President-elect Donald Trump campaigned on “Mass Deportation NOW!” His justifications for the necessity of this policy were easily dismissed by experts. New immigrants aren’t behind a murder spree, aren’t driving up crime rates, aren’t eating our pets, aren’t taking “black jobs,” and—in many cases—aren’t even here illegally. One area that is more difficult to assess, but also rarely mentioned by Trump: how mass deportation would affect U.S. government debt.
If Trump is looking for better intellectual cover for mass deportation, he could find it in a preelection report from the conservative Manhattan Institute (MI). Their report found that the influx of illegal immigrants since 2021 will add $1.1 trillion in federal debt over the lifetimes of the immigrants and that “mass deportations would significantly reduce the national debt over the long run.” This conclusion was seemingly at odds with a recent report from the Congressional Budget Office (CBO) that found a big and growing fiscal upside to the recent influx of nearly $1 trillion over the next decade.
The author of the MI study, Daniel DiMartino, generously shared his data and calculations, allowing me to see whether it was the CBO’s shorter timeframe or something else driving the divergent results. Last week, the Cato Institute published the results of my replication. I identified nine methodological problems in MI’s model that make deportation seem to benefit government budgets. Rather than a $1.1 trillion loss from recent arrivals, I find these immigrants provide a positive $4.9 trillion in net present value for the federal government over a lifetime.
How Is Such a Big Difference Possible?
Start with taxes: MI assumes that immigrants won’t increase tax revenues from businesses at all. This is obviously incorrect. Not only are many immigrants business owners, but businesses only hire workers because those workers will increase profits that will be taxed. Most analyses indicate that workers pay the majority of corporate income tax through lower wages. When workers are deported, they won’t be earning wages, and the businesses won’t be earning profits or paying taxes on them.
To determine future tax revenues, MI’s analysis assumes that recent illegal immigrants are very uneducated and won’t have high-paying jobs, with their report showing just 7 percent of recent illegal immigrants had a college degree, while almost half have no high school degree. Its estimate—which is based on a misreading of a decade-old blog post of mine—is at odds with more recent evidence. Demographers at the Center for Migration Studies have found that 20 percent of illegal immigrants ages 18 and up have a college degree.
It might seem surprising that so many illegal immigrants have college degrees. But many of the “illegal immigrants” that Trump and MI are talking about deporting didn’t even enter illegally. They came in a temporary status called “parole,” which Trump plans on canceling. Moreover, socialism didn’t just destroy the jobs of the poorest Venezuelans, Cubans, Nicaraguans, Haitians, and others. It ruined the prospects for more skilled workers as well, and they are often the ones who have the means to move. Immigrant children who grow up here illegally also often obtain education beyond high school.
MI’s failure to use the best, most recent evidence on immigrant education means that it dramatically understates recent illegal immigrants’ future tax revenue by $2 trillion.
Now consider the cost side: MI states new illegal immigrants are indirectly causing Congress to increase defense spending. This isn’t true. Population growth has lowered real per capita defense spending, making the maintenance of America’s standing army cheaper for Americans. MI then assumes Congress will cut defense spending by roughly $40 billion annually when the new illegal immigrants are deported. (Hint: it won’t).
MI also states that illegal immigrants will claim Social Security and Medicare at the same rate as the average immigrant—even though they are legally prohibited from obtaining those programs. Of course, some might receive asylum and become eligible for those federal programs, but that’s likely less than 10 percent of those who entered. Adopting a more reasonable assumption—that only 25 percent become eligible—reduces the costs from immigrants by another $2 trillion.
Once you properly correct for these issues, low-skilled immigrants go from net negative in MI’s model throughout their working lives to net positive throughout their working lives. Immigrants are paying more in taxes than they receive in benefits, so they are reducing future interest costs on the debt. This is something that MI doesn’t account for either.
Add up all these differences, and recent illegal (or soon-to-be illegal) immigrants go from negative $1 trillion to a positive nearly $5 trillion in MI’s model.
The True Cost of Mass Deportation
MI’s DiMartino has since admitted at least some of these calculations should be changed (though he still insists deportations will lead to lower defense spending). But let’s just assume for a second that MI did all the calculations exactly right, and recent immigrants will cost the U.S. government $1.1 trillion. “Mass deportation” will cost a lot of money too. On MI’s accounting, it would cost about $500 billion, which it says is still worth it.
The problem is that MI is not considering the fact that mass deportation will almost certainly be paid for by new federal debt, which means it should consider the future interest costs on that debt. Factoring in the debt, the cost of mass deportation triples to $1.5 trillion over the immigrants’ lifetime. In other words, even if MI was 100 percent right, mass deportation wouldn’t be worth it.
When you combine the likely cost of mass deportation with the lost fiscal benefits from recent illegal immigrants, reversing the “Biden Border Crisis” will end up imposing almost $6 trillion in costs on U.S. taxpayers.
Naturally, not all immigrants are fiscally positive. Immigrants who arrive just before retirement or who arrive at young ages and don’t graduate high school are likely a net cost to the government.
These negative effects are almost entirely the result of Medicare and Social Security. There is a simpler solution than deploying the military to round up or block the entry of immigrants: Just limit welfare. If immigrants were ineligible for welfare benefits, almost every immigrant would be fiscally positive over their lifetime, regardless of when they arrive or their educational attainment.
Let immigrants naturalize if they have paid in (either through their normal taxes or a special fee). There are next to no immigrants who would turn down that deal. Given the enormous upside, why would Americans?
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