Stagnant budget negotiations indicate that no “grand bargain” will be reached to lower the federal deficit. The United States does have a long run budget problem, but that budget problem is not nearly as large as many have made it out to be.
The Congressional Budget Office scored next year’s budget deficit to be 3.9 percent of GDP, which is down from 9.8 percent in 2009. This is the fastest pace of reduction ever outside of the demobilization after World War II. Jason Furman, President Barack Obama’s top economic advisor, said Nov. 19, that the fiscal gap, which marks the difference between current taxes and the amount of future taxes that would need to be raised in order to meet our budget expenses over the next 75 years, is only 1.7 percent of GDP. This is definitely a manageable number.
The New York Times published a story that identified even Republicans do not want to cut Medicare and Social Security or raise taxes before the 2014 midterm election, leaving no room to pass a substantive budget. More likely than not, the current budget negotiations will only kick the can down the road yet again. However, there is a legitimate Plan B: immigration reform. Between 1990 and 2005, immigrants created 25 percent of the highest growing companies over this period and immigrants make up almost 17 percent of all new business owners.
The Congressional Budget Office found the immigration reform bill the Senate passed would increase real GDP by 3.3 percent in 2023 and 5.4 percent in 2033, real increases of $700 billion and $1.4 trillion, respectively. The key to reducing our deficit is growing our economy rather than cutting from it. The CBO also indicated a 0.2 percent increase in the long-run growth rate would bring our long-run budget deficit to zero. Immigration reform offers a means to increase the long-run growth rate by 0.2 percent and eliminate America’s fiscal gap. Unfortunately, House Speaker John Boehner has refused to go to conference with the Senate on the immigration bill the Senate passed over the summer. It is one thing to oppose legislation, but it is completely unacceptable and self-serving to not even go to conference to discuss possible solutions. It is these types of actions that create the hostile and ineffective environment Washington, D.C. finds itself in today. While the “grand bargain’” as has been described in the past will likely not happen, should the House and Senate reach compromise on the immigration bill, another “grand bargain” would emerge. This grand bargain would expand the economy, which a budget-cutting bill would not do, and it would provide a significant means to lowering the deficit.
Alex is a junior majoring in political science, economics and environmental science. Do you think immigration reform would effectively lower the United States budget deficit? Please send all feedback to opinion@dailycardinal.com.
