Friday, June 01, 2007

Lazear Bullish on Economy & Immigration

In a conference call earlier this morning, top White House economist Ed Lazear predicted that future GDP growth will be much stronger than the latest 0.6 percent reading in the first quarter. He cited stocks, earnings, industrial production, the ISMs, capex, autos, and low inventories as precursors of stronger GDP growth.

Lazear also disputed the immigration cost estimates from Heritage Foundation analyst Robert Rector. According to Lazear, a dynamic analysis of the predicted results of the immigration reform bill shows a net gain to the U.S. economy of about $30 billion per year, as the economic benefits from capital, labor, lower prices, and higher tax payments overwhelm the transfer payment costs.

This is an interesting point, and one with which I agree. Put simply, at prevailing productivity rates, an increased labor force produces more GDP growth.

Lazear also argued that stronger border security and better employer enforcement through tamper-proof ID cards would help solve the growing problem of illegality.