And what that number is, David, it’s a little different than the birth rate, that would be births per 100,000 people or whatever. The total fertility rate, that's what we're talking about. The TFR, that is the number, the average number of births for women in childbearing age expected over their lifetime. There's some estimation that goes into that, because you're projecting into the future, but it needs to be a little over two, because not everybody lives a full lifespan to childbearing age. Well, we have been below 2.1 for some time, and that 1.7, it's not as low as some other countries, Germany, Japan, Russia.
Griswold: We can talk about that in a moment, but it's still well below replacement, and there's been some new research that says that's probably going to go still lower, which creates all ... Eventually our natural population growth is going to turn negative. We're going to have more deaths per year than births. Then you turn to that third variable in our population, immigration, and that was the main thesis of the paper.
Beckworth: Yeah. What you point to, and we'll come back to in a minute, is that that's the ultimate solution here. We're not going to budge fertility rates much or alter the trajectory for death rates all that much, but we can change immigration. But it is staggering, the decline in the fertility rates. I went and poked around some numbers, went online and it's falling, it's near one and a half percent. Now last year was even lower you mentioned, but I'm just looking at a chart now, Dan and there seems to be a particularly sharpened declined right after the Great Recession.
Beckworth: It was about two up until the Great Recession. It's been really accelerating downward since then. Is there a good explanation for why over the past decade it's been trending down?
Griswold: Yeah, that's another one of the worrying trends. Birth rates tend to fall during recessions. People are just less optimistic. You think they might have more time, but anyway they're less hopeful. The birth rate dropped during the Great Depression as well then it usually rebounds. It didn't rebound after the Great Recession. Then that brings us up to COVID. What COVID has done in so many areas of American life, COVID, hasn't kind of dramatically turned things around. It's more accelerated trends that were underway to working remotely and things like that.
Griswold: Well, the same demographically. COVID delivered a triple whammy to US demographics, and that's why in the census numbers I pointed out a moment ago, those were estimates as of July. They just take into account the first few months of COVID. I think when we do a full assessment into 2021, we're going to see the full triple whammy negative effect of COVID on demographics, but the death rate of course has gone up. There was recently an article in the Wall Street Journal, where they looked at expected deaths.
Griswold: Of the three variables of demographics, deaths are the most predictable. They've been going up about 1.6% a year for the past several years. I've got a chart in there. It's pretty much a straight line up. Again, this is perfectly normal. We're getting bigger, our health is actually slowly improving, but because there's more people and more older people, you just have about 1.6 more deaths per year. Well, in 2020, it's estimated we've had about 10% more deaths than usual. You hear the official numbers in 2020, about 300,000 COVID deaths.
Griswold: Actually, if you look at the, what the journal survey called excess deaths, so what we could have predicted for the year, with some precision we actually had more than 400,000 excess deaths. If anything, we've under counted the COVID deaths and that's understandable, right? Somebody could die having COVID, but they've got some underlying reason. They said, "Oh, he died of respiratory ailment or something like that." Then we have people who have died for reasons related to COVID. They're just lonely and give up their will to live, that sort of thing.
Griswold: Anyway, a 10% increase in deaths. There's been a significant decrease in expected birth through COVID. There was some analysis done by our colleagues over at Brookings and I cited in the paper, 300,000 to 500,000, probably fewer births because of COVID. Of course, in 2020, you got to project ahead nine months, and 2020/2021, there'll probably be somewhere to 300,000 to 500,000 fewer births. Then immigration, and here this is a, what you'd call a manmade phenomenon, right?
Griswold: The Trump administration, the former Trump administration now ... We're just after the inauguration of Joe Biden here, President Trump and his aides, particularly Stephen Miller took advantage, full advantage of the COVID-19 to drastically restrict immigration to the United States, some of it necessary. You don't want to have people flying in from highly infectious areas, but a lot of it not really related to COVID. But nonetheless immigration to the United States dropped sharply last year. So, those three elements, they're all you could argue passing phenomenon, but they have greatly accelerated, at least temporarily these worrying underlying demographic trends.
