Earlier in the week, Heritage released a study claiming that the immigration bill would bankrupt country due to welfare payments to regularized immigrants. Of course, another study from Heritage ("in peer review." I wonder if it will ever get out, given that Heritage is raising money off the restrictionist position) claims dramatic economic benefits. The one claiming benefits was done by Heritage’s very highly regarded Center for Data Analysis, and uses quite substantial economic analysis.
Mr. Rector and Heritage have done some good social science research in the past, but this time they have the story backward: In most cases immigrants will pay at least as much in lifetime federal taxes as they receive in benefits.
There are a large number of reasons, but perhaps the simplest is that recent welfare reforms have limited welfare benefits to citizens:
One basic flaw in the Heritage analysis is that, as a study by the Immigration Policy Center points out: "The vast majority of immigrants are not eligible to receive any of these [welfare] benefits for many years after their arrival in the United States. . . . Legal permanent residents cannot receive SSI [Supplemental Security Income], which is available only to U.S. citizens, and are not eligible for means-tested public benefits until 5 years after receiving their green cards."
The "welfare" charge is also refuted by the experience of the federal welfare reform passed 11 years ago. That law reduced the welfare eligibility of new immigrants on the sensible grounds that the magnet for America should be work, not a government handout. Ron Haskins, an architect of that reform and the author of a 2006 book on its consequences, concludes that "the use of welfare by noncitizens has declined rapidly" in the wake of that law.
The nearby chart shows how rapidly. Between 1994 and 2004, the percentage of immigrant households collecting traditional cash welfare payments, supplemental security income, and food stamps fell by about half. The decline in welfare use was more rapid for immigrants than for native-born Americans. The exception has been Medicaid, thanks to states that have increased immigrant eligibility for the state-federal program in recent years.
However, immigrants have a positive financial impact on the most expensive federal entitlements: Medicare and Social Security. This is because immigrants generally come when they are young and working. Seventy percent of immigrants are in the prime working ages of 20-54, compared to only half of the native-born American population. Only 2% of immigrants are over 65 when they arrive compared to 12% of natives.
As a result, most immigrants contribute payroll taxes for decades before they collect Social Security or Medicare benefits. The Social Security actuaries recently calculated that over the next 75 years immigrant workers will pay some $5 trillion more in payroll taxes than they will receive in Social Security benefits. These surplus payments more than offset the costs of use of other welfare benefits received by most immigrant groups.
Hmmmm. Heritage’s number crunchers, the Social Security actuaries, the CBO, and the Wall Street Journal all think that this will make us money…