THE BLOG
01/20/2015 10:20 am ET Updated Mar 22, 2015

Congress and Lack of Immigration Reform: A Study on How to Undermine the U.S. Economy and America's Place in the World

What is most surprising about the U.S. Congress today is how harmful its parochial views have become to America's long-term global economic interests.

Parochialism was always in the character of the House of Representatives. After all, its members appeal for renewed employment every two years based primarily on how they voted on issues that resonate with their constituencies. But now, Congress' provincial view of globalized economics, specifically as this relates to immigration reform, is putting the economic future of the nation in peril and undermining America's global leadership.

Today, a nation's wealth and potential are as likely to be measured by the innovative power of that country -- by the percentage of the economy that is involved in high-tech industries -- as it is by the amount of steel mills or the presence of other traditional fixed assets.

Unlike auto factories and steel mills, the key assets of knowledge-based industries are not fixed; they consist of highly educated engineers and entrepreneurs, people who, if the political climate in the country becomes too arduous, or if the rule of law a sham, can easily get on an elevator in their building, go to the ground floor and walk out. Economists and business executives call moveable assets such as this "elevator assets."

In a way, the 18th-century concept of mercantilism has been revived. But rather than acquiring and maintaining as much gold as possible, the way it would under traditional mercantilist theory, a nation's goal today is to acquire and retain as much intellectual capital as possible. High-tech engineers and entrepreneurs are the new high-priced commodity.

Ironically, the United States has a problem with elevator assets. The United States is the destination of choice for skilled engineers and technology entrepreneurs -- but they are not necessarily welcomed with open arms.

America's comparative advantage today stems from its knowledge-based industries. But Congress has not caught up to the importance of global movements in human intellectual capital -- with the way these movements affect strategic industries and the geopolitical standing of the United States. They appear not to understand that knowledge-based elevator assets are the new hot commodity and represent an inflow of investment into our country.

Here's the result: While the United States allows unrestricted flows of capital into the country, known as foreign direct investment, Congress has limited the flow of modern-day capital -- skilled engineers and tech workers -- by capping H-1B visas at a level that American technology companies know is far too low.

More than just high-tech companies are damaged by the lack of immigration reform.
Immigration has long given the United States a key economic advantage over other leading nations. Aging populations combined with low birth rates are common among the leading industrial nations -- except in the United States.

These countries have to answer the question of how they will maintain their populations' standard of living as retiring baby boomers start to overwhelm the capacity of the balance of the population to support boomer retirement while creating new economic growth. The opposite problem haunts much of the non-industrialized world, where birth rates are exploding.

In Japan more than 20 percent of the population is over age 65. The Japanese government estimates that if trends follow the same trajectory, 40 percent of the population will be older than 65 by 2060.

The European Commission has stated:

The proportion of people of working age in the EU is shrinking while the relative number of those retired is expanding. The share of older persons in the total population will increase significantly in the coming decades, which will lead to an increased burden on those of working age to provide for the social expenditure required by the aging population for a range of related services.

Meanwhile, in China, Helen (Hong) Qiao, Chief Greater China Economist at Morgan Stanley, is just one of many analysts wondering aloud whether China will grow old before it grows rich.

What makes the United States different is immigration. According Michael Hodin, blogging on The Fiscal Times:

It's only because of immigration that the U.S. doesn't find itself in the same economic conundrum as Japan, China, South Korea, and the European Union. ...

[T]he U.S. is exceptionally young among OECD nations, despite its 78 million baby boomers who are passing into retirement. And it's the country's immigrants that are keeping the population balanced and preventing it from becoming like Japan, Korea, and much of Europe....

[Without immigration the] U.S. would, in other words, have sub-replacement births like every other OECD nation. And it would, presumably, suffer a similar economic malaise caused in large measure by this demographic structural reconstruction of their populations.

Setting aside for a moment the everyday human tragedies wrought by the lack of immigration reform in the United States, that reform is vital if the country is to maintain its position in the world. It's past time for congressional leadership to realize this.

This essay originally appeared on Real Clear World on Jan. 19, 2015, under the title, "How Congress Daily Undermines America."