Fed's Powell Says Reduced Immigration Could Slow U.S. Economy

(Bloomberg) -- Federal Reserve Chairman Jerome Powell, in written responses to a Democratic senator, said reducing immigration could slow the economy over the longer run by limiting growth in the U.S. labor force.

The comments came in a written response to Senator Catherine Cortez Masto, a Nevada Democrat who asked Powell if he agreed with pro-immigration comments by Minneapolis Fed President Neel Kashkari. Kashkari, whose parents came from India and wife is from the Philippines, called immigration “as close to a free lunch as there is” for the American economy, according to a Wall Street Journal opinion column in January.

The Fed chairman's remarks in the August letter to the senator underscore some of the contradictions of the administration's economic policies. While its fiscal measures could stimulate growth and investment, trade and immigration policies could work against the economy. Powell told Cortez Masto that immigration accounts for about one-half of population growth annually, and that it directly affects gains in the labor force and thus economic increases.

“Thus, from an economic growth standpoint, reduced immigration would result in lower population growth and thus, all else equal, slower trend economic growth,” Powell wrote in the Aug. 29 correspondence that was obtained by Bloomberg News through a Freedom of Information Act request.

“As you know, immigration policy is for Congress and the administration to decide.”

Powell has studiously avoided veering into issues such as trade policy that are the domain of the administration or Congress. To economists along the political spectrum, his immigration remarks would be seen as a fact.

But immigration has become a charged issue in the midterm elections, with President Donald Trump vowing to deny U.S. citizenship to children born in the country of unauthorized immigrants. Trump has also said he's ready to deploy as many as 15,000 troops to the southern border with Mexico to stop or detain a caravan of migrants traveling north.

To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net

To contact the editors responsible for this story: Alister Bull at abull7@bloomberg.net, Brendan Murray, Randall Woods

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