Friday, May 25, 2007

The High Costs of Paranoia

The findings section of S. 1348, the version of the Immigration Bill that the Senate passed yesterday, offers eight reasons justifying the massive expenditures contemplated for tougher border control. Seven of them provide vague statements about the need of the government to control the border, defended on the tautological grounds that the government needs to control the border. Just one finding offers a concrete dollar amount as evidence of the allegedly high costs on the U.S. government imposed by undocumented aliens immigrating:
"Border communities continue to incur significant costs due to the lack of adequate border security. A 2001 study by the law enforcement coalition United States-Mexico Border Counties Coalition found that law enforcement and criminal justice expenses associated with illegal immigration exceed $89,000,000 annually for the Southwest border counties."

Ah, but this is only law enforcement costs. What about all the other costs, including welfare benefits, health care, education? An eminent scholar on this topic, George Borjas, explains in the online Encyclopedia of Economics that that because of taxes, the economic impact of immigration is revenue neutral:

Many people believe that because a comparatively large percentage of immigrants goes on welfare, the costs to native American taxpayers wipe out the gains from immigration. But this has not been the case in recent years. The numbers show why. The present value of cash welfare benefits (such as Aid to Families with Dependent Children) received by the typical immigrant family over its lifetime is $8,700. With 6.4 million immigrant households, the total cost of assistance programs for immigrants is about $56 billion.

But immigrants also pay taxes. The present value of lifetime earnings for the typical immigrant man is $380,000. With 7.6 million working immigrants (both men and women), total earnings of immigrants are at most $2.9 trillion, of which about 40 percent, or $1.2 trillion, are paid in taxes of all forms. Because 3 percent of total revenues are allocated to cash welfare benefits, immigrants pay about $36 billion ($1.2 trillion times .03) in taxes to fund welfare programs. Comparing the $36 billion that immigrants contribute to welfare to the $56 billion they consume, immigrants consume $20 billion more over their lifetimes than they contribute. Thus, the welfare system causes U.S. natives to lose about $1.1 billion per year (in present value terms). Subtracting this $1.1 billion from the $5 billion annual increase in national income, the United States benefits from immigration, but the economic gains are small.


Of course law enforcement officials would argue that these macro figures ignore the special law enforcement burdens imposed on their local jurisdictions. Leaving aside the self-interested character of the group cited in the Senate and House versions of the Immigration bill, self-described as a coalition "comprised of the County Judges, Commissioners and Supervisors of the U. S. counties located on the border with Mexico... to address challenges facing county governments located on the U.S./Mexico border"--and that the report does not assess the revenues from immigration--once you add it all up, it's clear that the federal government would be much better off simply transferring funds to state governments, as opposed to making far higher expenditures for the purpose of preventing entry. The easy back-of-the-envelope calculations below, based on official U.S. data reports, reveal the dire consequences of Congress's apparent math illiteracy. (For more, see this.)

The Congressional Budget Office estimates the costs of implementing the various policies offered in S. 1348 at $17 billion for the period of 2008-2012, or an average of $3.4 billion/year, of which just 4% would be for additional Social Security benefits, meaning $3.27 billion would be spent on enforcement bureaucracies, technologies, vehicles and weapons for the purpose of preventing immigrants entering. Assume that the national figure for law enforcement and criminal justice costs from undocumented aliens presently is at $890 million annually (ten times the Texas, California, Arizona, and New Mexico costs), which is on the high end of an estimate since the costs outside this region and a few others is close to zero. (The Act itself states that at least 50% of the funding must go to the "10 States with the highest percentage of foreign-born residents" Sect. 756 (7).) And assume that Borjas is right and the economic impact of immigration is revenue neutral. And, finally, accept the Congressional Budget Office estimate that the impact on Social Security is revenue neutral (because of the increase in payroll taxes).

Hmmm.... That means Congress, by its own accounting, wants to spend $3.27 billion of federal funds on law enforcement each year to prevent aliens from entering so that they can save states and counties $890 million each year in their law enforcement costs from aliens entering.

Over the course of the five years, this means that the government will be paying $11.9 billion to indulge its paranoia.

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