One way to 4 % growth

When the George W. Bush Institute commissioned Nobel-winning economist Edward Prescott to analyze its proposal to generate 4 percent annual growth for the U.S., the famously pro-free-market Prescott replied that a target of 3 percent was better for the long run. Prescott isn’t alone in his evaluation; most economists and policy specialists don’t believe that the U.S. economy can grow at 4 percent in the long run, no matter what policy steps we take. I’ve added my voice to that skeptical chorus on more than one occasion after Jeb Bush embraced the 4 percent target.

Here’s the thing, though – it isn’t quite true. There actually is one way that 4 percent long-term growth – or even higher – is possible. But there’s a good reason I haven’t mentioned it before now. It has about as much chance of happening as a snowball has of surviving an extended trip to Hades.

The way to get 4 percent growth is open-borders immigration policy.

Gross domestic product is simply the product of output per person and the number of people. The more people in your country, the higher the output. That’s why China, whose output per person is only about one-quarter of the U.S., is now the largest economy on the planet. It just has more bodies.

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The growth numbers you usually hear about in the news are total GDP growth numbers, not per capita figures. To boost those numbers, get more population.

Tripling the U.S. population would supercharge growth beyond anything currently imaginable. Yes, most of those immigrants would be poor and low-skilled, so output per person – and the standard of living of the average American – would go down. But the standard of living of the hundreds of millions who moved to the U.S. would go way, way up.

For those of us who aren’t libertarian crusaders, there are many reasons to be wary of open borders. A huge influx of mostly poor immigrants would overwhelm the U.S.’ social services, something that nonlibertarians believe is essential to the functioning of the country. The education and health care systems would be in chaos.

So if Jeb Bush wants to get us to 4 percent growth, he’s going to have to open the country up to a lot more immigration. It’s a good idea, but it’s not going to go over well with the Republican base. •
Noah Smith is an assistant professor of finance at Stony Brook University and a Bloomberg View columnist.

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