Beckworth: We had a perfect storm last year of-
Beckworth: ... immigration drops, death rates go up and then birth rates dropping. It's interesting that birth rates declined, and you mentioned 300,000 to 500,000 fewer babies because early on in the pandemic, there was this talk, almost the giddy joking talk about the COVID babies, right? Everyone's at home, they're going to procreate. But this process, this ordeal has been far worse than we thought, so I think that we've revised that hope, I guess, from early in the crisis. But all of this points to this demographic decline, which is troubling, and we'll come back in a minute to why it's so troubling.
Beckworth: But just to flesh this out a little bit more, you cite the United Nations has a study that says, by 2050, 55 countries around the world will have declining populations, including the US. You also mentioned a study by Lancet that says our population will peak in 2062, so a little more optimistic, but it will be declining thereafter. Multiple sources are saying, in another 20, 30 years we're going to be turning an important corner and the decline could have huge, huge consequences. I don't think most of us have grappled with that. You can look at Japan, Japan is going through right now, what will happen to us unless we change trajectory, right?
Griswold: Correct. Actually David, you're right about the United Nations and then the Lancet study, although the UN projections are actually a little more optimistic, because they are talking about natural growth. The UN population study actually assumes a higher birth rate. They're actually projecting US population to be somewhat larger in the future peaking at a later date. The Lancet study, which I would urge everybody to look at, that came out early in April of 2020, that had a more sobering and I think realistic look at birth rates, the total fertility rate. We mentioned a while ago, it's 1.7 in the United States.
Griswold: They projected, it's going to go down probably to 1.5, and their low end projection is even 1.4. By the way, if that sounds low, Japan and Germany and a number of other countries, Italy, are already there. They're at 1.4 or lower. You put that all together, the US population is going to peak in 2062, or whenever it was. The interesting thing is, I know you had Matt Yglesias on your show talking about one billion Americans. We aren't going to get there, unless we hugely immigrant increase immigration levels.
Griswold: I cite one book in there from a few years ago by Joel Kotkin called *The Next Hundred Million.* It's a very good, optimistic book. He's got a firm grasp on the benefits of population and all the reasons behind it, but I don't think we're going to get there barring some significant change in immigration. Let me point out one thing about the Lancet study. They say that total fertility rate depends overwhelmingly on two variables. 80% of a country's total fertility rate is explained by two variables, the education level of women and their access to birth control.
80% of a country's total fertility rate is explained by two variables, the education level of women and their access to birth control.
Griswold: I don't want to get into all the controversy about abortion, all that, I'm just talking about basic birth control that you get at any drug store. Those are not going to change significantly. Women are going to get more educated and we just agree wholeheartedly, that's a good thing. Men should be more educated as well. That's a good thing. Access to just normal non-controversial birth control, that's a good thing. By the way, it's happening around the world, the demographic revolution has been, it isn't just rich countries.
Griswold: The birth rates falling in a lot of middle income countries, mostly for good reasons. China had their one child policy, which I think you and I would agree was an abhorrent policy. They're paying the price for it now, but the authors of the Lancet study point out that these two most important variables for total fertility, total fertility rate are not going to change. If anything, that 1.7 rate is going to go down. You don't want to say anything's for certain in the social sciences, but it's pretty hard to see a scenario where that bounces up above what it is, never mind back up to 2.1.
Griswold: The Lancet study points out, it isn't just the United nations that's a little too optimistic when we talk in a moment about the future fiscal impact for the United States, Social Security, the budget, they all tend to assume total fertility rates that are much higher than I think we realistically should assume. We've got a problem, it's made temporarily worse by COVID, but it's a problem that's going to challenge us into the future. There's really only one policy instrument available. If we think it's serious, we've got to look at immigration policy.
Beckworth: Yeah. The pandemic should have been a moment for us to wake up, get sober and think really long and hard about our demographic decline in the United States. Now you mentioned Matt Yglesias. You're right; he was the show, great book. One of the things that really resonated with me, and I think can help us better understand this demographic decline is he noted, there were already regional disparities where certain parts of the country are experiencing this decline very painfully.
We've got a problem, it's made temporarily worse by COVID, but it's a problem that's going to challenge us into the future. There's really only one policy instrument available. If we think it's serious, we've got to look at immigration policy.
