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Invisible Economy
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March 07, 2002, 04:00 AM
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Originally published in the The American Legion Magazine,  July Issue, Vol. 143, No. 1.

WHY do I, as an immigrant, worry about immigration? I have an infant memory: playing with my twin brother in the back yard of my aunt`s home in a Lancashire cotton town. Suddenly, great whooping giants in U.S. Air Force uniforms (although with the crystal-clear recollection of childhood, I now realize that they had the lithe figures of very young men) leap out and grab us.

We are terrified and struggle free, which always made me feel bad in subsequent years. They were far from home, lodging with my aunt. And they just wanted a souvenir photograph.

They were the Cold War tail of that vast host that had come to Britain during World War II, when the whole town had resounded night and day to the roar of B-17 engines on the test beds at the great Burtonwood air base. And everyone had been glad to hear them.

I don`t know what happened to those Americans, although I remember one young wife showing us the first color slides we had ever seen, of southern California, and explaining that they hoped to move to this breathtaking paradise—it was, remember, the early 1950s—when they got out of the service.

They will be old now, if they are still alive. I don`t know what they or their children think of the transformation immigration is bringing to the nation they so bravely represented. I do know, however, that they ought to be asked.

Soon afterward, illegal immigration also was allowed to spin out of control.

The effect of this invasion will be profound. Here, however, I`m going to focus on just one little-understood point—from an economic point of view, it`s quite unnecessary. There`s no evidence that immigration will do Americans any good.

Today, it is astonishing to read the assurances given by the 1965 Immigration Act`s floor manager, Sen. Edward Kennedy, of Massachusetts.

"First, our cities will not be flooded with a million immigrants annually. Under the proposed bill, the present level of immigration remains substantially the same…. Secondly, the ethnic mix of this country will not be upset…. Contrary to the charges in some quarters, [the bill] will not inundate America with immigrants from any one country or area, or the most populated and deprived nations of Africa and Asia….

"In the final analysis, the ethnic pattern of immigration under the proposed measure is not expected to change as sharply as the critics seem to think."

Every one of Senator Kennedy`s assurances has proved false. Immigration levels did surge upward. They are now running at around a million a year, not counting 3-500,000 net illegal immigration annually. Immigrants do come predominantly from one area—85 percent of the 11.8 million legal immigrants arriving in the U.S. between 1971 and 1990 came from the Third World, 44 percent from Latin America and the Caribbean, 36 percent from Asia—and from one country: 20 percent from Mexico. The ethnic pattern of immigration into the U.S. did change sharply, because immigration from Americans` traditional European homeland has been choked off by the act. And the ethnic mix of the country has, of course, been upset.

By 2050, when (God willing) my American children will be in their 50s, there will be perhaps 400 million people in the United States. But only if immigration continues. Some 130 million of those people will be post-1970 immigrants and their descendants. Early in the next century, African-Americans will no longer be the largest minority. Around mid-century, caucasians will slip below half the population.

There is no economic rationale for our current immigration policy.

There is no precedent for a sovereign state undergoing such a transformation in the history of the world. Well, is there some economic rationale for this extraordinary policy? Extraordinary answer: no.

Economists have usually focused on the fiscal aspects of immigration—that is, are immigrants costing the taxpayers more than they contribute? It`s been a fierce debate which it is increasingly clear that the pessimists have won: the new immigrants are indeed a net fiscal burden.

But the more important question, hardly ever asked, is whether immigration is necessary—does it do something for the American native-born that they can`t do for themselves by other means (such as tax cuts)? Here, surprisingly, there has never been any dispute. "I`ve never said it`s necessary," University of Maryland economist Julian Simon, the much-quoted champion of immigration, told me in an interview.

Let`s look at both questions in turn.

Are immigrants a burden on the taxpayer?

The United States has had mass immigration before. The last great wave was at the beginning of this century. And the U.S. has had the welfare state, from the 1930s. But it has never had mass immigration and the welfare state together. It`s not clear the combination can work.

For example, up to 40 percent of immigrants coming through Ellis Island at the turn of the century ultimately went back. They had to. If they failed in the workforce, there was no government assistance. But now, if immigrants fail in the workforce, there is welfare. So they have been staying—less than 10 percent go home. The dynamic has fundamentally changed.

This problem has been made worse by the perverse workings of the 1965 Immigration Act. The act uncoupled legal immigration from the needs of the American economy by emphasizing so-called "family reunification" over immigrants with skills that employers wanted. In 1992, only 13 percent of the 914,000 legal admissions were "employment-based."

