Saturday, February 2, 2013

The Deficit and Immigration

Today's U-T is reporting that about 365,000 illegal immigrants evaded border security forces this year, down from a peak of 1.2 million in 2005.  This is either good news that stepped enforcement is working or proof that the border is still porous, depending on your point of view.  This may turn into one of those rare problems that goes away on its own.  The following chart of Mexican fertility rates informs the issue:

As you can see, Mexico's fertility rate had fallen very close to the replacement rate of 2.1 by 2010.  I expect this downward trend to continue and will result in much less economic pressure for Mexicans to desire to immigrate to the United States.  A WSJ article on America's baby bust indicates that a similar pattern is taking place in all of Latin America.  So while we debate how to solve illegal immigration, the problem may be solving itself.

That's not to say there is nothing to fix.  It still behooves us to secure the border, in order to prevent criminals and terrorists from entering.  But if we had a very broad based guest worker program, I think the number of illegal crossings would vastly diminish.  That would also increase the success rate for catching border crossers, because they would be much more rare, and the resources in place would be adequate to the task.

I look forward to reasonable immigration because we need more workers in this country, especially skilled workers.  Expansion of the legal avenues of immigration, such as the H-1B visa program, are unlikely to happen outside of the context of full reform.  But I am also committed to the rule of law, so I demand a secure border and that those who have entered illegally not be permitted citizenship, even if we allow them to stay under some circumstances.

What has this got to do with the Federal budget deficit?  Looming future deficits are a result of the poor shape of our demographic curve.  We don't have enough workers compared to the number of folks drawing medicare and social security.  The graph below shows a bulge of workers peaking in the 50-55 age range, with fewer workers behind them to produce the economic output necessary to sustain them in retirement.  Further, we can predict that the base of the graph will continue to shrink over time, see WSJ article on baby bust.

Certainly, there are other issues exacerbating the deficit.  Federal spending jumped in 2008-2009.   Promised benefits have also grown, and medical cost inflation has exceeded general inflation, but this profile would still spell trouble.  Increased immigration is a stop gap measure to fill in the gaps in this curve.  But that requires reform of the current system.

But in the long term, forces are at work that are slowing the growth of population world wide.  Doom-and-gloomers are now predicting extinction of the human race in 600 years due to falling birth rates, just getting ahead of the curve, I guess.  However, the forces and incentives shaping today's falling birth rates will certainly undergo change themselves.  Who knows what technology will bring to cause that change?  Child rearing robots could be THE key invention of the next century.

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