Beckworth: He mentioned in the Midwest, the Rust Belt area, and he gave example after example, these cities that are just, the population is leaving, prime age workers are going somewhere else. I live in Nashville, which is rapidly growing. There's Houston. There's many places that are growing, but the Rust Belt, it's depopulating. He gave the example of Detroit among others, at its peak in that the city proper itself had 1.85 million. Now it's down to 380,000. Wow. That story can be retold across the Midwest. If we want to see what the future holds, just look there. If we don't do something differently, just look at the Midwest and we can see what's in store.
Griswold: Yeah. He made a great point there, the trends are worrying in the United States, but it isn't the same. It isn't uniform across the country. We do have vibrant growing urban areas largely on the coasts. But it isn't just the Rust Belt cities too. I'm from a small town in the Midwest, grew up in Wisconsin and Minnesota, and we have a lot of rural counties and small towns that are losing their population. The overall population rate in some ways masks a deeper demographic erosion. David, if you look at the working age population in probably most US counties, it is declining.
Griswold: Certainly if you go to Iowa and a lot of those Midwestern places, the typical rural county is losing its workforce. The birth rates are declining. The population's aging. Younger people are migrating to cities and they are not attracting immigrants the way urban areas are. We're having a demographic hollowing out. Detroit's a dramatic urban example, and there's lots of other things going on in Detroit as well. But quietly across lots of rural America, it's just slowly emptying out.
The typical rural county is losing its workforce...We're having a demographic hollowing out...quietly across lots of rural America, it's just slowly emptying out.
Beckworth: Yeah. I want to come back to this question about rural America and why I think many of them are opposed to immigration. Those counties that are being depopulated most rapidly, are probably ones who would be fairly resistant to opening up and having more immigration. I want to come back to that question later, why are so many people seeing immigration as a threat as opposed to an opportunity. Alright, we've outlined that demographic decline, it's a real issue. It's going to become more pronounced as we go along.
Beckworth: The question then is why do we care? I think it's probably obvious to our listeners, but why do we care? I think you gave three reasons for why we should care, starting with the economic case. Tell us why we should care, there's a lot of macroeconomists listening to this podcast. This is Macro Musings after all. Why should I care about this demographic decline?
Why Should We Care About Demographic Decline?
Griswold: Yeah. This really is a macroeconomic question, isn't it? When you think of a nation's growth in the Solow growth model, you've got capital and labor and total factor productivity. Well, population growth, and in particular immigration, is a twofer. When you increase the number of people working, that's one way you increase GDP. I would say to my conservative friends, those who support President Trump's, I thought quite worthy goal of ramping up US growth to 3% a year, it's hard to do that when you've got a declining or slowly growth rapidly falling in your workforce.
Griswold: One, it's just more workers, which creates a bigger economy. By the way, that has some positive effects. If you have a larger domestic economy, you've got a bigger economy to support startup businesses and your domestic industries, which then it can be a launching pad for competing in global markets. But David, also a growing and a younger population also creates more innovation, more dynamism in the economy. Let's face it. Younger workers are more likely to start businesses. They're more likely to have a creative, new ideas.
Also, a growing and a younger population also creates more innovation, more dynamism in the economy. Let's face it. Younger workers are more likely to start businesses. They're more likely to have a creative, new ideas.
Griswold: I cite several studies in the paper to this effect, that younger workers lead to more business startups, more innovation. You see it every day in Silicon Valley, don't you, these 27 year old billionaires out there. They're a blessing to the economy generally speaking. There you have more innovation. Part of our slowdown in business startups and innovation, you can tie it to this demographic slowdown we've had. Right there, population growth, in particular the growth of the workforce and keeping the population if not younger, at least aging more slowly contributes to a board dynamic, successful US economy.
Griswold: The IMF and others have done studies that show a nation with more immigrants is going to have higher per capita GDP. It isn't just more people sharing existing GDP. It's a bigger pie for natives and immigrants alike.
Beckworth: Yeah. I think it's important to remind our listeners that not only is population growth going down, but total factor productivity growth is going down, another important part of growth. We just had Caleb Watney on, and we spent a whole show talking about the slowdown in total factor productivity growth, which is a big deal. He made the case, there might be some signs for hope in that area, but the fact is, it's rapidly declined. We don't have the rapid TFP growth we had after World War II through the '70s.
