The loss side of the ledger is that mass deportation of productive employees will drain economic growth and make it harder for Mr. Trump to deliver a return to the prosperity of his pre-Covid first term. Consider an economic paper published Tuesday by the Federal Reserve Bank of Dallas. “Our analysis,” the authors say, “raises the concern that a sharp tightening of immigration policies has the potential to substantially reduce output growth.”
The study is based on a model that includes historical data on immigration and the economy from 1955 to 2019. “U.S. GDP growth typically increases for two years in response to an unexpected increase in net unauthorized immigration and then gradually reverts to its mean,” the authors write. “Inflation shows almost no response in the first few years but decreases slightly at longer horizons.”
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The study finds that “high interior deportation,” with removals gradually rising to 437,500 a year, would cut economic growth by 0.83 percentage point this year and 0.84 in 2027.
If there’s a “self-deportation wave,” meaning half of the people with TPS leave the U.S. before mid-2026, that would shave GDP growth by 1.01 point this year and 0.45 in 2027.
Under “mass interior deportation,” with removals rising over the next two years to a million annually, growth would be 0.89 point lower this year and 1.49 in 2027.
Economic models aren’t perfect crystal balls, as the authors warn. “However, this does not mean the results are not informative,” they say. “There is good reason to be concerned that immigration policies that lead to a reduction in net unauthorized immigration relative to historical trends, all else equal, are likely to significantly lower real GDP growth.”
When it comes to the One Big Beautiful Bill Act (OBBBA), two things can be true at once:
The legislation contains some truly important policies, including permanent 100 percent bonus depreciation and other TCJA tax reforms, as well as changes to Medicaid and SNAP, steps toward energy independence, a permanent cap on the mortgage-interest deduction, and some welcome reductions to the Inflation Reduction Act subsidies, among others. That’s great.
But, the bill’s bottom line is fiscally irresponsible because it combines expanded and new tax breaks for special interests, while implementing only modest spending restraints (many of them in the future) relative to projected revenue losses. This bill, even accounting for any economic growth it spawns, exacerbates our already dire fiscal woes. That’s a shame.
I’ve made no secret of my disappointment with the fiscal impact of OBBBA. In fact, I have written pieces that are quite similar to Mark Antonio Wright’s excellent piece yesterday.
And yet, I also want to acknowledge that the final outcome could have been worse if it weren’t for some Republicans in Congress who fought hard to make things better. I find this thought terrifying, but such was the trajectory early on.
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Members who advocate for fiscal responsibility and threaten to withhold their votes if more cuts aren’t implemented are often dismissed as unhelpful or extreme. But as they always do, these members serve as a critical check on both parties. In this case, they reminded their colleagues that tax cuts without spending reform are not fiscally conservative; such cuts risk the fiscal sustainability of this country. These members also pushed back against the idea that expanding the welfare state indefinitely is costless.
Mike Viola sensibly predicts that “populist rage against credit cards will backfire on consumers.”
Michael Chapman is correct: Henry Hazlitt’s 1946 Economics In One Lesson remains relevant. A slice:
Take the minimum wage, for example. Last month, Senators Josh Hawley (R‑MO) and Peter Welch (D‑VT) introduced legislation to raise the federal minimum wage to $15 an hour, with automatic inflation adjustments. Vice President JD Vance favors an $11 rate. In New York City, mayoral candidate Zohran Mamdani, a self-declared socialist, wants a $30 minimum wage for the city. According to Welch, “Every hardworking American deserves a living wage.”
But as Hazlitt explained nearly 80 years ago, that kind of economic paternalism ignores reality. A wage is not a moral declaration—it is a price. Raise the price, and demand falls. When wages are mandated above the productivity level of the worker, employers have limited options: lay off staff, cut hours, reduce hiring, or replace workers with machines. Hazlitt’s summary still holds: “For a low wage you substitute unemployment. You do harm all around, with no comparable compensation.”
Benjamin Zycher explains that “natural gas is green and hugely beneficial economically.” A slice:
Let us not forget the adverse environmental effects of wind and solar power, studiously ignored by the opponents of fossil fuels: heavy-metal pollution, wildlife destruction, noise and flicker effects, massive land use and degradation of vistas, landfill problems, and on and on.
And there also are the enormous costs of renewable power compared with fossil electricity. When we include the costs (all in in year 2024 dollars per MWh) of backup generation ($132.65, for the most part, natural gas turbines) needed to avoid service interruptions, the Energy Information Administration cost estimates are as follows. Combined-cycle natural gas: $44.95. “Ultra-super critical” coal: $92.98. Nuclear: $99.31. Photovoltaic solar: $173.72. Onshore wind: $177.93. Offshore wind: $286.29. Unconventional power is not competitive, and the past efforts to force a shift toward wind and solar electricity has yielded substantial economic harm.
