“According to the National Academy of Sciences, our current immigration system costs America’s taxpayers many billions of dollars a year.”
— President Trump, speech to Congress, Feb. 28, 2017
One of the key arguments by the administration in its efforts to curb both legal and illegal immigration is an economic one: that immigration is harmful to the American economy and American workers.
In his speech to Congress, Trump referenced a September 2016 report by National Academies of Sciences, Engineering, and Medicine on the economic impacts of the U.S. immigration system. Trump cited the study to say that immigration costs “many billions of dollars a year.” Is that accurate? (Our roundup of 13 claims from his speech is here.)
A panel of economists, demographers and other experts conducted a comprehensive study of economic and demographic trends of the U.S. immigration system over 20 years, the impact of immigration on native-born workers’ jobs and wages, and the fiscal impact of immigration at the local, state and federal levels. (See the National Academies of Sciences, Engineering and Medicine’s response to Trump’s speech here.)
The 500-page report is detailed, and presents a range of estimates using a variety of economic assumptions. So anyone can pick one figure out of the report and present it with no context, or in a misleading way. That’s what Trump did here.
The panel analyzed data from 1994 to 2013 and found that in 2013, the total fiscal shortfall (calculated as the excess of government expenditures over taxes) was $279 billion for first-generation immigrants and $109 billion for the second generation. These figures represent deficits to the local, state and federal budgets combined. The White House said Trump was referring to these figures in the report.
But there’s a lot of other information in the study that gives context to these figures — and shows that immigration has an overall positive impact on the U.S. economy in the long run. The report found that over 75 years, each immigrant represents $259,000 in net present value for federal, state and local governments.
Over a period of 10 years or more, the impact of immigration on wages of U.S.-born workers is “very small,” the report says. However, research shows immigration reduces the number of hours worked by native teens (but not their employment rate), the report says.
“We don’t feel it’s appropriate to just look at the fiscal impacts. You have to look at the larger picture, and the larger picture includes a number of aspects where immigrants provide important benefits, including on economic growth, innovation and entrepreneurship,” said Francine Blau, chairwoman of the panel and economics professor at Cornell University. “And this is in combination of really no evidence of negative effects overall on wages or employment in the long term.”
It comes down to the costs and contributions of various generations of immigrants. First generations are more costly, but descendants of immigrants are a net positive for the states in general.
First-generation immigrants, on average, cost the government more than native-born generations. They’re new to the country, so they’ve contributed less in taxes than others who have lived in America their whole lives. They tend to be less educated, so they earn less, and they pay less in taxes. But when they reach 60, they cost less to the government than native-born Americans because they collect less in government benefits for the elderly.
First-generation immigrants tend to have more children and younger children than native-born Americans. So it costs state and local governments more money to pay for public education for the children of first-generation immigrants. But this is not true for all states, because immigrant communities tend to be concentrated by geography.
Second-generation immigrants (children of immigrants) are a net positive to the government, more than first-generation immigrants or native-born Americans. In general, they have higher levels of education, so they earn higher wages and salaries, and pay more taxes. Second-generation immigrants are among the strongest contributors to the U.S. economy. Their long-term fiscal impacts become more positive as they sustain their role in growing the labor force through innovation and entrepreneurship.
First-generation immigrants cost state and local budgets $57.4 billion annually in 2011-2013. But second-generation immigrants create a benefit of $30.5 billion annually. Second-generation immigrants tend to have fewer children on average than first-generation adults, so the education costs to state and local governments are less.
Immigrants are only a net burden if we think they increase the cost of government-provided public goods, said Gretchen Donehower, a researcher at the Department of Demography at the University of California at Berkeley, who analyzed the data for the panel.
“The only way you can conclude from our report that immigrants are a net burden is if you imagine that our expenditures on public goods (such as defense spending, payment of past debts, and general public administration) would be lower if we stopped immigration. This angle of the analysis was included in the report as a counterfactual to the usual assumption that they do not increase these costs,” Donehower said.
The Pinocchio Test
This is a long and detailed report, and it’s easy to cherry-pick numbers to make a particular point. The panel provided several different models of measuring the economic and fiscal impact of immigrants, showing both the costs and benefits.
The main point made in this report is that immigrants, particularly the first generation, incur costs to the government that are later balanced out by their descendants. Second-generation immigrants end up being a net positive to the government compared with the first generation, as they assimilate and obtain higher levels of education and wages. The chairwoman of the panel and an analyst who calculated the data for the panel disputed Trump’s characterization of the report, only focusing on the cost of immigration.
We were thrilled to find Trump for once cited immigration data from an independent and rigorous study. But, alas, Trump took one line out of a 500-page report, and totally skewed the intricate findings. He earns Three Pinocchios.
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