Beckworth: Then on top of that, now we've got populations declining. You highlight that population is both just the straight up input, more people working, more things are made, but also this point about dynamism and innovation. I think what you're really getting at is this Julian Simon, Paul Romer idea, that the more people you have, whether more babies, more immigrants, the greater the distribution of intelligence. Well, I think two points, one younger people are more risk loving. As you get older, you become more risk-averse so you're not going to be dynamic and risk-taking, but just in general, the more people you have, the greater the chance you're going to have geniuses, or certain types of people who can innovate, who can discover things.
Beckworth: I talked to Alex Tabarrok about this and he frames it this way, are people stomachs or brains? We worry about our conservative friends who are, they get anxiety about too many immigrants, but our friends on the left, some of them get worried about too many people. I think where their confusion lies is they view people as stomachs rather than brains. Julian Simon famously said, "The greatest resource we have is the human mind." I think too many people miss that. You got to have the people that have the innovation as you suggested
Griswold: Exactly right. I couldn't agree more, David.
Beckworth: Yeah. That's where immigrants are so important. I mentioned Caleb Watney, he gave a history as part of our conversation how after, right before World War II, after World War II, these German scientists came in, they're an important part of the Apollo project, later on Russian mathematicians came in. It's great that we get these folks. Part of our rapid growth, were smart immigrants as well as women entering the labor force during this period, as well was an important part of the story.
Beckworth: But I think too many people take for granted that we had growth that we had after World War II, without thinking through all the policy changes that were required to get it. We want people, we want the brains, we want them to come here. You're preaching to the choir, Dan, in this piece. I like to have these shows on the podcast, because it's just important to remind people how important population growth is. Okay. Economic growth is a big reason we want more people, both for the input they give to growth as well as the ability to sharpen and rejuvenate total factor productivity growth, idea generation. The second reason you give in your paper why we should care about this and it's closely related to the economic growth point is fiscal sustainability. Walk us through that concern.
The Fiscal Sustainability Concern
Griswold: Yeah, well population growth affects our long-term fiscal sustainability in at least a couple of ways. Most obviously Social Security, Medicare, these programs are based on having a sufficiently large working age population to support retirees. I won't walk through all the numbers, but the fiscal health of Social Security and Medicare has been slowly deteriorating over the years. The projection is in 2034, the trust funds are going to run out. Of course, the trust funds are illusionary anyway, right?
Griswold: There isn't a big stock of 2.7 trillion that they're drawing down, but it does mean the general fund of the federal government has an obligation to finance Social Security, because that was paid in from the excess Social Security taxes over payments. Well, we've crossed the point where Social Security is paying out more than it's taking in, in taxes that's running down the trust funds. Of course, if you've got a population that's growing more slowly and aging, that just accelerates the day of reckoning for Social Security.
If you've got a population that's growing more slowly and aging, that just accelerates the day of reckoning for Social Security.
Griswold: It's not a complete answer, but I crunch a few numbers in the paper and show that if we have more immigration, if we adopt the high immigration scenario that the Social Security trustees have pointed out, so like 1.6 million net migration a year versus their low of about 900,000 a year, you can take care of about 10 to 15% of the long-term funding shortfall of Social Security. It's not a magic bullet, but if you can shave off 10% of a huge public policy problem that's looming just in the next 15 years, that's significant.
Griswold: And the other thing is, of course, you expand the tax base with workers, and in some ways you create more demands on taxes, right? You need to build more roads and infrastructure, but there's other things that are public goods, right? National defense, paying off the national debt, those don't get bigger when you have more people come in. The expense is fixed going forward, or at least it's independent of the population. But if you have more people than the cost per capita of national defense of paying, of the national debt lessens, so that's another benefit.
Griswold: I also will point out high skilled immigrants are pure gravy from a fiscal point of view. The National Academy of Sciences did a very thorough analysis of the economic consequences of immigration. I think that study came out in 2016, but they pointed out that the typical immigrant who comes to the United States with a bachelor's degree, over their lifetime will pay half a million dollars more in taxes than they consume in government services. If they come in with an advanced degree, it's close to a million, it's like 972,000, over their lifetime.
