Likely Effects of US immigration Reform on the National Deficit and Social Security System

There has been growing bipartisan efforts in Congress to reform the laws that govern U.S. immigration policy.[i] On June 27, 2013, the U.S. Senate passed “The Border Security, Economic Opportunity, and Immigration Modernization Act” (S. 744).[ii] If this proposed reform becomes law, it will likely help reduce the growing budget deficit and add to economic growth. It is important to not mistake immigration reform with pure amnesty, because a comprehensive or piecemeal reform will address the problem of millions of “illegal” and undocumented immigrants as well as: “specialized programs for agriculture and hi-tech industries, border security and visa‐tracking capabilities, temporary work programs, the future of undocumented adults and children already present in the U.S., systems for employer verification of work eligibility, and other dimensions.”[iii]

The U.S. Congressional Budget Office (“CBO”) found that immigration reform will help reduce the federal budget deficit by over two trillion dollars over the next decade.[iv] Furthermore, according to the Pew Research Center, birth rates in the U.S. have been at their lowest levels since the 1920s.[v] Because “new immigrants and their descendants are still projected to account for most of the nation’s population increase by mid-century,”[vi] in the absence of population growth, the U.S. economy is likely to contract in the future. The foundation of economic growth is represented by the total Gross Domestic Product (“GDP”) (i.e. the total output of a nation’s economy), which is calculated from the total number of workers and the average output per worker. It is predicted that immigration reform will have a positive impact on U.S. economic growth, which will increase to 5.4% in 2033.[vii]Because “growth in the labor force participation rate can, in turn, raise the rate of GDP above the rate of population growth,”[viii] “providing legal status to our nation’s 11 million undocumented immigrants would grow U.S. GDP by a cumulative $832 billion and raise the wages of all Americans by $470 billion over a decade, all while creating on average 121,000 jobs each year.”[ix]These are, of course, only estimates. Nevertheless, this implies that any debate about immigration reform that omits discussion about its accompanying economic effects is partial at best.

Opponents of immigration reform may argue, among other things, that expansive immigration reform will drive down wages for the lower and middle class. However, “economists have repeatedly found that immigrants do not bring down the wages of lesser-skilled Americans and instead find that immigrants actually have small but positive effects on native workers’ wages and job prospects.”[x]This is mainly because immigrants tend to complement, rather than compete with, indigenous workers.[xi]What’s more, immigration reform can also become one of the ways to save the Social Security program.[xii] According to official Social Security Administration data, “[o]ver the next 50 years, new legal immigrants entering the United States will provide a net benefit of $407 billion in present value to America’s Social Security system.”[xiii] Because Social Security benefits to existing retirees are funded primarily out of the taxes paid by today’s workers, an additional influx of workers into the taxpayer pool is extremely beneficial to America’s Social Security fund. What’s more, according to the Pew Hispanic Center, the median age of illegal immigrant adults is 36.2 years of age; in contrast, the median age of legal immigrants and U.S.-born adults stands at 46.1 and 46.5, respectively.[xiv] So, because “immigrants typically arrive near the start of their working years . . . legalization would expand [the] tax base in a significant and meaningful way.”[xv]

Nevertheless, immigration reform should not be a hand-out for law breakers. Current illegal immigrants seeking legalization will have to demonstrate their tax history and pay backdated taxes (plus a fine for illegal stay in the country). Unfortunately, with respect to this issue and many others, there were numerous serious flaws in S.744. For example, the bill does not require payment of all back taxes and “[does] not specify how tax authorities are to collect back taxes from illegal immigrants.”[xvi] What’s more, S.744 (pg. 620) explicitly preempts states from enforcing immigration laws. Without a similar provision such as the 287(g) program (which is amended throughout S.744) under which the “state or local entity receives delegated authority for immigration enforcement within their jurisdictions,”[xvii] explicit ban of sanctuary cities, and E-verify (S.744 replaces this proven program with unspecified verification system,), S.744 is questionably unsound. Furthermore, most importantly, illegal immigrants who have committed serious crimes should not qualify for legalization in any way.[xviii] While S.744 disqualifies an alien for registered provisional immigrant status for aggravated felony, three or more misdemeanor offenses, unlawful voting, and other violations, it is flawed in other respects. First, it is imperative that classification of what constitutes a serious crime should be decided at the onset at the Federal level and not left to local jurisdictions, since some jurisdictions categorize certain serious crimes as misdemeanors while others classify these same crimes as felonies. This can create confusion and make the system not uniform with respect to crime categorization. Disturbingly though, Section 245B(3)(B) (“Waiver”) allows for serious criminals to get legal status. Those who would otherwise be excluded may be granted legal status by the Secretary for “humanitarian purposes, to ensure family unity, or if such a waiver is otherwise in the public interest.”[xix] Such loopholes should be corrected and dealt with at the underpinning levels of the reform.

On a positive note, opponents of immigration reform need to recognize what legalization of status will truly entail in the short term. The current version of the Senate bill provides a 13-year path to citizenship.[xx] Because only citizens have the right to vote and receive government benefits, such as unemployment insurance and Social Security, and have immunity from deportation for committing a crime, such privileges of citizenship would not apply to legalized non-citizens.[xxi]

The key to a good reform is to synchronize the various proposals so that the overall effect is “an improved legal immigration system that is generous enough to discourage unauthorized immigration and provide a solution for the 11 million unauthorized immigrants[.]”[xxii]These aspects of immigration reform may alleviate the antagonists who argue that it is unfair to legalize those who broke the law to begin with. Overall, immigration reform is as much about the human dimension as the economic one. It is a way for the U.S. to address its growth and fiscal challenges for the years to come, maintain its human-capital competitiveness on the world stage, and avoid stagnant or declining economic growth.

In sum, immigration reform is expected to have a positive effect of population growth; increased labor force participation rates,[xxiii]and an increase in the pace of entrepreneurship among immigrants, which is documented to be greater than among the native born population, may in turn raise the likelihood of greater innovation and productivity.[xxiv] Finally, principally in light of the so-called aging “Baby Boom” generation, immigrants and their offspring will make a crucial contribution to America’s dwindling Social Security system which is arguably in dire need of more funds and reform.