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Trump’s Plan To Cut Legal Immigration Could Hurt The Economy

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Immigration: Who will get the job done?

President Trump rose to political prominence in part by promising to crack down on illegal immigration — his signature promise during last year’s campaign was that he would build a wall on the Mexican border. Now he wants to reduce legal immigration as well. On Wednesday, Trump announced his support for a bill that would cut in half the number of green cards issued annually and would overhaul the immigration system to give more weight to prospective immigrants’ skills rather than their ties to family members already in the country. “This legislation will not only restore our competitive edge in the 21st century, but it will restore the sacred bonds of trust between America and its citizens,” Trump said in a joint appearance with the bill’s authors, Republican Senators Tom Cotton and David Perdue.

Cotton and Perdue have dubbed their bill the RAISE Act (Reforming American Immigration for a Strong Economy), and as that name suggests, they are pitching the legislation as a way to boost pay for American workers by protecting them from competition from immigrants. The bill has two main provisions for doing that: switching to a so-called merit-based immigration system, and reducing the number of immigrants admitted to the U.S. each year. It’s worth considering them separately.

First, Cotton and Perdue (and Trump) want to change how the U.S. decides who to admit to the U.S. Right now, the immigration system is primarily family-based: The U.S. issues about 1 million green cards1 each year, and roughly two-thirds of them go to people who already have close family members in the country. The RAISE Act would instead emphasize applicants’ skills; it would grant visas in part based on a system of points that gives credit for education, English-language ability, “entrepreneurial initiative” and other factors. (Low-skilled immigration, including legal and illegal, is already falling under the existing system.)

Many critics of the merit-based approach see it as un-American. On Wednesday, CNN reporter Jim Acosta got into a heated argument with White House adviser Stephen Miller over whether the proposal violated the Statue of Liberty’s promise that the U.S. welcomes “huddled masses yearning to breathe free.” But the idea also has its defenders, including some economists, who argue that it makes sense to give preference to immigrants who have skills that employers need and who are less likely to rely on government benefits. They note that other countries, including Canada and Australia, already use merit-based systems. (Other economists argue the U.S. needs both high- and low-skilled immigrants, and note that less-educated immigrants have high rates of entrepreneurship.)

There is far less disagreement among economists about the RAISE Act’s other big proposal, which halves the number of green cards issued each year. Mark Zandi, chief economist at Moody’s analytics, called the move a “grave mistake” in an interview with The Washington Post. Zandi is hardly alone: In April, nearly 1,500 economists from across the political spectrum signed a letter to Trump and congressional leaders extolling the economic benefits of immigration. They noted immigrants’ high rate of entrepreneurship, a key issue at a time when Americans are starting fewer companies, and emphasized the importance of bringing new workers to the U.S. to fill the hole left by retiring baby boomers. Trump has made the (already dubious) promise to boost U.S. economic growth to 3 percent per year; reaching that goal will be even harder with fewer immigrants on hand to bolster the U.S. workforce.

Fiscal policy: Hitting the limit

The Dow Jones Industrial Average hit 22,000 for the first time on Wednesday, and Trump was eager to claim credit. “It’s going to go higher, too,” Trump told reporters at a press conference Wednesday. “We’re doing a job.” (CNN pointed out that the milestone came almost exactly a year after Trump called the stock market a “big bubble.”)

Trump probably doesn’t have much to do with the stock market’s record run; it’s been driven by companies’ booming sales overseas. (It’s also important to remember that the stock market is a lousy measure of broader economic performance.) But there’s a surefire way that Trump and congressional Republicans could end the boom: by failing to raise the federal debt limit.

The debt limit caps the amount of money that the government can borrow. Since the government pretty much always runs a deficit, Congress has to raise the limit periodically in order to keep the lights on and — crucially — prevent the U.S. from defaulting on its debt. These debt-limit increases used to be routine, until a few years ago when conservatives in Congress figured out that they could use them as leverage. During the Obama administration, the votes repeatedly turned into a game of “chicken,” with Republicans demanding concessions — generally cuts to government spending — in return for raising the debt limit. The fights caused turmoil in the markets, particularly in 2011, when the standoff contributed to Standard & Poor’s decision to strip the U.S. of its AAA credit rating.