(I say "so-called family reunification" because it`s not what Americans think of as reunification. For example, much of it is immigrants marrying and importing spouses—a "family" that has never been united. But it has created uncontrollable "chains migration" from a small number of Third World countries and enabled them to shoulder all others aside. American interests are never considered.)

The "family-reunification" emphasis means that post-1965 immigrants are, on average, less skilled relative to Americans than ever before. And getting even less so.

The Harvard economist George J. Borjas (himself an immigrant—we are everywhere!) has found that, for example, in 1970 the average recent immigrant had 0.28 less years schooling than native-born Americans. But by 1990, the average recent immigrant had almost 2.39 years less schooling than American whites.

Yes, we hear a lot about Ph.D. immigrants working in California`s Silicon Valley. But the proportion of highly educated immigrants is small. For example, under 3 percent of recent immigrants had Ph.Ds. The proportion of immigrants who have not graduated from high school has sometimes exceeded 40 percent.

Result: in 1970, immigrants on average actually earned some 3 percent more than native-born Americans. But in 1990, immigrants on average earned 16.2 percent less.

And they are going on welfare. George Borjas estimated that in 1990 about 9 percent of immigrant families were on welfare, as opposed to maybe 5 percent of American whites. Including non-cash benefits like food stamps, perhaps 20 percent of immigrant families receive government benefits.

In its own way, the pro-immigration Urban Institute has conceded this reality. Testifying before Congress in 1993, it called for more public spending—"to put it bluntly, [to] avert the formation of a new urban underclass."

Bottom line: George Borjas`s estimates immigrants imposed a net cost on American taxpayers of over $16 billion in 1990.

And note that this doesn`t include the immense costs of educating immigrant children. Borjas makes the conservative assumption that this education will pay for itself when the students start working. I think that`s dubious, but in any case it is years in the future. Nor does Borjas include immigrants` Social Security taxes. They come with the future obligation to support retired immigrants.

What about Congress`s 1996 legislation, which basically required immigrants to become citizens to receive welfare?

It`s at best a start. Immigrants can naturalize after only five years—and the screening process has notoriously collapsed. They can receive payments intended for their American-born children—current law absurdly says that even children born to illegal immigrants are American citizens.

And they can cheat. Legal permanent residents were already supposed to be deported as a "public charge" if they used public benefits during their first five years in the United States. But census data shows they are massively on welfare.

Why not? From 1961 to 1982, only 41 people were deported because they were public charges. Then the INS gave up reporting the category.

Now let`s look at the second question:

Is immigration necessary?

If immigrants work at all—and some don`t—there must be some growth in overall U.S. output. But it could be minimal. And most of it is captured by the immigrants themselves, through their wages.

Moreover, a country`s living standard is expressed by its output per head, not just its sheer output. Specifically, the question is how much immigration benefits each native-born head. Otherwise, why bother?

Oddly, economists have made little effort to measure the overall economic benefits of immigration. The best current estimate was made recently by George Borjas. It suggests that in 1992 the wealth generated by immigrants and accruing to the native-born was very small: about one to three tenths of one percent of total U.S. economic output, or $6-$18 billion. It`s probably wiped out by the fiscal cost.

America is being transformed for—nothing.

Surprised that immigration has so little effect? Remember the U.S. economy is huge and deeply-capitalized. Immigrants make up only about 9 percent of the workforce. And labor is only a relatively small factor in economic growth. It`s far outweighed by technological innovation—which is why Japan has been able to grow three times faster than the United States over the last 50 years without any immigration at all.

Indeed, the U.S. economy`s average growth rate has actually slowed since the late 1960s, when the new influx began.

But although immigration does little good overall, immigrant competition does cause immense redistribution between Americans. Borjas estimates that some 2 percent of output—maybe $120 billion—is redistributed from labor to capital. That`s why you hear so many business lobbies blindly in favor.

I`m not saying that immigration, more particularly skilled immigration, can never be helpful. After all, where would Forbes magazine be without me? I like to think I`m worth at least half a balloon—maybe just the hot air! But it`s a luxury, not a necessity. And it`s a luxury that has been frittered away by 30 years of irresponsible policy.

So there is no economic rationale for current immigration policy. It must be justified politically. Immigration enthusiasts must say why they want to transform America.

And this brings us full circle. Because Americans ought also to be asked: Do they agree

Republished in VDARE.COM on March 07, 2002