The Long-Term Economic Costs of the President’s Executive Order on Immigration

For all the human disruption and confusion associated with President Trump’s executive order on immigration released on Friday, it is also worth noting the potential for substantial negative macroeconomic dislocation from increased barriers to travel to the United States.  In October of last year, I along with my colleagues Ted Alden and Hedi Crebo-Rediker published a note looking at the economic effects of a Muslim travel ban. While the title highlighted a prospect of full ban, the central historical experience we drew on for our analysis was the use of intensified security measures after the 9/11 attacks. These measures can tell us a lot about what to expect from the current extreme vetting measures, particularly if the president’s order is expanded to include more countries over time.

In sum, our report highlighted the following:

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Economic Impact Scenarios and MultiplierBase Spending Direct ($billion)Multiplier – Indirect ($ billion)Total Impact ($ billion)Related job losses (direct)Scenario 1$13.79$17.24$31.0350,600Scenario 2$29.50$36.88$66.38132,000

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In addition, we estimate the loss to education spending to be about 15 percent of the total foreign student spending, or $4.6 billion. We also look at the potential economic impact on five U.S. states that would likely see the largest negative impact from a Muslim or broader travel disruption, which are the states most dependent on international visitors and are most tourism-dependent: Nevada, Florida, California, New York, and Hawaii.

In general, there are important security benefits from an efficient vetting system for foreign travelers, but President Trump’s unprecedented executive order fails to meet the test.  If last week’s action--and the unusually heated rhetoric accompanying the move--is seen by the world as creating a hostile environment for foreign travelers or more fundamentally signaling a less open attitude towards the world, it will have broad based and far reaching economic consequences.