Griswold: Well, you multiply that by hundreds of thousands a year, you're contributing to the fiscal health of the country hundreds of billions of dollars a year by allowing more immigrants. I'll just point out one other thing. The Congressional Budget Office, the Social Security Administration, their projections depend on lots of other things, but they do depend on the population growth of the economy for all the reasons we've talked about. David, they assume a total fertility rate of 1.95.
You're contributing to the fiscal health of the country hundreds of billions of dollars a year by allowing more immigrants.
Griswold: I guess it's just bureaucratic inertia. There's smart people doing these projections. They're trying to get it right, but they're assuming a total fertility rate that's above the current rate. If you believe what the authors at the Lancet article point out, and I think it's pretty convincing, it's going to go lower. Those projections of CBO, of these huge budget deficits, of the Social Security administration of this day of reckoning getting closer all the time, it's even worse than we think because of the declining demographic picture that our country faces.
Griswold: Again, I sound like a broken record, but immigration is the one policy tool. You pointed out we can't do much about the death rate, it's just fixed. We can improve health, especially for elderly people, but that just keeps older people living longer, which is fine, but it that doesn't help you with the workforce. The total fertility rate is hard to jigger very much. Some countries have experimented with subsidized childcare and child credits, and they get maybe a one or two, a 10th of a percent bump up in the total fertility rate, but nothing that gets you back to 2.1. It comes down to changing our immigration policy.
Griswold: I had some reasons, I think President Trump had better policies ... President Trump would have better policies than Biden on taxes and other things, but on immigration, President Biden, I think clearly has what I would say are better policies that going to help us in this demographic challenge that we face.
Beckworth: Now on the fiscal sustainability question, when they do these calculations, like the ones you do in your paper or the ones that these agencies have done, are they looking at population growth as just an input to the economy, or are they also considering like the Paul Romer endogenous growth model or the Julian Simon effect, where TFP could also eventually go up?
Griswold: David, that's a good question. I don't know if their models take that into account. Obviously just population growth itself is a major factor and that's enough, but if anything the Romer model, that dynamic effects would just accentuate everything we've been talking about.
Griswold: You either get an increased benefit from having more people come in, or it just creates a kind of ... I mentioned in the paper, a downward fiscal and economic spiral, and that is the fewer workers you have to support the retirees, the more temptation there is to raise taxes on the workers that are still in the workforce to fund it. Well, more taxes has a discouraging effect on work, on investment, and you just get a downward spiral. We need to adopt policies today that get us out of that spiral.
More taxes has a discouraging effect on work, on investment, and you just get a downward spiral. We need to adopt policies today that get us out of that spiral.
Beckworth: Yeah. To paint a more positive picture, if we do have more people through more immigration, not only do we get better numbers in terms of fiscal sustainability, but it may be even better than the static analysis would suggest, because of that spillover effects into productivity growth. Maybe you go the other way down. I can imagine a world where we have fewer people, less dynamism, less innovation, less total factor productivity growth, so it actually is worse than what they're projecting.
Beckworth: If I can try to be charitable here, best case scenario, you have this decline in population and maybe it forces us to become more innovative, but that's, I don't want to bank on something like that. I don't want to bank on substituting to robots, because we run on physical bodies to do work. I'd rather roll the dice with more immigrants, which we know will make a difference. Okay. So we got economic growth, reason number one, fiscal sustainability, reason number two, and then a third one, I'm going to call the moral case. You don't use that term, but I'm going to use that case, the moral case for immigrants in terms of our influence around the world.
The Moral Case for Immigration
Griswold: Yeah. You could call it the moral case. You could call it soft power, our influence in the world. Despite our recent turbulence, we remain the world's leading free market democracy, market democracy in the world. The US is unique in a lot of ways, but one way we're unique is we're not only rich, but we're big. There are other countries that are maybe as rich or richer than we are Luxembourg, Switzerland. There are other countries that are bigger than we are in terms of population, but no country is as big and as rich and as dynamic as the United States.
