Can We Afford the High Cost of Immigration Reform?

Can We Afford the High Cost of Immigration Reform?

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Don’t shoot the messenger! The Heritage Foundation is under attack for delivering sobering news.

They say granting amnesty to 11 million illegal immigrants could cost the U.S. a staggering $6.3 trillion – or more. The conservative think tank has been widely criticized for the new study by Robert Rector and Jason Richwine, which details the fiscal toll of the immigration reform bill rolling through the Senate. Their analysis, though, is straightforward.

The scholars point out that most illegals are under-educated and poor, and therefore receive more from the government than they contribute. The authors point out that the financial burden imposed by such households, once they can access our myriad welfare programs, is no different from that levied by similarly positioned citizens.

There is no value judgment here. If anything, the report is an indictment of the welfare state – not of hardworking immigrants. As the report points out, “The governmental system is highly redistributive.” Still, the report erects a giant speedbump for the immigration bandwagon.

Heritage describes the typical illegal as 34 years old and holding only a 10th-grade education. In 2010, this person’s household took in benefits valued at roughly $24,721 and paid about $10,334 in taxes. Hence, such individuals were a net $14,387 drain on the Treasury.

Under the plan being devised by the bipartisan Gang of Eight, such households would over the course of 13 years work their way towards citizenship. During that period, these individuals would gain legal status, allowing them to work and pay taxes. But they would not become eligible for means-tested welfare programs or Obamacare. Hence, during this period, it is likely the cost of such families would decline, to an estimated $11,455 annually, as they creep out of the shadows and pay more in taxes.

During the next phase, however, when they tap into Social Security, Medicare, Obamacare and all manner of other benefits, the net cost of these households skyrockets to $28,000. Assuming that the 34-year-old lives to 84, the aggregate cost of amnesty soars to $6.3 trillion.

The report raises a question: can we afford to grant illegals citizenship?

Heretofore, opposition to immigration reform has focused mainly on border security or possible deflation of labor rates as millions more compete for work. Heritage has arguably redrawn the argument, just as numerous interest groups had jumped onto the reform movement. 

Democrats are keen to admit millions of new party supporters; unions covet new members; Republicans want rapprochement with Hispanics; the Chamber of Commerce targets highly skilled workers, farmers need field laborers – and most Americans see our current system as unsustainable and inhumane.

No one wants millions living in the country under the threat of deportation. Further, the recent terror attacks remind us of how poorly we monitor those coming in and out of the country. Most people agree, the status quo is unacceptable.

But, it is affordable. According to Robert Rector, if we do nothing about our illegal population, the cost of those households will total about $1 trillion over the next 50 years, rather than $6.3 trillion. He reasons that as those who live illegally in the U.S. approach retirement age, they will tend to go home if they do not have access to Social Security and Medicare. (This assumption seems questionable to me, as it assumes more generous treatment elsewhere.) It is the aging of this population that is so costly, just as it is for the country as a whole.

Criticism of the report from CATO and other organizations centers on the so-called “static” nature of the Heritage analysis. They argue that a large increase in the number of people working and paying taxes in the U.S. will have ancillary benefits, boosting GDP and tax revenues.

Indeed, one study concluded that men who become legal citizens saw their earnings rise by 14 percent to 24 percent. Others show that legalization leads to higher educational status, increased home ownership and reduced poverty.

Senator Marco Rubio (R-FL), a champion of the reform effort, notes rightly that immigrants can help their children move up the educational and earnings ladders, as his parents did, a prospect the study minimizes. The Heritage folks may well have underestimated the upside of legalization and further study of “next generation” outcomes may be warranted. Still, most reports highlighting the great contributions immigrants have made to the country support a greater influx of highly skilled and trained workers, not high-school dropouts.

The Congressional Budget Office has yet to analyze the Senate bill, but it will use dynamic scoring, incorporating prospective changes to the economy overall from an increase in the labor pool.

Their study in 2006, which used the same approach, concluded that the immediate cost of the proposed reforms would be $37 billion over ten years; however, taking into account the bill’s possible impact on economic growth, they deemed the measure to be a net contributor  -- of as much as $120 billion -- over the same time frame. 

Robert Rector points out that Congress fashions legislation so as to secure a green light from the CBO. Like Obamacare, which was crafted to show the least possible budget impact by collecting taxes and fees up front while shoving costs into the out-years, the immigration bill wreaks the most fiscal damage only after the 13-year interim period. This is when those 11 million new citizens gain access to the 80-odd means-tested government programs like food stamps, unemployment insurance, Social Security and Medicare that are available to our low-income families.

The Heritage authors caution that their estimates are at the low end of what is likely. How can that be? Because, among other reasons, they imagine that it is extremely unlikely that our legislators will withhold medical care for 11 million near-citizens over that interim 13-year period. I would agree.

The Heritage Foundation has done us a service by bringing the cost of immigration reform to light.  Their numbers may prove too high, but their analysis demands that our legislators apply more than wishful thinking – or weigh more than prospective campaign donations from special interest groups – in assessing the viability of reform. That doesn’t mean we should not fix our broken immigration system; it just means we should do so with our eyes open.