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TWOFER: Here’s how Haitians can rescue the US from its budget crisis and save themselves

In 2001, I published an obscure paper that concluded “Econometric tests and fiscal solvency accounting confirm the important role of growth in debt crises.” Based on this, I can now say that Haitians can rescue the US from an impending budget crisis. The crisis is already severe, with previously unthinkable warnings that US government bonds might lose their AAA rating.

What does this have to do with Haitians? Here’s the longer, more technical version (if you’re impatient, skip to next paragraph): budget solvency is about the future, not just about the present. Our ability to service our government debt is greater the higher is expected growth of the economy, because that means higher expected growth of tax revenues. If you expect tax revenue to be a lot higher tomorrow because of high growth, then you don’t have to worry as much about where you find the tax money tomorrow to pay interest and amortize principal on the debt. Economic growth equals (Growth of GDP per person) PLUS (Growth of Population). So one overlooked aspect of Population Growth is that it is GOOD for preventing budget and debt crises. And population growth is driven in large part these days in the US by immigration from places like … Haiti. Of course it will take more than Haiti alone to supply enough immigrants, but letting in more immigrants to the US from poor countries is desirable already for both us and the immigrants.

Here’s the short version. If you are worried about having enough tax revenue to pay interest on the government debt, find more taxpayers! And look, here are some people volunteering to become new taxpayers: Haitian immigrants fleeing quakes and poverty! So let’s open the door to our Haitian fiscal rescuers, who will also lift themselves out of poverty as dramatized by a previous post. It’s a TWOFER!

NOTES: my attempt to make an exam question out of this did not attract a large response (OK I was mostly just trying to get out of writing the blog post last night). It did produce one very funny satire, and one good two-part answer, the second part of which was the “right” answer (a special virtual Rolex (Aid) Watch prize for Kevin!)

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12 Comments

  1. Where's the aid? wrote:

    But what if your increased population begins to draw more on social services? Doesn’t this also increase the cost of government programs and therefore have the potential to increase spending?

    Posted February 10, 2010 at 12:48 pm | Permalink
  2. William Easterly wrote:

    Dear “Where’s the aid?”: good thing to raise. This is a standard part of the immigration debate, I suggest looking at the Clemens and Pritchett links for further discussion. Best, Bill

    Posted February 10, 2010 at 1:11 pm | Permalink
  3. Justin wrote:

    Yet another good idea that the US government and population will be too myopic to embrace.

    Posted February 10, 2010 at 7:53 pm | Permalink
  4. Geoff wrote:

    Should we maybe wait on this till unemployment goes under 6% or so?

    Posted February 10, 2010 at 9:28 pm | Permalink
  5. Kevin wrote:

    wooooo! my virtual girlfriend is going to be soo impressed

    Posted February 10, 2010 at 11:53 pm | Permalink
  6. RJS wrote:

    I wonder if it’s more likely that they’ll be a drain than a net benefit? Also, what happens when instead of spending their disposable income, they send the majority of it back as remittances? So much increasing tax revenue.

    Bad idea.

    Posted February 11, 2010 at 2:17 am | Permalink
  7. Anonymous wrote:

    The fiscal impact of immigration is like the old joke about the accountant in a job interview who, when asked what was “2 plus 2″ responded “what do you want it to be?”

    That is, as with all gains from trades there are rents, and policy could allocate those however they see fit–so we could tell immigrants, “look, you can come here and quintuple your pre-tax wages but we are going to charge you a “fiscal equalization” (or a “subsidize the white old folks”) tax for your presence that will mean your post-tax wages will only be four-fold—want to come on those terms?” Everybody is still better off and the US has just clawed back more of the gain.

    In point of fact we already do this by illegality as many (most) of even the “undocumented” have SSecurity taxes deducted into phony numbers and hence never claim benefits.

    Posted February 12, 2010 at 2:10 pm | Permalink
  8. This assumes that the Haitians will work, rather than vote themselves handouts. Consider the present condition of Detroit.

    Posted February 15, 2010 at 5:36 am | Permalink
  9. E Aboyeji wrote:

    Does it work the same way for developing countries. I have been working on this question for some time but my results have been majorly fucked. I’m elated to find I might have been right.

    Posted February 15, 2010 at 7:28 pm | Permalink
  10. fundamentalist wrote:

    Great idea! I have often told my children that their future has good and bad news. Good news: When us old farts retire, they will have their pick of the best jobs and salaries because there will be a shortage of workers. Bad news: They will have to work two jobs to pay my social security and medicare bills!

    I have offered them a solution to the bad news: let in more Mexicans. But you need to do it soon so that they can get jobs and pay taxes. Otherwise, you’re screwed!

    Posted February 16, 2010 at 1:17 pm | Permalink
  11. D polk wrote:

    You are assuming there will be jobs for these unskilled immigrants but we have few jobs for our unskilled citizens now. If we change to have a need for low-skilled employees, then immigration may be a plus but most people feel that is unlikely.

    Posted February 18, 2010 at 7:36 am | Permalink
  12. Mark wrote:

    This appears to be a half-thought-out conclusion. If the solution to our problems was more people, our budget issue would have been solved long, long ago.

    Posted February 18, 2010 at 6:38 pm | Permalink

4 Trackbacks

  1. By uberVU - social comments on February 10, 2010 at 6:54 pm

    Social comments and analytics for this post…

    This post was mentioned on Twitter by bill_easterly: The Answer to the EXAM QUESTION is a TWOFER: how Haitians can rescue us from our budget crisis and save themselves http://bit.ly/aA2SgT

  2. By Out-growing your problems « Robert Wiblin on February 11, 2010 at 3:49 am

    [...] is the easiest way to get economic growth? Immigration, says Bill [...]

  3. By BDNN: Posts for the Day on February 16, 2010 at 7:32 pm

    [...] BDNN: Reverse Psychology: http://aidwatchers.com/2010/02/twofer-here%E2%80%99s-how-haitians-can-rescue-the-us-from-its-budget-… [...]

  4. By Adopting Haiti « Keptklavier on February 24, 2010 at 10:29 am

    [...] Mass immigration from Haiti could even help the US solve its debt crisis… [...]

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    The Aid Watch blog is a project of New York University's Development Research Institute (DRI). This blog is principally written by William Easterly, author of "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics" and "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," and Professor of Economics at NYU. It is co-written by Laura Freschi and by occasional guest bloggers. Our work is based on the idea that more aid will reach the poor the more people are watching aid.

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