Here's The Massive Flaw With The Conservative Study That Says Immigration Reform Will Cost Taxpayers Nearly $7 Trillion

jim demintHeritage Foundation president Jim DeMint

Robert Rector and Jason Richwine released a Heritage Foundation report they claim describes the fiscal cost of comprehensive immigration reform.

The number being thrown around is a total cost of $6.3 trillion. The number is the aggregate cost over 10 years of people seeking various government benefits (health care, food stamps,e tc.)

The Heritage Foundation doesn’t want comprehensive immigration reform. 

But there are basic problems with the analysis to begin with.

Given that Heritage claims an estimated 11.5 million unlawful immigrants in the country, their conclusion implies that every single immigrant is going to get around $546,000 worth of free stuff over the next decade, which is pretty high.

But the problems with the report transcend back-of-the-napkin estimations. There’s a glaring and deliberate omission in the report’s estimation. The paper pretty much omits any discussion of any benefits.

Here’s how it works…

Buried on page 35 of the 38-page report, Rector and Richwine wave off a discussion of “Potential Economic Gains and Losses from Unlawful Immigration.”

Potential Economic Gains and Losses from Unlawful Immigration

While the fiscal consequences of unlawful immigration are strongly negative, some argue that unlawful immigrants create economic benefits that partially compensate for the net tax burdens they create. For example, it is frequently argued that unlawful immigration is beneficial because unlawful immigrant workers expand the gross domestic product. 

It’s worth noting that right off the bat, Heritage is not addressing the “potential” effects of unlawful immigrants, they’re looking retrospectively. The whole point of comprehensive immigration reform is to turn those unlawful immigrants into tax payers. This sectiondeliberately ignores that. 

The section continues:

While it is true that unlawful immigrants enlarge GDP by roughly 2 per cent, the problem with this argument is that the immigrants themselves capture most of the gain from expanded production in their own wages. Metaphorically, while unlawful immigrants make the american economic pie larger, they themselves consume most of the slice that their labour adds

This seems to admit (immigrants consuming “most” of the economic slice) that the economic impact of unlawful immigrants more than pays for themselves? It’s unclear. 

That, or Rector and Richwine are deliberately avoiding a discussion of fiscal multiplier effects. 

The central issue in the debate over the costs and benefits of unlawful immigration is not whether such immigration makes U.S. GDP larger (clearly, it does), but whether unlawful immigration raises the post-tax income of the average non-immigrant american. Given the very large net tax burden that unlawful immigrants impose on U.S. society, such immigrants would have to raise the incomes of non-immigrants to a remarkable degree to have a net beneficial effect.

First off, taken as a whole immigrants have a positive impact — neutral at worst — on average U.S. wages.

But most importantly, observe that Rector and Richwine didn’t address in this section what they claimed to address. 

The most important part of the whole immigration issue — in fact, the entire reason we’re talking about it — is that the potential economic gains from immigration reform are substantial. 

Rector and Richwine are consciously, deliberately avoiding talking about that.

They’re talking about the economic impact that unlawful immigrants have on the population.

They’re not talking about the economic impact that unlawful immigrants transitioning into tax-paying path-to-citizenship immigrants will have on the population. 

It’s a subtle bait and switch. It’s waving off the primary argument in favour of immigration reform by not actually talking about immigration reform. 

Heritage is run by very intelligent people. They probably realise the whole point of immigration reform is that the economic impact by immigrants is very, very substantial, and proposals to turn unauthorised immigrants into full-time taxpayers will have a very positive effect on the nation’s fiscal situation. 

In lieu of describing that positive economic impact, Rector and Richwine instead elected to deliberately obfuscate it. 

What’s more, this means that the point of the study is diametrically incorrect. The report doesn’t attempt to describe the net impact of immigrants on the federal budget. It describes the gross effect.

To calculate the net impact of unlawful immigrants on the federal budget, Rector and Richwine would have to incorporate the net positive economic impact that immigrants will have on the economy. 

Unfortunately, Heritage won’t do that because it will prove their point wrong. 

Here’s the most flawed portion of their analysis, though. 

Heritage assumes that unlawful immigrants will take that $6.3 trillion in aggregate benefits over the next 10 years and just not do anything with it.

Without incorporating an economic analysis, Heritage appears to assume that $6.3 trillion evaporates, burns, or just disappears. 

But instead — see page 14 of the study — we see it’s spent almost entirely on teachers, police, fire, and public safety. Mean-tested welfare — which isn’t saved and goes directly back into the economy — is the only substantial part.

Rector and Richwine pretend there isn’t a fiscal multiplier effect in the U.S.

Assuming their $6.3 trillion estimate is accurate — it’s probably not, but assuming it for the moment — that money doesn’t go to illegal immigrants, it goes through them into the greater U.S. economy where it is used to pay people, invest in things, and pay taxes. 

The main point is that Rector and Richwine’s analysis is deeply flawed, and the Heritage Institute ‘s analysis isn’t the “net” impact to taxpayers.

It’s an accounting ledger that only has costs and pretends there aren’t revenues. 

In order to get the number that immigration reform opponents desire, Rector and Richwine assumed that immigrants would receive government benefits, but wouldn’t spend them. They assumed that they would take money, but wouldn’t produce with it. 

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