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Originally a small, inexpensive safety-net program, Medicaid has grown into a major national health-insurance provider, covering nearly one in four Americans and more people than the public health insurance programs of the United Kingdom, Germany, or France. In Coverage Isn’t Care: An Abundance Agenda for Medicaid, Craig Garthwaite and Timothy Layton provide an overview of the Medicaid program; put forward a framework for thinking about the appropriate structure of the program; and propose a set of fundamental reforms aimed at improving the efficiency of the program.

The authors emphasize that decades of piecemeal changes have produced a fragmented program that merges various populations, providers, and revenue streams. They point out that recent reform proposals largely hold the structure of the program fixed and focus on marginal changes to financing and eligibility. Finally, they propose a broader and more fundamental set of reforms that acknowledge that Medicaid’s contemporary size and scope requires a different structure than its smaller historical predecessors.

Medicaid was created in 1965 as a small safety net program providing health insurance to the aged, blind, disabled, and very-low-income families with children. Eligibility expansions beginning in the 1990s set the stage for rapid growth. Congress first expanded eligibility to higher-income pregnant women and children (those with incomes under 133 percent of the Federal Poverty Line (FPL) for pregnant women and children under 6). In 1997 the State Children’s Health Insurance Program (SCHIP, now just CHIP) was introduced. Through this program Congress offered matching funds to states to cover children in families with incomes higher than the national Medicaid eligibility levels. Many states set eligibility for children at 200 percent of the FPL. Finally, the 2010 Affordable Care Act extended coverage to all adults with incomes below 138 percent of the federal poverty line.

Medicaid’s costs are shared between states and the federal government. The federal government matches a portion of state Medicaid spending through a formula known as the Federal Medical Assistance Percentage (FMAP), which varies from a 50 to roughly 90 percent federal match based on state per-capita income. As Medicaid was expanded to cover additional populations, Congress included more generous matching rates to incentivize states to undertake these expansions. The CHIP program included an “enhanced” FMAP for children in higher-income families with a minimum match of 65 percent. The FMAP was further expanded for the population covered under the ACA Medicaid expansion, which is almost entirely paid for with federal dollars (90 percent FMAP).

Garthwaite and Layton discuss the impact and feasibility of three commonly proposed categories of Medicaid reforms: FMAP reductions, administrative burdens and work requirements, and block grants and per-capita caps. All three, they point out, may generate substantial savings, but would almost certainly do so through reduced enrollment or by reducing program generosity (by, say, eliminating optional benefits like dental coverage), rather than creating a more efficient system.

The authors argue that instead of taking the current structure as given and trying to reform it with tweaks to the generosity of benefits or the level of enrollment, broader reforms are needed to expand the supply of a dedicated tier of lower-cost providers that offer access to basic healthcare for Medicaid patients.

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After two decades of relatively constant energy consumption, the nation faces a surge in power demand driven by artificial intelligence, domestic manufacturing, and continued electrification, developments that challenge an already-constrained electricity grid. In this way, the United States’ energy strategy must effectively bridge economic policy and geopolitical power while serving as a calibrated response to climate change.

In An Energy Strategy for National Renewal, Joseph Majkut outlines a strategy to boost energy generation, build transmission infrastructure, and approach greenhouse-gas emissions reductions while prioritizing global economic competitiveness. 

Forecasts suggest that U.S. electricity demand could rise by as much as 105 percent by 2040, driven by rapid growth in artificial intelligence (AI) data centers and strategic manufacturing. Capital investment in AI data centers could soar from $125 billion in 2024 to nearly $2 trillion by 2030, with facilities requiring electricity loads comparable to mid-sized cities. At the same time, the expansion of semiconductor and electric-vehicle production is straining regional grids. Together, these sectors are reshaping the U.S. energy landscape and propelling the need for increased generation and transmission capacity.

