Monday, August 26, 2013

Immigration


Chapter 3

Economic Unraveling 2: Immigration


 

Electing a New People


 

“The supreme function of statesmanship is to provide against preventable evils”

___Enoch Powell

 

A human flood, building over the last forty years will reach massive proportions over the next forty.  Nor was that decision one that had been made by the American people. The change is a consequence of decisions taken by pandering politicians aided and abetted by intellectual elites under the thrall of political correctness, business interests seeking cheap labor, union leaders betraying their members and environmental spokesmen betraying their principles.

 

It has been said that the United States has no population policy. This is untrue; however, there is a definite population policy which has been constructed over the last forty years. Without getting into the intricate details it can be said that immigration legislation and regulations beginning with the 1965 Act constitutes the most important part of a policy on population. When combined with the welfare state, social legislation, and affirmative action et al. the consequences of this population policy can be discerned.

 

As of 1970 all components of the population, particularly Non-Hispanic Whites, opted for a very slow increase in population; one approaching replacement level. This was a choice made freely as the sum of individual decisions regarding family, rather than one imposed from above. However, this was not to be. In what was probably the greatest lost opportunity of the American environmental movement, the governing elite was permitted to replace this collective policy of slow growth with one of rapid growth as a consequence of an unprecedented tide of immigration both legal and illegal. Furthermore, there are indications that current immigrants in response to the greater economic security provided by the U.S. have a higher fertility rate than their counterparts back home. The older population groups, particularly Non-Hispanic Whites are leaving those regions most heavily impacted by immigration and relocating to states in the south, Midwest and upper west. However, almost all states are on the verge of significant changes in population numbers and ethnic distributions.

 

The consequences of a large and rapid increase in population will be many. The exact social effects of the “browning of America”, of course, are beyond the scope of an economic study. However, it might be expected that the clash of cultures, which have been incipient in recent times, will be greatly exacerbated.  It has been noted that recent immigrant populations disproportionately participate in crime. Income and education of the most rapidly increasing immigrant groups are below average. On the other hand, proponents of continuing mass immigration contend that increasing diversity will enhance the quality of life and enrich the culture. It will also create a showcase for the world as to how people of different cultures can learn tolerance. One can assess such arguments as na├»ve and totally at variance with historical experience and current events.

 

It is the importation of poverty with its resulting fiscal problems and economic displacement that are of primary concern in this chapter. There have been a number of studies estimating the economic effects of recent immigration. Many of these studies show that the fiscal costs of new immigrants are significant and exceed the benefits. Other studies illustrate the negative effects such immigration has in terms of lost wages and unemployment among various groups of American citizens. Of course, there are economists and commentators who contend that such immigration has stimulating effects on the economy and generate tax receipts in excess of the costs. At the same time those economic analysts who have looked deeply into this subject point out that any such benefits accrue to the upper class elite and to immigrants themselves, and not to the mass of current American citizens.

 

Furthermore, rising inequality in the United States is linked to rising immigration, falling union membership and rapidly expanding international trade. But, these three trends are not independent of each other, and the rise in the immigrant population contributes to the other two trends. Since 1970, the country’s immigrant population has grown by some 50 million. Over the same period, the spread between mean and median family incomes, an indicator of increasing income inequality, has grown by nearly four times the rate of increase during the prior period (1947-1970) when the immigrant population was fairly stable. Since mass immigration was unleashed by the 1965 immigration law, increases in average inflation-adjusted family income have steadily shrunk and are approaching zero growth or even, if the trend continues, negative growth.

 

Immigration and Trade

 

In the last chapter we examined the effect of free trade on American economic decline. Another crucial factor is that of massive immigration. George Borjas, the foremost immigration economist, notes the strong similarities between the two. “The economic impacts of immigration and trade are closely linked. …both immigration and trade help connect the American labor market with the labor markets of other countries. They both increase the ‘effective’ labor supply of particular groups of workers in the United States.”[1] However he adds that “nevertheless … immigration … has a much larger economic impact in the long run.  … if the United States stopped trading … trade would no longer influence the effective labor supply in the American labor market. … Immigration, however, increases the labor supply permanently.”[2]

 

Moreover, agreements promoting free trade have had the side effect of encouraging additional mass immigration. The NAFTA agreement has been the most devastating by far as a spur to illegal immigration. Ed Rubenstein demonstrates the disastrous effect of American grown corn on the Mexican economy and on Mexican immigration.

 

The flow of immigrants north from Mexico since NAFTA is inextricably linked to the flow of American corn in the opposite direction, a flood of subsidized grain that the Mexican government estimates has thrown two million Mexican farmers and other agricultural workers off the land since the mid-90s. The displacement of Mexican labor caused by the dumping of U.S. grain is pervasive. According to a study by the Carnegie Endowment for International Peace, “about 3 million farmers in Mexico, mostly from small-scale farms, are involved in maize production. Indirectly some 18 million people depend on maize for their livelihood.” More than 80 percent of Mexico’s extreme poor live in rural areas, and more than 2 million of them are corn farmers.[3]

 

There was a loss of approximately 1.3 million Mexican agricultural jobs in the first eight years of NAFTA with much of this displaced population ending up in the United States.[4]

 

Demographic Change

 

The sheer demographic impact of recent immigration is comparable to that of the great wave which began in the last decades of the 19th century with a number of important differences. The great wave occurred at a time when the native stock was increasing rapidly; the current influx is occurring at a time of virtual population stability among the older pre-1970 population. A century ago much of the continent was sparsely inhabited, cities were smaller and there was a vigorous demand for low-skilled labor. There was also no welfare magnet and many immigrants ended up returning to their home countries. None of these conditions are present today. Moreover a century ago American culture was assertive and strong and insisted on assimilation; an outcome which is impossible today under the cult of diversity and the discrediting of American and Western culture and history. Above all the great wave was halted giving the long process of assimilation time to work and transform the immigrant population; there is no sign of a similar willingness to slow down the flow on the part of the American governing class.

 

The current second great wave of immigration is causing a rapid growth of population and a dramatic change in ethnic composition. In 1960 U.S. population stood at 179 million, by 2010 it was 309 million while the percent of non-Hispanic whites decreased from 89% to 64%. Appendix 3A shows the details of the change in U.S. demographics.  Between 1970 and 2004 there was a total population increase of 90,433,704 with an increase of 45,857,158 as a result of post 1970 immigration. 51% of the increase in population was due to immigrants arriving after 1970 and their offspring.[5] Furthermore, as shown in Appendix 3A an increasing share of population growth with each subsequent decade is due to the increase in the post 1970 foreign stock.

 

There is no doubt that today’s population far exceeds the projected figures for population during the 1970s when Americans decided to have families at replacement size.[6]  The adoption of the 1965 Immigration and Nationality Act was the fundamental change in immigration policy that triggered the current immigration-fueled population trend. The act eliminated immigration quotas which were based on ancestry and nativity and did not cap the immigration of immediate relatives of U.S. citizens opening the way for massive chain migration. Although the effect of the act was gradual in the first few years immigration soon began a period of rapid expansion.

 

The second great wave with its increasing ethnic differences has created a cascade of adverse economic and social consequences that are likely to characterize the American economy for the remainder of the twenty-first century. The divergence in educational attainment is striking and increasing. Post 2000 Immigrants constitute 16% of the adult workforce but 40% of non-high school graduates.[7] Furthermore, as we have seen in chapter 1, the economic impact of 911 and the subsequent military action in the Middle East is a general cost of political correctness and the diversity cult which allowed terrorists free rein in the U.S. This event can also be added to the cost of immigration. The steady flow over many years of one million or more immigrants, both legal and illegal and the ease of obtaining and overstaying visas would tax the resources of even the most motivated and dedicated immigration and customs bureaucracies. But under pressure from ethnic lobbies, cheap labor interests and diversity advocates in the top strata of politics, media and academe, such dedication is sorely lacking.

 

Nor has immigration had the promised economic growth benefits. The U.S. economy grew at a larger rate during the restricted 1950s than in subsequent decades. When American economists have made some of their rare efforts to measure the overall economic effects of immigration they have found that, immigration contributes almost nothing to economic growth. There is little economic benefit accruing to native-born Americans; when the full fiscal consequences are reckoned the net economic impact is negative as will be shown below. A fence along the southern border would have been a cost effective and cheap method of averting much economic damage. Rubenstein estimates that the entire U.S.-Mexico border could be sealed off for $3.3 billion dollars.[8] Such would be a minuscule sum by today’s standards.

 

The change in America’s ethnic composition amounts to a replacement of the existing population. In the 1950s and early 1960s most of the immigrant population consisted of Europeans and a sprinkling of well-educated Asians. Immigrant numbers were low, their education level was comparable to or even superior to that of natives and they generally caught up to native income levels in a relatively few years.

 

Importing Poverty

 

The 1965 Act brought about a great reversal; advanced industrialized countries were no longer the source of immigrants. Immigrants arriving in the 1980s and 1990s tended to be less educated than those that arrived in the 1950s and 1960s; in 1970, the average immigrant originated in a country with populations averaging 7.7 years of schooling. By 1990, the sending countries were those where the average person had a level of six years of schooling.[9] These new immigrants, particularly the low end of these, Hispanics, are precisely those who have benefited from the extension of sub-prime mortgages implemented by the policies of Bush and Rove. As we will later see this was to be an important factor in the great mortgage meltdown. Moreover, the years since 2000 have not shown any improvement in immigrant education levels as a result of continuing chain immigration and toleration of illegal immigration. The Center for Immigration Studies reports that in 2007 30.6% of immigrants between 25 and 64 did not graduate high school as compared to 8.4% of natives.  Even at the top end of the scale where highly educated immigrants were once more numerous, natives now enjoy an advantage with 31.1% having college degrees as compared to 29.1% of immigrants. In 1970 18% of immigrants were college graduates as compared to 12% of natives.[10]

 

Prior to the 1965 Act, there was a general consensus that immigration should be of benefit to the United States and that criteria for admission should select for economically independent productive immigrants. After 1965 immigration policy was readjusted to focus on ‘fairness’ to immigrants; current immigrant use of cash assistance programs is, at least, equal to that of the native population; immigrants rely on food assistance and Medicaid at a  significantly higher rate than natives. Even so, welfare use varies significantly among immigrant sending countries. Those with the greatest use are the Dominican Republic with 63%, Mexico 51%, Ecuador 46% and El Salvador 42%. Refugees from sending countries once in the USSR and from Cuba have high rates of usage of the welfare system but these are still lower than immigrants from Mexico and the Dominican Republic. There is indeed an enormous variation in the immigrant poverty rate by country of origin. There is a 31 percent poverty rate for Dominican immigrants and their young U.S.-born children. That rate is many times those rates associated with immigrants from countries such as Canada, India, and the Philippines.[11] For all immigrants welfare usage is at 33%, with Hispanic Immigrants at 46%. Native-born Americans use welfare at a rate of 19% with Hispanics at 36%, Non-Hispanic Whites at 15%; Non-Hispanic Blacks are at 38%.[12] Note that Hispanic immigrants have a welfare rate exceeding that of native Blacks. Natives have a 17.8% rate of Earned Income Tax Credit usage; the immigrant rate is 31.1%.  Natives have a 10.9% rate of Additional Child Tax Credit use; the immigrant rate is 22.5%. Since the U.S. welfare system is designed to provide assistance primarily to children, immigrants with both low income and high fertility participate at a high rate.[13] In addition to high welfare dependency the new immigrant population has a number of other peculiar characteristics:

 

Although immigrants are generally younger than natives, they and their children are more prone to certain conditions and risky behaviors. Compared to non-Hispanic white and black children, for example, Latino children generally are less likely to be immunized, have higher rates of tuberculosis, have higher rates of obesity and sedentary activity, have more dental caries, and are more likely to experience intentional and unintentional injuries. Latino adolescents are also more likely to use drugs, alcohol, and tobacco; less likely to use contraceptives; more likely to be injured; and more likely to attempt suicide than African-American and non-Hispanic white adolescents.[14]

         

Lowering standards for immigration will have consequences lasting for decades or even generations. Camarota observes that Immigrants take a long time to close the poverty gap. The poverty rate for immigrants only matches that of natives after being here for 26 years whereas it once took about 12 to 14 years to close the gap. Welfare use and lack of health insurance are very common even among long established immigrants.  Poverty, low income and use of social services are not confined to new arrivals. “What is also clear is that immigrants once closed the gap with natives much more quickly. Of course, we could change immigration policy and allow fewer immigrants into the country who have little formal education. If we did that, then immigrants who arrive in the future would almost certainly have incomes that match those of natives from the time that they arrive in the United States or soon thereafter.”[15] Samuelson observes that a fifth of Mexican Americans still were in poverty after the fourth generation in the U.S.[16] Borjas has a very pessimistic view of the consequences of recent immigration. He is of the view that it might take over a century for the immigrant-native gap to narrow.[17] His dire view is likely to be correct. Even if all of the differences between the new immigrants and the older population stock are environmental and cultural, ingrained cultural habits will take a long time to erase.