Griswold: This is where, David, I only spend a few paragraphs on it in the paper, but I'm maybe appealing to economic nationalists and America Firsters. If you consider Russia and China as our chief rivals in the world, and I think they are, what's one ace in the hole we have versus both of those countries? It's our growing population. They both have fertility rates that are below ... We're at about 1.7, Russia's at 1.6, China's at 1.5. Those aren't going to go up. We in good years attract a million or more immigrants a year. Both of those countries, aren't very attractive to immigrants.
Griswold: Demographics is one of the strategic as well as economic advantages we have. Why if you care about our influence in the world, would you want to literally shrink the American economy and our influence? Yes, there is a moral dimension to this. I want the United States to be a beacon to the world, welcoming people from around the world. We are an example of people from all over the world coming here, working side-by-side in their communities, having this wonderful dynamic, not only economy, but culture.
Griswold: To me, you just add it all up and it argues for, we need to look for ways of having more legal immigration to the United States.
Beckworth: Yeah, absolutely. Just looking back over the past year or so, I've been disappointed in some of our industries in the US who've changed their behavior because China's such a big market now. The NBA for example. I don't know if you remember the incident about Hong Kong protesters and LeBron James just completely cowered in my view. He's eager to talk about some issues, but when it comes to China, he completely backed down. I've mentioned on a previous podcast with Caleb and with Matt Yglesias, the impact China's having on movies coming out of Hollywood.
Beckworth: There's a number of other stories you can tell, because China has such a big market, they're going to be setting the norms. We want to have a big market so we can set the norms. It's important for us to maintain ... Again, it is a very US centric point I'm making here, but if you believe that we have the ability and responsibility to set good norms for the world, we can't do that if we shrink, and population growth is a big part of that story.
Griswold: David, just one interesting thing in the Lancet article, they not only project population, but they project the size of the economy. They actually say it's inevitable that China's economy is going to become larger than ours. They have four times as many people that if they just have a per capita GDP, one quarter of ours, they're going to have a bigger economy. The Lancet article actually projects out 100 years, or at least to the end of this century, that their economy is going to become bigger than ours.
Griswold: But then ours is going to become bigger than theirs again, because if we're facing a demographic challenge and we are, China's is even more serious. Their working age population is declining now, and immigration isn't really an option for them. It is very much for us. If you care about America's influence in the world, there's lots of factors that go into that, but we can't have a shrinking population, an older, less dynamic and smaller population and hope to exert all the positive influence that we can in the world for our benefit and the world's benefit.
Beckworth: That's right, Dan. Now we've been talking around this demographic decline that the facts, the implications, why we should care about it, and we've touched on the solution, but let's really drill down into what the solution you see is. As you say, it's not altering fertility rates or death rates, because those are largely fixed, we might even say exogenous to some degree. That's not completely right, but they're very hard to nudge. Immigration, we have a lot more leverage over it. What would you like to see the US do to fix this demographic decline via immigration?
The Immigration Solution for Demographic Decline
Griswold: The answer is simple if not politically simple. That is, we need to expand legal immigration to the United States. Up until the Trump years, we were averaging about 1.2 million net migration a year, issuing green cards to a little over 1 million people a year. I'd like to see us increase that whatever the number, I think it would be 1.5 million. Australia and Canada have legal immigration rates that are more than twice what ours is. We could have two million immigrants a year and we still wouldn't be where Australia and Canada are in terms of legal immigration per capita.
The answer is simple if not politically simple. That is, we need to expand legal immigration to the United States.
Griswold: Last time I checked, their economies are doing fine, their democracies are solid. They're thriving countries significantly smaller than the United States, but basically the same model. I think President Biden has taken some promising steps. He's reduced a lot of the Trump restrictions on immigration. He's talked about legalizing the 10 or 11 million who have been here illegally, many of them for a decade or more. We need to do that, including the DACA young people. But that's just a one-time fix.
Griswold: The ultimate solution and President Biden's been a little less clear on this, but I hope he comes around and embraces it fully, and that is to expand legal immigration significantly. David, we need more temporary immigration. H-1B is the principle of vehicle there, but of course those temporary immigrants and they're by definition high skilled, right? They all have a bachelor's degrees. They overwhelmingly work in computer sciences and IT, all the positive impacts that has on our economy, both fiscal and for dynamism. But H-1B workers often roll into permanent migration, permanent immigration, green cards.
