Posted Thursday, Jan. 10, 2013, at 3:41 PM
A lot of pundits lament the fact that Democrats and Republicans can't come together to make the painful choices that would reduce the country's debt:GDP ratio. I find it much more frustrating that we can't come together and make the painless choices that would do the same thing. Monetary stimulus is one such example.
Immigration is another. Because we so throttle the supply of visas for engineers, it's possible to find great natural experiments where the question of who was let in and who wasn't was a matter of pure chance. Michael Clemens looked at one such case and was able to do a detailed study and found that statistically identical workers employed by the same firm can increase their earnings by over $55,000 a year by securing permission to come to the United States. So what if instead of allocating these visas by lottery, we let as many people come as there are corporate sponsors for and charged $5,000 per person per year? On the one hand, we'd raise a little chunk of revenue without needing to raise taxes on any American. On the other hand, the huge productivity gains here—the Indians' labor is worth five to six times as much in the USA as in India—would boost growth.