Critics of a bipartisan Senate bill to overhaul the nation’s immigration system falsely claim that it will cost an additional $6.3 trillion, citing a study by a conservative group that opposes the bill. However, the report is not an analysis of the bill, and it says the cost of keeping the status quo “could run into the trillions” – so the net cost would be substantially lower than $6.3 trillion.
Here are the problems we found with what Sen. David Vitter calls the bill’s “$6.3 trillion price tag”:
- The Heritage Foundation, which produced the study, began its analysis months before the Senate plan was unveiled. The report’s lead author says some aspects of the bill, such as increasing green cards or legal permanent residence visas for high-skill workers, would likely lower the cost projection.
- The report says the total cost of the bill is $6.3 trillion over 50 years, but the “net increased fiscal costs” are $5.3 trillion. Furthermore, the net cost does not take into account what the report calls “a loophole in existing law” that would allow many immigrants to gain citizenship and tap government programs at a cost that “could run into the trillions.” So, even by the report’s own estimate, the net cost – compared with the cost of doing nothing — could be far less than $6.3 trillion or even $5.3 trillion.
- The Heritage cost estimate is over 50 years, a fact that immigration bill critics generally leave out when citing the report. Many economists warn that projecting costs over such a long period is highly speculative — it assumes no changes in the already unsustainable Social Security or Medicare programs, for example.
- Heritage used less optimistic assumptions than the nonpartisan Congressional Budget Office did when it projected the cost of a similar immigration plan in 2007. The CBO, which has yet to complete an analysis of the current bill, concluded that the 2007 bill would have had a “relatively small net effect on the federal budget” over 20 years.
- The Heritage report counts the cost of benefits paid to the children of those living in the U.S. illegally, even though many of those children by law are citizens.
Back in 2007, a similar report from the conservative Heritage Foundation that warned of the high cost of “amnesty” legislation helped to doom the fate of a bipartisan immigration bill. With the Senate currently considering the so-called Gang of Eight’s immigration bill, Heritage released a much-anticipated updated version of the 2007 report. This time, Heritage projects that an immigration plan that includes a “path to citizenship” will cost American taxpayers $6.3 trillion over the next 50 years.
Opponents of the Senate bill quickly seized on the report as evidence that the U.S. simply cannot afford the immigration bill.
Proponents of the bill — which notably included a number of Republicans who typically align ideologically with Heritage — dismissed the study as flawed and misleading. The report also came under fire from a number of conservative and libertarian think tanks. Most accuse the authors of the Heritage report of discounting the positive effects that immigration reform could have on the overall economy.
Assumptions lie at the heart of every economic forecast, and we’ll help you sort through some of the biggest ones that underpin and guide the Heritage forecast.
The methodology of the Heritage report, which is called “The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer,” is pretty straightforward. Most low-income, lower-educated households are net tax “consumers,” meaning they receive more in government services and payments than they pay in taxes. In 2010, the report says, households in the U.S. headed by persons without a high school degree received — on average — $46,582 in government benefits while paying only $11,469 in taxes, resulting in a net average budget drain of $35,113. That’s critical, the report states, because “the typical unlawful immigrant has only a 10th-grade education.”
Those who have come to the U.S. illegally — even though they are not eligible for such government programs as welfare, Social Security and Medicare — are already a drain on American taxpayers, the report states, because their children are students in taxpayer-funded public schools, and those same children are eligible for medical benefits and other services. In addition, the report states, “when unlawful immigrants live in a community, they use roads, parks, sewers, police, and fire protection.”
Heritage, May 6: In 2010, the average unlawful immigrant household received around $24,721 in government benefits and services while paying some $10,334 in taxes. This generated an average annual fiscal deficit (benefits received minus taxes paid) of around $14,387 per household. This cost had to be borne by U.S. taxpayers. Amnesty would provide unlawful households with access to over 80 means-tested welfare programs, Obamacare, Social Security, and Medicare. The fiscal deficit for each household would soar.
According to the report, that net loss would decline in the first 13 years after an immigration bill is signed because immigrants who apply for provisional status are expected to contribute more in taxes, while they still would not be eligible for government programs like welfare and Medicare. It is expected that it will take at least 13 years for immigrants to gain full citizenship. But after that point, the Heritage report states, “former unlawful immigrant households would likely begin to receive government benefits at the same rate as lawful immigrant households of the same education level,” and government spending and deficits “would increase dramatically.”
Heritage: 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.
“These individuals don’t pay in as much as they take out,” Heritage Senior Research Fellow Robert Rector, lead author of the report, told us in a phone interview. The U.S. has a highly distributive system, he said, and those without a high school education — on average — are a net drain on government spending, while those with a college degree are net contributors to government coffers. “If an immigrant with a 10th grade education isn’t a federal cost, then no one is,” Rector said.