Griswold: We need to increase both H-1B and employment-based green cards, and I've proposed elsewhere raising those numbers significantly. Let's index those numbers to the growth of the workforce, so we don't ... We haven't adjusted the H-1B caps and the employment based green cards for 30 years.
Griswold: We're still literally stuck at 1990. We increased the H-1B visas by 20,000, for those with master's degrees or higher from US institutions. But basically we're still stuck 30 years ago. Think how much the US economy has changed since 1990. If we do those things and also we need lower skilled immigrants too. A lot of that temporary, but they're doing important jobs, right? We've been reminded of that in our COVID economy, in terms of the construction industry, the hospitality industry, the contributions that immigrants make to the health care industry.
Griswold: We were talking earlier about rural America. They're not only emptying out just in terms of working age population, but they don't have enough doctors and healthcare. Let's have immigrant doctors come here and give them incentives to at least for a time work in rural areas. Immigration, I think answers so many needs of our country. Finally, I think we've got at least the political support and let's mention the public. One of the silver linings, I guess, of the Trump administration ... I don't want to dump on it, but on trade and immigration, President Trump was about as wrong as the president can be, let me just say that.
Griswold: But the public, if you look at the public opinion polls, David on both trade and immigration, the American public arguably has never been more friendly to the idea of welcoming more immigrants, of trading more with other countries, signing trade agreements. It's not the top issue for most Americans. It is for me because I love the issues. But it just means there's the political space there for a President Biden, for Democrats and Republicans in Congress to work together for immigration reform.
Griswold: Just a little bit of quick politics, in 2006 and in 2013, the US Senate passed serious immigration reform, including legalization of those here, including expanding illegal immigration by a super majority. I think it was 62 senators supporting it and of course, Democrats and Republicans alike; 68 in 2013. It died in a Republican controlled house. Now, that isn't going to happen this time around. I'm by nature, a glass half full person. I think there is the political space, the political opportunity to get real immigration reform done this year or next year. We just need the political will and the leadership to get it done. This paper on demographics just provides, I think one more argument that should appeal in a bipartisan way for members of Congress and the president to get this job done.
The American public arguably has never been more friendly to the idea of welcoming more immigrants, of trading more with other countries, signing trade agreements...There's the political space there for a President Biden, for Democrats and Republicans in Congress to work together for immigration reform...I think there is the political space, the political opportunity to get real immigration reform done this year or next year. We just need the political will and the leadership to get it done.
Beckworth: So, don't waste an opportunity.
Griswold: Yes, yes.
Beckworth: So, Dan, you touched on the Biden administration's new policies or potential new policies toward immigration. What we've seen so far is talk about DACA, giving a path to citizenship for the 11 million or so that are here. All of those are nice and great. I think we both agree would be a net benefit to the economy, but it's a one-time thing, right? It's like an increase in the level. It's not changing the growth rate. What you want to see is a more, and what you think is the more permanent solution to our demographic decline is a sustained change in the rate of increase in terms of number of people coming into the country, correct?
Griswold: Exactly. David, I've been studying and reading and writing about immigration for more than 20 years at the Cato Institute and at the Mercatus Center. If there's one common thread, it's been this argument that if you want to help the economy, and by the way solve illegal immigration, you need to increase numbers of legal immigration. We had an attempt at immigration reform in 1986. President Reagan signed the Immigration Reform and Control Act. It had a one-time legalization of about 2.7 million.
Griswold: It increased border enforcement. It was a temporary fix. It ultimately failed to solve illegal immigration. Not because we didn't have enough emphasis on enforcement, it's because it didn't do anything about expanding the future flows of legal immigration. I hope the Biden administration grasps and congressional leaders grasp that, yes, it's a good thing to legalize those who have been here, who are undocumented and have been here, working and contributing to society for years and years, including the DACA young people.
Griswold: But the single most important thing we can do on immigration reform is to expand opportunities for legal immigration, mostly at the high skilled [level], and expand H-1B, expand employment based green cards and then index them so they continue to grow more opportunities for low skilled immigrants as well. We have to do that and that will aid our economy. It'll brighten our demographic future. It'll make this great country even greater and more of a beacon and influence in the world.
