‘We need more people,’ says Fed’s Powell, but what does that mean for immigration reform?

His comments came as one new bipartisan proposal for immigration reform flopped in Congress, and some analysts say they aren’t optimistic about progress on immigration next year in a divided Washington. Still, others see Powell’s remarks having a small effect.

“Our labor force should be three and a half million more than it is,” the Fed chairman said in response to a question from MarketWatch during his Dec. 14 news conference, which followed the central bank’s latest interest-rate hike as it tries to tame inflation.

“So why is that?” Powell added. “Part of it is just accelerated retirements — people dropped out and aren’t coming back at a higher rate than expected. Part of it is … close to half a million who would have been working died from COVID. And part of it is that migration has been lower. It’s not our job to prescribe things, but I think if you ask businesses, pretty much everybody you talk to says, ‘There aren’t enough people. We need more people.’ So I tried to identify that in a speech I gave a month ago, but I stopped short of telling Congress what to do, because they gave us a job, and we need to do that job.”

Powell’s answer could be seen as part of a slow process that eventually results in long-awaited fixes to the U.S. immigration system, according to Stephen Yale-Loehr, a professor of immigration law at Cornell Law School.

“To me, it’s like water dripping on a rock,” Yale-Loehr told MarketWatch in an interview.

“A single drop of water, whether it’s from Fed Chairman Powell or somebody else, won’t make a difference by itself. But if enough drips of water from other people and other studies consistently show that immigration can help our labor shortages and improve our economy, then I hope that will move the needle so that Congress will seriously take up immigration reform in 2023.”

David J. Bier, the associate director of immigration studies at the Cato Institute, a libertarian think tank, sounds more pessimistic about Powell’s comment resonating among lawmakers focused on problems at the U.S.-Mexico border and other immigration issues.

“I think people on both sides are really not basing their opinions on the economics. They’re basing it on social feeling about immigrants,” Bier said.

“We’re not having a conversation about labor shortages and economic need. This is a debate about the rule of law and social impact.”

The immigration-related bill that might have the best prospects next year is one that would allow farmers to hire temporary foreign workers year-round, according to Theresa Cardinal Brown, managing director for immigration and cross-border policy at the Bipartisan Policy Center.

The measure, known in the House as the Farm Workforce Modernization Act, also would give undocumented agricultural workers a path to legal status. Its supporters include Colorado Democratic Sen. Michael Bennet, who has been negotiating with Idaho GOP Sen. Mike Crapo.

It has “the most bipartisan support” because so many states have an agriculture sector, Brown said. The bill’s backers have been lobbying many lawmakers.

“It doesn’t matter if you’re from a blue state or red state, if you have agriculture, they’ve been in your office multiple times,” she said.

The Sinema-Tillis deal on immigration

Washington briefly was buzzing in early December over a fresh bipartisan effort on immigration reform.

Sen. Kyrsten Sinema of Arizona — at that time a Democrat, but just days away from ditching the party to become an independent — and Republican Sen. Thom Tillis of North Carolina reached a preliminary deal that would offer a path to citizenship for two million “Dreamers,” more money for border security and the asylum process, and an extension for “Title 42” pandemic-era border restrictions. The Supreme Court has since weighed in on Title 42, ordering a pause on lifting the restrictions.

The Sinema-Tillis proposal failed to get traction, as lawmakers dealt with a host of other priorities while closing out the year and the 117th Congress. It was similar to a Trump-era plan that offered protections for Dreamers — undocumented immigrants brought to the U.S. as children — in exchange for border-wall funding and other measures, but also didn’t become reality.

The two senators would have been better off working behind the scenes to line up sufficient support for their plan instead of floating it without other backers and getting criticized from all sides, according to Cato’s Bier.

“If you’re not engaging with a very broad group of Republicans and Democrats, there’s just not a way to announce your way to a deal,” he said. “It was kind of a long shot, and I’m not exactly sure why they took the approach that they did.”

Bier and other analysts are downbeat on the Sinema-Tillis proposal’s prospects in the new year, when Republicans will take control of the House of Representatives after their wins in November’s midterm elections, while Democrats keep their grip on the Senate and White House.

The Cato expert said he doesn’t think top House GOP lawmakers see a reason to strike a deal with President Joe Biden and other Democrats on immigration, even if the agreement didn’t touch on Dreamers and only focused on border problems.

“If the border burns and there’s just chaos, they think Biden’s going to get blamed, so politically there’s not much of an incentive for them to get to a deal on anything,” he said. “They think politically this is just a winner for them, and they’ve been campaigning like that, and they plan to continue to campaign on it in 2024.”

Lora Reis, director of the Border Security and Immigration Center at the conservative Heritage Foundation, blasted the Sinema-Tillis proposal, while also saying she didn’t expect any major immigration legislation will advance in 2023.

“No one should be talking about amnesty for illegal aliens when we have the most historic border crisis we have ever faced right now, and no sign of it ending,” she said, when asked about the two senators’ plan. Their plan would be bad policy because it would encourage more people to enter the U.S. illegally and stay longer in the hopes of getting some form of amnesty, said Reis, who worked in the Department of Homeland Security during both the Trump and George W. Bush administrations.

Regarding Powell’s comments on migration, Reis said the U.S. should first secure the southern border and end illegal inflows, then take the step of “designing a simpler, better, lawful immigration system.”

“It would be nice if employers and other sponsors would speak up against illegal immigration,” the Heritage expert also said.

What else is ‘percolating’

Overall on immigration, the Bipartisan Policy Center’s Brown said Washington needs to get in gear.

“It’s a missed opportunity if Congress doesn’t get back into the game of legislating on all aspects of immigration. They have failed to legislate for quite a long time on the most serious issues affecting our immigration system,” said Brown, who worked in the Department of Homeland Security during both the Obama and George W. Bush administrations.

“All of the ultimatums that we can’t do X until we do Y have resulted in nothing. Neither X nor Y is done, and that’s not good, because our system is really under a lot of strain and having a lot of problems right now.”

Meanwhile, Cornell’s Yale-Loehr said the issues that already have been “percolating in Congress” would be on his immediate wish list for 2023.

“That would include helping the Dreamers to be able to achieve some kind of permanent status and reforming our border-security measures so that we can admit those people who really do need or will qualify for asylum, but otherwise deport people after a hearing if they don’t qualify under immigration laws,” the professor said.

“Third, I think we do need modernization in our agriculture industry, and there is a bill proposed by Sen. Bennet that would do that, and fourth, I think that Congress should pass the Afghan Adjustment Act to allow people who came from Afghanistan a permanent path to citizenship.”

That would be “an awful lot to accomplish in one year,” and a “hard battle” in an increasingly polarized Congress, he added.

Yale-Loehr noted that the Biden administration can act on its own on some immigration issues, and it’s doing so with its goal of trying to resettle 125,000 refugees in the U.S. in the current fiscal year. In addition, Biden’s State Department is expected to launch a private refugee sponsorship program.

The Cornell professor also suggested that grassroots efforts eventually might end up spurring U.S. lawmakers to do more.

“A lot of change happens from the ground up, rather than the top down — if you think about civil-rights legislation in the 60s, the Environmental Protection Act of 1970, the antiwar efforts,” he said. “It was because people really protested the existing framework that they forced Congress to make changes in those areas. And so too, I think that if more Americans stood up and said, ‘We need immigration reform,’ I think that that would help persuade Congress to actually put pen to paper and make some significant changes.”

MarketWatch’s Greg Robb contributed to this report.