 

Jobs for immigrants tend to be concentrated in agriculture, construction, cleaning, janitorial services and food service. However these industries also employ a large number of American natives with modest skill sets. The impact on native employment and wages and the consequent social problems is seldom considered by ethnic spokesmen and immigration boosters. When this displaced lower class population is added to that of low skilled culturally backward immigrants the result is the deterioration of U.S. consumers, workers and managers as compared with those of Europe and Asia that was noted by Porter.[18]  Thus the declining quality of the American workforce is directly related to the national origin of the immigrant population which “determines the ease with which this human capital can be transferred to the United States. … It does not seem farfetched to assume that the skills acquired in advanced economies tend to be equally useful in other industrialized economies … In contrast, the skills acquired in developing countries are much less useful in an industrialized setting.”[19]

 

Finally, the different cultural traditions of large immigrant populations affect the operation of America’s traditional individualist and capitalist system. The cultural background behind America’s hugely successful economy, one that is rooted in centuries of law and tradition is in danger of being permanently altered by large unassimilated populations from very diverse cultures.

 

Welfare Magnet

 

With recent immigrants being less educated than native-born Americans, or than past immigrants for that matter, it is only to be expected that they account for a disproportionate use of welfare. Immigrants are as quick to learn about welfare opportunities as they are to learn about employment opportunities. In both of these they are aided by the ethnic clusters established by previous immigrants. Opportunities, whether for income, documents, or various social service benefits, are communicated to them via these immigrant networks. New immigrants also seem to be well informed in this day of mass electronic communication and established ethnic networks as to which states and localities provide the most generous benefits and, for the undocumented, sanctuaries from scrutiny. Furthermore, the increasingly abused anchor baby loophole suggests a wide awareness, even prior to immigrating, of the medical benefits provided to immigrant mothers and their newborn.

 

As we have seen, prior to 1965 immigrants tended to be as well off as Americans; indeed they might have brought valuable skills which earned even higher incomes. In addition, immigrant sponsors were obligated to provide for those falling into economic hardship. By the 1990s there were no longer real efforts to enforce the guarantees against immigrant public charges from immigrant sponsors. Not surprisingly immigrant welfare rates began to exceed that of native-born Americans.[20] In some states these rates are quite high. Camarota reports that almost half of households using a welfare program in the state of California are immigrants; in New York, Florida, Texas, New Jersey and Arizona immigrant households account for one quarter to one third of all users.[21]

 

For many immigrants children are the golden passport entitling them to entry into America’s extensive array of social services. These include in addition to direct cash assistance, food assistance, Medicaid, and public and subsidized housing. In 2009 57 percent of immigrant households with minor children used at least one welfare program.  The rate for native households with children was 39 percent. There is a vast diversity of welfare use depending on country of origin. The highest child welfare use rates are for immigrants from the Dominican Republic, 82 percent, Mexico and Guatemala, 75 percent, and Ecuador, 70 percent. Immigrants with the lowest rates are from Britain, 7 percent, India, 19 percent, Canada, 23 percent, and Korea, 25 percent. Paradoxically, illegal immigrant households had higher participation in child social services than did legal households. Illegal immigrant welfare use is mainly that of food assistance and Medicaid; these make almost no use of cash or housing assistance. Legal immigrants, on the other hand use all types of assistance. The number of years since immigrating makes just a slight difference in welfare use. Those arriving after 2000 had a 60% household welfare usage rate, while those arriving before 2000 had a 55% rate.[22] Many immigrants do assimilate; at least into the welfare system if nothing else.

 

Immigration boosters often cite the taxes paid by recent immigrants to justify current policy. However, some 50 percent of immigrant households with children have no federal income tax liability, compared to 33 percent of native households with children. In addition for those households with tax liability, the average tax payment for immigrant households with children was $11,666; for native households with children it was $12,347. Thus when immigrant households with children do pay federal income taxes, average payment is less than that of native households. Welfare programs are primarily funded by the federal government through income tax contributions. The bottom line is that immigrants do not offset their welfare benefits through high tax contributions. CIS data shows that immigrant households with children use more welfare and have no income tax liability at higher rates than is the case for native households; and that Hispanic immigrant households have the highest rates of all.[23]

 

Medicaid is a program with a large immigrant fiscal burden, and one that is about to become much larger. In Arizona and Texas over 60% of immigrants and offspring are either uninsured or on Medicaid; in Colorado, North Carolina, Georgia and California it is half or more.[24] Furthermore, providing amnesty to illegal aliens would increase the burden substantially even without taking account of the new health reform.

 

This analysis has shown that the costs of providing Medicaid to legalized illegal immigrants would be substantial. Because illegal aliens are relatively young in age and in generally good health, the average cost of their Medicaid coverage is about half of the average cost of current Medicaid recipients, which includes the aged and disabled. Nonetheless, we still estimate that covering just 3.1 million uninsured illegal immigrants with the lowest incomes would cost $8.1 billion annually. This estimate does not include the extra costs of the illegal immigrants whose incomes would qualify them for the new affordability credits under health reform.[25]

 

The Earned Income Tax Credit program has become another subsidy to illegal immigrants ever since the IRS ceased preventing illegal aliens from receiving these refunds. The CIS study concludes that the immigrant population, both legal and illegal, has made use of this subsidy to a greater extent than have native wage earners by 44% to 29%. Furthermore for Hispanic immigrants the EITC participation rate rises to 59%.[26]

Two programs open to all immigrants and their children, regardless of their immigration status are the WIC and School Lunch programs. While only legal immigrants are eligible for food stamps, illegal immigrants receive these benefits on behalf of their anchor babies. Using the immigrant participation rates calculated in the CIS studies Rubenstein estimates that the Department of Agriculture spends at least $10 billion to provide food for immigrant households under the Food Stamps, WIC and School Lunch programs. The immigrant vs. native percent total receipts were 7 percent to 6.3 percent Food Stamps; 15.5 percent to 5.8 percent Subsidized School Lunch; 6.6 percent to 2.7 percent WIC.[27]



Impact on Native-born Workers


 

The influx of new immigrants has had a marked effect on wages, employment and working conditions of native workers. Between 2000 and 2010 some 14 million new immigrants, both legal and illegal entered the country. This was in spite of the fact that there was a net decline of jobs during that decade. Some 13 million entered during the 1990s, a decade of great job growth. Thus the indication is that immigrants are motivated by a wide variety of factors; public amenities, welfare, family reunification, desire for freedom; in addition to strictly economic incentives.[28] However, very recent estimates indicate that poor economic conditions may finally be taking a toll with the increase in the immigrant population slowing. The illegal alien population may also have been deterred by recently enacted and proposed legislation at the state levels.

 

Immigrant labor is heralded by business oriented economists as being the solution to U.S. labor problems. Some free market economists contend that high unemployment among American born groups results from government transfer payments which subsidize their choosiness about the jobs they will accept. This stimulates the demand for immigrant labor. Pro-immigrant economists also worry about future labor shortages. However if solutions to such concerns are needed then pro-natalist policies could be designed to encourage Americans to step up their birth rate. These policies could include increasing tax deductions for dependent children, eliminating marriage tax penalties and reducing the costs of education. In fact immigration by increasing job competition tends to increase economic insecurity thereby motivating restricting family size. By suppressing native reproduction immigrants may be, in fact, replacing and not simply adding to the native population.[29] Such concerns may, in fact, be designed as a cover for the real reason certain business interests advocate large scale immigration – the desire for cheap labor.

 

Wages

 

It is an elementary principle of economics that an increase in the supply of labor, ceteris paribus, must lower wages. Earlier in the last decade Borjas estimated that the immigrant influx that entered the United States between 1980 and 2000 lowered the average wage of U.S. workers by 3.7%.[30] Using Borjas’ finding that each 10 percent increase in the U.S. labor force due to immigration reduces native wages by about 3.5 percent, Rubenstein updates this estimate at two later time periods. In his earlier analysis Rubenstein comes up with a 5.25% wage loss; a few years later with a further increase in the foreign born he ups his estimate to 5.5%. Earlier in the last decade immigration reduced the average annual earnings of native-born men by about $1,700; toward the end of the decade the reduction increased to $2,503.[31] Over the last few decades it appears that the immigrant impact on wages has been accelerating.

 

Borjas found that immigration had a differential effect on workers by education and skill level. Wages fell by some 7.4 percent for high school dropouts; college graduates lost some 3.6 percent in average wages. The mid-level groups, high school graduates and those with some college were less impacted with a reduction of about 2 percent. Borjas’ estimates also indicate that the group of native workers hurt most by immigration were high school dropouts with between five and twenty five years of experience. Borjas also ran a model simulation to estimate the labor market impacts under the counterfactual assumption that there had been no Mexican immigration between 1980 and 2000. The results were as follows:

 

 


Group

% Wage Impact

No Mexican Immigration

High School Dropouts

-7.4

-0.2

High School

-2.1

-0.8

Some College

-2.3

-1.8

College Graduates

-3.6

-3.6

All

-3.7

-1.4

 

Mexican immigration clearly has the greatest adverse impact on less educated lower skilled workers.[32]



Rubenstein extends his analysis to include an estimate of the tax implication of recent immigration. The reduction in the average wage inevitably leads to reductions of revenues from personal income taxes, payroll taxes, sales, and excise taxes. On the other hand these are probably offset to some extent by an increase in corporate income tax receipts due to the profitability of employing lower cost labor. He estimates that reduction in tax revenues amounts to some $169 billion of which $70.3 billion is a direct result of immigration and $98.4 billion results from the displacement of native workers.[33]

 

Rubenstein also estimates the immigrant impact on wages for various states. The highest impacted state, not surprisingly, is immigrant rich California where native-born workers have lost $6,162, or 12 percent of the average annual wage. New York is next with a loss of $5,674 or 9.4 percent of its average wage. Other states with large reductions include Nevada with a loss of 8.5%, Arizona with 6.3% and Massachusetts with a reduction of 6.1%. Thus state governments have lower tax revenues from native-born workers, while paying them more unemployment and welfare benefits. Moreover, due to the relative poverty of immigrants the value of the benefits they receive will be greater than the tax revenues they generate.[34]   

 

The state estimates given above should be viewed as short term effects of immigration; in the long run the initial impact of immigration spreads out to encompass all states. Borjas observes how ‘spatial correlations’ indicate that the average native wage is somewhat lower in high immigrant labor markets but the actual wage differential often turns out to be rather small. Business observes that cities flooded by less-skilled migrants tend to pay lower wages to laborers and will tend to relocate to those areas.  Immigration increases the return to capital in high immigrant areas and the subsequent flow of jobs will soften the effect of immigration.  On the other hand in those cities with low immigration the outflow of capital will cause worsening economic conditions and lower wages.[35] Furthermore,

 

The forces that tend to equalize employment opportunities across labor markets are reinforced by the fact that native workers will also respond. Laborers living in Michigan or Mississippi were perhaps thinking about moving to California before the immigrants entered that state. These laborers learn that immigration has reduced their potential wages in California. As a result, many will decide to remain where they are or move elsewhere. – and some Californians might actually find it worthwhile to incur the cost of leaving the state to search for better opportunities.  The migration of native workers within the United States … accomplishes … a ‘spreading out’ of the additional workers over the entire nation, rather than in just a limited number of localities.[36]

 

The end result is that these factors will eventually spread the effects of immigration over the country as a whole.