The existing grid is unable to support the scale of new power demands, creating reliability problems, as the power sector operates on increasingly thin reserve margins during periods of peak demand. Majkut calls for strengthening generation, transmission, and distribution infrastructure while continuing to reduce emissions. He argues that the country needs to do so in a way that aligns our strategic competitiveness goals with climate concerns, as the carbon intensity of products is becoming a key competitive differentiator in international markets. America already holds distinct carbon-intensity advantages in key production sectors, but these need to be preserved by continuing to invest in clean energy and resilient infrastructure.

In light of these challenges, Majkut proposes four policy proposals to support strategic energy competition. 

Expand the development and deployment of nuclear energy. Expanding nuclear power would complement solar, storage, and natural gas by providing large-scale, carbon-free baseload generation. Majkut proposes an anchor tenancy model in which the Department of Energy is a contracted purchaser of power from a project under development, so that private developers can secure funding from capital markets and attract other potential offtakes, enabling financing and the start of construction. 

Invest in transmission enhancements. Investing in high-voltage interstate transmission is one of the most strategic long-term steps the federal government can take to strengthen the energy system. Majkut calls for federal funding and authority to accelerate the buildout of a national grid capable of transferring power efficiently across states, especially to regions hosting data centers and strategic industries.

Build new natural-gas plants ready for later retrofit with carbon capture and storage equipment. While natural gas will be necessary to meet rising demand, future emissions reduction goals will require retrofitting many of these facilities. Designing plants today with future carbon capture and storage (CCS) in mind is a low-cost hedge that helps prioritize long-term emissions-reduction progress. Federal and state policy should encourage CCS readiness as a condition of accelerated permitting and incentives for new gas generation.

Establish rigorous carbon-accounting standards. As global markets increasingly reward low-carbon production, the United States will need credible emissions accounting to maintain competitiveness. Majkut recommends U.S.-led standards that leverage the expertise of the Departments of Energy and Commerce to guide investment, enhance transparency, and build support for broader climate policies.

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Housing affordability in the United States has become a major challenge for Americans and a key policy priority for US policymakers. In this paper, Benjamin Keys and Vincent Reina assess the drivers of the housing affordability challenge, concluding that inadequate supply, barriers to homeownership such as tight credit standards, and the lack of a meaningful housing safety net have made affordable housing increasingly out of reach for many Americans. The authors then propose specific policy solutions to expand supply, improve access to homeownership, and strengthen the housing safety net. 

Keys and Reina first lay out several facts about the decline in housing affordability in the United States. Since 1980, median inflation-adjusted rent has nearly doubled—from under $950 to $1,700 in 2023—while the share of affordable rental units has collapsed from more than half of the housing stock to just over 20 percent. The share of renters who are “rent burdened,” spending over 30 percent of their income on housing, has risen from 35 to 48 percent.

Second, homeownership has become increasingly out of reach. The ratio of median sales price to median income has increased from 2.4 in 1990 to 5 in 2023. With home prices elevated, first-time buyers are entering the market later and in smaller numbers. The median age of a first-time buyer has climbed from 29 in 1980 to 38 in 2024, and the share of all housing purchases made by first-time buyers fell from 50 percent in 2010 to 24 percent in 2024.

Keys and Reina identify four main drivers of the nation’s housing affordability crisis: 

Challenges in building housing. Local land-use and zoning restrictions have sharply limited housing supply. Lengthy permitting processes, uncertainty, and high fixed development costs further push up costs for builders, incentivizing the construction of high-priced, luxury units and leaving the low-cost segment undersupplied. 

Barriers to homeownership. Homeownership has become increasingly difficult due to tighter credit standards, high levels of student-loan debt, and disproportionately high denial rates for minority households. Lending standards to obtain high-LTV, fixed-rate, 30-year mortgages have increased since the global financial crisis: average FICO scores for newly originated purchase mortgages have increased from 705 in 2006 to 740 in 2022. 

A lack of a housing entitlement program. The United States has never had a housing safety net for renters or owners, and the existing assistance leaves many eligible recipients without support. For every one household that receives a housing choice voucher, as many as four other households are eligible. Public housing represents less than 2 percent of units, and the Low Income Housing Tax Credit produces only about 110,000 units annually, often at rents too high for the lowest-income families. 

