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  • White House Report Ignores That We Need a Better Economy, Not Amnesty

    The White House yesterday released a report with state-by-state projected impacts from “commonsense immigration reform” that is “like the Senate bill.” It is the latest in a series of reports from various governmental and private firms that show that the economy will be bigger with increased immigration.

    On its face, that result is completely expected, since by definition immigrants will add some value to the country’s economy. The question is not whether we’d have a bigger economy (higher gross national product, or GNP) but whether we’d have a better economy (higher post-tax income for those legally present at the inception of the policy).

    Imagine you have an economy of 10 people. Adding two more people would make the economy 20 percent larger (assuming they produce the same as the existing population), but it would not necessarily make the original 10 better off. If the new workers were less productive but qualified for transfers from the original 10, then the original 10 would be worse off than before.

    In analyzing the Senate immigration bill (S. 744), the Congressional Budget Office (CBO) noted (p. 3) that per capita GNP under comprehensive immigration reform would be negative—even though the economy would be larger.

    The White House report also does not include separate projections with respect to blanket amnesty of roughly 11.5 million illegal immigrants. Heritage has explained that such a policy is unfair and costly and would not solve the problem of illegal immigration. Moreover, the economic effect of such an amnesty is very minor, and most—if not all—of the benefits would accrue to the formerly illegal immigrants themselves.

    What will not be minor is the fiscal impact of amnesty: higher taxes for those here legally. Heritage senior fellow Robert Rector, one of the architects of the 1996 welfare reform, has calculated that over their lifetimes, amnesty recipients would receive trillions more in government services and benefits than they pay in taxes.

    The White House report also touts supposed deficit reduction by counting increased payroll taxes. Most immigrants, like most Americans, will pay less into Social Security than they receive in benefits, and that is especially true for low-income beneficiaries (which the predominantly low-skilled amnesty recipients would be).

    Senator Jeff Sessions’s (R–AL) Budget Committee staff explained that the White House report’s authors

    fail to include CBO’s careful caveat that using Social Security and Medicare taxes to pay for general government today creates an IOU for these very same funds that the Social Security and Medicare Trustees will one day ask the U.S. Treasury to pay. In short, counting these funds for deficit reduction today when they should be set aside for the payroll tax payer’s future Social Security and Medicare benefits creates a hole that future taxpayers, many of whom will be today’s young people struggling to launch their work lives, will have to fill.

    Not all of the report is completely off-base. Sensible immigration reform could lead to economic growth and avoid an unnecessary and costly amnesty. Heritage has noted before that a functioning immigration system that stresses high-skilled immigration could provide an economic boost and would help our fiscal situation, because college-educated immigrants will pay far more in taxes than they receive in benefits and services.

    Immigration reform should lead to a better economy—not just a bigger economy—for all those legally present. It should also exclude an unfair, unworkable, and costly amnesty that undermines the rule of law.

    Posted in Security [slideshow_deploy]

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