 

The meatpacking industry is a case study on the impact of immigrant labor. Average wages in meatpacking have declined from $21.75 an hour in 1980 to $12.03 in 2007; this in an industry that once sustained middle class blue collar jobs. Furthermore with labor accounting for some 8.3% of the production cost of beef and 11% of pork economists estimate that if the wage were increased by one third  retail prices would only rise an average of 2.3% for beef and 3% for pork.[37]  Clearly it is not the American consumer that has reaped the major benefit of immigration in this industry. Indeed, Borjas has estimated that the economic surplus to native-born consumers from the lowering of wages due to immigration amounts to about $30 annually; a pathetically meager amount in light of the displacement of native workers and the other costs incurred.[38] Economist Daniel Indiviglio has summed up the effect of immigration on wages as follows:

 

If these jobs remain open, one of two things will happen. Either wages will rise to a level that will attract workers, or if the wage required is too high to make a profit the firm will go out of business. That's just the free market at work, and cries from business owners that the inability to hire illegal workers is forcing them out of business is no more compelling than a cry that the inability to do something illegal such as pollute is forcing them to close their doors. The question is whether they are profitable when forced to internalize all costs, and pay the above-board market price for the resources they use.[39]

 

Worker Displacement

 

Gains in employment since the year 2000 have gone overwhelmingly to immigrants. In testimony before Congress Steven Camarota presented data indicating that foreign born workers “accounted for just 34 percent of the growth in the working-age population (18 to 65) between 2000 and 2010, but 100 percent of the net increase in jobs went to immigrants during the entire decade.” Furthermore, there was “a dramatic decline in share of natives holding a job during the decades — from 76 percent in 2000 to 69 percent in 2010.”[40] U.S. born Teenagers were particularly hard hit. Their summer labor force participation declined from 64 percent in 1994 to 48 percent by 2007 immediately before the current recession.[41] Researchers at the Center for Immigration Studies estimate that this decline in teenage employment is the result of newly arrived young immigrants displacing potential young American workers from employment. The researchers find that new immigrants had a strong, statistically significant, negative impact on the likelihood of teenage employment. Each one percentage-point increase in the share of new immigrants in a states workforce reduces the probability of employment of U.S. born young adults by 2.1 percentage points. Moreover, it is the influx of illegal immigrant workers that is primarily associated with an increasing tendency for employers to operate outside of the legal employment framework paying workers off-the-books and hiring through employment contractors. In this way employers are able to save on the expense of providing employee protections and benefits.[42]

 

Young and unskilled workers are not the only victims of employment displacement. Taking advantage of the H-1B visa program U.S. employers have imported highly trained workers at much reduced wages. The available labor market evidence indicates that there is no shortage in the United States of workers in science, technology, engineering, and mathematics (STEM) occupations. In 2006 there were an estimated 16.6 million Americans with science and engineering degrees while there were some 4.3 million to 5.8 million employees in the STEM sector.[43] Industry apologists point to the high proportion of foreign graduate students in science and engineering as proof that immigrants are needed to fill STEM positions. However, the high proportion of foreign-born graduate students is a result of the success of industry in lobbying for guest worker programs. With reduced earnings in STEM employment capable native students have been driven into other career paths.[44] The H-1B visa program, as currently administered is beset with fraud and abuse; and such abuse has been abetted by government.

 

Bringing in hundreds of thousands of foreign workers to fill jobs in high-skilled occupations would make sense only if there were a critical shortage of native workers, and not the oversupply that currently exists. Companies are using guest worker visa programs not to supplement American workers but to supplant them. Not only is there an overabundance of qualified STEM workers already in the country, the high tech industry is also importing workers at a much higher rate than it is creating new jobs. In 2009, when 245,600 jobs in the high tech industry were lost, 214,271 H-1B petitions were approved, 84 percent of those submitted. Microsoft in 2009 laid off 5,800 workers while bringing in 2,355 H-1Bs. IBM, a top ten recipient of both H-1B and L-1 workers, laid off over 28,000 workers in the U.S. between 2005 and 2009.[45]

 

Employer fraud often takes the form of writing H-1B job descriptions to insure that no native employees will be found with the “required” skill. The petitioning employer then conducts their own wage surveys in order to establish the level of compensation. For example, one report notes that the prevailing wage calculated by computer industry employers are about $22,000 less than the Bureau of Labor Statistics median wage estimates.[46] Furthermore, H-1B’s sister visa program the H-2A agricultural jobs program has never performed as envisioned. Agricultural interests have found it easy and less costly to simply employ illegal farm workers.[47] Once again the deliberate policies of government have enabled this employer abuse to continue.

 

It was inevitable that the displacement of American workers be accompanied by a decline in safety and working conditions. One indicator is that of the rise in on-the-job injuries and deaths. The cost of these workplace mishaps has risen at a higher rate than both employment growth and CPI medical cost estimates. That immigration is the likely cause is suggested by the following. Hispanic workers make up 13.4 percent of total employment, but account for 19.3 percent of non-fatal workplace injuries in 2005. From 1995 to 2005 fatalities involving Hispanic workers increased by 51 percent while those involving White workers decreased by 21 percent and those involving Black workers decreased by 30 percent. The language barrier may be one factor involved in decreasing workplace safety but the tendency of immigrant workers to exaggerate or misrepresent their skills is another. Although Hispanic immigrants gravitate to risky occupations, this is not a sufficient explanation for their higher injury rates. In the hazardous meatpacking industry government data show that the whites still employed in this industry, perform the same tasks more safely than Hispanics. The same is true in construction and manufacturing.[48] Moreover, the more intensive monitoring of safety conditions on the part of states and localities required by less capable labor is just another additional cost of immigration.

 

One additional effect of mass low wage immigrant labor should be noted. The incentive to implement productivity enhancing innovation is stifled. The example of Switzerland is instructive. By holding back immigration following World War 2 Switzerland, unlike its neighbors, was motivated to upgrade its labor productivity.[49] Porter notes the effect of immigration and other factors increasing the supply of labor on American productivity.

 

A large pool of available labor entered the American labor force in the 1970s and 1980s, a function of the postwar baby boom, more women working and immigration. With many new employees available, American firms did not face the same pressure to automate and move into more sophisticated segments as did those in most other advanced nations.  … While many new jobs were created, the rate of upgrading in the American economy was set back. At the same time, economic growth could occur despite sluggish growth in productivity.[50]

 

Wealth Redistribution

 

“Immigration can be viewed as an income redistribution program, a large wealth transfer from those who compete with immigrant workers to those who use immigrant services or buy the goods produced by immigrant workers.”[51] The native born may benefit from immigration in two ways. In the first place immigrants may bring in skills and abilities that are scarce thereby increasing production efficiency. In addition immigrants may have new ideas and insights into the production and distribution of goods and services. These positive externalities may not be as necessary in a world with modern communications as they once were. The relation between skills and machines differed a century ago so that skilled workers and machines were substitutes for one another in the production process. Thus the entry of unskilled immigrants to operate the new machines at that time was beneficial to industrialization.  However, that does not imply that unskilled immigration is a benefit to the country now.  The real economic debate regarding immigration is between the winners and losers in the wealth redistribution process.[52]

 

In addition the externalities due to immigration are more likely to be negative with congestion and environmental damage due to increased population, political instability and intergroup conflict. Borjas estimated the net benefit of immigration to be of the order of $10 billion annually, an amount that is swamped by the fiscal costs. Furthermore, the small benefit that may be due to immigration is a cover for massive wealth redistribution. The lower income and less capital owning black population is even more adversely affected than are other groups.[53] Account must also be taken of the costs due to the disruptive effects of lack of employment opportunities for lesser skilled Blacks. There are also increased welfare costs of the impacted working population in general. It is the employers of immigrants who are the chief beneficiaries because immigration, as we have seen lowers wage rates. The small benefit when combined with the large redistributive effects is just one more example of a general hollowing out of the economy.

 

There are a number of estimates of the magnitude of this wealth redistribution. Borjas calculates the redistribution as follows. Given the labor share of 70% and the native born population of 90% native born workers take 63% of GDP as remuneration.  With a 3% lowering of the native born wage the native born share of GDP falls by 1.9%. With GDP at $8 trillion the earnings of native born workers drops by $152 billion. Assuming that there is an $8 billion immigrant surplus a total of $160 billion is transferred to the users of immigrant labor. These calculations are very sensitive to the immigration wage impact. With a zero impact there is, of course, no redistribution. With a 10% wage impact the immigration surplus is $28 billion and the redistribution of wealth amounts to a staggering $500 billion.[54] In another simulation which divides workers into skilled and unskilled, Borjas finds that the redistribution of income goes to the upper 30% who are the owners of capital and the skilled workers.  The immigration surplus itself is, once again small, less than $20 billion. He also finds that if the immigrants simply replicated the native workforce in the percentage of skilled and unskilled workers there would be no immigration surplus, simply two parallel economies.[55] Appendix 3D contains a brief description of the economic theory underlying the concept of immigration surplus.

 

Economists Ian Dew-Becker and Robert Gordon have looked at wage and salary growth among the richest 10 percent of American earners for the years 1966 to 2001. They found that while the median wage and salary increased 11 percent, for those above the 90th percentile the increase was 58 percent while among the now infamous one percent above the 99th percentile the increase was 121 percent. The super-wealthy above the 99.9 percentile had a 236 percent increase. This does not even take into account income due to investments which presumably showed a similar disparity.[56]

 

A convenient way of measuring income inequality is through the use of the Gini statistic (see Appendix 3B).  The following chart shows the U.S. Gini statistics since 1970:

 


 


Source:  U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements


Gini assumes values between zero and one with zero representing complete income equality. Income inequality has shown a steady increase over the period, occasionally slipping down but then resuming its upward march in subsequent years.

 

Immigration is one obvious factor that may result in the rise of the Gini statistics. British columnist Ed West presents an “inconvenient” scatter diagram showing a relationship between Gini statistics and the percentage non-Hispanic White population for the fifty states. There is a clear downward trend; the lower non-Hispanic White percentages tend to be associated with higher Ginis. West notes the irony that despite the acceptance into the American mainstream of various dispossessed groups including that of immigrants “the United States has gone from being a comparatively egalitarian society to one of the most unequal democracies in the world.”[57]    

 

Hispanics constitute the largest recent immigrant group. Looking at Gini statistics and Hispanic percent of population by state confirms the above graphic. A regression between these two variables is statistically significant however the relationship is weak (r2 = .07). The results of this analysis and the following regressions are presented in Appendix 3C. The reasons for the weak results when cross-section state data are used were elucidated by Borjas (see section on Wages above).  The effects of immigration quickly spread out beyond the states most impacted.  

