The real costs of amnesty

 

The Heritage Foundation

The amnesty under consideration in Congress would come at an enormous cost: more than $5 trillion over the lifetime of immigrants who are legalized. But the bill is structured to hide most of those costs from voters.

To see how, let’s start with some basic facts about taxes and spending in the United States. The average household receives about $32,000 in cash and services from federal, state and local governments combined. These range from direct benefits such as Social Security to public services such as police and firefighting.

Households headed by college graduates tend to pay more in taxes than they receive in government benefits. At the other end of the spectrum, households headed by someone without a high-school diploma tend to receive about $4 in government benefits for every $1 they pay in taxes. This is not a comment on the relative “worth” of any type of household, but a simple reflection of our redistributionist system.

So what does this have to do with amnesty? The typical undocumented immigrant in the United States today has about a 10th-grade education. Individuals with educational attainment that low, on average, will be net fiscal consumers rather than contributors.

The Heritage Foundation recently published an exhaustive report that calculated just how large this net fiscal deficit is. If amnesty is granted to the 11.5 million undocumented immigrants now in the United States, they will eventually become eligible for the full panoply of government benefits. Total federal state and local government expenditures to these individuals would come to $9.4 trillion over their lifetimes. Total taxes paid by the amnesty recipients would equal $3.1 trillion. The net life-time deficit: $6.3 trillion.

In calculating these numbers, we considered all government expenditures and taxes at the federal, state and local levels, attributed to immigrants who would receive amnesty. No other cost estimate is nearly so comprehensive.

Nevertheless, the Congressional Budget Office will claim the costs of amnesty are much lower. One reason for this is that the CBO will consider only federal entitlements, while state and local budgets will obviously be affected as well. More important, however, the CBO typically considers only a 10-year budget window. Nearly all the increased costs occur outside that 10-year time frame, and are not included in the CBO calculations.

The current Senate bill specifies that immigrants receiving amnesty will be ineligible for the Affordable Care Act and for means-tested benefits for 13 years. In other words, the major costs imposed by the amnesty will not make their way into official CBO estimates. Quite convenient for amnesty supporters!

The largest cost due to amnesty will come three decades from now, when immigrants who received amnesty will become eligible for Social Security and Medicare benefits. About $3.5 trillion of the net fiscal cost of amnesty comes from the retirement years.

About half of undocumented immigrants pay into the Social Security and Medicare trust funds now, but none are currently eligible for benefits. Suddenly allowing those immigrants to receive benefits will obviously come at a fiscal cost to taxpayers.

But even this straightforward logic is obscured by the way the government estimates costs. The Social Security Administration just released a study indicating that amnesty would add $140 billion to the Social Security trust fund. But that’s over the next 10 years — not counting the Social Security benefits that new participants will eventually receive.

The fiscal cost of amnesty will be huge. But the government seems unwilling to admit it.

There is a better way to structure immigration policy — a way that will result in a net fiscal gain for taxpayers rather than a loss. First, we should not grant amnesty to undocumented immigrants. Second, we must ensure that any guest-worker program is truly temporary, not a gateway to welfare entitlements.

Third, we should reorient our legal immigration system to favor high-skilled immigrants. College-educated immigrants would likely pay more in taxes than they receive in benefits, just as well-educated natives do.

Canada and Australia already employ this basic logic when designing their immigration systems. It’s a model that Congress should strongly consider.

Robert Rector is senior research fellow in domestic policy at The Heritage Foundation.

© 2013, The Heritage Foundation

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