Populists, Beware! [WSJ Pro-Illegal Op Ed has Two Trillion Dollar error]

The Wall Street Journal ^ | April 1, 2006 | EDWARD GILLESPIE

[Plutarch]

In coming weeks, Republicans in Congress must choose either a comprehensive immigration reform package including a guest-worker program or a narrowly focused border-security bill. The former would improve homeland security, help our economy and build greater Republican majorities. The latter, conversely, would ignore fundamental problems, hurt our economy and risk the party's majority status.

Lawbreakers should not be rewarded with citizenship, but respect for the rule of law need not conflict with two other pillars of conservative philosophy: freedom and economic growth...

--------snip-------------

Much of the resentment toward immigrant labor is based on the misperception that it is a drain on our economy and resources. However, researchers at the Academy of Sciences for the U.S. Commission on Immigration Reform have demonstrated that immigrants add about $10 billion annually in net economic output due to the increased supply of labor and resulting lower prices. Furthermore, a typical newcomer pays $80,000 more in taxes than he takes out in benefits over the course of a lifetime.

[Plutarch]

The Wall Street Journal is a major component of the Open Borders Lobby, and have been hammering incessantly for a Guest Worker program. Today's Op Ed piece is more of the same. It cites a study incorrectly that provides a two trillion dollar error in its favor. The WSJ needs to publish a correction.

Furthermore, a typical newcomer pays $80,000 more in taxes than he takes out in benefits over the course of a lifetime.

Mr.Gillespie's claim is from the National Research Council's The New Americans: Economic, Demographic, and Fiscal Effects of Immigration. As can be seen from the table below, the $80,000 refers not to immigrants themselves, each of which cost the taxpayers $3000, but is a sum of cost of the initial immigrants and their descendents.

Mr. Gillespie claims that the "typical newcomer" pays more in taxes than he (not he and his descendants) takes out. He thus sloppily and conveniently makes a $83,000 per illegal error in his argument's favor, which multiplied by 12 million illegals equals almost exactly a trillion dollars ($996,000,000,000).

Moreover, Mr. Gillespie in his piece is explicitly and exclusively discussing a Guest Worker program and illegal immigration, not the more educated and thus taxpayer-friendly legal immigrants.

Since the Guest Worker program would be comprised almost exclusively of non High School graduates, the lifetime net fiscal cost for a "typical [illegal] newcomer" is, as shown in the Table, a negative $89,000. Only those immigrants with more than High School education have any positive lifetime net fiscal impact, and Mr. Gillespie knows that no significant numbers of such immigrants would ever be enrolled in a Guest Worker program.

Using the source he cites, it would have been far more correct for him to have stated:

Furthermore, a typical illegal newcomer will take out more than $89,000 in benefits than he will pay in taxes over the course of a lifetime.

Adding the $89,000 taxpayer cost to the fictitious $80,000 benefit brings Mr. Gillespie's total error per illegal to $169,000. Multiplying this figure by 12 million illegals is two trillion dollars ($ 2,028,000,000,000).

Mr. Gillespie may respond that he was only citing the net cost of immigration overall. However, to bring up the taxpayer cost at all is to completely destroy his pro-Guest Worker argument. If the data he cite demonstrate that legal immigrants with more than high school education represent an $105,000 benefit to the taxpayer, and ill-educated illegals an $89,000 cost, the only rational conclusion can be to promote highly educated legal immigration, and eliminate poorly educated illegals.

This taxpayer cost in the illegal immigration issue is no small matter, and the author has no means of defending the true $89,000 cost in the source he cites. The Wall Street Journal needs to be held to task for this two trillion dollar mistake and publish a correction without delay.

WSJ E-mail: wsj.ltrs@wsj.com

[Brimack34]

They are apart of the MSM. Do not let the facts get in the way of their point. You and other freepers along with blogs are the new correction pages of the MSM.

[NapkinUser]

The Wall Street Journal is nothing short of a shill for cheap labor and open borders. They are not to be taken seriously on this issue. The comment about how an amnesty helps republicans shows that they're more than willing to lie through their teeth.

[UNflagburner]

How's this an error? The author clearly pointed out that the immigrants themselves will cost more on average, while the descendants will be beneficial. Since the descendants will live here, why shouldn't they be considered when looking at the impact of immigration.

[Plutarch]

The author clearly pointed out that the immigrants themselves will cost more on average, while the descendants will be beneficial.

Gillespie states the following:

Furthermore, a typical newcomer pays $80,000 more in taxes than he takes out in benefits over the course of a lifetime.

Gillespie doesn't mention any descendants. He uses the immigrant + descendant figure to describe the immigrant figure alone. He couldn't use the overall immigrant figure because it was $-3000. It would have been weak to describe "immigrants and their descendants", because descendant tax revenue is a pig in a poke. So he just slipped in the $80,000 figure.

[Rick_Michael]

"the only rational conclusion can be to promote highly educated legal immigration, and eliminate poorly educated illegals."

