Spurring an Economic Recovery: Citizenship for Certain Illegal Immigrants

A significant amnesty granting citizenship for large numbers of illegal immigrants would stimulate consumer spending and borrowing, introduce several million new potential home purchasers into the economy, and bring potentially hundreds of thousands of new citizens into the regular economy to buy cars, purchase insurance, borrow from banks, and buy homes. Total economic consumer demand for purchases and borrowing is declining as large numbers of U.S. households confront declining home values, a challenging job market, and lack of credit. Consumer spending is responsible for more than two-thirds of total U.S. gross domestic product: there will no recovery in the U.S. economy until consumers begin to increase spending again. Forces working against increased consumer spending in the near term are rising unemployment, the unavailability of credit, and falling home values.

Economic demand could be stimulated by tax cuts and the lowering of interest rates by the Federal Reserve. However, the federal government and most state and local governments are experiencing huge deficits: their ability to borrow further is threatened by declining tax receipts, and their ability to cut taxes further is limited by their immediate need for revenue. With regard to interest rates, the Federal Reserve has already pushed rates to 1-1/2%, but borrowing rates for consumers have not declined. In fact, most lenders are restricting lending to only the most credit-worthy consumers.

There is a simple solution to stimulating aggregate demand in the economy: naturalizing several million illegal immigrants in the U.S. Most illegal immigrants operate in a shadow economy, not making major purchases that require credit, and operating on a cash basis that does not rely on social security numbers and credit checks. Illegal immigrants today drive cars purchased for cash from desperate sellers, and often drive without a driver’s license and insurance (which require proof of citizenship or residency). It is not difficult to imagine the normal spending of new citizens regularizing their transaction in order to maintain their citizenship.

There are a few classes of illegal immigrants that could be granted citizenship without much fanfare. First, approximately 60,000 graduating high school seniors each year are illegal immigrants. They were often brought to the United States as young children by their illegal immigrant parents, and grew up on the United States. A bi-partisan proposal called the DREAM Act (Development, Relief, and Education for Alien Minors Act) to naturalize these children failed in both houses of Congress, but that Act should be revived. Naturalizing these children who have worked hard to graduate from high school would allow them to go onto college (where citizenship or legal residence is required), purchase cars, get married, buy homes, and be productive members of the United States. Currently, these students graduate – sometimes as valedictorians – and work in menial, low-paying shadow economy jobs.