Rector’s sermon

The Heritage Foundation report alarms that it will cost taxpayers $6.3 trillion net dollars if we permit legalization of presently undocumented immigrants. It is a lot of money – almost 42% of the U.S. GDP in 2012 – so it sounds scary. The authors of this report, Robert Rector and Jason Richwine Ph.D., innocently add that the cost will spread over the lifetime of these new immigrants. From their report one can find out that an average age of an illegal immigrant is 34. According to the latest data a 34 years old person will likely live an additional 45.6 years. This means that even if the numbers from the Heritage Foundation are correct (they are not), that $6.3 trillion would be about $140 billion per year, slightly below 1% of the last year GDP. Just by noting that they rely on this intimidating tactic puts a reader on the alert that this report is not about facts but about the ideological standings of its authors.

Putting aside the numbers, one can accept that we might predict the financial outcome of political decisions for the next few years or so. But, how accurate could our calculations be for ten, twenty or forty-five years into the future? Forty-five years ago, transatlantic flights had barely started. China was in the midst of the Cultural Revolution. Forty years ago, Microsoft and Apple did not yet exist. Almost exactly thirty years ago, Motorola introduced the first portable cell phone, priced at $3,995. Twenty years ago, we did not use the internet or email. How, based on the knowledge available then, could one make reasonable predictions about our costs today? These were none of the concerns of our geniuses from the Heritage Foundation.

Many numbers in the report are from government statistics and they seem to be accurate. For example, the chart 9 showing the total of welfare spending – both federal and state. In constant 2011 dollars it was only $64 billion in 1965 but a shocking $927 billion in 2011. I divided these numbers by the population in the corresponding years; in 1965 it was $331 per person; in 2011 it was nine times more, $2,975 per person. This is the real problem; too many Americans receive too much just for being, not for working. For the know-it-alls at the Heritage Foundation this problem, screaming to be resolved, is as a snow storm in the winter or a heat wave in the summer; it is as a god given plague, which we cannot and should not even attempt to do something about.

This brings us to the core of the argument in Rector’s and Richwine’s report. All the money they counted is for the welfare and other government distributed services that legalized immigrants will likely consume, as well as similar costs of poor Americans who might utilize welfare more as immigrants will take some of the jobs they could do. This focus on the redistribution of a portion of the wealth that the government captures, not on the creation of more wealth by businesses – is the major flaw of this report. The wealth that the government can redistribute is limited, the wealth that thriving businesses can create, is unlimited. And not counted in the report.

Obviously, when we bring immigrants, with many of them working low pay jobs, some of them will use welfare, if legally available. Should our worries about this cost justify restricted immigration? For the wiseacres from the Heritage Foundation the answer is obvious.  We need to screw up our immigration policy in order to accommodate for the welfare system we have screwed up before.  Introducing their report in the Washington Post column, president of the Heritage Foundation, a former U.S. senator, Jim DeMint together with Robert Rector, began with quoting the famous statement by Milton Friedman that the United States cannot have open borders and an extensive welfare state.

In this video, Prof. Friedman acknowledges that we cannot have free immigration in the state where every resident is promised certain minimum levels of income or subsistence regardless of whether he works or not. He points to government arrangements on welfare and immigration affecting freedom. Referring to restricted immigration he concludes boldly how bad it was to make a socially advantageous act illegal as this leads to undermining morality in general. Only someone elated with an anti-immigration obsession can lose the sense of reality to the extent of listing Prof. Friedman as a supporter of restricted immigration.

In 2006 I wrote an essay “Migration to the future” outlining an employment based immigration reform concept; explaining how our immigration crisis can be resolved by adopting the free market mechanisms. This text was followed by my comments on the immigration debate then, on the desperation of immigration opponents, and my comments on the famous gumball video. With these texts on my personal website, I wrote an email to Prof. Friedman asking for his opinion. He started his comments with: “we are speaking the same language.” Then, referring to the welfare he expressed concerns that my proposal “would not solve the problem completely.” Then, he made it clear that “we clearly want to move into direction you are talking about, so this is a question of nitpicking, not a serious objection.” Later, I named my immigration reform concept as the Freedom of Migration Act proposal. Hence, if the eagles from the Heritage Foundation want to stand for immigration policy as envisioned by Milton Friedman, they should support the Freedom of Migration Act, as it reflects teachings of Prof. Friedman and it has his explicit endorsement.

