J.P. Morgan reportedly told a prospective customer that if you have to ask how much something costs, you can’t afford it. That sort of logic is acceptable for robber barons, but falls short when offered up by our elected leaders. In the debate over immigration, we need them to find out how much their policies will cost.

Recently, the Senate considered a massive immigration reform bill, S. 1348, the Secure Borders, Economic Opportunity and Immigration Reform Act of 2007. Although senators appeared to have killed this legislation in late June, we have not seen the last of such proposals. This bill could have granted amnesty to nearly all illegal immigrants in the United States. We should beware of such plans in the future. Clearly, such an action would greatly increase long-term costs to the taxpayer by offering immigrants access to means-tested welfare programs such as Social Security and Medicare. Fiscal costs would rise in the intermediate term—and increase dramatically when amnesty recipients reach retirement. Although it is difficult to provide a precise estimate, it seems likely that if 10 million adult illegal immigrants currently in the U.S. were granted amnesty, the net retirement cost to the government (benefits minus taxes) could exceed $2.6 trillion.

(Art by Matt Mahurin.)

This is a much starker forecast than the $23 billion cost estimates of S. 1348 provided by the Congressional Budget Office (CBO). However, CBO estimated only the changes in benefits and revenues that would occur in the first 10 years. Since relatively few illegal immigrants are currently elderly, virtually none receive Social Security and Medicare. A major result of the bill would be to make illegal immigrants eligible for Medicare, Medicaid and Social Security. CBO does not address these retirement costs at all.

Furthermore, the Senate’s immigration reform bill would have offered amnesty and a path to citizenship to the 12 million–plus illegal immigrants currently in the United States. Its lax evidentiary standards would have encouraged millions more to apply for amnesty fraudulently. Because there was no limit on the number of amnesties that could be granted, the actual number who could have received amnesty might have been far higher.

Let’s also keep in mind that any illegal immigrant who becomes legal would be eligible for medical care benefits under the Medicaid Disproportionate Share Program. More children will be eligible to attend public schools and receive Head Start and day care assistance. Many state and local governments may also provide further benefits and services.

Busted Budgets
Beyond the $2.6 trillion price tag for retirement benefits, there are other budgetary costs left unacknowledged—most resulting from the educational backgrounds. Illegal immigrants generally have very low education levels: 61 percent of illegal immigrant adults lack a high school diploma; 25 percent have only a high school diploma; 5 percent have attended some college; and 9 percent are college graduates, according to estimates by the Center for Immigration Studies. The Pew Hispanic Center estimates slightly higher education levels for illegals: 49 percent without a high school diploma; 25 percent with a high school diploma; 10 percent with some college; and 15 percent with a college degree. Overall, 49 to 61 percent of adult illegal aliens lack a high school diploma, compared to roughly 10 percent of native-born adults.

Because of their low education levels, illegal immigrants have a poverty rate that is roughly twice that of native-born Americans. The poverty rate of children in illegal immigrant families is 37 percent, compared to 17 percent among children in nonimmigrant families. The poverty rate among adult illegal immigrants is 27 percent, compared to 13 percent among nonimmigrant adults.

Certainly, many illegal immigrants working off the books and paying no direct taxes will work on the books after receiving amnesty, and, as a result, tax payments will rise immediately. Under S. 1348, benefits from Social Security, Medicare and most welfare programs would have been delayed many years. As a result, the increase in taxes between 2008 and 2017—estimated by the CBO at $48 billion—plus fines paid by amnesty recipients would have initially slightly exceeded the increase in government benefits received.

However, the opposite will hold true in the long run. In particular, the cost of retirement benefits for amnesty recipients is likely to be overwhelming. For federal programs that already face precarious financial futures, such as Social Security and Medicare, this additional obligation could hasten their collapse.

In light of this fact, we must take the long view to know what we are really buying. When we do, it becomes clear we cannot afford amnesty.

PHILIPPE LEGRAIN
Journalism fellow of the German Marshall Fund of the U.S. and author of Immigrants: Your Country Needs Them.

Critics of regularizing the status of 12 million hardworking immigrants claim that the richest nation on earth cannot afford it.

They calculate that amnesty would eventually cost the United States $2.6 trillion. They reason that if 10 million adult illegals are regularized, some 8.5 million will live to retire at age 67 and, thereafter, cost taxpayers $17,000 per year each for the next 18 years. Because the typical illegal immigrant is now in his early 30s, he will not retire for another 35 years or so. In effect, these critics claim that taxpayers cannot afford an extra $144.5 billion a year between 2042 and 2060. Given all the productivity-enhancing improvements in technology likely to occur by then (not to mention plausible changes in public policy), such hypothetical future costs are rounding errors. With even a fractional uptick in economic growth—hardly an unreasonable hypothesis, not least because legalized immigrants would be able to borrow to start their own businesses—they vanish into thin air.

The benefits of regularization, though, are immediate and large. Even critics admit that it would swell federal coffers now, because immigrants would pay income and payroll taxes, but remain ineligible for most benefits until five years after obtaining a green card—perhaps as long as 13 years in total. And, by definition, they will be net contributors to Social Security until they retire.

Critics argue that low-skilled immigration is harmful because the newcomers are poorer and less educated than Americans. But that is precisely why they are willing to perform low-paid, low-skill jobs that Americans shun. In 1960, more than half of American workers over the age of 25 were high school dropouts; now, only one in 10 are. Understandably, high school graduates aspire to better things, while even those with no qualifications do not want to do certain dirty, difficult and dangerous jobs.

Without low-skill immigrants, America would grind to a halt. Who would do construction work, clean dishes, hospitals and hotel rooms and look after Americans’ children and elderly parents? Such jobs cannot readily be mechanized or imported; the elderly cannot be cared for by a robot or from abroad. And, as people grow more affluent, they increasingly pay others to do arduous tasks, such as home improvements, that they once did themselves, which frees up time for more productive work or more enjoyable leisure.

Everyone Wins
These critics rightly rage against protectionism and other harmful curbs on economic freedom. Yet favoring free trade, but not the freer movement of people who produce goods and services, is economically illiterate. Just as it is cheaper and mutually beneficial for Americans to import IT services from India, it often makes sense to import services, such as housecleaning, that have to be delivered on the spot. The fact that immigrants are here illegally is not a sign of moral turpitude, but of misguided government intervention in the labor market. Because employers cannot obtain visas for foreigners to come here legally, immigrants have no choice but to come illegally instead. The only crime committed by these enterprising people is wanting to work hard to earn a better life for themselves and their children—the epitome of the American dream.

Their efforts benefit the economy considerably. They lower production costs and thus reduce consumer prices, enabling Americans’ incomes to stretch further. They stimulate investment, because a larger labor force raises the return on capital. And their labor often complements the skills of American workers. For example, a foreign nanny may enable an American doctor to go back to work, where hard-working foreign nurses and cleaners enhance her productivity. A recent study by the National Bureau of Economic Research in Cambridge, Mass., finds that the influx of foreign workers between 1990 and 2004 raised the average wage of U.S.-born workers by 2 percent.

Furthermore, immigrants’ children tend to be more successful than most. Look at how Irish Americans, once dismissed as a degenerate drain on society, have prospered. Latinos are already following in their footsteps.

But the biggest benefits of immigration are inherently unpredictable. Who would have guessed that, when they arrived in the United States as children, Sergey Brin would one day cofound Google and Jerry Yang, Yahoo? Who would have imagined that the son of a Kenyan who grew up herding goats could be the next U.S. president? The only certainty is that, without a green card, their chances of shining would have been dim.