 

A time series analysis for national data and years since 1970 yields a much stronger relationship. It shows a strong highly statistically significant relationship between U.S. Gini coefficients and percentage Hispanic foreign stock (r2 = .96), defined as post-1970 Hispanic immigrants and their offspring. The results also indicate that when the post Hispanic foreign stock doubles from its current 10% the U.S. will reach Latin American levels of inequality with a Gini exceeding 0.56. However, an even stronger relationship exists between the total foreign stock percentages and the Gini coefficients. The following scatter diagram shows the strong fit.
 


The slightly stronger relationship shown by the entire foreign stock (r2 = .97) as compared to the Hispanic foreign stock might seem a little anomalous at first. After all the large number of Hispanic immigrants tend to be very low income. However, the immigrant flow tends to be bifurcated with a large low income group at the bottom and a small high income group at the top with very little in between. The high earning upper immigrant group consisting mostly of Asian immigrants, although fewer than Hispanics, are still considerable and would tend to slightly increase the inequality by adding to the numbers at the top of the income scale.

 

A question that frequently arises in regression analysis and in the examination of time series data is whether there might be other explanatory factors which show similar trends and might add to the apparent effect of the variable under examination. Multiple regression analysis is the method used to examine the effects of a number of variables. Two other factors that might be related to the increase in inequality are the shrinking of manufacturing and the rise of the “FIRE” (finance, insurance, real estate) economy. A good proxy variable for these factors is the U.S. balance of trade. The latter is statistically significant when used alone in regression analysis but is less so than was the case for foreign stock. When both the trade balance and the foreign stock are entered as explanatory variables in a multiple regression, a problem known as multicollinearity obscures the effect of the trade balance. This is due to the fact that both foreign stock and the trade deficit have moved closely together over the last forty years; they are said to be highly correlated.  All of the explanatory power is sucked up by the foreign stock variable resulting in a reversal of the expected sign of the trade balance estimated coefficient.  However there is a method by which the effect of each variable can be held constant. The results show that both variables are strong and highly statistically significant but that the effect of foreign stock is much stronger. Those interested in delving into the regression details should refer to Appendix 3C.

 

The joint effect of immigration through its impact on the supply of labor and of international trade is an important aspect of recent U.S. economic history as Rubenstein, quoting Dew-Becker and Gordon, points out:

 

To be convincing, a theory must fit the facts, and the basic facts to be explained about income equality are not one but two, that is, not only why inequality rose after the mid-1970s but why it declined from 1929 to the mid-1970s. Three events fit neatly into this U-shaped pattern, all of which influence the effective labor supply curve and the bargaining power of labor: (1) the rise and fall of unionization, (2) the decline and recovery of immigration, and (3) the decline and recovery in the importance of international trade and the share of imports….Partly as a result of restrictive legislation in the 1920s, and also the Great Depression and World War II, the share of immigration per year in the total population declined from 1.3 percent in 1914 to 0.02 percent in 1933, remained very low until a gradual recovery began in the late 1960s, reaching 0.48 percent (legal and illegal) in 2002. Competition for unskilled labor not only arrives in the form of immigration, but also in the form of imports, and the decline of the import share from the 1920s to the 1950s and its subsequent recovery is a basic fact of the national accounts.

 

The Roaring Twenties ushered in a forty-year era during which ordinary workers got richer while the rich got relatively poorer. Americans found themselves sharing broadly similar lifestyles in a way not seen since before the Civil War. Economic historians Claudia Goldin and Robert Margo call this period of declining income disparities the “Great Compression.” The decline in labor supply brought on by lower immigration was key to this happy turn of economic events.[58]

 

Economic theory indicates that immigrant labor should produce benefits accruing to natives (see Appendix 3D).  The evidence indicates that, in fact, there is at least some immigrant surplus but it goes to the employers of immigrants. Even so the immigrant surplus is far outweighed by all of the other costs of immigration as shown in the following sections.





Immigration’s Fiscal Burden



 


In the early 1990s the consensus of many economists studying the economic impact of immigration was that immigration was no longer a source of great economic benefit. The 1993 Huddle study found that the net cost of immigration to government including welfare use by displaced native workers exceeded $40 billion. Business Week, on the other hand, claimed that immigrants pay $90 billion in taxes and receive $5 billion in cash welfare benefits.  The $5 billion, however, excluded other means tested programs: Medicaid, EITC, housing subsidies and food stamps.[59] When considering the overall impact the preeminent authority in the field, George Borjas concluded that when the fiscal cost was taken into account the short term net benefit of immigration was negative on the order of $15 to $21 billion per year. In the long run there may be some slight fiscal benefit but this surplus would be rather small. He concluded:


 


The cost-benefit approach clearly suggests that issues other than the sign of the bottom line will determine the direction of the immigration debate. After all, this bottom line is neither overwhelmingly positive nor overwhelmingly negative - and a prudent person would probably conclude that it is pretty close to zero. Some of these other issues may be economic, such as the large redistribution of wealth induced by immigration. Some may be political, such as the redistribution of political power that immigration can bring about. And some may be cultural, such as the impact of immigration on ethnic diversity and on the cultural cohesion of American society.[60]

 

We have already examined the effects on the redistribution of wealth. The most dramatic examples of the cost due to loss of cultural cohesion occurred in the extraordinary events of 9/11 and its aftermath and in the immigrant effect on the subprime meltdown (which will be examined below). However, even regarding the ordinary fiscal costs of immigration, a number of recent studies indicate that it may be much larger than previously suspected. We have seen that lower incomes and larger family sizes imply that illegal households pay less in taxes and use more in services than do native households, even with the heroic assumption that they pay all the taxes they should. Moreover, we have also seen that while most illegal immigrants work, with very low incomes and children born here, many of them make more intensive use of the welfare system than do natives.

 

Over the last twenty years, however, the large fiscal cost of immigration has become more pronounced and apparent than was the case early in the 1990s. The increased immigrant flow along with displaced native workers at the lower end of the income scale has caused a continued increase in the number of dependent households. The illegal alien population has also soared since the 1986 amnesty with its promise of border security and employer sanctions foiled by ethnic and business interests.

 

Cost of Illegal Immigration

 

The cost of benefits provided to illegal immigrants is the one most apt to raise the ire of native taxpayers. The most thorough and extensive set of estimates of the fiscal impact of illegal immigration are those from the Federation for American Immigration Reform; the FAIR estimates are presented in this section.[61] In this study Jack Martin and Eric Ruark find that illegal immigration costs U.S. taxpayers $28.8 billion a year at the federal level and $84.2 billion spent by states and localities. Education of the children of illegal immigrants costs some $52 billion; most of this is borne by state and local government. Taxes received from illegal aliens do not come close to the level of expenditures. In addition these do not take into account the additional loss resulting from unemployed and underemployed U.S. workers replaced by illegal immigrants. Also most illegal immigrant workers do not pay income taxes; however many claim tax credits targeted for low income workers. There are also a large number of one-time illegal aliens who have been regularized through various legalization provisions.

 

The authors use a 13 million illegal alien population estimate plus another 3.4 million U.S. citizen children often referred to as anchor babies. They also assume that there are 8 million illegal immigrant workers with those on the books averaging annual family incomes of $31,200. The estimate of taxes collected from illegal immigrant workers is not a true offset to expenditures on illegal aliens as such receipts would still occur and would likely be even greater if those jobs were filled by legal workers.  Estimated federal fiscal costs, in $billions are: education 2.1, medical 5.9, justice 7.8, welfare 4.7 and general 8.1. Total expenditures at the federal level total some $28.8 billion. Because of the Earned Income and Child tax credits, the net income taxes collected from illegal immigrants are a negative $2.3 billion. Accounting for Social Security, Medicare and employer withholdings the total of federal taxes collected is about $9.5 billion. Thus, net federal outlays due to illegal immigrants amounts to $19.3 billion.

 

Estimated costs at the state level vary widely and, of course, depend on the illegal immigrant share of the state population. For that reason, California, Arizona, and Nevada taxpayers bear the greatest burdens. Total outlays over all states amount to about $84.2 billion; after tax receipts of some $4 billion the net outlays are $80.2 billion. States with large immigrant populations, of course, bear the largest net costs: California $20.5 billion, Florida $5.2 billion, Illinois $4.3 billion, New York $9.3 billion, Texas $8.4 billion.  Martin and Ruark’s findings are summarized in the following table:

 

                        Outlays for Illegal Immigrants ($millions)

 
OUTLAYS
RECEIPTS
NET
Federal
$28,795
$9,457
$19,339
State/Local
$84,211
$3,955
$80,255
Total
$113,006
$13,412
$99,594

 

The net expense per citizen household at the federal level for illegal aliens is nearly $190; at the state level the net expense is about $885 net for a total of about $1,075. The authors were careful to avoid double counting by keeping the federal and local expenditures as well as receipts separate. For example, on the federal side there was a $300 million cost of reimbursement to the states in the State Criminal Alien Assistance Program and that same amount was deducted from state costs of incarcerating illegal and deportable aliens.[62]

 

In addition, Martin and Ruark note an additional adverse impact of illegal immigration. The remittances sent out of the United States by illegal alien workers suppress tax collections that would otherwise have occurred if the money had stayed in the United States. And, as we have seen in the preceding chapter, on the trade deficit, there is also a multiplier effect on economic activity in general. With an estimate of remittances of $57.7 billion and a multiplier of 1.7 the annual drain on the U.S. economy is close to $100 billion.

 

Cost of Immigration: State and Local Government

 

Legal immigration is another drain on the public purse.  The higher level of poverty among recent immigrants also means that these groups have less tax paying ability and, therefore, impose a higher tax burden on the general population. This higher percent of poverty, in addition to the illegal immigrant population, also characterizes the larger number of legal immigrants.

 

One recent estimate is that excluding poor immigrants and their children would reduce the population living in poverty by some 8.5 million. Furthermore, without the wage competition and displacement due to immigration fewer native-born Americans would be on the poverty rolls.[63] In addition to immigration’s direct effect on expenditures, the impact on native workers reduces tax revenues. Rubenstein estimates the tax revenues lost due to total immigration, legal and illegal, as follows. He uses Borjas’ estimate that immigration causes U.S. born workers a 5.25 percent reduction in income. With these workers receiving eighty eight percent of income, total personal income declines by some 4.6 percent. Assuming that tax receipts decline at the same rate he estimates a total annual loss in federal, state and local tax revenues of about $98.4 billion occurring in the early years of the last decade.[64] Presumably the losses have increased in the years since.

 

Furthermore, there are two important ways in which immigration may directly affect expenditures. First there is the interaction between immigration and the welfare state. Immigrants and their offspring have a demand for social services, including welfare, medical assistance and housing as do the native born. However, the higher level of poverty among recent immigrants has a greater impact than is the case for the population as a whole. Similarly, immigrants have the same need for education as do other population groups. However, a higher level of poverty leads to a higher reliance on public education. Cultural and language differences also require additional and, often expensive, compensatory programs.