Not a Study of Gang of Eight Bill
Critics of the Senate bill — the Border Security, Economic Opportunity, and Immigration Modernization Act — have repeatedly, and erroneously, referred to the Heritage study as an analysis of the bill.
Immigration bill opponent Sen. Jeff Sessions issued a statement on the report:
Sessions, May 6: The study released today by Heritage about the costs of the Gang of Eight’s proposed amnesty should be heeded by all lawmakers. The study puts to rest the contention that the bill will benefit American taxpayers, reduce our deficits, or strengthen our already endangered Social Security and Medicare programs. At a time when our nation’s major entitlements are already nearing bankruptcy, we cannot afford to add another $6.3 trillion in long-term net costs to already over-burdened state, local, and federal governments.
Sen. David Vitter, also an opponent of the immigration bill released this statement:
Vitter, May 6: A $6.3 trillion price tag should completely disqualify the Gang of 8 proposal, even without the amnesty. Our federal debt severely threatens our economy as it is now. The last thing we should be doing is granting amnesty to illegal immigrants, giving them all the taxpayer funded benefits and advantages of citizenship, while completely turning our back on enforcement.
But as Rector explained to us in a phone interview, “This analysis isn’t of the whole immigration bill.”
Heritage began its study in November, long before the Senate bill was unveiled. Rather, Rector said it is an analysis of unlawful immigration and amnesty. “Other aspects of the bill are outside the scope of what I studied,” Rector said.
In particular, he said, the bill’s plan to add more visas for high-skill workers “could partially offset some of the other costs.”
Rector said he will update his study to incorporate some of the details of the Gang of Eight plan, but that it could take another six months.
$6.3 Trillion Compared with What?
And, while opponents of the Senate immigration bill have frequently cited the $6.3 trillion figure from the Heritage report, few have noted how much more it might cost compared with keeping things as they are now.
You have to wade into the study a bit — to page 29 of the 92-page report — to find an estimate of how much illegal immigration costs under current law. In other words, what would it cost if Congress doesn’t do anything? According to the Heritage report, the “lifetime fiscal costs of unlawful immigrants under current law are comparatively low: only around $1 trillion. The net increased fiscal costs generated by amnesty would be around $5.3 trillion ($6.3 trillion minus $1 trillion.)”
However, there is an important caveat to the “current law” estimate of $1 trillion. The Heritage report on page 30 assumes “most unlawful immigrants will return to their country of origin around age 55.” But according to the Heritage report itself, that’s not how things work under current law. As the report explains:
Heritage report, May 6, page 30: There is a loophole in existing law that may allow many or most current unlawful immigrants to achieve lawful status and obtain benefits from the welfare system, Social Security, Medicare, Obamacare, and Medicaid. … The loophole in existing law is the open-ended provision of green cards to the foreign-born parents of U.S. citizens. A majority of adult unlawful immigrants have children who were born in the U.S. When these children reach age 21, they can immediately demand that their unlawful immigrant parents be given a green card (legal permanent residence) as parents/immediate relatives. The number of green cards (or visas for legal permanent residence) available to parents is unlimited, and the visas will be granted almost automatically.
Once the parent spends five years in legal permanent residence, he immediately becomes eligible for welfare and citizenship. As a legal resident, the parent may also be given credit in the Social Security system for work performed previously as an unlawful immigrant. This would contribute to future eligibility for Social Security and Medicare benefits.
If millions of unlawful immigrants utilize the parent visa option in the future and thereby obtain legal permanent residence and/or citizenship, the cost to the taxpayers could run into the trillions.
Thus, ironically, the increased fiscal costs generated by amnesty may be reduced by the fact that many unlawful immigrants already have potential long-term access to Social Security, Medicare, Obamacare, and means-tested welfare through a loophole in current law.
The “loophole” doesn’t work exactly as Rector described, according to immigration law experts with whom we spoke.
It’s certainly true, according to the 14th Amendment, that an immigrant’s child who is born in the U.S. is a citizen by birthright. And it’s also true that once that child turns 21, he or she can sponsor the parents to become citizens as well. But according to Erin Oshiro, senior staff attorney for the Immigration and Immigrant Rights Program at the Asian American Justice Center, the parents would have to return to their home country for at least 10 years before returning to the U.S. (something an immigrant living unlawfully in the U.S. for more than 21 years is unlikely to want to do).
It is possible such parents might apply for a waiver — based on a financial hardship to the citizen household — to reduce or eliminate the need for the parent to leave the country, but such a waiver is hardly automatic. Whether “millions” of immigrants in the U.S. might seek to obtain citizenship through sponsorship from their children, and whether the cost of those immigrants remaining might “run into the trillions” is highly speculative. It’s also highly unlikely that most immigrants currently living in the U.S. will return to their homeland at age 55, as Rector assumes.
