National Data | "Path To Citizenship" Goes Through U.S. Taxpayer's Pocket

Here's a question Tamar Jacoby's pollsters should ask Americans: would you support a "path to citizenship" [Bushspeak for amnesty] if you knew it would cost you, oh, say $2.4 trillion?

Robert Rector, the reigning domestic policy expert at Heritage Foundation, has shown that it will.

It works like this: In recent testimony before the House Judiciary Committee, Rector calculates the fiscal deficit of households headed by immigrants who lack a high school diploma. He finds that the average uneducated immigrant household:

  • Receives $30,164 in government benefits

 

  • Pays $10,573 in government taxes

 

  • Generates a fiscal deficit of $19,588 ($30,164 less $10,573)

There are about 4.5 million such households, implying that the fiscal deficit (benefits received less taxes paid) for all poorly educated immigrant households equals $89.1 billion (4.5 million times $19,588). More than half of this deficit—$49.1 billion—occurs at the state and local government level.

Bottom line, according to Rector: Eighty-nine billion dollars a year, or about 0.6 percent of GDP, is transferred from native taxpayers to immigrant beneficiaries.

This amount far exceeds the infinitesimal gains in native before-tax income that earlier studies have attributed to immigration. Thus Rector's study shows that immigration is reducing the living standards of U.S. natives.

Here's how amnesty fits in:

About 41 percent of these uneducated immigrant households are headed by illegal aliens. They are eligible for many of the same benefits received by legals, notably public education. (At $7,737 per household, public education accounts for more than one-quarter of all government costs associated with immigrants.) And while illegals themselves are technically ineligible for welfare—unless you think they might lie—their U.S.-born children receive the full gamut of means-tested welfare benefits. The biggest difference occurs in Social Security and Medicare.

In an editorial [May 24, 2007]  attacking Rector's fiscal impact study, the Wall Street Journal notes what everyone already knows: immigrants generally come here when they are young and working. Seventy percent are 20 to 54, compared to only half of natives. Just two percent of immigrants are over 65 when they arrive. So immigrants contribute payroll taxes for some years before they collect Social Security and Medicare. Overall, they will pay about $5 trillion more in payroll taxes over the next 75 years than they will receive in Social Security benefits. (Eventually, of course, these legal immigrants will themselves become a liability to the system, at which point the WSJ would no doubt advocate more immigration—in other words, a Ponzi scheme.)

But the WSJ conveniently suppresses these inconvenient truths:

  • This subsidy from immigrants is nowhere near enough to staunch the long-run actuarial deficit facing Social Security or Medicare.

The 2007 Trustee Reports project increasingly large deficits in both Social Security and Medicare, with a 75-year deficit of $6.8 trillion in the retirement fund and $11.6 trillion in the health insurance fund. The Medicare Trust fund is expected to run out of cash by 2019, while Social Security will hang on until 2041.

The agreement allows Mexican aliens to vest for Social Security after working just 18 months in the U.S., and make up the difference by "claiming" to have worked in Mexico. We say "potential" because the U.S.-Mexico agreement has yet to be signed by the President—or even sent to Congress for review. While costs will ultimately depend on specific terms and language, any totalization agreement will hasten the demise of both Social Security and Medicare.

And amnesty will accelerate Social Security's demise far more dramatically than totalization.

Rector's explanation: If the government gives amnesty to 9.3 million illegal immigrants—and there may be as many as 20 million—most of them would eventually become eligible for Social Security and Medicare benefits or Supplemental Security Income and Medicaid benefits. Of course, not all of the 9.3 million adults given amnesty would survive till age 67—normal mortality rates would probably reduce the population by roughly 15 percent before age 67. But that means 7.9 million individuals would reach 67 and enter retirement. Their average life expectancy would be around 18 years.

Rector's conclusion:

"The net governmental cost (benefits minus taxes) of these elderly individuals would be around $17,000 per year. Over eighteen years of expected life, costs would equal $306,000 per elderly amnesty recipient. A cost of $306,000 per amnesty recipient multiplied by 7.9 million amnesty recipients would be $2.4 trillion. These costs would hit the U.S. taxpayer at exactly the point that the Social Security system is expected to go into crisis." [The Fiscal Cost of Low-Skill Immigrants to State and Local Taxpayers by Robert E. Rector, Testimony Delivered May 17, 2007]

The bottom line: amnesty will cost Americans $2.4 trillion. Go on, Tamar. See how popular that is.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.