They may not like how he went about it, but most Americans approve of President Obama’s immigration order. That could change. As word leaks out about the potential cost of granting millions of low wage-earners access to Social Security and Medicare, and eventually other benefits, enthusiasm could sour.
As he announced his immigration measure, President Obama assured Americans that people being offered protection from deportation would not qualify for healthcare benefits. He further claimed the program would not “offer the same benefits that citizens receive.” Many Americans assume he meant that the 5 million or so newly documented people would not be eligible for Social Security for example, or Medicare, but that is not true. People who receive a Social Security number, work and pay taxes, will, qualify for both programs within ten years.
The problem is, most immigrants here illegally are not highly educated and tend to work in low-paying jobs. According to a 2012 Pew Research study, 35.8 percent of Hispanics over the age of 25 living in the U.S. had less than a high school degree, compared to 8.5 percent of whites. Only 14 percent were college graduates, versus 33 percent of whites.
According to the same survey, just 15 percent of Hispanics (both native and foreign born) earned over $50,000 per year; some 33 percent of whites had income above that level. As a result, most of the people impacted by Obama’s executive order will be on average net tax consumers in that they will pay into our tax system less than they will receive in the way of benefits.
In a recent interview about the immigrants being admitted, Robert Rector of the Heritage Foundation said, “Given their expected earnings… they will draw about three dollars’ worth of benefits out of those programs over their lifetimes for every dollar they put into them. But the overall cost in outlays will be around a trillion dollars for those programs alone.”
Like others, Rector expects the program to grow over time. The leadership of La Raza applauded Mr. Obama’s move in a press release, but warned, “We also note that this is just the beginning. This action is not a path to a green card or to citizenship, and it does not cover millions of worthy immigrants contributing to our country every day to whom we vow to continue working for reform legislation in Congress.” Rector has projected that the all-in costs of expanded legalization will be an additional trillion dollars, assuming that eventually all these newly legal residents will be able to access not only Social Security and Medicare, but our 80 separate means-tested programs as well.
Not everyone agrees with Rector. In a recent op-ed, Vice President Joe Biden claimed that the immigration reform bill passed last year by the Senate “would be an absolute game-changer for our economy, adding $1.4 trillion to our economy, reducing the deficit by nearly $850 billion over 20 years, and extending the solvency of Social Security by another two years.”
Biden says the economic boost will emerge “as more workers come out of the shadows and contribute to our economic growth and tax base, and entrepreneurs gain a greater opportunity to innovate and create jobs in the United States.”
Actually, reports by pro-immigration groups tend to undermine Biden’s claims, by noting that people in the country illegally already pay significant taxes. A study by the Institute on Taxation and Economic Policy (ITEP) reported that in 2010, undocumented immigrants paid $10.2 billion in state and local taxes. About 77 percent of that total came from sales and excise taxes, with the balance being income and property taxes. The group reports, “Their effective rate [6.4 percent] is close to taxpayers in similar income situations.” In other words, making them legal will not significantly change their tax payments.
This organization agrees that granting these workers legal status would boost revenues – not because they are earning enough to guarantee higher tax collections, but because “legalization would increase immigrant wages both because of their increased bargaining power with employers and because of their increased investment in their own language and skill development, thus increasing the taxes paid by those same immigrants.” The expected bump in bargaining power and skill development may be code for an anticipated increase in union membership (now we know why the SEIU et al have been so strongly pro-legalization); but surely a resulting increase in wages would not be immediate.
The ITEP report suggests that full tax participation might be a positive except that “In states with Earned Income Tax Credits, the income tax gains would be offset in part by immigrants being newly eligible to claim the federal credit and thus the state versions.”
Low income should not be an issue for the increased number of high-tech students and workers whom President Obama also welcomes through his executive order. Ironically, Mr. Obama has chosen to open the door for high-value students by expanding the Optional Practical Training Program (OPT). This program currently allows STEM students to stay in the U.S. for 29 months and others to remain for 12 months.
A new directive from Homeland Secretary Jeh Johnson will “expand the degree programs eligible for OPT and extend the time period and use of OPT for foreign STEM students and graduates, consistent with law.” The catch here is that while taking advantage of OPT, workers pay no Social Security or Medicare taxes, further penalizing those programs.
The potential cost of President Obama’s immigration program does not mean we shouldn’t provide the millions living in our country illegally with a path to legal status; I believe we need to do that. However, let us be honest about the possible benefits and burdens. In launching Obamacare, the president lied to Americans about the costs and impact; he should not be allowed to do the same with his immigration initiative.
Top Reads from The Fiscal Times: