David Frum

05.07.13

Heritage Immigration Study Gets the Big Things Right

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In a modern social insurance state, all of us are both contributors and beneficiaries.

We pay taxes. We receive schooling, Medicare, and Social Security. We are eligible for Medicaid, food stamps, unemployment insurance, low-income housing vouchers, and so on and on.

When the United States chooses to admit somebody as a resident, it accepts a fiscal bargain. The newcomer promises to contribute; the newcomer is entitled to receive.

How will that bargain balance?

Between 1930 and 1970, that bargain balanced in favor of the receiving society. The immigrants the United States accepted in those years tended to be better educated than the native-born; on average, they earned higher incomes and paid more taxes. They were less likely to receive social benefits. Even when they ultimately qualified for Medicare, that program cost nothing near so much as it does today.

But since 1980, the balance has tipped. The skill level of post-1980 immigrants has declined. They are more likely to be poor than the native born. They are more likely to receive benefits. As health costs have soared, those benefits have become more expensive.

Worse, the children and grandchildren of the post-1980 immigrants are remaining poor. The US economy has changed in ways that make it more difficult for the unskilled to rise. And the new Latino minority - the largest element within the post-1980 immigration - is increasingly prone to income-lowering behaviors such as dropping out of high school and bearing children outside marriage.


US immigration policy resembles that joke about the restaurant that lost money on every sale and tried to make up for it on volume. What the US economy needs is more output per person. What open immigration offers is lower average output, but from more persons.

Now it is proposed to do two things:

1) Create a pathway to citizenship for 10 million or more unlawful immigrants.

2) Accelerate and expand future legal immigration.

How will that proposal affect the social insurance bargain?

It's amazing how little attention this question has gotten to date. If for nothing else, the Heritage Foundation deserves thanks for forcing policymakers to acknowledge that immigration has costs and that those costs will be very, very large.

Critics of the Heritage study raise four principal objections to the work of Robert Rector and Jason Richwine. (It's possible I've missed one or more, but these are the four I've encountered.)

Objection 1) The study pays too much attention to fiscal effects - i.e., government revenues and costs - and not enough attention to the larger economy.

Yet when fiscal effects get large enough, they become economic effects. Whether the immigrant-generated budget shortfall is $6 trillion or $4 trillion or $8 trillion, it will have to be covered somehow. That "somehow" will be an economic fact: either more taxes on the productive economy or less government spending on other priorities. Ominously, the priority that tends to get shortest shrift is government investment - an important predicate of future economic growth.

Studying fiscal effects is also a good way to keep the economic debate honest. American politics often privatizes gains, while socializing losses. Nowhere is that proclivity more in evidence than in immigration policy. Present immigration policy creates gains and losses. The gains are captured by the immigrants themselves, and secondarily by more affluent Americans. The losses fall on less-affluent Americans and on taxpayers. That's true under the present regime, in which unlawful immigrants are generally ineligible for federal benefits - and will be much more true after legalization.

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Objection 2) The Heritage Foundation study uses "static analysis" rather "dynamic scoring," failing to account for the economic growth and thus the extra government revenues that the immigration deal will stimulate.

The Heritage Foundation does use a dynamic analysis, in that it posits that wages among unlawful immigrants will rise to catch up to those of lawful immigrants.

More important, this complaint about "dynamic analysis" exposes an uncomfortable fact for immigration advocates. Most discussion of the immigration deal focuses on the pathway to citizenship for the currently unlawful population. But the bill would also greatly expand future immigration - and may well also perversely invite further waves of illegal immigration, since legalization comes right away but enforcement mechanisms won't be fully phased in for ten years.

Yes, more workers will mean more growth. But because those additional workers are likely to be low-productivity workers, they won't generate enough growth per person to fund the services they and their descendants will consume over the years to come. US immigration policy resembles that joke about the restaurant that lost money on every sale and tried to make up for it on volume. What the US economy needs is more output per person. What open immigration offers is lower average output, but from more persons.

Objection 3) Heritage assumes that the newly authorized immigrants will all go on welfare, not work and rise into the middle class.

Heritage assumes that the newly authorized immigrants will come to resemble the present legal immigrant population. That population has a higher propensity to use social services than the native born. But remember, the most expensive of all US social services is Medicare. Everybody who lives past 65 will use that service - and the great question overhanging all of us is whether the future US economy will generate enough revenue to pay for it.

If there's any dogmatic assumption in the immigration debate, it is the dogmatic assumption of immigrant proponents that the immigration of the 21st century must follow exactly the same pattern as the immigration of the 20th century. All the evidence points the other way.

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Objection 4) Heritage is tallying the costs of unlawful immigrant households. But households that include unlawful immigrants also often include lawful residents too - for example, children born on U.S. soil. The cost of providing services to those lawful household members should not be tallied as part of the cost of the immigration bill, since those services will have to be provided anyway. 

That's an interesting objection, but it proves too much. The cost of providing services to US citizen children of unlawful entrants is a cost of lax immigration policy. Had the policy been enforced to date, those children would not have been born in this country and would not have claims on US public services. The decision to accept admit a low-skilled immigrant also accepts fiscal responsibility - not only to the immigrant himself or herself - but for his or her descendants. Since human capital is bequeathed from generation to generation, the fiscal consequences of a low-skilled admission reverberate for decades. Americans are paying now for unwise admissions in the 1970s and 1980s. They will pay more for the lax enforcement of the 1990s and 2000s.

You don't solve that problem by saying: Let's do it again, only bigger. But that is what this bill does.