Lastly, let us look at the numbers twisting in the report. The authors list four categories of costs that taxpayers will incur. In the first category they include: Social Security, Medicare, unemployment insurance, and workers’ compensation. It is plainly cheating as in their very concept all of these benefits are earned services. One needs to work and make regular contributions in order to qualify for these benefits. For all practical reasons the contributions deducted from every paycheck could be considered as an investment or insurance to cover disability and retirement. Theoretically, these benefits could be managed by private businesses, and many advocate for privatization of Social Security. It is just the consensus among Americans that the government was entrusted in managing these services. By listing these services as cost to taxpayers the fellows from the Heritage Foundation disclosed that they do not know our political system.

The cost of educating children of presently illegal immigrants, at $12,300 per pupil per year, also made into their list. For bureaucrats in Washington, education is an expense; for entrepreneurial Americans it is an investment. Comparing to most other industrialized nations, the U.S. has very low density of population. We have infrastructure and technology; we need more people in order to stay competitive. With the population growth slowing down in Mexico the abundance of cheap labor will dry out soon. With competition from other industrialized nations, we are approaching times that it will become harder and more expensive to get guest workers. By granting citizenship and providing education to children of illegal immigrants we are stealing these kids, and have a shot at making them Americans from the start so we will need fewer immigrants later. This is a business approach. This is thinking of people who actually make money. Politicians, who spend others people money can make disaster out of every opportunity, and this is why the xenophobes from the Heritage Foundation printed in red ink the cost of education of children of illegal immigrants.

It is hard not to laugh when the anti-immigration zealots from the Heritage Foundation add the costs of police, fire, highways, parks, and similar services needed with increased population. Their formal argument is that taxes paid by mostly low-income immigrants would not cover the cost of the expansion of these services. They did not get it that illegal immigrants are here only because their work enriches Americans, who then pay more in taxes to cover population based services. Without those illegal immigrants Americans would pay less in taxes and fewer Americans would have well paid government jobs delivering these services. It takes the Washington insiders to explain the plain economic growth as the loss.

The only additional costs that legalization of presently undocumented immigrants would bring are in Earned Income Tax Credit, public housing, Supplemental Security Income, and Temporary Assistance for Needy Families. The proposal by the Gang of 8 has provisions to postpone access to these services; hence, only people able to support themselves would stay. The Freedom of Migration Act has similar approach.

Finally, the advocates of the labor class at the Heritage Foundation claim that “unlawful immigration appears to depress the wages of low-skill U.S.-born and lawful immigrant workers by 10 percent.” “Appears” seems to be the right word. In their reasoning that illegal immigrants suppress wages of natives, the researchers from the Heritage Foundation seem to depend heavily on the work of Prof. George J. Borjas from the Harvard Kennedy School. As it is hard for non-experts to debate the professors, I use as guidance this article by another expert in this field, Prof. Giovanni Peri. After reviewing 12 representative articles on the subject, he concluded that most of them find small and statistically insignificant effects of immigration on employment. According to Prof. Peri, the exemption are papers by Prof. Borjas who finds short term significant negative wage impact of immigrants on the less educated natives. In some groups it could be close to 10% and this is what our ideologues from the Heritage Foundation cling to.

There is a grain of truth in their claim.  As the Charles Murray book “Coming Apart” documents, the meaningful part of our poor, mostly men, are already demoralized by our welfare system to the point that they are incapable to hold any job at all, regardless of pay. They bounce from job to job, as no employer wants them. As soon as immigrants come to town, all these town losers go on permanent unemployment, as employers are happy that they do not need to deal with them anymore. Nevertheless, generous politicians from the Heritage Foundation wrote the lengthy treatise arguing that we should kick out people who want to work productively and bet our future on these town losers.‎