Why Immigration Reform Won’t Increase Government Spending

On Tuesday, just days after a bipartisan group of Senators released a set of principles to reform the immigration system with a pathway to citizenship for the nation’s 11 million undocumented residents, House Republicans convened a hearing to consider the benefits of immigration reform. The stacked witness list — of the eight witnesses testifying, four were opposed to comprehensive reform, and only two were clearly in favor — reflected the growing anxiety among conservative lawmakers about the cost of granting legal status to undocumented people, who, Republicans fear, would qualify for state or federal benefits and cost tax payers millions.

The New York Times echoed these concerns on Wednesday with an article warning that “chances are good” that reform will “cost the government money.” The piece, by reporter Eduardo Porter, cited a 2007 Congressional Budget Office report which found that immigrants are “putting a burden on state and local budgets” and warned that once unauthorized immigrants became citizens, they “would be entitled to the same array of government benefits as other Americans”:

The White House and other backers of reform have made much of a 2007 Congressional Budget Office analysis concluding that the failed immigration overhaul would have increased government revenue by $48 billion over a decade while adding only $23 billion to direct spending on entitlements and other programs. But the report also said that including the costs of carrying out the new law would actually increase the budget deficit by $18 billion over the decade and several billion a year after that.

But there is good reason to believe that concerns about increased government spending are overstated and that immigration reform will prove to be a net benefit for the economy.

Currently “spending by state and local governments on services specifically provided to unauthorized immigrants make up a small percentage” of government spending, some of which is offset by taxes paid by the unauthorized population. The majority already “pay federal, state, and local taxes” and that number will increase as the undocumented population embarks on a path towards citizenship and leaves the cash economy.

Research shows that legalizing immigrants boosts their wages, which increases consumption, business revenue, and ultimately the entire economy. Immigration reform would add up to $5.4 billion in new tax revenue over the first three years, and a cumulative $1.5 trillion to the U.S. economy over a decade. Allowing these immigrants to naturalize would add even more economic activity, as naturalized immigrants earn 8 to 11 percent more in wages than permanent residents.

The Congressional Budget Office agrees with that assessment. The office’s score of the Senate’s 2006 comprehensive immigration reform plan calculated a net benefit of $12 billion over 10 years and an updated report placed the revenue gains even higher. An analysis of the 2007 immigration proposal found that legalization would increase revenue over costs by a factor of 2 to 1.

Significantly, the projected deficit of $18 billion from the CBO’s analysis (and the number Porter cites in his piece) is the result of additional border enforcement and other security measures which will not be as costly in a 2013 reform proposal. After all, much has changed along the border since 2007 as the nation has met and exceeded the security goals of past reform efforts. The U.S. spends $18 billion each year on immigration enforcement — more than every other federal law enforcement agency combined — and as a result net undocumented migration is now at or below zero.

As Sen. John McCain (AZ), one of the Republican members of the bipartisan group working on immigration reform admitted at a press conference to announce his support for immigration reform, “There is no question, there has been a significant reduction in illegal crossings over the past five years.”

As a consequence of these advancements, any immigration reform legislation introduced today would have to spend far less on border security. And since undocumented immigrants and even permanent residents will bill barred from receiving most social services and will have to wait a significant period of time before qualifying, the net cost of immigration reform to the economy will remain positive.