Barriers to financing construction and repairs. Developers and owners both face barriers when trying to finance new development, which affects the supply of new units being built, and rehabilitation, affecting the ability of units to stay in the housing stock. Since 2015, tighter credit standards have constrained developers, landlords of small properties, and homeowners seeking to rehabilitate aging housing stock. 

In response to these challenges, Keys and Reina outline three key policy proposals to improve housing affordability: 

Make it easier to build. Policymakers at all levels can make it easier to build by accelerating production, reducing barriers, and incentivizing sensible density through zoning reforms, such as reducing minimum lot sizes and parking requirements, and allowing accessory dwelling units near transit. The federal government could further expand multifamily financing through a loan system similar to the current system in place for single-family lending. 

Address barriers to home ownership. The tax code can be reformed to reduce barriers to homeownership by converting the regressive mortgage interest deduction into a targeted first-time homebuyer credit while balancing demand-side incentives to avoid driving up prices. Policymakers could also explore taxes on imputed rent to encourage downsizing, make existing mortgages more assumable or portable, and expand tax-credit programs like the proposed Neighborhood Homes Tax Credit to support the development of affordable for-sale housing. 

Create a stronger housing safety net. Strengthening the housing safety net would ensure affordable shelter during income shocks by expanding proven tools like direct rental assistance and national emergency-rental support to promote greater housing stability.

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Despite strong economic conditions, survey data reveal substantial economic worry and discontent among Americans. Pew survey data from 2024 indicated that “strengthening the economy” was Americans’ top policy priority, above “defending against terrorism,” “reducing crime,” and “dealing with immigration” (Pew 2024). A separate Pew survey from that same year found that only 53 percent of Americans believe that the “American Dream,” defined as the idea that anyone can achieve success in the United States through hard work and determination, is still possible (Borelli 2024).

Advancing broad economic prosperity requires an understanding of the economic well-being of American households, as well as potential contributors to widespread economic malaise. With that goal, this piece highlights current evidence on household financial well-being through six facts and accompanying figures. First, we document trends in earnings and income growth across the wage distribution as well as by educational attainment, gender, and geography. Second, we highlight trends in the costs of two salient household budget items: housing and healthcare.

1. Compared to half a century ago, inflation-adjusted wages have risen across the income distribution.

The typical worker in the United States earned more in recent years than at any point over the past half century, after adjusting for the rising cost of living.^[1] Figure 1 shows that median hourly wages increased by 33 percent from 1973 to 2023 and that wages increased across each earnings decile over that time. To be sure, wage growth has not been uniform across time or across the wage distribution. The lowest earners (the bottom 10 percent), for instance, experienced a sharp decline in real wages from 1979 through 1997. In the subsequent period, from 1997 to 2023, however, real wages have risen 48 percent among the bottom decile of earners—compared to 33 percent for the median worker and 37 percent for the 80th percentile of earners. Thus, the overall story of the American worker is one of substantial wage growth over the past half century and particularly over the past 30 years.

[1] Throughout this paper, we adjust earnings and income data for the rising cost of living using the Personal Consumption Expenditures (PCE) price index. Researchers typically deflate such data using either the PCE or the CPI-U-RS, a version of the Consumer Price Index for all Urban Consumers (CPI-U) that incorporates improvements made to CPI calculation methods over time (BLS 2025). We prefer the PCE price index as it is a chain-type price index, meaning it incorporates consumers’ substitution behaviors as the relative prices of goods change (BLS 2011).

2. Over the past four decades, household income has risen across the income distribution, reflecting both rising earnings and a more generous tax-and-transfer system.