The single most important thing we can do on immigration reform is to expand opportunities for legal immigration, mostly at the high skilled [level], and expand H-1B, expand employment based green cards and then index them so they continue to grow more opportunities for low skilled immigrants as well.
Beckworth: Okay. You've got me sold. Let's move on in the time we have left to trade policy. You touched on it a little bit already. But definitely trade policy was a big part of the conversation around President Trump. It looks like it will be with Biden as well. One question I have about the legacy at least of Trump's administration on trade policy, do you think it will have a lasting change in the trajectory of where trade policy goes? Our friend, Doug Irwin had great book *Clashing Over Commerce.* I've had him on the show a few times.
Beckworth: You've worked with him many times and he talks about there being three regimes in US trade history. I'm wondering, is this a new one we're in or are we on the same one, and President Trump's trade policy was just the big nasty bump in the road, we've made it over and we're back on the trajectory we were on before him?
The Post-Trump Future of Trade Policy
Griswold: Yeah, well, of course time will tell. There's less to say on trade in part because President Biden isn't as different as Trump is on trade. I wish he was. But he sounded some Trumpian themes, buy America, having buy America provisions for at least a federal procurement. Of course, what this means is less competition for government contracts, which means we'll pay more for infrastructure and defense and all these other things. It's basically ripping off taxpayers to get less for our tax dollars.
Griswold: By the way, US companies are very competitive in bidding for contracts in other governments. In the WTO, we have something called the government procurement agreement, which basically we agree to open up contracts to foreign providers, as long as they open up contracts for US providers. Well, if we focus on buy America, what that will mean is other countries will focus on buy France or buy Japan or buy India, and that means not by American.
Griswold: It's just not a good deal for ultimately for the US economy and US taxpayers, and President Biden has kind of swallowed that approach unfortunately. I think what you will see, David, is a ramping down of the aggressive, confrontational rhetoric of the Trump administration. I don't think you'll see these sweeping unilateral tariffs go into place. I think there'll be rolled back much more slowly than I would like. I don't have great hopes for a significant change under Biden. He may ultimately want to rejoin the Trans-Pacific Partnership in some way or another that was negotiated under the Obama/Biden administration.
Griswold: I think that was a good agreement, which we should have been a part of. We're losing out in markets over there. I think you'll see the World Trade Organization get revived as a dispute settlement forum. Under the Trump administration, we have unconscionably thwarted and paralyzed the dispute settlement mechanism, which has worked actually quite well and in America's interests. We won lots of cases where we've opened up foreign markets through the dispute settlement mechanism. I think Biden will re-engage there. I'm cautiously, in the long-term, a little bit optimistic about trade policy under Biden, much more so about immigration policy.
I'm cautiously, in the long-term, a little bit optimistic about trade policy under Biden, much more so about immigration policy.
Beckworth: Okay. Biden will be more of an institutionalist, kind of restore things like the WTO, maybe engage more with multi-lateral trade deals, as opposed to trying to go alone. I think that's one of the lessons we've learned from the past four years, that trade is not easy if you go it alone. It's much easier if you have a multilateral approach.
Griswold: Correct. You mentioned the great Doug Irwin, we're both fans of his. The era we've been in, in trade policy since the 1930s, Smoot-Hawley was the end of the previous policy, a crash and burn of that old model of inward looking tariffs. We've had the area of reciprocity, which has meant we'll lower our tariffs if you lower yours. That has worked quite well, both in the multilateral, WTO, the GATT and then the WTO and also assigning regional agreements. That was at first anyway, a democratic enterprise. Your great Tennessean, Cordell Hull, was FDR’s secretary.
Griswold: He led us out of the protectionist wilderness, and most of the trade liberalization we've experienced in the post-war era has been under the leadership of Democrats who understood, yes, it's good for our economy, but it's also good for our place in the world, this soft power, this influence that we were talking about earlier. Trade enhances that as well as immigration does.
Beckworth: Okay. Well, on that high note, our time has come to an end. Our guest today has been Dan Griswold. Dan, thank you so much for coming back on the show.
Griswold: David, always a pleasure.
Photo by Alexi Rosenfeld