How to Solve the Housing Crisis and Jumpstart the Economy
November 19th, 2008 by Al Lewis (alewis)
The solution to the housing crisis –and part of the solution to our economic downturn — is right at America’s doorstep. Let a million more well-to-do immigrants into the country, to buy and rent the unused units, and to start spending money.
There is no other choice. The solution certainly won’t come from within the US . Consumer confidence polls suggest Americans will be spending far less in the next year or two. Most companies are pulling back on investing in new equipment and capacity, according to just about every headline. And, with the deficit now projected to far exceed $1-trillion, there is serious doubt that the government has enough borrowing capacity to stimulate consumer demand with a sufficiently large tax cut or spend enough on its own sustainably.
Basic economic theory holds that consumers, business and government are the major sources of demand for goods and services. If the first two are spending less, as they already are, the government is supposed to pick up the slack by cutting taxes or spending more. But that cannot happen now on the scale needed. The government is essentially projected to be tapped out, and it is unclear that there will be a sustainable recovery as a result. Recall that the Depression didn’t really end until the government started incurring massive deficits to finance World War II. We’re already doing that – including the bailout the deficit will be far higher than any other peacetime year ever.
So where to turn to jump-start the economy? Immigrants. Not just any immigrants, but immigrants with some means. Surely there are a million fairly well-to-do would-be immigrants out there, working-age people who would pay perhaps $5000-$10,000 as an “entry fee” to immigrate following the obvious background investigation, and who can demonstrate a net worth of two or three times that amount (with help from family contributions). In addition to raising money, the “entry fee” and means test weed out people who intend to immigrate just to live off public largesse, thereby satisfying those who oppose immigration due to that particular concern.
Are there a million such people? No one knows. But add together the enormous numbers who enter the immigration lottery every year (which itself costs the winners about $1000 in processing fees), plus those who pay middlepeople similar or greater sums to enter illegally, plus those who haven’t even tried to enter because the process is so cumbersome and the outcome so uncertain, and the overall pool probably exceeds 100,000,000. Surely some small percentage of this total could meet these requirements. Even if not a million, any number helps.
This new class of relatively well-off immigrants will stimulate the economy. They’ll buy or rent a million units of unsold, foreclosed, and fire-sale housing. They’ll also furnish those houses, buy cars, and patronize local businesses, creating jobs and boosting local tax rolls.
The current crisis started with housing and it should end with housing as a jumping-off point — that is the reason to bring in a million new residents. A million new buyers or renters should sop up much of the overhang and restore some of the lost value of the rest of the housing supply. Some estimates identify five years of oversupply of housing, meaning that this crisis could linger that long. This proposal could end it within one.
Of course, even for up to $10,000 apiece, not just anyone should be allowed to immigrate. We could also use this as an opportunity to address some other labor force issues. Surely there are skill sets which are more in demand than others, as in healthcare. For instance, licensing requirements could be expedited so that regional shortages of nurses and primary care physicians could be alleviated.
Paradoxically, this proposal has nothing to do with the outcry over illegal immigration and quotas and amnesty and border fences and should not get bogged down in that debate. Instead, it’s purely about elementary macroeconomics and the one surefire, untapped way to stimulate the economy out of its current and projected contraction. We need immigrants because, quite frankly, there is no other near-term source of economic growth. For years, anti-immigrant activists have complained that newcomers are sapping the US economy. Now they may save it.
Tags: bailout, economic downturn, financial crisis, housing crisis, recession
November 20th, 2008 at 5:18 am
Could someone post a comment and tell me why we are not alredy doing this? This seems like a screamingly obvious way out of the, um, box? I can’t believe that no one in Washington has come up with this. Hoepfully it’s not caught up in the imigration debate
November 20th, 2008 at 6:59 am
probably this has gotten confused with immigration policy and would be opposed for that reason but this makes a lot of sense.
November 20th, 2008 at 10:26 am
Yes, the whole point is that it seems like it DOES make sense and yet it isn’t even being considered. No one (except here) as even suggested it. What is wrong with it? What am I missing?
I think the word “immigration’ is political poison but we have to get over that. This is not about immigration.
November 20th, 2008 at 2:19 pm
Maybe there is something wrong with this — the problem with your website is that no one is arguing the negative. Is there something we are overlooking? Why isn’t this even being discussed? We need to look at ALL options, like now.
November 20th, 2008 at 9:40 pm
I think other countries would get annoyed at us taking their people. I don’t think that’s why we aren’t doing it (like Bush cares what other countries think). I think we aren’t doing it because no one has thought of it but if they DID think of it the reason we wouldn’t do it is becasue other countries would get annoyed
November 21st, 2008 at 11:50 am
There is probably some reason related to immigration policy why we don’t do this but whatever it is can’t possibly be as important as brinking our economy and the world’s back from the brink. Just do it!
November 22nd, 2008 at 10:38 am
I googled on “economic recovery” and “immigration’ and no one is proposing this. The closest was oen of twelve points in a Forbes editorial to increase quotas for skills-based immigrants, which is fine but still misses the big picture. New home sales were at their lowest point in 50 years last month…let’s bring in some people to buy them, and then furnish them
November 22nd, 2008 at 12:54 pm
there is slso a website which propsoes stopping illegal immigration to solve the eocnomic problems. it doesn’t say how — probably that is their answer for everything. I agree that we do need more illmigration faster to do end the recession
November 22nd, 2008 at 3:12 pm
I saw that Forbes list of 12 points. They put this on as a way of getting more skilled people into the country. They totally missed that it could be a major source of demand for goods and services. What is wrong with our government that it isn’t doing this right away?
November 23rd, 2008 at 4:32 pm
saw the comments on the Friedman article suggesting to come here. This is way smarter of an idea than what he was proposing because it creates something out of nothing ,as opposed to having the government just try to rescue the industry
December 6th, 2008 at 2:02 am
Excellent review. I think we aren’t doing it because no one has thought of it but if they DID think of it the reason we wouldn’t do it is becasue other countries would get annoyed.I think other countries would get annoyed at us taking their people.I think the word “immigration’ is political poison but we have to get over that. This is not about immigration.
December 7th, 2008 at 2:54 pm
Free hit it on the head on the immigration word being poisonous. I don’t think other countries would get annoyed because they count on the US to jumpstart the world economy.
February 7th, 2009 at 10:54 pm
Just wondering…where all these people going to work? So we have to create new jobs for all of these new immigrants or are they going to take the jobs that the currently unemployed have a chance of getting reemployed into? These people don’t need to move here - companies send US jobs overseas because of the uncompetitive US burdens placed on them (over regulation, taxation and litigation)
February 8th, 2009 at 1:28 pm
the whole point is that ONLY immigrants who can ADD to the demand sidfe of the equation by coming in with “means” would be eligible for entry into the US.
April 25th, 2009 at 12:47 pm
hey, dailtfinance just cribbed your idea but they added that Canada did exactly what you are proposing 20 years ago when they had an oversupply of houses
December 12th, 2009 at 9:24 pm
Solve the Housing Crisis and Jumpstart the Economy | ThinkOOB? Seriously? I was searching Google for how to buy tax foreclosures in california and found this… will have to think about it.