 

The second impact of immigration is due to the effects on spending for infrastructure and the quality of life. Congestion and environmental effects due to the increase in population creates the demand for additional public spending. Maintaining public safety and the quality of life requires large increases in expenditures. Public utilities and transportation facilities are severely impacted by an increasing population. In addition, the most recent immigrant cohorts appear to have a higher need for police, fire and public transportation than the general population thereby magnifying the effect on public spending.

 

Measuring the fiscal impact of recent immigration is no easy task. Rubenstein in his Cost of Diversity study has updated some estimates of the impact of immigration on state and local government expenditures obtained from a regression model which I developed early in the last decade. In that model I employed two measures of the fiscal burden imposed by immigrants on native-born Americans. The first is excess expenditure defined as government spending received by immigrants over and above what an equivalent number of native-born would receive. The second is net cost which consists of government spending attributable to immigrants less the taxes they pay. (Details of the regression model are in Appendix 3E.)

 

As expected certain expenditure categories are particularly sensitive to immigration. These include health, education and welfare and public safety. Other spending categories are undoubtedly impacted by immigration but their effects are harder to estimate as accurately. These include transportation infrastructure, utilities and the environment.  The pattern of immigrants settling in high growth areas where spending on infrastructure and the environment is expanding rapidly distorts the estimated expenditures attributable to immigration. In the same manner the tendency of non-immigrant whites to live in more affluent and less densely populated areas will increase their amount of per capita public safety spending thus underestimating the true immigrant effect.

 

With these qualifications in mind Rubenstein obtains the following table:[65]

 

          Estimated State and Local per Capita Expenditure on Population Group 2006

Function
Non-Hispanic White
Black
Foreign Born & Offspring
Education
$2,151
$1,465
$3,246
Welfare
$911
$1,113
$1,056
Health
$358
 $730
$672
Public Safety
$1,057
 $767
$755
Other
$2,339
 $464
$4,228
Total
$6,816
$4,539
$9,957

 

Source: Stan Fogel, “Recent Immigration: Impact on State and Local Expenditures,” May 2003. 2006 estimates based on Ed Rubenstein’s extrapolations of Fogel’s figures for 1992 and 1999.

 

The average per capita spending for immigrants exceeds that of non-Hispanic Whites by $3,141, or 46 percent. It exceeds that for Blacks by $5,418, or 119 percent. The greater spending for Whites than for Blacks reflects their living in affluent low density areas with greater spending on education and amenities. Immigrants, on the other hand, tend to settle in areas similar to those of Blacks and yet consume more in the way of government services and benefits. However, much of this apparent discrepancy, as mentioned, may be due to underlying factors other than immigration per se. It is for expenditures on health, education and welfare (HEW) that the contrast is most telling. The immigrant population consumes welfare and health spending at comparable rates to that for Blacks and at greater rates than that for Whites. Education spending on immigrants, in particular, is over twice that for Blacks and a third greater than that spent on Whites. This is, undoubtedly, the result of greater resources required for bilingual education and similar programs.

 

The immigrant portion of HEW spending is presented in the following table[66]:

 

                         Impact of Immigration on State Health, Education, and Welfare Spending

                                                                           ($ Millions)

 
2006
1999
1992
Total HEW spending (actual)
$1,174,060
$815,277
$566,880
Immigrant HEW spending (estimated)
$433,156
$197,691
$95,091
Immigrant Percent of total HEW spending
36.90%
24.20%
16.80%
Excess immigration spending (a)
$103,565
$48,667
$29,561
Un-reimbursed immigration spending (b)
$201,348
$84,512
$37,287
Un-reimbursed Percent of total immigration spending
46.50%
42.70%
39.20%
a. Spending on immigrants over and above their population share.
 
 
b. Spending on immigrants over and above their tax payments.
 
 
 
Sources: Stan Fogel, “Recent Immigration: Impact on State and Local Expenditures,” May 2003. (1992,
1999); Author’s extrapolations of Fogel’s figures (2006).
 
 

 

It is seen that HEW spending due to immigration is estimated at $433 billion in 2006 which is 37 percent of all state HEW spending. The un-reimbursed portion of HEW spending represents a net transfer of income from native-born Americans to immigrants. In 2006, that un-reimbursed amount was estimated to be $201.3 billion. With the total immigrant stock on the order of 50 million in 2006 (see Appendix 3A table 3), on average, every foreign born person and his U.S. born child received a net transfer of approximately $4,026 from U.S. natives in 2006. Moreover with a U.S. population of 300 million, the immigrant HEW subsidy paid for by non-immigrants was some $800 per year. The consensus of economists, as we have previously seen is that the economic surplus generated by immigrants and accruing to native-born Americans is minuscule, amounting to about $12.5 billion. With fiscal costs to native taxpayers of some $200 billion net economic impact is a negative $187.5 billion annually.[67] And that cost only includes state and local HEW spending; direct Federal expenditures (other than reimbursements to states) and the harder to estimate non-HEW categories may add considerably to that total. My original study found that the gap between total annual expenditures for, and revenues received, by states and localities on non-HEW functions may amount to two thirds of the HEW gap increasing the net negative still further. In any event, the bottom line is that current immigration incurs a substantial net loss. However, as we have seen this loss is not evenly shared. Native elites gain considerably from immigration; some in the form of a substantial wealth transfer to the owners of capital and others to an even more ominous increase in political power from immigrant votes.


Federal Government Expenditures

 

Rubenstein provides the following estimates of the immigration impact on federal expenditures. As was the case with state and local expenditures, both legal and illegal immigrants are included. His results in descending order by department are as follows:[68]

 

Fiscal Impact of Immigration: Federal Spending 2007

Amount $billions
Per Immigrant
Treasury
146.6
3,868
Social Security
58.3
1,538
Health and Human Services
57.2
1,509
Homeland Security
25.2
665
Transportation
13.7
361
Education
12.9
340
Agriculture
10.3
272
Housing and Urban Development
7.4
195
Labor
7.1
187
Energy
2.6
69
Justice
2.1
55
State
1.2
32
Commerce
1.1
29
Interior
0.4
11
Defense
0.3
7
Total
346.4
9,139

 

Some portion of these expenditures is for grants and reimbursements to the states and so would be counted as part of the estimated fiscal impact on state and local governments. However, many of these estimates are not for grants to the states. For example the Treasury impact includes $100 billion of federal taxes estimated lost from the reduction of native incomes due to immigrant labor competition. Homeland Security expenditures include customs, border protection, immigration workplace enforcement and other immigrant related administrative costs. These, along with federal prison expenses are all direct costs to the federal government. Transportation costs include $6 billion lost due to immigrant related traffic congestion. Other indirect costs include environment related expenditures, such as pollution control, and communicable disease monitoring and control. Given the lower incomes characterizing the recent immigration population, most of these costs would not be recovered via taxes.

 

Other Estimates

 

Another estimate of immigration’s fiscal impact relies on the 1997 findings of the National Research Council which only looks at benefits directly paid to immigrants. Rubenstein updates the NRC numbers to 2010.[69] He finds that the average immigrant household in California receives $4,835 per year more in state and local benefits than it pays in state and local taxes. The federal discrepancy between benefits paid and taxes received is $3,745 for a total subsidy of $8,580 per immigrant household. Multiplying this estimate by 12.9 million immigrant-headed households nationwide gives $110.7 billion as the fiscal shortfall attributable to immigration in 2010. The tax burden on native households amounts to almost $1,000 annually representing 1.4 percent of average household income. This, of course, does not take into account all of the less direct fiscal costs resulting from immigration.

 

Two important less direct immigrant related expenditures are for education and criminal justice. In 2005 Rubenstein, using a total of 25 percent foreign-born children plus U.S.-born children of immigrants in the public elementary and secondary education system, estimates immigration related education expenditures at $125 billion plus another $3.2 billion for federal Title I grants. The cost of educating immigrant children may, in fact, be even higher due to special needs and bilingual education.[70]

 

In 2004 some 267,000 non-citizens were incarcerated in U.S. prisons and local jails. Approximately 27 percent of all prisoners held in the Federal Bureau of Prisons system were criminal aliens, the great majority from Latin America. Rubenstein estimates the costs of holding foreign-born, non-citizen inmates in BOP facilities at $1.5 billion with an additional $300 million of reimbursements made to state and local governments for holding criminal aliens. Even so an estimated 80,000 to 100,000 illegal immigrants who have been convicted of serious crimes are still at large. These government expenditures are dwarfed by the economic burden including loss of income and property, uncompensated hospital bills, and emotional pain and suffering, imposed on crime victims and the public at large.[71]

 

Some observers note that urban areas with high concentrations of immigrants have lower crime rates than other comparable municipalities. However, as Rubenstein points out some cities with large Hispanic populations have below-average crime rates simply because they have a lower black population share; not because of particularly low crime rates among the Hispanic immigrant population.  African-Americans have sixteen times as great a crime rate as foreign-born Mexicans and twice that of U.S. born citizens of Mexican descent. “So as Hispanics displace blacks in America’s largest cities, stable or slightly declining crime rates are not at all surprising. But correlation does not imply causality.”[72]

 

In 1997 David Simcox estimated the cost of the 1986 IRCA amnesty over the course of the ten years since the start of legalization.[73] He determined that the direct cost of the legislation was $102.1 billion in twenty federal, state, and local assistance programs and services over the course of the decade. Taxes collected from the newly legalized population were $78 billion, for a net fiscal deficit of $24 billion over the period. The indirect costs added to the deficit by a considerable amount. These indirect costs include those resulting from citizen job displacement of about 187,000 workers, education of some 1.25 million children of legalized immigrants, additional illegal immigrants encouraged to enter and additional chain migration. The total estimated direct and indirect cost was almost $80 billion over the ten year period.

 

In 2008 the federal budget allocated some $774 million for Refugee Assistance programs. Among these programs are matched savings accounts made available to refugees with annual income less than 200 percent of the poverty line; the cost of which is some $25 million annually. The rapidly increasing numbers of refugees and their chain-migrating family members have imposed another large taxpayer-funded cost.[74]

With the aging of the population increasing the need for long-term care, Medicaid expenditures have been rising steadily. Immigrants, however, are a rapidly growing factor behind Medicaid spending. In 2005, 14.8 percent of native households received Medicaid payments versus 24.2 percent of immigrant households. Although the 1996 law made illegal immigrants ineligible for all Medicaid services except emergency room care, their U.S.-born children were exempted. The 1996 law allowed states to extend Medicaid coverage to new immigrants using state funds. The result is that Medicaid coverage actually declined less for low-income immigrant parents than for low-income natives. Rubenstein finds that 11 percent of all Medicaid outlays go to immigrant households which is less than their share of the population. However, recently immigrants are accounting for a disproportionate share of new enrollment. The Emergency Medical Treatment and Active Labor Act of 1985 requires hospitals to provide emergency room care for all including illegal immigrants. Health and Human Services provides some $250 million to fund this mandate. EMTALA also gives illegals who are diagnosed with disabilities the right to qualify for Supplemental Security Income. [75]

 

Immigration accounts for a large portion of those who lack health insurance. Sixty four percent of illegal immigrants are without health insurance, as compared to 13 percent of natives; illegal immigrants account for 15.4% of the uninsured population. “The large number of illegals without insurance, and the impact this creates for taxpayers, indicates that the desire of some businesses to have access to large numbers of unskilled immigrant workers creates significant problems for the healthcare system and taxpayers.”[76] The problem is exacerbated by the children of immigrants; altogether uninsured immigrants and their children make up 31.7% of those without health insurance; twice their share of population. Furthermore, post 1990 immigrants without insurance amount to 62.9% of the growth in the uninsured population. Along With their U.S. born children they account for 71% of this growth.[77]   

 

The Earned Income Tax Credit is a subsidy to employers who hire low-wage immigrants in place of   equally qualified natives and is championed by the U.S. Chamber of Commerce.[78] Collecting EITC funds requires some form of verified tax identifier. Since 1996, the IRS has obligingly issued more than 14 million Income Taxpayer Identification Numbers (ITINs). The Clinton welfare reform law did make the use of ITINs by illegal aliens more difficult. This resulted in the increased use of bogus Social Security numbers, a practice facilitated by the laxity of the IRS in verification of these SSNs or in the existence of claimed dependent children. Some illegal immigrants even manage to claim children residing in Mexico as dependents.[79]

 

Closely related to the EITC is the Additional Child Tax Credit (ACTC). In 2005, the IRS paid out $924 million on ACTC claims; currently that number has quadrupled to over $4 billion. The increase was the result of the combination of the 2001 Bush tax cuts with the recent stimulus package which made refunds easier to get. Reports of fraud and abuse have exploded. Numerous dependents are claimed; often these are not even members of the immediate family, and sometimes even residing in Mexico.[80]

 
Social Security

 

In their report[81] Martin and Ruark point to social security, along with Medicare, as the only programs in which illegal aliens may provide a fiscal surplus. They estimate that illegal immigrants pay in about $7 billion per year into the Social Security Trust Fund and about $1.64 billion into Medicare without receiving any benefits for these withholdings. However they are quick to add that the proponents of illegal immigration fail to point out one important fact. Should any of their pet amnesty schemes be enacted “these workers would represent a very significant additional liability for the Social Security Trust Fund and further hasten the insolvency of the system.”