Here's where certain people may not agree with me...I'm all for legally immigrating higher numbers of doctors, scientists, engineer, etc...here. Anyone that's highly educated would benefit this country extremely. Not only would business want to make this country more of a home, our voting system wouldn't be polluted with legions of socialists.

Just don't bring in any lawyers...we have enough of them.

[onyx]

What's to disagree? We have lawyers aplenty.

[UNflagburner]

He uses the immigrant + descendant figure to describe the immigrant figure alone.

He uses the term 'newcomer' to describe the people who would be here with immigration and wouldn't be here without it. That figure is the one that matters. It makes absolutely no sense not to look at the descendants, because clearly they'll live here.

It would have been weak to describe "immigrants and their descendants", because descendant tax revenue is a pig in a poke.

No more so than it is for immigrants. That is, you are assuming that the previous trends will hold for both groups. But why does it make sense to do so for immigrants but not their children?

[backhoe]

Here's the boilerplate:

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It is my opinion that we are already in WWIV ( WWIII being the Cold War ) and there are two, somewhat interlocking elements to it:

Islam, a Religion of Peace®? ( links, blogs, quips, quotes, aggravating pictures ) is located here- click the Pic, and scroll backwards:

"Thunder on the Border," click the picture:

( PS- my personal prediction? That picture will become one of the most widely distributed, and most hated, pictures on the internet. The Illegal lobby could not have done more damage to themselves with that "Mexican Flag Superior, America in Distress" photograph if they had tried... )

---

Now, here's some of the "why" behind part of it:

My wife- the "former Democrat"-- finally "got" why unrestricted, illegal immigration is bad- when she saw what it did in our neighborhood, to the value of our house. Try to sell your home when 2 doors down the duplex has a yard full of cars ( and trucks, the newest & gaudiest ), three satellite dishes, and 15 or so people living in a space meant for four?

Good luck.

This is an "Issue" that cuts across party lines, demographics, and everything else.

In addition, whatever the arguable social costs are ( and there are many, despite what apologists for Illegal Aliens claim-- you simply cannot ignore the vast breech it causes in National Security when we are engaged in the fourth world war.

Months ago, Roger Hedgecock reported that besides the usual Arabic detritus being found along our borders by Homeland Security, they were finding Chinese trash as well.

WTH is coming over our borders?
( besides [see my links] mumps, antibiotic-resistant tuberculosis, and God-knows what else )

[Ranald S. MacKenzie]

Much of the resentment toward immigrant labor is based on the misperception that it is a drain on our economy and resources.

More of the resentment is based on the perception that the Southwest is rapidly being turned into a carbon copy of freaking Chihuahua.

[sgtbono2002]

Bring in as many legal immigrants as you like, but make them come in thru the gate.. Sneaking in over the border is BS.

[mtbopfuyn]

Not only that, but they're using a table that's a decade old.

[stopem]

UNFORTUNATELY they are taken seriously by House, Senate, our President and all employers who illegally pay these people under the table.

I would like proof that they pay taxes, that they pay more than what they take out of welfare services including medicaid.

[LowCountryJoe]

From Julian Simon’s research:

Data from the 1976 Survey of Income and Education

Data from the Census Bureau's 1976 SIE on family earnings and taxes paid by the various cohorts of immigrants are shown in Table 7.1. These earnings data enable one to estimate the taxes paid by immigrant families.

Within three to five years after entry, immigrant family earnings reached and surpassed earnings of the average native family (as of 1976); this catch-up is due largely to the youthful non- retired age composition of immigrant families. The average native family paid $3,008 in taxes in 1975. In comparison, immigrant families in the United States 10 years paid $3,369, those here 11-15 years paid $3,564, and those here 16-25 years paid $3,592. All the cohorts' payments substantially surpassed natives' payments.

Akbari found the same pattern in Canada for 1980. Immigrants who arrived in Canada between 1946 and 1976 contributed substantially more in taxes than did natives (1989, Table 4). And though the results vary somewhat, Akbari's data for 1990 also show much the same pattern (1994, Table 5).

These data, ranging over 15 years and two countries, corroborate each other that immigrant families tend to pay more taxes than do natives in most relevant cohorts.

It is family data such as these that are relevant for policy discussions, because the family is the relevant economic unit. Data to be considered later in this section (for completeness only) generally pertain to individuals.

Flows from the Public Coffers

By summing the categories for the 1975 expenditures in the Census Bureau SIE, we find that the average immigrant family received $1,404 in welfare services in years 1-5 in the United States, $1,941 in years 6-10, $2,247 in years 11-15, and $2,279 in years 16-25. Natives averaged $2,279, considerably more than the immigrants get during their early years in the United States. The early years are more relevant than are later years because rational policy decisions weigh the distant future less heavily than the near future, for exactly the same reasons that a dollar in hand is worth more to us now than a dollar that will be in hand 10 years from now.

As to Social Security when immigrants grow older: The children of retired immigrants support them with their taxes, just as the children of natives do for their parents, so the retired immigrants are no special burden upon natives. This matter is discussed at length in Simon (1989, Chapter 5).

