The Manhattan Institute’s City Journal is normally one of the best sources for analysis of important contemporary issues. But a long-time blind spot for the Manhattan Institute has been on issues like population growth and immigration.
A prime example of this tunnel vision is Brian Chen’s October 21 article about how many U.S. cities, and even states, have been burned so badly by the COVID-induced economic downturn. Chen observes, correctly, that an economic downturn was inevitable – if not brought on by the COVID pandemic, then by something else – but cities and states that now find themselves in fiscal crisis have acted as though the sun would shine forever.
One of the pillars of fiscally troubled jurisdictions’ pollyannnaish forecasting is that perpetual population growth would bail them out of whatever long-term financial commitments they made to satisfy the short-term demands of some special interest or another. Other faulty assumptions included a belief that the stock market would rise forever, and that people would be willing to pay whatever it costs to enjoy the excitement of Manhattan or the Los Angeles sunshine, driving up property values, rents and tax revenues.
“Population growth is a remedy for budget troubles,” Chen asserts, semi-accurately. More broadly, Chen seems troubled by the fact that the Congressional Budget Office has scaled back its 2040 U.S. population projection to 366 million – 22 million fewer than it forecast four years earlier. The underlying assumption is that population growth, rather than the skills and productivity of the population, are the determinant of prosperity and fiscal solvency.
If the people growing your population are high-earning, taxpaying folks, then the jurisdictions where they live will have more money to spend. If your population growth is being driven by an influx of low wage earners who are dependent on a lot of public services and benefit, then population growth merely blows bigger holes in budgets.
COVID-19 has exposed the obvious flaws in all of the assumptions many state and local governments made. In fact, places like New York and California were not just losing population even before COVID, but losing their middle class tax bases. These are people who finally decided that the negatives – high costs of living, burdensome taxes, poor public services – outweighed the benefits that these places offered.
In fact, Chen makes that exact point. “With unfunded pension liabilities looming, a decline in revenue was bound to push states and municipalities over the edge at some point,” he cites as one example of why these places are in trouble. Population decline in these places is not a cause of them being on the brink, but rather a symptom their reckless policy decisions.
Nor is mass immigration the answer. Continued large-scale immigration (the primary driver of population growth in the United States) of people who are heavily dependent on government assistance will not undo fiscal messes created by enormous unfunded pension liabilities and other irresponsible policy decisions. Moreover, recent trends have shown that immigrants are avoiding these poorly managed places, especially those who are likely to be net tax contributors, just like the native-born are.
A better immigration system, as opposed to a bigger one that just creates greater population growth, is part of the formula for generating government revenues that would help fill some of the yawning deficits faced by government at all levels. Fewer immigrants, but ones who are selected based on their likelihood to succeed and contribute, would be a step in the right direction.
Even a complete overhaul of our immigration policies (and ending the self-inflicted additional fiscal and social harm caused by sanctuary policies) will not offset the damage caused by decades of bad fiscal policies and unrealistic promises to government retirees and other poor spending decisions that were predicated on ridiculously optimistic revenue assumptions. These fiscal projections closely mirror unsubstantiated claims that the ill-prepared immigrants we admit today will eventually become net contributors at some point in the future and that it will all work out well in the end.
Massive immigration-induced population growth is no substitute for good old fashioned fiscal discipline. It will likely only compound the problem.