 

Furthermore, a consideration of the long run prospects for social security paints a much less rosy picture of the helpfulness of immigration. The changing demographic reality as a consequence of immigration may lead to some unpleasant political consequences. As non-white immigrants increase in numbers and political clout they may well vote against providing benefits to the elderly from previous ethnic stocks. The negative impact of immigration on the earnings of native workers is also cause for concern. Decreasing wage earnings by native workers will diminish the solvency of an already weakened fund. To obtain a benefit from immigration going forward requires an ever increasing flow of immigrants as previous cohorts age and enter the system. Thus Social Security will turn into an ultimately unsustainable Ponzi scheme. With Americans living longer and being healthier the obvious solution would be to encourage those who want to keep working to remain in the workforce. Rubenstein estimates that “by raising the age of eligibility two years, we lowered elderly dependency by more than a complete cessation of immigration would have raised it.”[82] Fairness might require that equal opportunity and affirmative action for elderly willing workers be vigorously pursued. This would be an instance in which the benefits of such programs would exceed their social costs.

 

Moreover, with the rapid rise of the post 1990 over 65 immigrant population we might not have to wait for the long run; only two decades may suffice to witness the negative effects of immigration:

 

Given that immigrants now possess lower skills than natives and their earnings average substantially less than natives’, those immigrants who qualify for entitlement programs could collect more in benefits than they paid into those programs through taxes. With the Baby Boom cadre entering retirement over the next 20 years, federal health programs will already be weakened financially. Significant immigration now by disproportionately lower earners will impose fiscal challenges to entitlement programs 20 years and more hence.[83]

 

The above fiscal impact studies since the mid-90s are summarized as follows:

 

 

Summary of Studies: Annual Cost of Immigration $billions
Study
Group
      Year
Type
Source
Exp. Type
Amount
Martin and Ruark
Illegal
2010
Net
Federal, State and Local
Total
99.6
Rubenstein
All
2006
Net
State and Local
HEW
201.3
Fogel
All
1999
Net
State and Local
HEW
84.5
Rubenstein
All
2007
Gross
Federal incl grants to State and Local
Total
346.4
Rubenstein/NRC
All
2010
Net
Federal, State and Local
Transfer payments
110.7
Rubenstein
All
2005
Gross
Federal, State and Local
Education
128.2
Rubenstein
Illegal
2004
Gross
Federal incl grants to State and Local
Incarceration
1.8
Simcox
Illegal
1997
Net
Federal, State and Local
IRCA
8.0
Huddle
All
1993
Net
Federal, State and Local
Total
40.0
Rubenstein
Refugee
2008
Net
Federal incl grants to State and Local
HEW
0.8

 

It is apparent that immigration, in addition to all of its other economic effects entails a large fiscal cost; and one that appears to have increased substantially in recent years. Education and welfare, including direct payments to immigrants, constitutes a major part of such spending. Illegal immigration also has a significant impact. Furthermore a comparison of the gross and net expenditure estimates indicates that immigrant tax receipts cover less than half of their fiscal costs.



 

Environment, Energy and Infrastructure

 
In 1970 environmentalists expressed a well-founded concern regarding the effect of rapid population growth on the environment. The American people without the type of coercive government policies found elsewhere were close to achieving replacement level population growth. The American elite decided otherwise and by massively increasing immigration repealed that sensible decision. The great crime of the environmental movement quickly followed. Major environmental organizations buried the issue of population once it was apparent that nonwhite immigration was the greatest source of growth. Immigration also has a large impact on natural resource consumption, notably that of energy, and on infrastructure. “America faces not only an aging society, higher energy prices and the costs of refurbishing aging roads, sewers, ports and schools. It must cope with these challenges while also absorbing a huge tide of immigrants.”[84] Moreover the challenges will mount; by 2050, as projections from the Census Bureau and a number of private organizations demonstrate, a continuation of present trends will result in a population approaching 450 million. Most of this increase will be due to immigrants and their progeny.[85]
 
Environment
 
Conservative commentators jetting across the country and looking down at all of the “empty spaces” may tend to disparage the problem of population growth. They ignore the fact that such lands are either inhospitable or are needed to provide the food, water and resources for dense populations residing elsewhere. One might expect that liberals, with their vociferous expressions of concern over global warming and environmental degradation to be more sensitive to the issue. But it appears that their devotion to the cult of diversity and their eagerness to displace the U.S. majority population is a much greater priority. Air and water pollution are, of course, exacerbated by growing population but it is the proliferation of solid waste that is most visible. Our urban areas now generate three times the amount of such waste as they did in 1960; city governments try to solve the problem by shipping their waste to far off landfills.[86]
 
The direct impact of immigration on solid waste production is most easily seen on the illegal immigration pathways along the Mexican border. Here the Bureau of Land Management spent some million dollars annually to mitigate the problem of illegal alien and smuggler generated solid waste; it has been estimated that at least four times that annual appropriation is really needed. Immigrants apprehended left some 25 million pounds of trash over the last decade on federal and tribal lands in southern Arizona; many times that would have been left by uncaught illegal crossers. As can be expected such litter includes cans, bottles, paper, personal items, food and even weapons. Most unpalatable of all is the human waste deposited. Larger items include abandoned vehicles and bikes. Vandalism and graffiti add to the problem. Fire damage, a potentially acute problem in the dry Arizona landscape is one more impact enabled by unsecured borders.[87]
 
Supplying the growing immigrant fueled population with clean water is a problem that is becoming more acute and is most serious in California and the southwest. The demand for water in California is putting a strain on the capacity of the water supply authorities and requires the construction of ever more dams and reservoirs. The water problem in the Southwest cannot be blamed on increasing per capita residential use; in Los Angeles this has been dropping for two decades. The problem is due to the sheer numbers of population increase. Such population growth has forced communities throughout the Southwest to divert water, previously devoted to agriculture, to municipal use. [88] While immigrant water use is comparable to that of the general population their tendency to settle in the dry areas of the Southwest has exacerbated the supply problem. Phoenix and other southwestern cities may find themselves running out of water within a few decades. San Diego has even had to resort to recycling toilet water for drinking.[89] Water use in these areas increasingly relies on “mining” existing aquifers setting the stage for a major future water crisis.
 
Water pollution is a problem that the U.S. has succeeded in largely containing over the last few decades. However, the pressure of rapidly growing populations, many from parts of the world where contagious disease is still rampant, always represents a potential hazard. In addition meeting the increased needs of waste disposal can have a costly impact on the nation’s water systems. There are also the dangers of resource extracting technologies such as hydraulic-fracturing on the water supply. The large and growing population requires such potentially hazardous technologies to meet its energy and resource requirements.
 
Water use is closely linked to the problem of urban sprawl. A growing population spilling out of established towns and cities into areas abutted by dams creates a major flood hazard. Immigration has a direct impact on urban sprawl.  The conventional wisdom is that immigrants live in urban centers, often in crowded conditions. Contrary to the common perception, about half the country’s immigrants now live in the nation’s suburbs.” Furthermore urban sprawl is much greater for second generation immigrant populations. “Of the children of immigrants who have settled down and purchased a home, only 24 percent have done so in the nation’s central cities.”[90]
 
However, the first generation of immigrants will settle in urban areas and most ((55 percent) of these will live in central cities as opposed to suburbs. Immigrants increase the population density in urban areas with direct effects on traffic congestion. Although recent immigrants are less likely to own automobiles and more apt to rely on mass transit, over time they will tend to converge to native transportation patterns. Moreover, the native populations of central cities displaced by immigration will settle in suburbs and thus contribute to increased automobile use and traffic congestion.[91]
 
Infrastructure
 
In fact the need for additional highway construction is driven by population growth which in turn has been driven by immigration. In 2010 the U.S. spent 50 percent more, adjusted for inflation, on highway construction than was the case in 1985.  Despite that, highway miles increased by only six percent, far below the increase in population. Population growth has outrun the ability of government to effectively spend the increased amounts devoted to transportation infrastructure.[92] Crumbling highway bridges are symptoms of immigrant fueled population growth outpacing expenditures. Given the fiscal deficit due to recent immigration the government’s ability to finance projects such as bridge maintenance and construction is adversely affected. In 2004 California transferred $3.1 billion from the transportation trust fund to the general fund in order to finance social programs among whose chief beneficiaries are immigrants and their children. The diversion of funds brought bridge replacement to a halt in many areas.[93]
 
Public transportation is also affected by rapid population growth. Since immigrants settle in densely populated areas urban mass transit is particularly impacted. It is one more case in which the immigrants are disproportionate consumers of these services without providing a proportional share of tax revenues needed for operation, construction and maintenance. The burden on public transit and other urban amenities is likely to be even greater as many recent immigrants come from rural areas without any experience of dense urban living; some recent refugees, e.g. Hmong and Somalis, come from quite primitive tribal cultures before being resettled into American towns and cities.
 
Aviation infrastructure including airports, air traffic control systems and transit to and from airports, has also been impacted by population growth. Airline security costs have exploded in the wake of 9/11. Expenditures for screening of passengers and luggage including technologically sophisticated monitoring devices have increased greatly. Moreover, as we have seen, the laxness of our immigration and visa enforcement was directly responsible for the 9/11 attacks and the subsequent costs.  
 
