National Data | Amnesty And The Deficit—Obama's Orwellian Inversion
Print Friendly and PDF

President Obama's El Paso speech kicking off yet another "comprehensive immigration reform" a.k.a. amnesty drive really interests (see here and here) because, unlike everyone else, we think he means it.

This time, Obama's sob-sister rhetoric was accompanied by a document, Building a 21st Century Immigration System, [PDF] highlighting the alleged economic and fiscal benefits stemming from amnesty.

Look at this quote:

"In 2010, the Congressional Budget Office (CBO) estimated that last year's DREAM Act, which would help keep educated young people in the U.S. who were brought here by their parents as children, grew up in our country, and who know no other home, would reduce the deficit by $1.4 billion over the next 10 years, because of increased tax revenues."

The DREAM Act is a back-door amnesty that (basically) would confer permanent legal status to illegal aliens up to age 35 who arrived in the U.S. before age 16—provided they complete two years of college. Student beneficiaries would also receive cheaper in-state tuition rates.

Needless to say, the DREAM Act does not provide federal funding to cover the cost of the increased enrollment and decreased tuition to colleges. So to pay for DREAM, colleges will either have to reduce the number of spaces available for American citizens, increase tuition overall and/or be compensated by the state taxpayer. It is conservatively estimated that: (a) about 1 million illegal immigrants will eventually qualify for the benefit and, (b) each will receive a tuition subsidy averaging $6,000 per year. So Americans will have to cough up as much as $6 billion per year more as a result of DREAM. This effect is not reflected in federal finances.

But the Obama Administration's claim about the benefit to federal finances turns out to be a sleight of hand anyway. The 2010 CBO report cited by the White House, actually says

"CBO and JCT [Joint Committee on Taxation] estimate that enacting the [DREAM] bill would reduce deficits by about $1.4 billion over the 2011-2020 period. That result reflects an increase in on-budget deficits of about $1.4 billion over that period and a decrease in off-budget [i.e., Social Security] deficits of about $2.8 billion over the same period."

(Italics and underlining added). So, contrary to the President, DREAM will increase the federal ("on-budget") deficit according to CBO.

It might reduce the so-called unified  deficit, which includes the "off budget" item Social Security, because immigrants initially pay into Social Security and are generally (not always) too young to receive benefits. But that's not the same thing—Social Security payments are supposed to be held in trust.

And anyway, that effect is temporary. Eventually, immigrants do become old enough to claim benefits. Then their impact on the "off-budget" deficit turns negative. This is why the report also says: "CBO estimates that the bill would increase projected deficits by more than $5 billion in at least one of the four consecutive 10-year periods starting in 2021".

The White House document also quotes an earlier CBO report on the budget consequences of the proposed 2007 amnesty:

"A 2007 cost estimate by the CBO found that a path to legalization for unauthorized immigrants would increase federal revenues by $48 billion but would only incur $23 billion in increased costs from public services, producing a surplus of $25 billion for government  coffers." (The link provided by the White House goes to a Treason Lobby think tank (the Hamilton Project at Brookings)—they in turn are quoting this official estimate.

But the White House is here using exactly the same sleight of hand.  In fact, the CBO report specifically acknowledges that the $25 billion "surplus" is achieved by including the Social Security in the calculation. When you net out the retirement fund, comprehensive immigration reform again exacerbates the budget deficit:

 "…CBO and JCT estimate that the direct spending and revenue effects from the [Comprehensive Immigration Reform Act of 2007] legislation would increase the on-budget deficit by an estimated $14 billion over the 2008-2012 period and by an estimated $30 billion over the 2008-2017 period."

 Again, over time the Social Security effect reverses—hence the report concluded:

"By 2027, CBO estimates, implementing the legislation (including the necessary appropriations) would increase the unified deficit (or reduce any surplus) by several billion dollars a year."

This CBO report also noted that legalization is, in fact, a double fiscal whammy. Not only does it increase on-budget spending, but it reduces tax revenues available to fund the budget. The latter is particularly surprising because amnesty legalization would increase the number of illegals filing tax returns. CBO explains the apparent anomaly:

"…because these workers would be able to work legally in the country, they would become eligible for many of the tax-reducing provisions available to workers with children, including the dependent exemption, child tax credit, earned income credit, and head-of-household filing status. Application of those provisions would either reduce income taxes or increase outlays from refundable tax credits."

Bottom line: the Obama Administration has performed a brazen Orwellian inversion. When the CBO says deficits, Obama says surpluses. When CBO says increase, the Obama Administration says decrease. Etc. Even though the underlying documents are hyperlinked there for anyone to read.

Did the Obamaites really think the Main Stream Media (and the GOP) would let them get away with this?


Closing point: In the long run, amnesty legalization will hurt Social Security also. Most illegals will become eligible for retirement benefits at age 67. Heritage Foundation research finds that an average elderly low-skilled immigrant creates a net cost (benefits minus taxes) of about $17,000 per year. (This figure includes federal, state, and local government costs for the elderly.) Over eighteen years of expected retirement life the added costs come to $306,000 per amnesty recipient.

Under present law, Social Security is expected to become insolvent in 2037. Amnesty will hasten its demise.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.

Print Friendly and PDF