Now the issue is looming again for the first time since Trump took office. In a letter to congressional leaders last week, Treasury Secretary Steve Mnuchin said it is “critical” for Congress to raise the debt limit by late September. House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell reportedly want to avoid any drama and pass a “clean” increase that doesn’t include spending cuts or other provisions. The White House wants that too; budget director Mick Mulvaney, who earlier this year said he wanted to pair a debt limit increase with spending cuts, on Wednesday said he now backed a clean hike.

It isn’t clear, however, that rank-and-file Republicans in the House are on board. The conservative Freedom Caucus appears to have given up on the huge spending cuts they initially demanded, but still hasn’t committed to a clean increase. And Politico this week reported that Democrats are warning that GOP leaders shouldn’t count on them to pass an increase, either. With Republicans controlling both chambers of Congress and the White House, a full-blown debt-limit showdown seems unlikely. Then again, “unlikely” is the new normal in Washington, D.C. If the vote comes down to the wire, investors could suffer.

Education: Affirmative action

The Trump administration appears to be wading into one of the longest-running battles in the culture wars: affirmative action in higher education. On Tuesday, The New York Times reported that the Department of Justice is preparing to investigate and possibly sue colleges and universities that engage in “intentional race-based discrimination” in their admissions processes. The Times said the move appeared to target policies that solve people believe discriminate against white applicants; the Justice Department disputed that characterization and said it was instead pursuing an existing case alleging discrimination against Asian-American applicants at Harvard. But Attorney General Jeff Sessions has been critical of affirmative action in the past, and The Washington Post cited two anonymous sources saying the Justice Department is looking for new people to work on the investigation after career staffers refused to do so.

The debate over affirmative action has a long, tortured history in both the political and legal arenas. The Supreme Court has repeatedly upheld the right of colleges to consider race in admissions but has narrowed that right over time: Just last year, the court upheld the University of Texas’s race-conscious admissions program but warned that not all affirmative-action policies would be constitutionally permissible. Proponents argue that affirmative-action policies not only help increase diversity on campus but also give disadvantaged groups an opportunity to attend college, which they might not have had otherwise. Opponents say the policies discriminate against white and Asian applicants.

This much is clear: Despite affirmative action and other efforts to diversify college campuses, black and Latino students remain significantly less likely to attend college than their white and Asian peers. Black and Latino students are underrepresented at public universities in nearly every state relative to their share of the college-age population, according to data from the Education Department and the Census Bureau.2 Public colleges in states that have banned affirmative action have, on average, even wider racial gaps in enrollment.

For all the attention on enrollment, however, the racial gap in graduation is just as significant — and even more stubborn. Studies show that black and Hispanic students graduate at lower rates than white and Asian students. In Oklahoma, for example, 13 percent of black students and 31 percent of Hispanic students at public universities graduate within six years; among white students, the graduation rate is 36 percent.3

Footnotes

  1. Green cards (more formally known as “lawful permanent resident” cards) give holders the right to live and work permanently in the U.S. and to receive Social Security and other benefits. Green cards also offer holders a path to citizenship.

  2. We used the Department of Education’s College Scorecard data to calculate undergraduate enrollment by race and ethnicity at four-year public colleges for every state. We compared those numbers to the racial breakdown for residents ages 18 to 24 in each state, using Census population estimates via the Missouri Census Data Center.

  3. The Department of Education doesn’t release state-level graduation rates. These figures are calculated by averaging school-specific graduation rates, weighted by each school’s undergraduate population in each racial category.

Ben Casselman is a senior editor and the chief economics writer for FiveThirtyEight.

Michelle Cheng is FiveThirtyEight’s data reporting intern.

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