While fact 1 concerns long-term trends in individual worker wages, examining trends in household income helps to shed light on how total resources have changed, taking into account changes in household structure and the tax-and-transfer system. Figure 2 plots changes in household income, showing both market income and total income, by income quintile. “Market income” consists of wages, along with additional labor income (such as employers’ contributions for health insurance premiums), business income, and capital gains (CBO 2024). For all quintiles, both market income and household income increased between 1979 and 2019. For the lowest quintile of households, market income rose by 40 percent. Post-tax and transfer income of this group increased by 100 percent. As outlined by Kearney and Sullivan (2025), changes to the US tax-and-transfer system over this time, such as expansions to the Earned Income Tax Credit, have played a large role in raising the resources of low-income households.

3. Labor market outcomes have been marked by an increased return to education and a decline in inflation-adjusted wages for men without college degrees.

Despite rising wages across the income distribution and broad growth in household income, certain groups have fared better than others over the past five decades. Indeed, breaking apart wage data by gender and education highlights two key economic trends. First, there has been a consistent rise in the return to education from 1973 to 2024. Both men and women with a college degree or higher, especially those with advanced degrees, have experienced the strongest real wage growth: From 1973 to 2024, wages for men and women with advanced degrees have risen 38.4 and 32.9 percent respectively; wages for men and women with college degrees have risen 16.9 and 27.6 percent, respectively. Second, in contrast, men without college degrees have fared poorly in the labor market. Over this time, real wages declined 15.5 percent for men with high school degrees and 7.8 percent for men without high school degrees.

The twin trends of widening inequality in wages by education groups and the decline in earnings among men without college degrees are largely a product of developments in prior decades, including automation and globalization. Advances in technology that began in the 1980s sparked a polarization in the labor market that increased the returns to education and shifted workers without college degrees into low-wage jobs (Katz and Autor 1999). Men without college degrees saw wages stagnate in the first decade of the 2000s, as those who had been working manufacturing jobs that were eliminated due to rising global competition then moved into service-sector jobs (Autor et al. 2016). In the past decade, however, labor-market polarization has given way to general skill upgrading in the labor market, as Deming et al. (2024) describes, and real wages have risen across all education levels, including for men with less than a college degree.

4. Geographic income inequality has widened since 1980. 

The dynamics described above tie directly into differences in economic growth that have emerged across geographies over this time. Figure 4 shows that from 1980 to 2023, per-capita real income (excluding government transfers) for the top 1 percent of counties rose by 165 percent, compared to 84 percent for the median county.

This divergence across cities reflects the dynamics of both labor markets and housing markets. The increased concentration of “knowledge workers” in cities fostered further growth, creating what Enrico Moretti (2004; 2012) has called the “Great Divergence” between highly educated, high-income, high-growth cities that attracted these workers and the areas that did not. Furthermore, as David Autor (2020) detailed, over this period, cities experienced a decline of middle-paying production or clerical jobs that a worker without a college degree might have once found there. From 1980 to 2015, the “urban wage premium” for workers with a college degree or greater rose by 50 percent, driven by the rise of high-paying professional and managerial jobs in cities.

At the same time, inelastic housing supply in these “superstar” cities caused house prices to rise to the point that living in such cities has become unaffordable for many low-wage service-sector workers (Gyorko, Mayer, and Sinai 2013). These developments have cut off a key mechanism of regional income convergence and individual economic mobility—a mechanism of which America’s cities have historically served as a trademark (Glaeser et al. 2005; Glaeser 2011; Ganong and Shoag 2017).

5. Rising housing costs have strained the budgets of many low-income Americans, making renting more burdensome and homeownership increasingly unattainable.

To be sure, rising housing costs are a concern not only in large cities but across the country, as Keys and Reina (2025) detail. Rent is consuming a larger share of household budgets, rising home prices are making home buying unaffordable, and for recent homebuyers, high mortgage rates mean that mortgage payments consume a significantly higher share of monthly budgets than they did for prior cohorts.

Figure 5 shows that roughly half of US renters are now classified as rent-burdened, meaning they spend 30 percent or more of their income on housing (US Census Bureau 2024). This burden is the largest for low-income households. In 2022, 83 percent of renters with incomes below $30,000 spent at least 30 percent of their income on rent. The largest increases over time have been seen for middle-income renters: The share of households making between $45,000 and $75,000 who spent at least 30 percent of their income on rent has nearly doubled since 2001, reaching 45 percent in 2022 (Airgood-Obrycki 2024).