Flows to the Public Coffers

As shown above, the average native family paid $3,008 in taxes in 1975. In comparison, immigrant families here 10 years paid $3,369, those here 11-15 years paid $3,564, and those here 16-25 years paid $3,592--in all those cases, substantially surpassing natives' payments.

Net Effect on the Public Coffers

Having in hand both the amounts of taxes paid by immigrants and the amounts of welfare services they use, one may then compute the net balance, positive or negative, for immigrants as a group. Additionally, one can then compare their impact on the public coffers with that of natives. I will now present these calculations for the United States as of 1975, based on the SIE.

Assuming that 20 percent of taxes finance activities that are little affected by population size (for example, maintaining the armed forces and the Statue of Liberty), the consolidated data on services used and taxes paid show substantial differences to the benefit of natives: an average of $1,354 yearly for the first 5 years the immigrant families are in the United States, and $1,329, $1,525, and $1,383 for years 6-10, 11-15, and 16-25, respectively. These are the amounts that natives are enriched each year through the public coffers by each additional immigrant family on average. Evaluating the future stream of differences as one would evaluate a dam or a proposed harbor, the present value of an immigrant family discounted at 3 percent (inflation adjusted) was $20,000 in 1975 dollars, almost two years' average earnings for a native family; at 6 percent the present value was $15,000; and at 9 percent it was $12,000. (All these data are based upon the total stock of immigrants in the United States, without distinction as to whether they are legal or illegal. Illegals are likely to be underrepresented in the survey because of their reluctance to deal with public officials, but the Census Bureau has found that a large proportion of them do respond to such surveys. The underrepresentation is not likely to have a significant effect upon the overall calculations above, and, if anything, it is likely to cause an understatement in the benefit to natives.)

There are other costs for some groups of immigrants, too. For example, during the period prior to the SIE, the federal government paid $1,000 per person to resettlement organizations to cover overhead and start-up money for Vietnamese, Soviet Jewish, and other refugees. This expense and such costs as special refugee schooling should be deducted from the above present-value calculation for the average immigrant family. But it is unlikely that these deductions would make the calculation negative.

Qualification

As discussed above, the data for the 1980s for relative earnings (and hence taxes) for individual native and immigrant men are sufficiently different from the data for earlier cohorts that it may be prudent not to rely on a synthetic-lifetime study which includes later cohorts along with the earlier cohorts. But taken together, these data do not indicate that the earlier findings are no longer relevant.

Furthermore, the 1975 data for the United States are corroborated by two similar studies for Canada by Ather Akbari (1989; 1995), one using 1981 data and the other using 1991 data, from two different sources (census data for 1981 and Survey of Consumer Finances for 1991). The results of Akbari's study of 1981 data are entirely consistent with my study for the United States using 1970s data, and his study of 1991 data shows no major differences from the study of the 1981 data or my study of U.S. 1975 data.

Net Balance for Undocumented Aliens

In the previous chapter, the expenditures on illegal aliens were estimated to be about $1,390 per capita, which is considerably less than for legal immigrants and about 38 percent of the level for natives. This means that, if, on average, illegal immigrants pay at least 38 percent as much taxes as natives, they will be paying their own way.

Clark et al. (Table 6.2) estimate that the 2.8 percent of the undocumented population in the seven states pays 1.3 percent of the total of sales, income, and property taxes, or 1.3/2.8 = 46 percent as much taxes as natives. If--and there seems little reason to estimate a higher or lower figure--the same proportion holds for total taxes, then taxes paid by illegals more than offset the costs of the services that they use. That is, the 46 percent of the average natives' inflow that immigrants pay in taxes is a greater amount than the 38 percent of the average natives' outlays on the illegals. And assuming that total U.S. inflows balance total outlays, and that other public outlays on account of illegals are not greater than for natives (indeed, they surely are much less), illegals are more than paying their own way and are contributing to the public coffers. If one were to make any reasonable accounting for the low marginal expenditures on public goods such as defense and foreign activities in connection with illegals, the accounting would look even more favorable for illegals.

[LowCountryJoe]

The Wall Street Journal is nothing short of a shill for cheap labor and open borders.

The WSJ doesn't have a bunch of dummies working for it. These people know what they're talking about. And as far as "shills" go, the bio on the guy who wrote the piece shows he has Republican credentials; after all, he was the RNC Chairman for a year and a half.

But don't just take Gillespie's word on the matter and dismiss it. Read Julian Simon's research on the The Economic Consequences of Immigration into the United States. Informed people should know not to bet against the late Julian Simon.

[NapkinUser]

"And as far as "shills" go, the bio on the guy who wrote the piece shows he has Republican credentials; after all, he was the RNC Chairman for a year and a half."

I know exactly who he is. Gillespie supports the McCain-Kennedy-Specter immigration bill, which in my opinion is the worst, most liberal immigration bill floating through the senate.

[stopem]

Their bottom line is THEIR bottom line.

I view it from MY bottom line which is as a taxpayer and American worker who does not support lowering wages, who sees the result of having to pick up the tab to support them (on medicaid, welfare, overcrowded schools)and subsidize their employers.