Import Taxpayers

Ben Wattenberg

October 10, 1990|By Ben Wattenberg

WASHINGTON — Washington.---FRANTIC BUDGETEERS in Washington would be oh, so happy if there were only a magical way to cut the deficit, without raising taxes, without cutting spending -- during a time of economic sluggishness when straight economic growth can't do the job.

Curiously, there is a way.

Sounds like a free-lunch recipe from a funny farm? It is not. You get more revenues, without raising taxes, if you add taxpayers.

How do you get more taxpayers? You can grow them. That starts with conception. It then costs a lot to raise the little critters, and it takes roughly 20 years, a generation, until you get a real producer. Not an immediate help.

Or you can import extra taxpayers. That process is called immigration. It doesn't take 20 years. It can start in 20 days if Congress acts wisely.

How does it work?

Consider a new immigrant. That immigrant, typically skilled these days, gets a job. He or she pays taxes. The taxes are spent in several different ways. Suppose we categorize them as follows: Interest on the Past Debt, Defense, Social Security and Everything Else.

A share of the new immigrant's taxes goes to pay for Everything Else, but the immigrant also draws money from the Everything Else account -- education, welfare, air-traffic controllers. Call that part a wash.

But interest on past debt remains the same whether or not America takes in more immigrants. Our defense spending will remain the same. Immigrants, typically young adults, draw very little from Social Security. Those three items of fixed costs or past commitments -- defense, Social Security and interest -- make up about 60 percent of the federal budget.

Accordingly, about 60 percent of an immigrant's total taxes goes for painless deficit reduction, that is, paying off fixed costs without raising the taxes of anyone now living in the United States. Roughly speaking, very roughly, that 60 percent amounts to about $5,000 per immigrant household. Per year. Year after year, compounding.

(There are other benefits. It's said that our real-estate sector is ''overbuilt.'' Hence there are ''see-through'' office buildings and apartment houses, currently near-worthless. Some are owned by the feds because of the S&L mess. But overbuilt is another way of saying ''under-occupied.'' More immigrants would help fill up those under-occupied buildings, making them valuable again.)

The United States currently allows in 540,000 legal immigrants per year. The Senate has passed a bill (co-crafted by Senators Edward Kennedy and Alan Simpson) that would raise the total to 630,000. The House-passed version (by Rep. Bruce Morrison) takes the total to 775,000. In addition, the House bill calls for additional temporary slots amounting to about 100,000 a year.

The House and Senate are now negotiating. If a bill on the high side passes, the deficit reduction during the 1990s could be in the $75 billion range, perhaps more. Because Senator Simpson is pawing the ground, there may be no bill at all.

By Washington budget-accounting standards, a potential $75 billion deficit reduction is bigger than a bagatelle, but smaller than a breadbox. It does, however, offer a message.

Our political economy is schizophrenic. Powerful forces do not want to raise taxes; equally powerful ones do not want to cut spending. The answer is economic growth, which is what makes cutting the capital-gains tax alluring. But economic growth is stimulated most by demographic growth.

Is it an economic free lunch? Of course, it is. Exactly the same kind of free lunch that, in a few centuries, changed America from an almost unpopulated wilderness to the biggest, most prosperous, most influential nation in history.

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