Immigration, Net Costs, & Misplaced Priorities
This morning on the radio, the topic was once again about illegal immigration. This time the discussion focused on the “costs of immigration”. I found the discussion to be shallow and frankly tinged with a not too subtle tone of racism. The problem is two fold. First there was literally no discussion of the magnitude of the costs, and the discussion focused solely on the costs, not the benefits that illegal immigrants provide.
Typically the discussion was about little Juanito and how much money it costs to educate this illegal child in the U.S. school system. Nothing was said about the work that Jaunito’s parents do and the value such works adds to the economy. Nothing was discussed about the taxes paid. The true measure of the costs here should be the net costs, not the total costs.
So how much are the net costs of illegal immigration? This report from the GAO from 1995 (pdf) put the net costs at anywhere from $2 billion a year to $19 billion a year with an illegal population of 3 to 5 million. So even if we take the worse case scenario of 3 million immigrants and $19 billion in net costs and scale it up to today’s estimated population (say 12 million) we are talking about $80 billion in net costs. A middle of the road estimate would be around $50 billion. Either way I see this as chump-change for the most part.
First we have to remember that the U.S. economy is well over $12 trillion dollars in terms of GDP. Or in other words illegal immigration is equal to about 0.64% of GDP. By contrast the U.S. budget deficit is ten times larger as a percentage of GDP. Spending for the Medicare Prescirption Drug plan is going to cost $18.2 trillion.1 And Medicare, aside from the prescription drug program, has a shortfall in the range of $50 to $60 trillion over the next 75 years. But here we are worried about chump-change due to illegal immigration.
This leads me to, “Why?” The only thing I can think of is that things like Medicare shortfalls are boring and dull. After all it requires reading actuarial reports, figuring out what the taxable wage base is, and looking at projections which brings in things like statistics and already 48.3% of the audience is on the verge of a coma. Illegal immigration on the other hand seems to touch off some sort of fear of people who are different. They don’t look like “us”, the don’t talk like “us” and they eat all that weird food and dammit I can’t read the signs over the stores that cater to their consumption! So illegal immigration gets lots of attention, but the complete shambles that things like Medicare are in are just ignored. If we could just stem the flow of illegals why economic nirvana would result. Americans would go back to hanging drywall, mowing their own yards, and chopping up chickens. I’m even sure that controlling the U.S.-Mexico border would reverse the global downward trend in manufacturing employment.[/sarcasm]
In short, I see all this handwringing about the U.S. becoming part of Mexico as nothing more than misplaced priorities by people who seem deathly afraid of people who are different than them. The response to the charge of racism is often, “It isn’t racism! We just oppose illegal immigration. And the costs are real.” Sure the costs are real, but they are much smaller when compared to other issues such as Medicare funding. And sure illegal immigration isn’t a good thing, but instead suggest a guest worker program (i.e. make those illegal immigrants legla) and you still get the howling. So both objections, IMO, while technically true are just rhetoric to deflect criticism and hide the rather disquieting aspects of the illegal immigration movement.
1This number is from Jagadeesh Gokhale’s testimony. It isn’t explicit, but I think that number looks at the net present value of the prescription drug program in perpetuity (basically forever). There is not a similar calculation for immigration, but I would imagine that if such a calculation were done the number would be much, much smaller like by a factor of 10. The reason is that prescription drugs are expensive and going to get even more expensive as the U.S. population ages. In fact, we might want more and more young workers from south of the border simply to shore up these fiscally reckless policies.