Likewise, high interest rates, tight lending standards, and constrained supply have made homeownership increasingly unaffordable for the typical American. Figure 6 shows the Federal Reserve Bank of Atlanta’s estimate of the income needed if annual homeownership costs are to equal no more than 30 percent of annual income and plots it against the actual median income. From 2008 to 2019, that “qualified income” matched the median annual income. But from 2020 through 2023, the qualified income has risen to 1.5 times the median annual income.

Finally, for homebuyers able to obtain a mortgage since the pandemic, housing costs take up a substantially higher share of income compared to costs for homebuyers pre-pandemic, as shown in figure 7 below. For a buyer who obtained a mortgage in 2016, those payments consumed on average 15 percent of income in the first year; for a buyer in 2024, first-year mortgage payments made up 26 percent.

6. Healthcare costs are outpacing inflation.

Housing is not the only household necessity that has become increasingly expensive. Healthcare costs in the United States have risen steadily over the past several decades. Americans face high and rising out-of-pocket costs, which more than doubled from $677 per person (inflation-adjusted) in 1970 to $1,425 in 2022, as shown in figure 8. Importantly, out-of-pocket expenditures do not include spending on health insurance premiums, which have also risen substantially. In 1999, an average worker contributed $1,564 in premiums for family health insurance (not including the employer’s contribution); by 2024, that cost had more than quadrupled to $6,393 (KFF 2024).

Research has found that healthcare costs are rising largely because prices—that is, the amount individuals pay for goods and services like pharmaceutical drugs, physician care, and hospital stays—have risen, as opposed to families consuming more healthcare and prices staying the same (Anderson et al. 2019). Figure 9 shows that while the overall consumer price index has risen 86 percent since 2000, the index for medical care has risen 121 percent.

While part of the rise in prices has been attributed to forces like hospital consolidation, high prices are also a result of valuable innovations that have led to new (and more expensive) drugs and treatments (Cooper et al. 2019). As Garthwaite and Starc (2023) lay out, high prices themselves serve as an incentive for firms to make costly investments in innovation, which increases access to new drugs and treatments in the future. In this way, reforms should focus on driving value in today’s healthcare system—by (for example) improving transparency and competition at several points in the pharmaceutical drug supply chain, rather than strictly by lowering prices.

Conclusion

Advancing widespread prosperity today requires a clear understanding of the current state, and historical evolution, of household economic well-being. Contrary to popular claims, American workers across the wage distribution are materially better off now than they were in 1979. Wage growth has exceeded the increased cost of living even for the bottom 10 percent of workers—indeed, the story of wage stagnation is largely one that ended in the mid-1990s. The rise in household income has been even greater due to the increased generosity of the tax-and-transfer system.

However, automation and globalization have widened the gap in wage growth between those with college degrees or greater, who have seen faster-than-average wage growth, and non-college workers, particularly men with high school degrees or less. These highly educated workers clustered in a small set of high-tech cities, and as housing supply failed to keep up with demand, such cities became too expensive for low-wage workers—driving a trend of widening geographic income inequality and cutting off mechanisms of economic mobility. Indeed, housing costs are increasingly straining renters’ and many homeowners’ budgets across the country. Along with housing, healthcare costs are a salient household expense that has outpaced overall price growth in recent decades.

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In “Beyond the Myths: A Clearer Path to Poverty Alleviation in America,” Melissa S. Kearney and James Sullivan reassess poverty trends and policy responses in the United States. They document that, contrary to common perceptions, poverty has declined substantially over the past four decades and that anti-poverty programs have played a central role in this progress.

The authors argue that framing poverty reduction as a matter of simply transferring cash overlooks the complex and multifaceted challenges faced by those living in poverty. Sustained progress requires investing in people’s capacity to succeed, with particular attention to four areas: developing skills, strengthening families, removing barriers to individual flourishing, and expanding upward mobility for children born into disadvantaged circumstances.