Education infrastructure is also under stress due to immigration related population growth. Immigration accounts for a disproportionate 21 percent of the school-age population. In California some 47 percent of public school enrollment consists of immigrants or the children of immigrants; the Los Angeles public school system has been particularly hard hit.[94]   The district is in the midst of a $19 billion new school construction program with a target of 150 new facilities by the year 2012. The Los Angeles Unified School District even found it necessary to call on the Army Corps of Engineers to manage it. There is nothing extraordinary about this new construction; this is simply basic educational infrastructure needed to meet the needs arising from a massive increase in the student population. School construction costs have exploded in states with large percentages of immigrants. In addition to California, Florida, Arizona and Nevada have experienced a sizeable increase in education construction expenditures. Compounding the sheer numbers of immigrants as a driver of school construction costs are the higher fertility rates of immigrant women and the automatic citizenship provided to offspring of illegal immigrants.[95]
 
Health infrastructure is also greatly affected by immigration. Many Emergency Departments in poor areas having the burden of serving large uninsured immigrant populations have been forced to close. There has been a ten percent decline in the number of emergency departments between 1991 and 2006; as expected California has been particularly hard hit. Also as can be expected it is illegal immigration that is a major factor behind the emergency room problem. Illegal aliens utilize hospital emergency departments at more than twice the rate of the overall U.S. population; uncompensated illegal alien care is the cause of many closings. Some sixty percent of the uninsured patients in Los Angeles are not U.S. citizens. The burden on hospitals is made worse by federal law; the Emergency Medical Treatment and Labor Act requires that every emergency department treat uninsured patients for free. Many of these are immigrants and illegal aliens.[96]
 
Repairing and maintaining our overburdened infrastructure is a continuing burden which falls directly on users through higher tolls, fares and user charges, or indirectly on general taxpayers. As we have seen in the last chapter state governments have often resorted to selling or leasing roads and other infrastructure systems to private companies including those owned by foreign interests. Elected and appointed officials go to great lengths to continue their addiction to diversity and cheap labor. “There is no end to the financial chicanery that infrastructure junkies will employ to support their habit.”[97]
 
Energy
 
America’s widely discussed energy problems, the potential for climate change, water contamination from natural gas extraction, oceanic oil spills and the dependence on foreign energy sources, are directly related to immigration driven population growth. With 51% of the growth in population since 1970 due to immigrants and their offspring, half of the increase in energy consumption is immigration related. In 1974 U.S. energy consumption was 74 quadrillion BTUs. In 2006 this had grown by almost 35 percent to 99.9 quadrillion BTUs. Per capita energy consumption fell by four percent over the same period due to conservation, new energy-saving technologies, and more efficient energy use. Residential and industrial use led the way in per capita energy use reduction. However commercial and transportation per capita energy consumption increased. Increased commercial use may be an indication of the shift to the new service economy.[98] The increase in per capita transportation use may well be a result of the problems of traffic congestion and the flight of affluent natives to less densely populated areas with longer commuting times discussed above.
 
The per capita reduction in residential energy consumption is overwhelmed by the sheer numbers of population increase. This requires a substantial increase in electric generating capacity. Rubenstein estimates that in an area of high immigration driven population increase (3 percent per year) households of four will have $120 added to their annual electric bill to pay for the needed additional generating capacity. In California with population growing at eight times the decline in per-capita demand from 1979 to 1999, rate increases of at least $1,600 per year for a family of four was required to maintain the needed generating capacity. It was easier for state officials to accept the resultant state energy crisis rather than impose such rate increases.[99]
 

IRCA: The Missed Opportunity for Immigration Reform

 
A quarter of a century ago the opportunity arose to reverse at least some of the deleterious effects of the 1965 immigration legislation. It was perhaps inevitable, given the pro-immigration interests at work that the attempt would fail. The history of that failure is instructive in revealing the forces working against real reform of immigration.
 
In 1982 at the behest of the Hesburgh Select Commission on Immigration and Refugee Policy Senator Simpson and Representative Mazzoli began hearings on proposals to control illegal immigration.[100] The three key recommendations proposed by the Commission were border enforcement, employer sanctions, and a counterfeit-resistant identification system for employees. Simpson added the proposal to eliminate chain immigration by ending the preference for brothers and sisters of citizens and legal resident aliens and for capping legal immigration. The pro-immigration forces led by Senator Kennedy inserted a proposal for a limited amnesty for illegal immigrants, an idea accepted by the Reagan Administration. When the bill reached the Democratic-controlled House Simpson and Mazzoli also had their 450,000 ceiling on legal immigration stripped from the legislation. The legislation was also postponed until the next Congress.
 
Simpson’s bill passed the Senate in 1984, but hampered by weak support from the president, he had been obliged to add amnesty in return for a weak set of employer sanctions. The House then passed a bill which included employer sanctions and a verification system. The Democratic House leadership always eager to find new victim groups whose civil rights needed protection, and under pressure from the Hispanic lobby, added an elaborate system of amnesties, in return for a watered-down set of employer sanctions. These amnesties, in addition to illegals residing in the U.S. for four or more years, included one directed to recent Cuban and Haitian refugees. The legislation also provided for a new agricultural guest worker program. Illegal aliens now regularized totaled some 3.1 million with 70 percent consisting of Mexicans with no more than a seventh-grade education. By the mid-90s chain migration added an additional 8 million relatives of amnesty recipients.
 
Another provision added a lottery of 5,000 visas to immigrants from the top thirty-six nations that had failed to use at least 25 percent of their 20,000 quota as established by the 1965 law. While Kennedy intended this to benefit his Irish constituency, the State Department ultimately added thirty-six countries, most from Africa and Europe. Congress, always eager to pander to select ethnic interests, ultimately expanded this category into the diversity lottery visa pool.
 
The legislation did provide for federal sponsorship of pilot programs in the states aimed at producing a single national identification document. However, neither Reagan nor any succeeding president expressed any interest in this provision. The legislation also provided for a path to strengthening the employer sanctions; another improvement ignored by subsequent administrations.
 
Some of the reasons for the failure of the Federal government in enforcing those IRCA provisions that might have staunched the illegal immigrant influx are discussed by former INS agent Michael Cutler.[101] In the first place there were never a sufficient number of personnel tasked with enforcement responsibilities. As computer technology became more sophisticated making it easier to produce counterfeit documents, agents were never given sufficient training in identifying such fraudulent materials. With the larger than expected numbers of IRCA applicants, agents were pressured by superiors to cut corners processing applications. Thus, investigations were rarely conducted and undiscovered fraud was rampant.
 

Real Immigration Reform

 
Immigration in its present form, as the previous sections have illustrated, is no longer an economic benefit but a significant drain contributing to the hollowing out of the American economy and its once vibrant middle class. There are three aspects of immigration policy that should not even be debated. One is that additional amnesty type legislation should be a non-starter. Another is that a system is needed to track visitors who are here legally. Finally ways of reducing the illegal immigrant population should be put into effect.
 
Twenty five years have passed since the IRCA faux immigration reform and the problem has gotten much more acute. One lesson that should be learned from IRCA is the need to avoid any more amnesties whether open as in the recently defeated McCain-Kennedy legislation or subtle as in the various “DREAM” act proposals. Cutler concisely points out why it is important to avoid rewarding those who have willfully disregarded our laws with any future amnesties:
 
 A nation’s primary responsibility is to provide for the safety and security of its citizens and yet, for reasons I cannot begin to fathom, the members of the Senate who voted for S. 2611 are seemingly oblivious to the lessons that the disastrous amnesty of the Immigration Reform and Control Act of 1986 (IRCA) should have taught us. That piece of legislation led to the greatest influx of illegal aliens in the history of our nation. Fraud and a lack of integrity of the immigration system not only flooded our nation with illegal aliens who ran our borders, hoping that what had been billed as a ‘‘one time’’ amnesty would be repeated, but it also enabled a number of terrorists and many criminals to enter the United States and then embed themselves in the United States.[102]
 
He points to the case of Mahmud Abouhalima, a citizen of Egypt who entered the United States and overstayed his tourist visa. Abouhalima whose participation in the first attack on the World Trade Center in 1993 foreshadowed the even more horrendous second attack, obtained resident alien status pursuant to IRCA. Abouhalima turned the American dream into a nightmare.  “The other terrorists who attacked our nation on subsequent attacks, including the attacks of September 11, 2001, similarly exploited our generosity, seeing in our nation’s kindness, weakness, gaming the immigration system to enter our country and then, hide in plain sight, among us.”[103]
 
The case of Abouhalima and the 9/11 terrorists also points to the necessity of a visa entry and exit tracking system. A large part of the illegal population consists of those who enter legally and simply overstay their visa expiration dates. The technology for implementing such a system certainly exists; only the will on the part of our elected officials is lacking.
 
Reducing the large illegal alien population should be another priority. The most obvious way is to enforce security at our borders so that more undocumented immigrants do not add to the number already here. A nation that can send large contingents abroad to protect the disputed borders of Kosovo or the rugged borders of Afghanistan is surely capable of guarding the desert and sealing off the southern border. An entry-exit tracking system, an employee identification system and stiff employer sanctions would reduce the problem. Curbing the “anchor baby” situation whereby illegal immigrants or “birth tourists” can have permanent access to the U.S. simply by giving birth on American soil would also be effective. Rounding up aliens and piling them into buses, a favorite horror scenario which illegal alien proponents love to recount is not necessary. When employment conditions become unfavorable and the rewards for illegal entry cease, many illegal aliens will self-deport and the illegal population will shrink via attrition.
 
There are in general three ways in which the economic and fiscal burden due to immigration can be reduced. The first is to tighten eligibility requirements for various social services. This will have only a limited effect since expenditures for infrastructure, public safety and even education cannot be so constrained. Nevertheless it can reduce the burden somewhat and would help encourage a reduction of the illegal alien population. The second is to reduce the number of immigrants, legal and illegal. This would, of course, have a direct effect on the level of spending. Finally, more selectivity in the immigrants who are admitted, by increasing average income and tax paying capacity, would do much to close the immigrant fiscal gap.
 
We have specified some ways in which illegal immigration might be reduced. However, the legal immigrant flow is even larger. Legal immigration levels should be drastically reduced, even to the numbers that prevailed before the 1965 Act. Chain immigration should be eliminated by ending the special preference for siblings. Purposeless programs such as diversity lottery visas should be brought to an end. The H-1B visa program and related employment based visas such as the H-2A agricultural jobs visa should be closely monitored and tightened. Refugee resettlement programs should be reformed. Qualifications should be tightened and the temporary nature of such refugee visas should be established; when conditions in their home countries improve refugees should be repatriated.
 
Finally, more selectivity in admitting immigrants is strongly recommended. By Increasing the average income and tax paying capacity of new immigrants their use of public services would be reduced and the fiscal gap would be closed. A skills-based point system such as the one in Canada would be a good replacement for the current immigration system. Skilled immigrants bring with them the following advantages. They pay higher taxes and receive fewer social services and they are more likely to assimilate rapidly. Of course, the qualifications and abilities looked for should be those that are genuinely scarce.[104] Vernon Briggs emphasizes that any such skills-based system should meet the following criteria:
 
The number of such employment-based skilled immigrants should be flexible but the tendency always should be to reduce the number downward as circumstances change in order to encourage domestic education and training programs to increase their graduates in the shortage occupations. … A shortage in the short run should not mean automatically that more skilled immigrants be admitted. First recourse should always be to allow market forces to signal the domestic education and training system to respond.[105]
 
Of course the vested interests in the immigration lobby would complain vehemently regarding such a skills-based system:
 
Those who value the current diversity of the immigrant flow – or who for political reasons, want to see a marked change in the racial and ethnic composition of the population – will surely ascribe the worst of motives to anyone who argues that the United States might want to improve the skills of its immigrant population. Typically, accusations of racism – and the ugly prospect of Stalinist-like media show ‘trials’ where the accused must publicly atone for their alleged sins – are enough to silence most Americans who believe that admitting large numbers of unskilled immigrants is not in the national interest. … Nevertheless, facts are facts, and an unskilled immigrant flow does have many undesirable economic and social repercussions. A skills-based point system would provide a simple mechanism for screening the visa applicants.[106]
 
One might simply add that in addition to a skills-based point system prospective immigrants should be screened for security purposes, particularly those who are likely to have hostile ideological imperatives.




