There are plenty of reasons to think strong and steady economic growth is a pretty darn good thing: higher incomes, more jobs, lower poverty, more government revenue for the military and public services such as healthcare, education, and infrastructure. But let’s try to quantify some of those benefits. Here’s a bit from recent analysis by Douglas Holtz-Eakin, former director of the Congressional Budget Office:

In its most recent 10-year economic and budgetary outlook, the CBO pegged the growth potential of the United States at 1.8 percent. In contrast, from 1948 to 2022, the country averaged 3.1 percent growth annually. If one could magically raise the growth rate from 1.8 percent to 3.1 percent over the next 10 years, it would generate (cumulatively) an additional $20 trillion of gross domestic product (GDP), which would translate into another $4 trillion in tax revenues. That’s not enough to close the $20.2 trillion in deficits projected over that budget window – there is no way to “grow ourselves out” of the budget problem – but it is still a good chunk of change.

OK, growth is good, and faster growth is better if generated in a sustainable way. (Not just by pumping money into the economy for a short-term blip followed by a nasty bust.) But how does an economy generate sustainable, long-term growth? One of the most obvious ways is to increase the number of workers. As Holtz-Eakin explains the math, “GDP growth is the sum of the growth in the number of workers and growth in GDP per worker, also known as productivity.” The impact of a growing labor force on GDP growth is obvious in this chart:

With a fast-growing workforce, it used to be a lot easier to generate fast GDP growth. Now we have all those Baby Boomer retirements and a falling birth rate to contend with. But there is another option. Again, Holtz-Eakin:

Looking back, the labor force grew at an average annual rate of 1.2 percent from 1948 to 2022, but CBO is assuming that it will only grow 0.4 percent annually over the next decade. . . . Raising the rate of labor force growth to 1.2 percent would require admitting an annual average of 1.4 million more immigrants each year, if done in a reformed immigration system that focused on economic growth. Notice that if immigration reform were done in a strategic fashion, it could also raise the average quality of human capital in the labor force and add to labor productivity in the process. Thus, the overall increase in economic growth might exceed a jump from 1.8 to 2.6 percent and the increase in revenues could come in higher than $1.2 trillion.

Given this obvious fix to historically slow economic growth, this chart is a major downer:

DHE: “This has been the perennial conundrum. Americans want better growth and the fastest route to better growth performance runs through immigration increases and reforms, which Americans oppose.”

Let me go further: This “conundrum” helps explain why some right-wing nationalist populists downplay the importance of economic growth. Their distaste for immigration naturally leads to a dismissal of growth in order to remain somewhat ideologically consistent. Same goes for their attacks on Silicon Valley. If you want a vibrant economy, you need a vibrant technology sector, and that requires an open economy. Drawbridge down. 

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