The Costs of Immigration
One of the comments on yesterday’s post points out that some immigrants are net burdens on the welfare state because they consume more services than they pay in taxes and might, if they get strong enough, procure even more transfers. I agree with Bryan Caplan that an international free market in labor services is an important component of a free market. The problems many libertarians and conservatives associate with immigration stem from poorly-defined private property rights rather than immigration as such.
This got me wondering about the cost of welfare for immigrants and how it compares to other components of government spending. After all, the claim that comes right after “they took our jobs” is “they’re going to take our welfare.” How much do immigrants cost?
According to the Center for Immigration Studies (via the Federation for American Immigration Reform), state government spending on welfare for immigrants is $11-$22 billion through programs like TANF. A report by the Center for Immigration Studies estimated that the Federal Government spend some $26.3 billion on services for illegal immigrants in 2002. These immigrants paid about $16 billion in taxes, leaving us with a net cost of about $10.4 billion (these are their numbers; I know $26.3-$16=$10.3, but there’s rounding error).
Let’s bias this number upward. We’ll take the high estimate of state spending ($22 billion) and assume that the $26.3 billion is all costs. Add them together and we get $48.3 billion. Let’s round it up to $50 billion and assume that there are no offsetting benefits. According to the website www.usgovernmentspending.com, state, local, and federal governments spent almost $5 trillion in 2007. Even if the money spent on welfare for immigrants had no offsetting benefits, it’s about 1% of government spending in 2007.
This is not meant to be precise: the numbers are from several different years, and the calculations are only to get a sense of the magnitude of government spending on immigrants relative to government spending on everything else. Even if you double this crude estimate of the amount being spent on immigrant welfare, you’re up to 2% of 2007 government spending. Compared to the elephants in the Federal budget (Social Security, Medicare, Defense), the money we’re spending on welfare for immigrants isn’t very much.
Does welfare for immigrants cost us money? Yes, but I think the evidence suggests that these costs are pretty small relative to the benefits from larger markets (here’s one example of evidence). Even if there are no offsetting benefits, by focusing so much attention on it we are kind of like a grocery shopper with debt trouble who loads up his shopping cart with hundreds of dollars worth of extravagant, frivolous, and unhealthy items and then argues for hours with his family over whether they should save $1 a week by purchasing store brand rather than name brand soft drinks. If the body politic were an actual body in need of medical attention, waste from defense and entitlement spending would be compound fractures in both legs while waste from welfare spending for immigrants might be a scraped elbow.
Update: Shikha Dalmia points me to her piece on taxes paid by and benefits paid to illegal immigrants.