Immigration could help cure economic growth problems

On Monday, a top official with the Federal Reserve argued that since there is little more the Fed can realistically do to increase economic growth, policy approaches that are non-monetary in nature, such as tax and immigration reform, could be a quicker route to improvement.

Neel Kashkari, President of the Minneapolis Federal Reserve Bank, released a 5,100-word paper just after midnight, pointing out that the U.S. labor market is now close to normal but that the level of inflation remains below the 2% target set by the Federal Reserve. He also noted that economic growth continues to fall well short of the level it was before the financial crisis.

In the paper, Kashkari writes that monetary policy is doing what it can to support a healthy economic recovery, which leaves regulatory and fiscal policies to deal with any remaining issues. Kashkari noted an array of possible causes for the slow economic growth in the U.S., citing “lackluster technological innovation,” an aging population and a lack of willingness by both business and households to take risks because of the financial crisis.

Kashkari includes the prospect of immigration reform as one of the ways the U.S. government could deal with some of these issues, particularly to make it easier for highly skilled foreign workers to get U.S. visas that allow them to work in the country. Kashkari also points to increased spending on research, streamlining the tax code and other regulations, and rebuilding infrastructure as possible solutions.