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RAISE Act: Risk To US Economy

Summary

The US Senate has proposed cutting the number of green cards issued annually by half.

Immigration would fall to a rate three times less than historical average.

This catalyst provides a net negative going forward in the US economy and financial markets.

President Donald Trump on Wednesday embraced a Senate proposal to cut the number of green cards issued annually by half, as part of his drive to reduce legal as well as illegal immigration into the U.S.

The policy would provide one more net negative for the US economy and financial markets, because aggregate demand growth equals the sum of productivity growth and population growth.

This legislation, according to Cato, “would reduce the per capita rate of immigration to the lowest amount since just after the Great Depression.” In fact, “immigration would fall to a rate three times less than the historical average and 11 times less than the historical high.”

The Institute further explains:

From 1820 to 2017, the immigration rate averaged 0.45 percent of the population annually. In 2017, that rate was 0.32 percent. In other words: 28 percent below the average historical rate. If the United States were to adopt the 'historical norm,' it would need to raise immigration quotas by about the amount that RAISE lowers them: 411,000. By contrast, under the senators’ proposal, immigration would fall to 0.14 percent—more than three times less than the 'historical norm.'"

(Source: Cato Institute)