July 2013

Immigration Policy and the Economy

By John R. Hendrickson

The United States Congress is debating a comprehensive immigration reform bill which attempts to provide border security while granting amnesty to over 11 million illegal immigrants. The argument made by advocates of immigration reform, notably the famous Senate “Gang of Eight” claim that granting amnesty will bring illegal immigrants out of the “shadows” and into the economy to pay taxes and thus generate economic growth. Proponents of immigration reform also argue that passing comprehensive reform will finally secure the southern border with Mexico. Immigration reform is being sold as both a pro-economic growth and border security measure, but the policymakers should follow their constitutional obligation of defending the border first, enforcing current immigration laws, and implementing sound fiscal policies which lead to economic growth.

Immigration policy in the United States has always been a controversial and hotly contested issue of debate. Historically the United States has been a nation that has welcomed immigrants while emphasizing efforts at Americanizing newcomers. At the same time immigration is a legal process. Recently the nation has seen a great influx of immigration as the number of illegal immigrants has escalated and immigration laws and border security are in neglect. In fact many states, notably Arizona, are attempting to act on their own to protect their border from illegal immigration because the federal government has failed to act.

In dealing with immigration policymakers need to deal with a variety of factors including national security, economics, and cultural and societal impact. In regard to economics it is often argued by advocates of immigration that more immigrants will lead to greater economic growth, because businesses will be started and many sectors in the national economy depend on immigrant labor. It is also argued that granting amnesty to illegal immigrants will lead them out of the “shadows” and turn them into taxpayers who will then contribute to government coffers which pay for entitlement programs such as Social Security.

Both economic assertions should be treated with skepticism. It is estimated that granting amnesty to the 11 plus million illegal immigrants would cost taxpayers around $6.3 trillion.[1] A recent report by The Heritage Foundation explained the fiscal impact of granting amnesty:

In addition to concerns of rule of law and fairness, amnesty will cost taxpayers trillions of dollars. This is because some taxpayers contribute more in taxes than they receive in government benefits, while others consume more than they contribute. Most unlawful immigrants fall into this second category of net tax consumers. Even now unlawful immigrant households consume $14,387 more in benefits than they pay in taxes on average.[2]

Illegal immigrants also currently receive a number of governmental services and “children are eligible for nearly all federal means-tested welfare programs including food stamps, Medicaid, Temporary Assistance for Needy Families, and the Children’s Health Insurance Program.”[3] The Heritage Foundation estimated that:

The total cost of means-tested welfare to these children comes to around $17 billion per year. Under current law, illegal immigrant households receive about $2.40 in government benefits for every $1.00 paid in taxes. The overall cost to taxpayers (total benefits minus total taxes) is $54 billion per year.[4]

Granting amnesty to over 11 million illegal immigrants is both bad policy in regard to economics and the rule of law. As the national economy continues to grow at a slow pace with high unemployment and record numbers of Americans already on some form of government assistance such as food stamps, adding additional burdens on the welfare state would be disastrous.

Taxpayers are already confronted with a severe fiscal crisis with a national debt of $17 trillion and trillions in unfunded liabilities from entitlement programs such as Social Security and Medicare. Comprehensive immigration reform is needed, but the current approach will only add additional problems to a nation that is starting on the slope of decline.

The solution to immigration is to secure the border, enforce existing immigration laws, punish businesses that hire illegal immigrants, and begin the process of establishing control over a broken immigration system. Granting amnesty now will not just cost taxpayers trillions of dollars, but also violate the rule of law and further signal that the United States is unwilling to defend the borders or enforce immigration laws, which will encourage further illegal immigration.

The best way for policymakers to create economic growth is to begin the process of cutting spending, paying down the national debt, reducing taxes, and eliminating excessive regulations which are hindering the economy. Policies, such as the Patient Protection and Affordable Care Act, should also be repealed because they are adding to the greater policy and economic uncertainty. Following these policies will lead to economic growth, which will lead to job creation, and a stronger middle class.

“Comprehensive immigration reform” as it now stands is not good policy for taxpayers who are currently overburdened by the already expanding welfare and regulatory state. Although the economic impact is dangerous enough, perhaps the greater threat is in the future implication if the immigration reform measure becomes law. As Congressman Steve King (R-IA) warned:

The ‘Gang of Eight’s’ proposal is irreversible and alters the very fundamental structure of America forever. Regardless of the trillions of dollars in costs and the flood of legal immigration opened up by the bill, we would see the fundamental destruction of the rule of law, at least with regard to immigration law. If this happens, America cannot be untransformed. The pillars of American exceptionalism will crumble and fall because we will have made massive exceptions to the rule of law.[5] 

John R. Hendrickson is a Research Analyst at Public Interest Institute.

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation. They are brought to you in the interest of a better-informed citizenry.

[1] Robert Rector, “The cost of amnesty: Rector on Lou Dobbs,” The Heritage Foundation, May 9, 2013, <http://www.heritage.org/multimedia/video/2013/05/rectordobbs> accessed on June 24, 2013.

[2] The Heritage Foundation Immigration and Border Security Reform Task Force, “The Senate’s Comprehensive Immigration Bill: Top 10 Concerns,” Backgrounder, No. 2819, June 21, 2013, The Heritage Foundation, Washington, D.C., <http://www.heritage.org/research/reports/2013/06/the-senates-comprehensive-immigration-bill-top-10-concerns> accessed on June 24, 2013.

[3] Ibid.

[4] Ibid.

[5] Steve King, “Immigration reform: Amnesty will only expand bloated welfare state,” Deseret News, June 9, 2013, < http://www.deseretnews.com/article/765631730/Immigration-reform-Amnesty-will-only-expand-bloated-welfare-state.html?pg=all> accessed on June 25, 2013.