Politics

Study puts cost of amnesty at $6.3 trillion

Study puts cost of amnesty at $6.3 trillion

Robert Rector and Jason Richwine of the Heritage Foundation have released a new report that puts the cost of amnesty for illegal immigrants at a cool $6.3 trillion for the American taxpayer: $9.4 trillion in government benefits and services, minus an anticipated $3.1 trillion in tax revenue for the new citizens, over the course of a “lifetime.”

The typical unlawful immigrant is 34 years old. After amnesty, this individual will receive government benefits, on average, for 50 years. Restricting access to benefits for the first 13 years after amnesty therefore has only a marginal impact on long-term costs.

If amnesty is enacted, the average adult unlawful immigrant would receive $592,000 more in government benefits over the course of his remaining lifetime than he would pay in taxes.

Over a lifetime, the former unlawful immigrants together would receive $9.4 trillion in government benefits and services and pay $3.1 trillion in taxes. They would generate a lifetime fiscal deficit (total benefits minus total taxes) of $6.3 trillion. (All figures are in constant 2010 dollars.) This should be considered a minimum estimate. It probably understates real future costs because it undercounts the number of unlawful immigrants and dependents who will actually receive amnesty and underestimates significantly the future growth in welfare and medical benefits.

Rector and Richwine explain that they prepared these figures to counter certain optimistic notions about the illegal immigrant labor pool, which tend to be held by people who greatly underestimate the cost of government services for both average and low-income households:

Many conservatives believe that if an individual has a job and works hard, he will inevitably be a net tax contributor (paying more in taxes than he takes in benefits). In our society, this has not been true for a very long time. Similarly, many believe that unlawful immigrants work more than other groups. This is also not true. The employment rate for non-elderly adult unlawful immigrants is about the same as it is for the general population.

Many policymakers also believe that because unlawful immigrants are comparatively young, they will help relieve the fiscal strains of an aging society. Regrettably, this is not true. At every stage of the life cycle, unlawful immigrants, on average, generate fiscal deficits (benefits exceed taxes). Unlawful immigrants, on average, are always tax consumers; they never once generate a “fiscal surplus” that can be used to pay for government benefits elsewhere in society. This situation obviously will get much worse after amnesty.

Many policymakers believe that after amnesty, unlawful immigrants will help make Social Security solvent. It is true that unlawful immigrants currently pay FICA taxes and would pay more after amnesty, but with average earnings of $24,800 per year, the typical unlawful immigrant will pay only about $3,700 per year in FICA taxes. After retirement, that individual is likely to draw more than $3.00 in Social Security and Medicare (adjusted for inflation) for every dollar in FICA taxes he has paid.

The authors also mournfully observe that “even if all the children of unlawful immigrants graduated from college, they would be hard-pressed to pay back $6.3 trillion in costs over their lifetimes.”  And of course, assuming all of them will graduate from college and secure highly compensated positions is absurdly optimistic.

It should be noted that this is not a specific analysis of the Gang of Eight immigration reform bill, although in their summary the authors use a comparable timetable for legalization to break the amnesty process into phases:

If enacted, amnesty would be implemented in phases. During the first or interim phase (which is likely to last 13 years), unlawful immigrants would be given lawful status but would be denied access to means-tested welfare and Obamacare. Most analysts assume that roughly half of unlawful immigrants work “off the books” and therefore do not pay income or FICA taxes. During the interim phase, these “off the books” workers would have a strong incentive to move to “on the books” employment. In addition, their wages would likely go up as they sought jobs in a more open environment. As a result, during the interim period, tax payments would rise and the average fiscal deficit among former unlawful immigrant households would fall.

After 13 years, unlawful immigrants would become eligible for means-tested welfare and Obamacare. At that point or shortly thereafter, former unlawful immigrant households would likely begin to receive government benefits at the same rate as lawful immigrant households of the same education level. As a result, government spending and fiscal deficits would increase dramatically.

The final phase of amnesty is retirement. Unlawful immigrants are not currently eligible for Social Security and Medicare, but under amnesty they would become so. The cost of this change would be very large indeed.

With this timetable in mind, there would be a brief period during the “interim phase” where tax payments from these provisional citizens increased faster than government benefits, reducing the net cost of benefits for the average unlawful immigrant household slightly, from $14k to $11k.  But once the naturalization process was completed, the cost of benefits would soar to $43k per household, while tax revenue would rise only to about about $16k, plus a further taxpayer loss of $22,700 per amnestied illegal once they retire and begin collecting Social Security and Medicare benefits.

The Heritage report is not without its critics – including Senator Jeff Flake (R-AZ) of the Gang of Eight, and Rep. Paul Ryan (R-WI) of the House Budget Committee – who inaccurately claimed the report did not estimate the economic benefits from amnesty.  (As you can see from the excerpts above, it most certainly does.)  As Conn Carroll of the Washington Examiner (who used to work for the Heritage Foundation) noted on Twitter, amnesty proposals use the same magic trick employed by the ObamaCare con artists to understate the cost of their proposals, relying on Congressional Budget Office estimates that only look 10 years into the future… when the really big costs will come later.

That’s why the Heritage study employs a much longer timeline.  If critics want something to grumble about in the short term, they’d be better off complaining that many news articles will cite the Heritage net amnesty cost to taxpayers of $6.3 trillion without noting the time span of the estimate, leading readers to assume the costs would be incurred either instantly, or over the 10-year window commonly employed for deficit projections.  The Heritage study is not at all disingenuous about this, and the reason for the long time period is easily understood, but it probably won’t be explained thoroughly by every source that quotes the figure.

Perhaps given a little more time to digest the full 92-page report, opponents will come up with a more detailed critique of how the costs and benefits of amnesty were calculated.  At the end of the first day after its release, it appears to face no such challenges, while shattering quite a few illusions.  If “comprehensive immigration reform” was presented to American voters honestly, they would be asked to choose between amnesty and the welfare state, because we definitely can’t afford both, and arguably can’t afford either.

Update: I’ve seen some online criticism that the Heritage study did not adequately compare the cost of the status quo (i.e. benefits and other costs associated with keeping the large population of illegal aliens in their current status) with the cost of amnesty, although the excerpts quoted above do explicitly mention the cost of the status quo.  Would those who level this criticism at Heritage care to calculate the cost and benefit of actually enforcing our current immigration laws and thinning out the illegal population?  We’re always told such measures would be unthinkably expensive (and, of course, unspeakably cruel.)  But would they cost less than $6.3 trillion?

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