Much more to be said about this topic, but I’m already getting some questions as to the economic assumptions behind the CBOs score of the immigration bill. (Getting ready to go on the Diane Rehm radio show to talk sequestration’s impact).
How, for example, do you explain the budget agency’s finding that in the first decade (2014-23), the increase in the immigrant population would boost GDP but slightly lower GDP per capita (the latter relative to CBOs baseline projection–i.e., GDP/cap doesn’t fall, but it grows less quickly)?
Well, here’s some very easy math: GDP=GDP/POP*POP. All CBO is telling us is that through 2031, population growth would outpace GDP growth (if you want to get fancy, take changes in natural logs of both sides; now you have additive growth rates). So the economy gets larger–there’s more employment, more compensation, and more tax revenues–more government spending too, but revs>spending by about $200 billion over the first ten years. But because population growth is a bit faster than GDP growth, per capita GDP (first term after the equals sign) grows more slowly than the baseline growth rate.
It’s not necessarily intuitive, but what’s going on here–what the little equation shows–is that population growth adds to GDP growth. The bill, according to CBO, increases the US population by 16 million (about 4%) by 2033, and that leads to GDP that’s 3.3% higher in 2023 and 5.4% higher in 2033.