Kearney and Sullivan outline three key common misconceptions about poverty in the United States. 

Misconception 1: The US has made little progress at reducing poverty.
For many years, policymakers and pundits have claimed that poverty has not fallen. However, Kearney and Sullivan show that, when measured accurately, poverty has fallen dramatically since the 1980s—by roughly half according to income-based measures and by more than 80 percent using consumption-based measures. Broader indicators of material well-being, including housing quality and access to amenities, tell the same story: poverty has declined substantially over the past four decades.

Misconception 2: Anti-poverty programs are ineffective.
Anti-poverty programs have been central to poverty reduction over the past four decades. Comparisons of pre- and post-tax incomes of low-income households show that tax credits and in-kind transfers directly reduce the poverty rate by roughly two-thirds—from 17.4 percent before taxes and transfers in 2023 to 6.1 percent after them. Beyond their immediate impact, programs such as the Earned Income Tax Credit, SNAP, and Medicaid yield long-term benefits for children, improving health, educational attainment, and adult earnings, underscoring the importance of maintaining these safety nets alongside policies that promote long-term self-sufficiency.

Misconception 3: Just giving people cash will solve poverty.
The claim that America could eliminate poverty simply by giving people money conceives of this problem too narrowly as a financial one, when in reality the challenge runs much deeper. Research on guaranteed-income programs shows that unconditional payments rarely lead to greater economic independence or investments in education and skills, as persistent poverty reflects structural barriers that money alone cannot resolve. True poverty alleviation requires addressing underlying issues—such as education, health, family stability, and barriers to work—through long-term investments in people and families.

Guided by facts and evidence, Kearney and Sullivan propose an anti-poverty agenda for the country focused on making long-term investments in people and families. They propose four specific areas of investment.

An anti-poverty agenda: Alleviating poverty requires investing in people

1. Advance skills and education. Expanding access to high quality education and training is one of the most reliable ways to reduce poverty and promote long-term economic security. Comprehensive student-support programs, flexible high schools for adults, and sector-based workforce training programs can help students obtain skills valued in the labor market.
2. Strengthen families. Family structure is strongly correlated with child poverty and long-term outcomes. Investing in strong families requires a multi-pronged approach aimed at addressing the decline in marriage among non-college educated adults, expanding programs that help low-income couples establish healthy relationships, and reforming the tax-and-transfer system to eliminate marriage penalties.
3. Address individualized barriers to stability: All too often, individuals and families who struggle to make ends meet face a complex web of barriers that prevent them from becoming economically stable. Addressing poverty often requires providing assistance that is customized to the unique set of challenges that each individual or family faces.
4. Boost upward mobility for poor children. Investments in children’s nutrition, healthcare, housing stability, and early education have proven to yield long-term gains in health, educational attainment, and earnings. 

These reforms, the authors stress, should complement policies that promote and sustain strong economic growth and widespread opportunities for all.

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The United States stands at a pivotal moment in economic policymaking.  The Trump administration has profoundly reshaped America’s approach to international economics, adopting a more confrontational stance on trade and retreating from long-standing multilateral agreements. In April 2025, the Trump administration announced tariffs on goods from every US trading partner, ranging from 11 to 50 percent, which were then reduced to 10 percent as countries negotiated bilateral trade agreements (White House 2025b). This bilateral, “deals-based” approach to trade negotiations further cements the end of an earlier era of engagement through multilateral institutions.  

In addition, Congress has passed sweeping legislation that makes significant changes across a range of domestic policy areas. The recently passed One Big Beautiful Bill (OBBB) extends expiring provisions in the 2017 Tax Cuts and Jobs Act (TCJA), introduces new tax cuts, reduces the generosity of Medicaid and SNAP, rolls back incentives for renewable-energy investments, eases financing requirements for low-income housing, bolsters national defense, and strengthens border security efforts, all while adding an estimated $3.4 trillion to the federal deficit over the next ten years (CBO 2025). Questions abound about the economic implications of the bill’s many provisions, including how the permanence of some TCJA provisions will affect business investment, how changes to Medicaid and SNAP will impact vulnerable populations, and how the increase in debt will drive up interest rates and affect the macroeconomy. 