More broadly, the point is that estimating the cost of illegal immigration under current law is highly speculative, and the Heritage projection of $6.3 trillion is not net of how much illegal immigration would cost if the U.S. does nothing.
As Rector himself wrote in the report, “It does not represent the increased fiscal costs caused by amnesty alone. The increased lifetime costs caused by amnesty would equal $6.3 trillion minus the estimated lifetime fiscal costs of unlawful immigrant households under current law. Calculating the latter figure is not easy.”
But even by Rector’s calculation, the “net” cost of the “path to citizenship” legislation — the cost over and above the current cost — could be “trillions” of dollars less than $6.3 trillion.
The Projection Is Over 50 Years
When citing the Heritage study and the $6.3 trillion price tag, few immigration bill opponents mention one of the biggest caveats: that the report looks at the cost over the next 50 years. Rector says it is necessary, and appropriate, to look over such a long term because the bulk of the cost will hit in the later decades of the 50-year window, as immigrants now here illegally become legal residents and ultimately become old enough to tap retirement benefits like Social Security and Medicare.
Some economists caution, however, that economic forecasts over such a long period of time are highly speculative.
“We have no idea what things will look like in 50 years,” said Bob Williams of the nonpartisan Tax Policy Center. “In the long run, I don’t think we know what the situation will be. It [the $6.3 trillion figure in the Heritage report] is not a number that anyone should put a lot of faith in.”
For one, the report assumes no changes to Social Security and Medicare, even though the programs’ trustees say the programs are unsustainable in their current form.
Social Security and Medicare Boards of Trustees, 2013 annual reports: Neither Medicare nor Social Security can sustain projected long-run programs in full under currently scheduled financing, and legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers.
“You have to ask yourself, what’s the point of doing a 50-year study,” when things change so dramatically over time, said Alex Nowrasteh, the immigration policy analyst at the libertarian Cato Institute and one of the chief critics of the Heritage study. Think if you had done a study of the impact on low-skilled workers 50 years ago, he said. The results would be laughable. There was no Medicare and Medicaid then.
Other economists note that a 50-year window can make a cumulative cost seem particularly huge by today’s standards. Due to inflation, a dollar today won’t be worth as much as a dollar in 50 years.
If the GDP rises at a reasonable rate, Rector and his critics agree that the estimated $6.3 trillion cost is equal to about 1 percent of government spending.
“That’s a pretty small number,” Nowrasteh said.
Critics of the Heritage study have questioned several assumptions made by the report’s authors — everything from the amount that legalization could boost earnings for immigrants to the amount of welfare they may use.
“Any time you make a projection, the outcome depends on your assumptions,” said Williams at the Tax Policy Center. “What you choose as a starting point drives the answer.”
The chief criticism of the Heritage report is that it does not adequately employ “dynamic” scoring — in other words, it does not account for the full impact of the bill on the performance of the overall economy.
“Here we go again. New Heritage study claims huge cost for Immigration Reform. Ignores economic benefits. No dynamic scoring,” tweeted Republican Sen. Jeff Flake, one of the senators of the so-called Gang of Eight that wrote the bill.
House Budget Chairman Paul Ryan also was critical of the Heritage study, telling Roll Call, “The Congressional Budget Office has found that fixing our broken immigration system could help our economy grow. A proper accounting of immigration reform should take into account these dynamic effects.”
The nonpartisan Congressional Budget Office typically does not employ dynamic scoring when projecting the cost of proposed legislation. But in 2007, it made an exception for an immigration bill that includes many of the same guiding principles of “earned citizenship” as the current immigration bill (though there are also a number of differences).
Donald Marron of the Tax Policy Center, who was acting CBO director back in 2007, explained why:
Marron, May 3: That non-dynamic approach works well for most legislation CBO and JCT consider, with occasional concerns when large tax or spending proposals might have material macroeconomic impacts.
That approach makes no sense, however, for immigration reforms that would directly increase the population and labor force. Consider, for example, an immigration policy that would boost the U.S. population by 8 million over ten years and add 3.5 million new workers. If CBO and JCT [Joint Committee on Taxation] tried to hold population constant in their estimates, they’d have to assume that 8 million existing residents would leave to make room for the newcomers. That makes no sense. If they allowed the population to rise, but kept employment constant, they’d have to assume a 3.5 million increase in unemployment. That makes no sense. And if they allowed employment to expand, but kept GDP constant, they’d have to assume a sharp drop in U.S. productivity and wages. That makes no sense.
Because increased immigration has such a direct economic effect, the only logical thing to do is explicitly score the budget impacts of increased population and employment.