Immigration and the Subprime Mortgage Meltdown



 


An inconvenient truth ignored by most mainstream financial commentators, whether from the right or the left, is the strong relationship between immigration and the housing bubble. The U.S. Foreclosure Market Report of August 2008 reported that Nevada had the nation’s highest foreclosure rate for twenty consecutive months.[107] One in 91 households had a filing of foreclosure that month. Nevada real estate showed a sixteen-fold increase from the previous month and an 89 percent increase over that of August 2007. California came in with the second highest state foreclosure rate, with one in every 130 households receiving a foreclosure filing. Arizona registered the third highest state foreclosure rate, with one in every 182 households receiving a foreclosure filing that month. These three states are among the ones most heavily impacted by immigration. Also in the top ten were Florida, Georgia, Colorado and Illinois. The map below from Realty Trac shows foreclosure rates by county.


 

The Clinton National Homeownership Strategy provided for new rules under the Community Reinvestment Act to set numerical targets for minority neighborhoods including, of course, new immigrant neighborhoods. The Department of Housing and Urban Development led the way to pressure banks and mortgage brokers to lower lending standards. The Bush administration, pursuing a strategy of cultivating Hispanic support increased the number of Hispanic immigrants as affordable housing beneficiaries. Prior to the 1990s Latino homeownership rates were 40% or less; subsequent to the push by first Clinton and then Bush this rate approached 50% just prior to the mortgage meltdown. Of course, immigrant properties made up a large proportion of foreclosures.

 


The map shows the heavy concentration of foreclosures in the “sand states”: California, Nevada, Arizona and Florida. Other heavy immigrant receiving states, New Jersey and Colorado, as well as more recent immigrant destinations in the South, Georgia and Tennessee also show some impact. The “rustbelt” states: Ohio, Michigan, Indiana and Illinois also had fairly high foreclosure rates.
 
Appendix 3F describes a regression analysis showing a strong relationship between recent immigration and mortgage foreclosures. The foreclosure rate for each state was regressed on Hispanic foreign stock as a percent of the population using a “dummy” variable to separate out the rustbelt states. The coefficient of the Hispanic foreign stock variable is highly statistically significant. A one percent increase in the Hispanic foreign stock increases the rate of increase (not the foreclosure rate percentage as such) in the foreclosure rate by 2.8%.
 
At this point we have seen how misguided trade policy, the culture of diversity and mass immigration are undermining the U.S. economy. The result has been the diminishment of the middle class, the shrinking of the manufacturing base and the displacement of large numbers of workers.  The employment opportunities that were once available to them are disappearing as manufacturing leaves and service, agricultural and construction jobs are filled by low-wage immigrant labor. Large numbers added to the underclass via immigration are joined by numerous displaced native workers. In addition to vanishing manufacturing the U.S. must also bear massive domestic and foreign debt, and immense financial costs due to terrorism and the resulting military response. And as shown by events in California the demographic shift hinders the political feasibility of applying policy correctives. In the following we will see how the marriage of Social Engineering with Financial Engineering almost destroyed the entire U.S. financial system.
 


 

 
 
 
 



 
 

 
 
 
 
 



 

 
 

 
 


 



 

 

 



 


 
 


[1] George Borjas, Heaven’s Door, Princeton University Press, 1999, p. 85.
[2] Ibid, p. 86.
[3] Edwin S. Rubenstein, What Price Mass Immigration?, The Social Contract - Winter 2007-2008, p. 138.
[4] Ibid, p. 139.
[5] Joy Lee, Jack Martin, Stan Fogel, Immigrant Stock’s Share of U.S. Population Growth 1970-2004, FAIR, 2005.
[6] “Our Lost Future” Numbers USA. http://www.numbersusa.com/overpopulation/ourlostfuture.html
[7] Steven Camarota, Immigrants in the United States, 2007, November 2009, CIS Backgrounder, p. 10.
[8] Rubenstein, What Price Mass Immigration?, p. 81.
[9] Borjas, Heaven’s Door, p. 45.
[10] Camarota, Immigrants in the United States, 2007, p. 22.
[11] Ibid, p. 16.
[12] Ibid, p. 21.
[13] Ibid, p. 22.
[14] Rubenstein, What Price Mass Immigration?,  p. 95.
[15] Camarota, Immigrants in the United States, 2007, pp. 13-14.
[16] Samuelson, The Great Inflation and its Aftermath, p. 243.
[17] Borjas, Heaven’s Door, p. 140.
[18] Porter, Competitive Advantage of Nations, pp. 522-24,
[19] Borjas, Heaven’s Door, pp. 46-7.
[20] Peter Brimelow, Alien Nation, New York, Harper, 1996, p. 148.
[21] Steven Camarota, Immigrants in the United States, 2007, p. 28.
[22] Steven Camarota, Welfare Use by Immigrant Households with Children, Center for Immigration Studies, April 2011.
[23] Ibid
[24] Camarota, Immigrants in the United States, 2007.
[25] James Edwards, Jr., The Medicaid Costs of Legalizing Illegal Aliens, Center for Immigration Studies, July 2010.
[26] Camarota, Welfare Use by Immigrant Households with Children.
[27] Rubenstein, What Price Mass Immigration?, p. 141.
[28] Steven Camarota, A Record-Setting Decade of Immigration: 2000-2010, CIS, October 2011.
[29] Brimelow, Alien Nation, p. 165.
[30] George Borjas, Increasing the Supply of Labor Through Immigration: Measuring the Impact on Native-born Workers, CIS Backgrounder, April 2004, p. 5.

[31] Edwin Rubenstein, The Economic Case for a Moratorium, The Social Contract, Winter 2009-2010, p. 78 and The Economic Case for an Immigration Moratorium, The Social Contract, Winter 2011, p. 48.

[32] Borjas, Increasing the Supply of Labor Through Immigration, p. 6.

[33] Rubenstein, What Price Mass Immigration?

[34] Rubenstein, The Economic Case for an Immigration Moratorium, p. 49.
[35] Borjas, Heaven’s Door, pp. 63-67.
[36] Ibid, p. 67.
[37] Jerry Kammer, The 2006 Swift Raids, November 2009, CIS Backgrounder, p. 5.
[38] Borjas, Heaven’s Door, pp. 90-91.
[39] Daniel Indiviglio, Would Cracking Down on Illegal Immigration Really Cut Unemployment?, http://immigrationreform.com/2011/11/16/.
[40] Steven Camarota, Immigrant Gains and Native Losses in the U.S. Job Market, 2000 to 2010, Testimony Prepared for House Judiciary Committee, March 2011.
[41] Ibid.
[42] Andrew Sum, Paul Harrington, and Ishwar Khatiwada, The Impact of New Immigrants on Young Native-Born Workers, 2000-2005, CIS, September 2006, pp. 4-10.
[43] Eric Ruark and Matthew Graham, The Myth of a Skilled Worker Shortage, FAIR, November, 2011, p. 3.
[44] Ibid, p. 6.
[45] Ibid, p. 15.
[46] Rubenstein, What Price Mass Immigration?, p. 109.
[47] Ibid, p. 139.
[48] Ibid, p. 110.
[49] Porter, Competitive Advantage of Nations, p. 83.
[50] Ibid, p. 522.
[51] Borjas, Heaven’s Door, p. 13.
[52] Ibid, pp. 102-3.
[53] Ibid, pp. 87-98.
[54] Borjas, Heaven’s Door, p. 91.
[55] Ibid, p. 99.
[56] Rubenstein, The Economic Case for an Immigration Moratorium, p. 10.
[57] Ed West, The one inequality infographic no one on the Left wants to see, November 16th, 2011, http://blogs.telegraph.co.uk/news/edwest/100118076/the-one-inequality-infographic-no-one-on-the-left-wants-to-see/
[58] Rubenstein, The Economic Case for an Immigration Moratorium, p. 10.
[59] Brimelow, Alien Nation, p. 152.
[60] Borjas, Heaven’s Door, p. 126.
[61] Jack Martin and Eric Ruark, The Fiscal Burden of Illegal Immigration, FAIR, July 2010.
[62] Jack Martin, Private communication.
[63] Rubenstein, Cost of Diversity, p. 8.
[64] Ibid, pp. 10-11.
[65] Ibid, p. 12.
[66] Ibid
[67] Ibid, p. 13.
[68] Rubenstein, What Price Mass Immigration?, p. 142.
[69] Rubenstein, The Economic Case for an Immigration Moratorium, p.16.
[70] Rubenstein, What Price Mass Immigration?, pp. 85-87.
[71] Ibid, pp. 90-91.
[72] Rubenstein, The Twin Crises: Immigration and Crime, The Social Contract - Summer 2011, p. 30.
[73] David Simcox, The Cost of the IRCA Amnesty After 10 Years, May 1997.
[74] Rubenstein, What Price Mass Immigration?, pp. 101-102.
[75] Ibid, pp. 94-98.
[76] Camarota, Immigrants in the United States, p. 36.
[77] Ibid, pp. 17-19.
[78] Ed Rubenstein, The Earned Income Tax Credit and Illegal Immigration, The Social Contract, Spring 2009, p. 4.
[79] Ibid, pp. 11-12.
[80] Arnold Ahlert, Illegal Aliens Get Billions in Tax Refunds, FrontPage Magazine, May 21, 2012.
[81] Martin and Ruark, The Fiscal Burden of Illegal Immigration, pp. 38-40.
[82] Rubenstein, The Economic Case for an Immigration Moratorium, p. 22.
[83] James Edwards, The Golden Years?: Deficit Reduction and Immigration, CIS, November 2011.
[84] Samuelson, The Great Inflation and its Aftermath, p. 242.
[85] See for example Jack Martin and Stan Fogel, Projecting the U.S. Population to 2050, Federation for American Immigration Reform, March 2006.
[86] Ed Rubenstein, The Twin Crises - Immigration and Infrastructure, The Social Contract - Winter 2009, p. 73.
[87] Rubenstein, What Price Mass Immigration?, pp. 135-37.
[88] Rubenstein, The Twin Crises, p. 80.
[89] Ibid, p. 5.
[90] Rubenstein, What Price Mass Immigration?, p. 125.
[91] Rubenstein, The Twin Crises, p. 63.
[92] Rubenstein, The Economic Case for an Immigration Moratorium, p. 33.
[93] Rubenstein, The Twin Crises, pp. 14-17.
[94] Ibid, p. 4.
[95] Ibid, pp. 54-55.
[96] Ibid, p. 35.
[97] Ibid, p. 5.
[98] Rubenstein, What Price Mass Immigration?, pp. 122-24.
[99] Rubenstein, The Twin Crises, p. 25.
 [100] The following history of the IRCA legislation is derived from Otis Graham, The IRCA Fiasco, 1981-1986: Reform’s Maiden Voyage, The Social Contract Fall 2011, pp. 11-16.
 [101] Michael Cutler, Insanity on Steroids - How Our Leaders Refuse to Learn the Lessons of the 1986 Amnesty, The Social Contract Fall 2011, pp. 24-25.
[102] Michael Cutler, Crime and Immigration, The Social Contract, Summer 2011, p. 18.
[103] Ibid
[104] Borjas, Heaven’s Door, pp. 19-20.
[105] Vernon Briggs, Immigration Policy in Free Societies, December 2009, CIS Backgrounder, p. 4.
[106] Borjas, Heaven’s Door, p. 61.
 [107] RealtyTrac, Foreclosure Activity Increases 12 Percent In August, realtytrac.com, September 13, 2008.

 
 
 

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