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Republicans test new argument: Immigration can cause inflation
Republicans are testing a new argument this week that encompasses three key issues of the 2024 campaign: immigration, inflation and the high cost of housing.
The emerging case is that a Donald Trump-led immigration crackdown in 2025 could help in the fight against high prices, at least when it comes to finding an affordable home.
It’s a case that will likely be met with skepticism by many economists, but it’s a line of reasoning that has been immortalized in the recently revealed GOP platform ahead of next week’s convention in Milwaukee.
As the document says, the next president should close the southern border and deport millions of people already in the country, in part because illegal immigration has “raised the cost of housing, education and health care for American families.”
It’s a message that’s at odds with a chorus of economists, as well as Democrats, who have released studies saying Trump’s proposals — from tariffs to tax cuts to immigration crackdowns — could cause a further rise in inflation.
Read more: Is the inflation fever ending? Price increases in everyday expenses are finally slowing down.
Former President Donald Trump speaks at a campaign rally in Philadelphia in June. (AP Photo/Chris Szagola) (ASSOCIATED PRESS)
But it’s an argument that’s gaining traction in Republican Party circles.
EJ Antoni of the conservative Heritage Foundation has been fielding questions from congressional aides on the topic in recent weeks. His group’s case is that there is a 2-to-1 ratio at play: An influx that increases an area’s population by 5 percent translates, he said, into rents rising by 10 percent.
“This is clearly having an impact right now,” he noted in an interview, citing communities along the southern border, as well as large cities where new migrants are traveling, as those most impacted.
Jerome Powell’s take on the matter
The new message was tested on Capitol Hill this week during a Senate Hearing Featuring Testimony by Federal Reserve Chairman Jerome Powell.
Sen. J.D. Vance, an Ohio Republican and one of Donald Trump’s top vice presidential contenders, raised the issue when he had the opportunity to question the Fed chairman on Tuesday, saying it was a topic “I imagine most of my colleagues aren’t asking about.” [about].”
Powell looked skeptical.
“There is no clear answer, but my view is that in the long run, immigration is inflation-neutral; in the short run, [it] may have actually helped because the labor market became more flexible,” Powell responded.
Read more: How does the labor market affect inflation?
But he acknowledged there could be regional effects, with some communities potentially seeing higher housing costs if they face a wave of new residents.
The story continues
Others echoed Powell’s point and focused on the benefits to the labor market. Barbara Doran of BD8 Capital Partners noted on Yahoo Finance this week from Trump that “if he actually gets elected and deports millions of immigrants, these are the ones taking the jobs that help keep wage pressures down.”
Vance dismissed that idea during his conversation with Powell on Tuesday, noting that it’s another way of saying lower wages for Americans.
“Why do we see this as a good thing?” he asked. “Why not try to raise wages in a way that takes some of these workers off the sidelines?”
Federal Reserve Chairman Jerome Powell testifies before the Senate Banking, Housing and Urban Affairs Committee on July 9. (CHRIS KLEPONIS/AFP via Getty Images) (CHRIS KLEPONIS via Getty Images)
An argument rooted in the UK
This latest campaign talking point appears to have at least some roots in the UK, specifically in some comments by Huw Pill, Chief Economist at the Bank of England.
He reportedly said this spring that “fairly large increases in immigration” into his country have put pressure on the country’s housing stock more than other issues like higher interest rates.
Analysis on the subject in the US has also found that immigration can increase property values, but this may also be due to the positive effect on the overall economy.
A study of the Partnership for a New American Economy, which examined data from 2000 to 2010, found an “effect on median home value” due to immigration, but concluded that the change was primarily due to increased economic activity.
In any case, the Republican plan for immigration if Trump returns to office is doubling down on the hardline anti-immigration policies that marked his first term. Those promises include a pledge, as this week’s GOP platform put it, to enact “the largest deportation operation in American history.”
Sen. J.D. Vance, R-Ohio, and Donald Trump appear at a campaign rally in March in Vandalia, Ohio. (AP Photo/Jeff Dean, File) (ASSOCIATED PRESS)
Easing the worries of the business world
The inclusion of the inflation argument this week in the GOP platform was part of a larger effort by Republicans to smooth out some of the rough edges of some of their campaign promises that have worried economists and business leaders.
The Republican Party’s release of its party platform was notable for the way the brief document sought, after much internal turmoil, to offer a more voter-friendly view on social issues like abortion and same-sex marriage.
But the same could be said about the way he approached some business world issues.
On the subject of trade and tariffs, the document declined to repeat some of Trump’s bolder plans. On the campaign trail, Trump promised a 60 percent tariff on Chinese goods and a 10 percent “ring around the country” for other trading partners.
Tariffs are unpopular with many business owners and executives who actually pay them. The GOP platform briefly addressed the issue, noting that “Republicans will support base tariffs on goods made abroad.”
The platform is also notable for not repeating the party’s long-running effort to repeal Obamacare and continues Trump’s aggressive push to target the fossil fuel industry, with promises to “drill, baby, drill” on nearly every page.
It’s all part of a message that will likely be repeated ad nauseam next week on the convention stage as the party looks to press its advantage after Biden’s disastrous performance in the recent debate.
Antoni predicts that voters will increasingly focus on the topic of immigration and inflation, and that Republicans will “really focus on that issue and make sure Americans are aware of it.”
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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