On Thursday, the National Academies of Sciences, Engineering, and Medicine will release its report on “The Economic and Fiscal Consequences of Immigration.” According to the report, first generation immigrants as a group increase the nation’s fiscal deficit. In other words, the government benefits they receive exceed the taxes paid.
The National Academies’ report provides 75-year fiscal projections for new immigrants and their descendants. The fiscal impact varies greatly according to the education level of the immigrant. Low-skill immigrants are shown to impose substantial fiscal costs that extend far into the future. The future government benefits they will receive greatly exceed the taxes they will pay.
On average, a nonelderly adult immigrant without a high school diploma entering the U.S. will create a net fiscal cost (benefits received will exceed taxes paid) in both the current generation and second generation. The average net present value of the fiscal cost of such an immigrant is estimated at $231,000, a cost that must be paid by U.S. taxpayers.
The concept of “net present value” is complex: it places a much lower value on future expenditures than on current expenditures.
One way to grasp net present value is that it represents the total amount of money that government would have to raise today and put in a bank account earning interest at 3 percent above the inflation rate in order to cover future costs.
Thus, as each adult immigrant without a high school diploma enters the country, the government would need to immediately put aside and invest $231,000 to cover the future net fiscal cost (total benefits minus total taxes) of that immigrant.
Converting a net present value figure into future outlays requires information on the exact distribution of costs over time. That data is not provided by the National Academies.
However, a rough estimate of the future net outlays to be paid by taxpayers (in constant 2012 dollars) for immigrants without a high school diploma appears to be around $640,000 per immigrant over 75 years. The average fiscal loss is around $7,551 per year (in constant 2012 dollars).
Slightly more than 4 million adult immigrants without a high school diploma have entered the U.S. since 2000 and continue to reside here. According to the estimates in the National Academies report, the net present value of the future fiscal costs of those immigrants is $920 billion.
This means government would have to immediately raise taxes by $920 billion and put that sum into a bank account earning 3 percent plus inflation per year to cover the future fiscal losses that will be generated by those immigrants.
To cover the future cost, each taxpaying U.S. household, on average, would have to pay an immediate lump sum of over $10,000. Costs would go up in the future as more than 200,000 additional adult immigrants without a high school diploma arrive in the country each year.
Again, converting a net present value figure into future outlays requires information on the exact timing of future costs that are not provided by the National Academies. However, a rough estimate of the future net outlays (benefits minus taxes) for the 4 million adult immigrants without a high school degree who have entered the U.S. since 2000 is perhaps $2.6 trillion.
One might argue that these estimates are exaggerated because many immigrants may return to their country of origin. But the report estimates already have a re-emigration rate of 31 percent built in.
A surge of low-skill immigrant workers may push down wages and thereby reduce consumer costs. But the National Academies report indicates such consumer gains would be modest, and if the wages of less-educated immigrants are driven down, the wages of less-educated U.S. workers will fall as well. Any consumer gains would come at the cost of wage losses for the most vulnerable American workers.
One might also argue that is it misleading to assign the costs of government “public goods” such as defense and interest of the national debt to recent immigrants. But the National Academies estimates exclude such public goods costs.
Advocates of ongoing, massive low-skill immigration have suggested that low-skill immigrants generate large-scale economic externalities that benefit U.S. workers. The National Academies report finds minimal evidence of such effects.
The continuing inflow of low-skill immigrants into the U.S. creates large fiscal burdens for U.S. taxpayers in both the present and the future.
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