Spurring an Economic Recovery: Citizenship for Certain Illegal Immigrants

A significant amnesty granting citizenship for large numbers of illegal immigrants would stimulate consumer spending and borrowing, introduce several million new potential home purchasers into the economy, and bring potentially hundreds of thousands of new citizens into the regular economy to buy cars, purchase insurance, borrow from banks, and buy homes. Total economic consumer demand for purchases and borrowing is declining as large numbers of U.S. households confront declining home values, a challenging job market, and lack of credit. Consumer spending is responsible for more than two-thirds of total U.S. gross domestic product: there will no recovery in the U.S. economy until consumers begin to increase spending again. Forces working against increased consumer spending in the near term are rising unemployment, the unavailability of credit, and falling home values.

Economic demand could be stimulated by tax cuts and the lowering of interest rates by the Federal Reserve. However, the federal government and most state and local governments are experiencing huge deficits: their ability to borrow further is threatened by declining tax receipts, and their ability to cut taxes further is limited by their immediate need for revenue. With regard to interest rates, the Federal Reserve has already pushed rates to 1-1/2%, but borrowing rates for consumers have not declined. In fact, most lenders are restricting lending to only the most credit-worthy consumers.

There is a simple solution to stimulating aggregate demand in the economy: naturalizing several million illegal immigrants in the U.S. Most illegal immigrants operate in a shadow economy, not making major purchases that require credit, and operating on a cash basis that does not rely on social security numbers and credit checks. Illegal immigrants today drive cars purchased for cash from desperate sellers, and often drive without a driver's license and insurance (which require proof of citizenship or residency). It is not difficult to imagine the normal spending of new citizens regularizing their transaction in order to maintain their citizenship.

There are a few classes of illegal immigrants that could be granted citizenship without much fanfare. First, approximately 60,000 graduating high school seniors each year are illegal immigrants. They were often brought to the United States as young children by their illegal immigrant parents, and grew up on the United States. A bi-partisan proposal called the DREAM Act (Development, Relief, and Education for Alien Minors Act) to naturalize these children failed in both houses of Congress, but that Act should be revived. Naturalizing these children who have worked hard to graduate from high school would allow them to go onto college (where citizenship or legal residence is required), purchase cars, get married, buy homes, and be productive members of the United States. Currently, these students graduate - sometimes as valedictorians - and work in menial, low-paying shadow economy jobs.

A second group of naturalizable illegal immigrants are spouses and children of legal residents who came to the United States illegally with an illegal immigrant spouse who later obtained legal residence. Currently, there are at least one to two million illegal immigrant spouses and children of legal residents in this country. The legal spouse often obtained legal status through asylum or through a special employment based program. His or her spouse and children may have visited and overstayed their visitor visas or have entered the country illegally. Many have already applied for their legal residency but the wait for a visa number and thus residency in these categories (spouse of resident and illegal immigrant minor or major children of legal resident) can be over ten years for residents from some countries. These are intact families with a working spouse. Naturalizing the illegal immigrant spouse and children will allow these families to increase their household income, spend more, move to a home rather than renting, and contribute to aggregate demand in the economy.

Third, we need to offer legal status to workers who have come to the U.S. legally, but whose job change or other circumstance terminated their legal residency status. Some workers come to the United States on H1-B visas that require that they work for a specific employer or work in a specific industry for some period of time. They cannot change employers without jeopardizing their visa, but some do leave their job or are terminated from employment for economic reasons. These individuals were given legal work permission, but because of some unforeseen event have lost the permission to work legally in the United States. Often these individuals are skilled and productive workers.

Additionally, Congress should offer thousands more H1-B visas for skilled workers to work in the United States. The United States exports jobs to other countries not because those jobs can be performed less expensively overseas, but because the skills are overseas. Allowing U.S. companies to bring in skilled workers would increase total economic demand and consumption in the United States and bolster the U.S. economy.

What about the concern about labor unions that the new workers would take their jobs in a slow economy. Studies on immigration have shown that the net result of immigration for the economy is a greater number of total jobs for all citizens over time. At any one point in time, more workers for the same number of jobs would increase competition for that static number of jobs. However, over any meaningful period - one year, two years, five years, ten years, etc. - immigration has shown to generate jobs rather than increase competition for them. Furthermore, many jobs are sent overseas because of the U.S. immigration policies; those jobs could be bought back to the U.S.

Several million illegal immigrants who are already in the United States working in the shadow economy could be converted to home buyers, auto purchasers, and bank borrowers without great fanfare or controversy. Doing so would stimulate consumer spending and promote a recovery in slowing U.S. economy.