Using a limited dynamic scoring approach, the CBO estimated in a June 4, 2007, fiscal report that the total net cost of the 2007 immigration bill over 10 years would be $17.8 billion. CBO said the cost for the second decade would be somewhat higher as more immigrants became legal, and the costs of benefits increased. But payroll tax receipts would also grow. So by the end of the first 20 years, CBO estimated that the net effect would be to increase the yearly federal deficit “by several billion dollars a year” and characterized this as “a relatively small net effect on the federal budget balance over the next two decades.”
The CBO has not yet scored the latest Senate immigration plan, but CBO Director Doug Elmendorf has indicated that it intends to use the same “dynamic” scoring methods it used in 2007.
Elmendorf, May 2: Today’s letter notes that CBO and JCT anticipate taking a similar approach for any forthcoming legislation that would make major changes in immigration policy — reflecting any significant changes in the size of the U.S. population and labor force in the cost estimate for the bill, and describing any broader macroeconomic effects in supplemental material.
Update, July 3: On June 27, the Senate passed S. 744, the Border Security, Economic Opportunity, and Immigration Modernization Act, by a vote of 68-32. On July 3, the CBO released a cost analysis of the legislation and concluded it would reduce the deficit by $158 billion over the next 10 years, and by another $685 billion in the decade after that.
The Heritage Foundation’s Rector agrees that the legalization of millions of immigrants will expand the GDP. But he argues that most of that gain will be absorbed by the salaries to those immigrants, and that there will be almost no benefit to existing residents. Rector says he did employ dynamic elements in his model, but he says his critics are using a dynamic score that does not take into account the low educational level of most current immigrants who came to the U.S. illegally.
“Most people wouldn’t know the difference between a dynamic score and a cheeseburger,” Rector said.
Rector said the models employed by those who have attacked his methodology “did not distinguish between immigrants with a Ph.D and those with a 4th grade education. … You have to be able to specify the type of labor you are bringing in.”
The fact is, he said, that the average educational level of immigrants currently in the U.S. illegally is 10th grade. With an average age of 34, it is unlikely those immigrants will go back to school, Rector said. The benefit to the economy of someone without a high school diploma is far below that of someone with the average educational level, he said.
One of the authors of the Senate bill, Republican Sen. Marco Rubio, pushed back against that assumption.
“Their [Heritage’s] argument is based on a single premise, which I think is flawed,” Rubio said. “That is these people are disproportionately poor because they have no education and they will be poor for the rest of their lives in the U.S. Quite frankly that’s not the immigration experience in the U.S.”
Rector also dismissed the CBO’s 2007 projection as misleading because it focused on the 10-year cost. In the case of the Gang of Eight bill, most of the cost comes after the first 10 years, as it would take an estimated 13 years to reach full citizenship — at which point immigrants would gain access to costly social programs like welfare. The average age of immigrants now in the U.S. illegally is 34, so it will be decades before many of them are eligible for expensive retirement programs like Social Security and Medicare. That’s why a long-term analysis is so critical, he said.
At a forum on the cost of immigration held at the Bipartisan Policy Center on May 29, Douglas Holtz-Eakin — a former director of CBO and one-time chief economic policy adviser to the John McCain presidential campaign — agreed with Rector about legislators sometimes manipulating the CBO’s directive by pushing costs outside of a 10-year window to present a rosier economic impact than legislation will actually have in the long term. However, Holtz-Eakin argues that “new entrepreneurial vigor” and other economic benefits from immigration would “raise the pace of economic growth by nearly a percentage point over the near term, raise GDP per capita by over $1,500 and reduce the cumulative federal deficit by over $2.5 trillion” over the next 10 years.
And while it’s true that CBO’s 10- to 20-year analysis does not capture some of the larger long-term costs, said Nowrasteh of the Cato Institute, it also includes the front-end cost of educating the children of immigrants without including their older years when they will be tax contributors. Nowrasteh argues that Rector makes the most pessimistic assumptions about wages, how new immigrants will affect GDP, and welfare usage. The baseline used by the CBO is “a much better baseline,” he said.
Another assumption made in the Heritage report is that the American-born children of immigrants who came to the U.S. illegally should be counted as part of the cost. For Rector’s study, that added a lot of cost related to such things as public school education.
Some argue that since the children born in the U.S. are immediately deemed American citizens, they should not be included when considering a cost of illegal immigration.
Rector called that more of a polemical issue. He argues that it makes no sense not to count the cost of the citizen children born to those who are here illegally, as those children are here as a result of illegal immigration.
We don’t take a position on whether to include children born in the United States to immigrants who came to the U.S. illegally in an analysis of the cost of immigration legislation, but we point it out to show that there are differences of opinion about any number of assumptions made in such a report.
— by Robert Farley
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