Immigration Reform 2013: Can Our Welfare State Bear the Cost of Illegal Immigration?


The Senate Gang of Eight's immigration-reform compromise, or any of its future variations, will most likely attract and provide amnesty for low-skilled labor from south of the border. This is troubling for a couple of reasons, and while it might sound like I am demonizing immigrants, it's important to remember that these are the facts. And I think we should consider them before putting a new burden on our indebted government. 

1. Immigrant households are nearly twice as likely to receive welfare as native households. 

report by the Center for Immigration Studies (CIS) found that immigrants who are here for 20 years are "much more likely to live in poverty, lack health insurance, and access the welfare system than are native-born Americans." Specifically, immigrant households that have been here for 20 years are almost twice as likely to receive some type of welfare than their native counterparts. 

Presumably, the immigration package supported by both parties will include conditional guarantees for legalization (earn your way to citizenship). Immigrants' tendency to need government assistance means we are much more likely to expand our welfare rolls if reform passes. 

2. Obamacare, rightly or wrongly, forces us to subsidize uninsured immigrants.

This happens in two ways: First, the Affordable Care Act (ACA) forces individuals into a common market where, theoretically, Americans share the cost of their insurance. Second, the ACA grants subsidies to low-income individuals looking to purchase health insurance. But because not everyone can equally contribute, the government will end up spending a lot to insure millions of its citizens.

CIS looked at a variety of socioeconomic factors relating to the immigrant population (poverty, education, etc.). Their results were not encouraging:

-Adult immigrants, here for 20 years, were twice as likely to be uninsured as native adults.

-Adult immigrants, here for 20 years, had a 50% higher poverty rate than that of natives.

-The amount of uninsured immigrants (29%) was more than double the amount of uninsured natives (13.8%) in 2010.

-"New immigrants and their U.S.-born children account[ed] for two-thirds of the increase in the uninsured since 2000."

An influx of immigrants most likely translates into a larger health exchange but with lower incomes and a greater need for health subsidies. Say hello to a bigger CBO price tag, America.

3. Immigrants are not exactly our life preservers for the Gray Tsunami and upcoming explosion of entitlement costs.

Social Security and Medicare are supposed to at least partially pay for themselves, hence the name "entitlement." Americans pay into the programs through payroll taxes and reap returns, according to certain formulas, at the end of their life. In a perfect world, this would have happened. Instead, these programs are nearly bankrupt, forcing younger Americans to pay the benefits of older Americans. Because America is aging and birth rates are falling, this system is in jeopardy.

Proponents of immigration reform generally argue that bringing in young immigrants with higher birth rates will help balance entitlement spending. But as Megan McArdle shows in her post about Social Security, it may not be that easy. The gray tsunami is sweeping the entire world, not just America. Mexico, at least at the time McArdle wrote the piece, was in a limbo where birth rate had slowed but the number of elderly was still at a sustainable level. She also points out that low-skilled immigrants do not contribute as much to Social Security since its progressive structure distributes more income downward. Moreover, with all of the other forms of government assistance and tax exemptions, how do we know if the majority of immigrants will even be a net positive for our fiscal situation?

The net fiscal impact of the Gang of Eight's bill is still suspect. The Congressional Budget Office (CBO) estimated President Bush’s immigration reform would cost $1.168 trillion over the course of a decade. It was not until the Senate added an amendment that the CBO rescored the bill to show it had cost savings. I am not sure exactly what gimmicks the Senate pulled but it seems highly unlikely that bringing in a wave of unskilled labor with a greater likelihood to be on government assistance will be a boon to the economy.