Meanwhile, rising geopolitical tensions and rapid advances in artificial intelligence are redefining the landscape for US strategic competitiveness. China is taking steps to advance its economic capacity and to boost its military capabilities, and Russia’s continued invasion of Ukraine marks its clear ambitions of territorial expansion. The US faces these rising global tensions with eroded industrial capacity and a weaker recognition of the connection between commercial interests and the country’s national interests that came to define prior decades.  

All these developments have fueled a high degree of economic uncertainty about economic conditions, for both households and businesses. Measures of consumer sentiment remain well below levels in 2023 and 2024 (Economic Policy Uncertainty Index n.d. and University of Michigan 2025, respectively). These developments also raise urgent questions about how best to safeguard and advance America’s prosperity and bolster America’s strategic competitiveness. 

This 2025 Aspen Economic Strategy Group (AESG) policy volume takes up these questions. The six chapters in this book, organized into two sections, consider the implications of these developments and evidence-based approaches to moving forward in a way that bolsters American economic prosperity. 

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The United States’ innovative edge depends on its ability to draw on the best talent from around the world. However, the laws that govern high-skilled immigration are outdated and misaligned with the needs of today’s economy. Only a small share of green cards, which provide immigrants permanent resident status in the United States, are allocated based on skills or employment. These eligibility pathways are constrained by rigid numerical caps,  causing long and growing backlogs. As a result, temporary visas (such as H-1Bs and J-1s) have become the de facto system for recruiting and retaining high-skilled workers in the US, even though these pathways are not designed to provide long-term employment or residency. Moreover, these temporary visas are also subject to restrictive caps and allocation mechanisms that undermine strategic selection.

In Aligning High-Skilled Immigration Policy with National Strategy, Jeremy Neufeld outlines the shortcomings of the current high-skill immigration system and offers policy reforms that would advance the United States’s ability to attract, select, and retain the world’s most promising workers.

Green-card caps and per-country limits restrict the flow of high-skilled talent.
Each year, the US issues about one million green cards, which offer lawful permanent resident status, but only 7 percent go to individuals selected on the basis of their skills or job offers. These limits—set more than three decades ago—are compounded by per-country caps that can produce decades-long wait times. To address these issues, Neufeld proposes that Congress increase the number of green cards available for high-skilled workers, particularly in critical emerging-technology fields.

Temporary visa programs create bottlenecks and reduce selectivity.
U.S. recruitment of high-skilled workers relies heavily on temporary nonimmigrant visas such as F-1 student visas and H-1B specialty occupation visas, which are limited in duration and tightly constrained by employment rules. This “funnel” system accepts far more recruits at the top, through universities and exchange programs, than there are available green cards at the bottom. To strengthen selection and efficiency, Neufeld recommends replacing the random H-1B lottery with a compensation-based allocation system that prioritizes the most qualified candidates. 

Rigid visa rules limit innovation and fail to prioritize merit.
Visa holders are often tied to specific employers and have stringent, work-related restrictions, significantly limiting the labor market mobility of the visa holder. This rigidity significantly restricts innovation and entrepreneurship, preventing immigrants from starting their own companies or commercializing research for fear of losing their visa, and in turn limiting innovation spillovers that would otherwise benefit the broader economy.

Neufeld proposes a points-based green-card system that awards visas based on characteristics associated with success, like education, SAT scores, salary, language proficiency, and job offers. Furthermore, he also recommends more proactive talent recruitment, as existed during the end of World War II. He suggests that talent scouts could experiment with identifying and recruiting to the United States winners of math and science olympiads, winners of scientific prizes, budding entrepreneurs, and top young scientists, in order to attract the highest potential immigrants.