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Will Trump's 'Public Charge' Rule Destroy the Economy?

January 28, 2020 (5 min read)

Stuart Anderson, Forbes, Jan. 28, 2020

"On January 27, 2020, the U.S. Supreme Court approved an order to allow the Trump administration to proceed with the public charge rule. It is likely the administration’s most consequential economic policy. Estimates indicate the administration’s public charge rule will reduce legal immigration to the United States by hundreds of thousands of people a year. Given how much this will lower labor force growth in America, the public charge rule will likely have a more negative impact on future economic growth than anything positive the Trump administration has done or probably could do in the coming years.

While it is reasonable to be concerned about any group, whether immigrants or natives, using excessive welfare benefits, that is not the purpose of the public charge rule. Immigrants are already ineligible for major federal public benefits during at least their first five years in the United States, and the regulation does not add to those restrictions. Instead, the purpose is to make foreign nationals ineligible to immigrate by granting federal officials enormous discretion to deny them green cards.

The public charge rule was an “obsession” for White House adviser Stephen Miller because of its potential to prevent immigration, reported New York Times journalists Julie Hirschfeld Davis and Michael D. Shear in their book Border Wars: Inside Trump’s Assault on Immigration

Immigration analysts expect implementation of the public charge rule to be ruthless. An applicant would be denied permanent residence if a consular officer or immigration adjudicator, in effect, issues a prediction that an individual might use certain benefits for 12 months within a future 36-month period. U.S. District Judge George Daniels observed there is no precedent for this type of definition in the history of U.S. law.

The Migration Policy Institute concludes, “[N]early half of the U.S. noncitizen population could be at risk of a public-charge determination – up from the current 3%.” The technology startup Boundless estimates up to 200,000 young married couples could be at risk of not qualifying for a spousal green card under the regulation.

It is easy to see how much lower immigration could be under Trump administration policies. In FY 2018, 185,909 individuals received permanent residence as refugees and asylees. However, those were primarily individuals who physically arrived in prior years. Given the administration has reduced refugee admissions by more than 80% and enacted highly restrictive asylum policies, one should expect going forward that 100,000 to 150,000 fewer refugees and asylees will gain permanent residence each year when compared to FY 2018.

The number of Immediate Relatives of U.S. Citizens – the spouses, children and parents of U.S. citizens – already declined by 87,745, or 15.5%, between FY 2016 and FY 2018, after two years of administration policies. With the public charge rule in effect for the next few years or possibly much longer, depending on future court rulings and the results of the 2020 presidential election, one can foresee a reduction of 200,000 or more immigrants a year in the Immediate Relatives of U.S. Citizens category from the FY 2016 level.

There is also the human toll of U.S. citizens and lawful permanent residents separated from spouses and possibly needing to leave the United States to be with them. (See this analysis of the impact on U.S. citizens of the administration’s travel ban.)

Admitting fewer immigrants generally means less economic growth, since labor force growth is an important element of economic growth. It is economic growth that improves the standard of living in a nation. Using the public charge rule to reduce legal immigration means lower long-term economic growth may be Donald Trump’s most lasting legacy.

To give a sense of the impact: Joel Prakken of Macroeconomic Advisers estimates if America cut legal immigration in half that would reduce the rate of economic growth in the United States by about 12.5%. “The effect gets bigger over time because the Census assumptions for immigration keep growing,” said Prakken.

Without immigrants contributing to the quantity and quality of the labor supply, the majority of the economic growth gains America saw between 2011 and 2016 following the recession would have been wiped out, according to economists at Oxford University and Citi.

“In the past decade, population growth, including immigration, has accounted for roughly half of the potential economic growth rate in the United States,” according to Morgan Stanley’s chief global strategist Ruchir Sharma. “Virtually no nation has ever sustained rapid economic growth without strong population growth. And at a time when every major country including the United States faces continued decline in population growth, workers are an increasingly precious source of national economic strength.”

The Pew Research Center finds the size of the U.S. labor force would fall without immigrants. Pew concluded that without new immigrants, by 2035, “the total U.S. working-age population would drop by almost 8 million (or more than 4%) from the 2015 working-age population.”

The conservative American Enterprise Institute asked more than 20 economists to evaluate the Trump tax cuts. Several supported specific reforms and believed lower taxes served a purpose by allowing individuals and businesses to keep more of what they earned. However, in general, the economists did not find a significant positive long-term impact of the Trump tax cuts on economic growth.

A National Foundation for American Policy analysis found the Trump administration’s protectionist trade policies have negated much of the benefit to the economy from its deregulation policies, even using the administration’s own deregulation estimates.

Over time, the impact of hundreds of thousands of fewer immigrants per year would have a significant negative cumulative effect on the U.S. economy and America’s ability to deal with its aging population. As labor economist Mark Regets, a senior fellow at the National Foundation for American Policy, puts it: “You can’t change the labor force by millions of people and have it not be consequential.”"