Tuesday, June 18, 2013

Immigration Reform Bill: Higher Unemployment, Higher Interest Rates, Lower Wages, Lower GNP


There should be a congressional hearing on how the CBO was directed to lie to the American people about the "Immigration Reform" bill. Normally, we go soft on the CBO. Their job is to make estimates based upon narrow parameters. Their estimates do not include macroeconomic variables, only static analysis, and are limited to a 10-year time frame...until today.

To save you time, the CBO report contains the following within their typical 10-year estimation window, the rest is just politically-motivated Doo Doo designed to push through amnesty:

  • "S. 744 would lower per capita GNP by 0.7 percent in 2023"
  • "Slightly raise the unemployment rate through 2020"
  • "Average wages for the entire labor force would be 0.1 percent lower in 2023"
  • "Higher Interest Rates"

Only economically net positive macroeconomic effects are included in this report.

The Details

CBO.GOV on the Amnesty bill: (bold italics ours)
Following the long-standing convention of not incorporating macroeconomic effects in cost estimates—a practice that has been followed in the Congressional budget process since it was established in 1974—cost estimates produced by CBO and JCT typically reflect the assumption that macroeconomic variables such as gross domestic product (GDP) and employment remain fixed at the values they are projected to reach under current law. However, because S. 744 would significantly increase the size of the U.S. labor force, CBO and JCT relaxed that assumption by incorporating in this cost estimate their projections of the direct effects of the bill on the U.S. population, employment, and taxable compensation
I The Government

ONLY the bill's economically net positive effects are included and widely reported to people who will never drill down to the truth. This is another affront to our nation and an insult to our intelligence. If you are going to break convention, at least be intellectually honest. This can only mean that this report was politically motivated, a repeat of the ObamaCare CBO reports.

There are parts of the truth littered in the report, but just enough to make the lie convincing to those who want to use it for political purposes. The CBO breaks their own 10-year estimation rule. Making economic estimates further than 10 years out is a fool's errand on the scale of global warming predictions.

Consider the rationalization for extending the CBO forecast beyond 10 years with the argument that low-skilled workers incorporated into the estimate will not be eligible for social security and other benefits for 10 years: (bold italics ours)
CBO and JCT generally do not provide cost estimates beyond the standard 10-year projection period. However, S. 744 would cause a significant number of people to become eligible for certain federal benefits in the decade following 2023, so CBO and JCT have extended their estimate of the effects of this legislation for another decade.
 From here the report attempts to lump unspecified economics impacts "take our word for it" style:
...the economic impacts not included in the cost estimate would further reduce deficits (relative to the effects reported in the cost estimate) by about $300 billion over the 2024–2033 period.
Next, soft-selling of lower GNP and average wages:
Per capita GNP would be less than 1 percent lower than under current law through 2031 because the increase in the population would be greater, proportionately, than the increase in output; after 2031, however, the opposite would be true. CBO’s central estimates also show that average wages for the entire labor force would be 0.1 percent lower in 2023 and 0.5 percent higher in 2033 under the legislation than under current law. 
The only saving grace to this report is buried at the very end, in the summary: (bold italics and brackets ours)
 In sum, relative to current law, enacting S. 744 would:
  • Increase the size of the labor force and employment,
  • Increase average wages in 2025 and later years (but decrease them before that), [B.S.]
  • Slightly raise the unemployment rate through 2020,
  • Boost the amount of capital investment,
  • Raise the productivity of labor and of capital, and
  • Result in higher interest rates.
Chalk this one up as another attempt to sell Doo Doo Economics.
Doo Doo Economics


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