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Immigration's Price Tag

This column was written by Byron York.
When George W. Bush visited the U.S. Border Patrol's Yuma Station Headquarters in Arizona on Monday — for the second time in a year — his message on illegal immigration sounded a bit tougher than in the past. "Illegal immigration is a serious problem — you know it better than anybody," he told a group of border agents. "It puts pressure on the public schools and the hospitals, not only here in our border states, but states around the country. It drains the state and local budgets … Incarceration of criminals who are here illegally strains the Arizona budget. But there's a lot of other ways it strains the local and state budgets. It brings crime to our communities."

The president touted his get-tough-on-the-border policies, enacted under pressure from the then-Republican Congress, and singled out Operation Jump Start, under which National Guard troops assist border agents. But he also stressed the need for "comprehensive" reform — and when he did, his message sounded like the George W. Bush of old. "Past efforts at reform failed to address the underlying economic reasons behind illegal immigration," the president said. "People are coming here to put food on the table, and they're doing jobs Americans are not doing."

With those words, the president was revisiting the great question in the debate over illegal immigration: Is the presence of illegal immigrants, mostly from Mexico, a boon to the U.S. economy, or a drag? It's a question that has long divided Bush supporters; the Wall Street Journal editorial page tells us that a lenient immigration policy is absolutely vital for American prosperity, while enforcement-first advocates tell us a strict policy is the only thing that will ensure continued economic health.

Both have plenty of statistics to cite to make their case. But now a scholar at the Heritage Foundation, Robert Rector, has found a new and revealing way to get at the answer.

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Rector has just published a study, "The Fiscal Cost of Low-Skill Households to the U.S. Taxpayer," that is ostensibly not about immigration at all. He takes the most detailed look yet at the economics of the 17.7 million American households made up of people without a high-school degree. With numbers from the Census Bureau, the Congressional Research Service, the Bureau of Labor Statistics, and other government agencies, Rector found what they make, what they spend, and how much they receive in government services.

The reason Rector chose to look at low-skilled workers is that it is estimated that nearly two-thirds of illegal immigrants fall into that category. (By way of comparison, slightly less than 10 percent of native-born Americans are in that group.) By focusing on those workers, Rector was able to make use of information on them that is more detailed and precise than information on immigrants as a whole. And any conclusions he reached would be applicable to a large majority of illegal immigrants who are already in this country as well as those who would come here under various immigration reform proposals.

Rector began by calculating the dollar value of the benefits those low-skill workers receive from the government. There are direct benefits, like Medicare and Social Security, and means-tested benefits, like food, housing and medical benefits specifically for low-income people. Then there is public education, along with population-based services like police and fire protection, parks, and roads. (Those services benefit everyone, and their cost usually increases as the population increases.) After that, there is interest on the public debts, a burden spread throughout all income groups, and the cost of what Rector calls "pure public goods" — national defense, scientific research, and a few other areas — which benefit everyone but do not necessarily rise in cost as the population rises.

Rector found that in 2004, the most recent year for which figures are available, low-skill households received an average of $32,138 per household — the great majority in the form of means-tested aid and direct benefits. (Rector excluded from that figure the cost of public goods and interest; with those included, he says, each low-skill household receives an average of $43,084.) Against that, Rector found that low-skill households paid an average of $9,689 in taxes. (The biggest chunk of that was the Social Security tax — $2,509 — followed by state and local taxes, consumption taxes, property taxes, and federal income taxes, but Rector counted everything, including highway levies and lottery purchases.) In the final calculation, he found, the average low-skill household received $22,449 more in benefits than it paid in taxes — the $32,138 in benefits, excluding public goods, minus the $9,689 in taxes.

Taking that $22,449, and multiplying it by the 17.7 million low-skill households, Rector found that the total deficit for such households was $397 billion in 2004. "Over the next ten years the total cost of low-skill households to the taxpayer (immediate benefits minus taxes paid) is likely to be at least $3.9 trillion," Rector writes. "This number would go up significantly if changes in immigration policy lead to substantial increases in the number of low-skill immigrants entering the country and receiving services."

From a purely money perspective, it's a powerful argument. At a cost of $22,449 per household per year — well, multiply that by an adult lifespan of 50 years and you have an average lifetime cost to the taxpayer of $1.1 million per unskilled worker. Increase that population with a wave of unskilled immigrants, and you're talking a lot of money.

There's probably room for argument on Rector's exact numbers. Jeffrey Passell, a senior research associate at the Pew Hispanic Center, questions whether some of Rector's cost estimates might be too high. For example, the arrival of new illegal immigrations will likely not raise the cost of defending the country, he says, so perhaps future immigrants will not be quite as expensive as Rector claims. (Rector tried to address that issue by excluding the cost of pure public goods in the $22,449 figure.) Still, Passell does not question the basic premise of Rector's report. "One of the purposes of our government is to provide support for people on the low end," says Passell. "Of course there is a bit more spending on households on the lower end than on the high end, and of course the low-income households don't pay as much as the high-income households. That's not surprising."

The bigger argument over Rector's approach is whether illegal immigrants bring economic benefits that outweigh their undisputed costs. Tamar Jacoby, an advocate of comprehensive reform who is a senior fellow at the Manhattan Institute, points to a study done recently of immigrants in North Carolina which estimated that in the past 10 years, Hispanic immigrants had cost the state $61 million in benefits while being responsible for more than $9 billion in economic growth. "Yes, the individual might cost more in services," says Jacoby, "but they are growing the pie so significantly that that cost pales in comparison."

Not so, says Rector. "The problem is, the growth to the pie that they make, they eat," he explains. The economic growth reflected in the numbers, he says, is what the immigrant workers are making. "To the extent that they make the pie grow any bit more than what they take out of the pie in wages, it is very subtle, and it would be a tiny fraction of the gross domestic product growth," Rector says.

And that means something for the immigration debate, and for George W. Bush's proposals. "Every one of these [reform] bills envisions bringing in millions and millions of additional low-skill immigrants with the right to access welfare and become citizens," says Rector. "Within 10 years, you would have four million of these individuals, each of whom can bring family. You'd be looking at a cost of $80 billion per year." Perhaps Congress and the president will decide to do that. But if Robert Rector is correct, no one should underestimate the cost.

By Byron York
Reprinted with permission from National Review Online

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