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.
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