Manhattan Institute Confuses Cause and Effect When it Comes to Population Growth

The Manhattan Institute’s City Journal is normally one of the best sources for analysis of important contemporary issues. But a long-time blind spot for the Manhattan Institute has been on issues like population growth and immigration.

A prime example of this tunnel vision is Brian Chen’s October 21 article about how many U.S. cities, and even states, have been burned so badly by the COVID-induced economic downturn. Chen observes, correctly, that an economic downturn was inevitable – if not brought on by the COVID pandemic, then by something else – but cities and states that now find themselves in fiscal crisis have acted as though the sun would shine forever.

One of the pillars offiscally troubled jurisdictions’ pollyannnaish forecasting is that perpetualpopulation growth would bail them out of whatever long-term financialcommitments they made to satisfy the short-term demands of some specialinterest or another. Other faulty assumptions included a belief that the stockmarket would rise forever, and that people would be willing to pay whatever itcosts to enjoy the excitement of Manhattan or the Los Angeles sunshine, drivingup property values, rents and tax revenues.

“Population growth is aremedy for budget troubles,” Chen asserts, semi-accurately. More broadly, Chenseems troubled by the fact that the Congressional Budget Office has scaled backits 2040 U.S. population projection to 366 million – 22 million fewer than itforecast four years earlier. The underlying assumption is that populationgrowth, rather than the skills and productivity of the population, are thedeterminant of prosperity and fiscal solvency.

If the people growingyour population are high-earning, taxpaying folks, then the jurisdictions wherethey live will have more money to spend. If your population growth is beingdriven by an influx of low wage earners who are dependent on a lot of publicservices and benefit, then population growth merely blows bigger holes inbudgets.

COVID-19 has exposed theobvious flaws in all of the assumptions many state and local governments made.In fact, places like New York and California were not just losing populationeven before COVID, but losing their middle class tax bases. These are people whofinally decided that the negatives – high costs of living, burdensome taxes,poor public services – outweighed the benefits that these places offered.

In fact, Chen makes thatexact point. “With unfunded pension liabilities looming, a decline in revenuewas bound to push states and municipalities over the edge at some point,” hecites as one example of why these places are in trouble. Population decline inthese places is not a cause of them being on the brink, but rather a symptomtheir reckless policy decisions.

Nor is mass immigration the answer. Continued large-scale immigration (the primary driver of population growth in the United States) of people who are heavily dependent on government assistance will not undo fiscal messes created by enormous unfunded pension liabilities and other irresponsible policy decisions. Moreover, recent trends have shown that immigrants are avoiding these poorly managed places, especially those who are likely to be net tax contributors, just like the native-born are.

A better immigrationsystem, as opposed to a bigger one that just creates greater population growth,is part of the formula for generating government revenues that would help fillsome of the yawning deficits faced by government at all levels. Fewerimmigrants, but ones who are selected based on their likelihood to succeed andcontribute, would be a step in the right direction.

Even a complete overhaulof our immigration policies (and ending the self-inflicted additional fiscaland social harm caused by sanctuary policies) will not offset the damage causedby decades of bad fiscal policies and unrealistic promises to governmentretirees and other poor spending decisions that were predicated on ridiculouslyoptimistic revenue assumptions. These fiscal projections closely mirrorunsubstantiated claims that the ill-prepared immigrants we admit today willeventually become net contributors at some point in the future and that it willall work out well in the end.

Massive immigration-inducedpopulation growth is no substitute for good old fashioned fiscal discipline. Itwill likely only compound the problem.