From December 2022 to February 2023, encounters of migrants crossing the southwest (SW) border with Mexico are down 39 percent. President Biden’s immigration and border plan that expanded legal migration to the United States through humanitarian parole should take credit for this decline. Under Biden’s plan, up to 30,000 migrants from Venezuela, Cuba, Nicaragua, and Haiti (VCNH migrants) are allowed to enter the United States legally each month through humanitarian parole. As a result, more of them are waiting to come legally rather than attempting to cross illegally.

In February 2023, the number of VCNH migrants encountered, found inadmissible by Customs and Border Protection (CBP), or apprehended by Border Patrol decreased by 84 percent compared to December 2022. The number of VCNH migrants showing up at the border fell from 91,344 in December to 22,084 in January and then further down to 14,381 in February (see Figure 1).

This trend supports Cato’s theory that legal migration discourages illegal immigration and border crossings. Non-VCNH migrants who do not have the option of humanitarian parole fell by only 12.5 percent from 160,651 in December 2022 to 134,192 in January and rose again to 140,617 in February. Almost 80 percent of the total decline in encounters along the border from December to February comes from a reduction in VCNH migrants.

VCNH migrants can apply for humanitarian parole from their home countries, and they must meet all health standards, be screened for security purposes, and have a U.S. sponsor. Once approved, they can fly to the United States rather than paying a smuggler to bring them to the U.S. SW border. Once here, they can reside for two years, they can apply for a work permit, and have little recourse to welfare. Importantly, the President can extend the two-year residency at any time. If nearly 30,000 people are admitted every month from VCNH countries, then the Biden immigration and border plan could be the largest immigration liberalization since 1965.

Looking at the individual countries reveals a more complicated reality. For example, Venezuelans have had some access to humanitarian parole since October 2022. The number of Venezuelans who came to the SW border without authorization dropped by 64 percent from October to November of 2022, rose slightly in December and January but fell again in February (Figure 2). Their numbers fell by 2,607 between December and February. Haitians, another group with access to humanitarian parole before Biden’s January immigration plan, increased from 5,138 in December 2022 to 7,430 in February, a 45 percent increase.

However, the number of people showing up at the border from Nicaragua and Cuba dropped substantially from December to February (Figure 2). Nicaraguans dropped from 35,387 in December to 639 in January, a 98 percent decline. Cubans dropped by 98 percent, from 42,653 in December to 753 in February. Those are enormous declines for people from countries most recently added to humanitarian parole.

Figures 1 and 2 look at all encounters by CBP along the Southwest border, which includes apprehensions by CBP’s subcomponent agency of Border Patrol. Apprehensions by Border Patrol are an even better way to look at the chaos along the border because that agency apprehends migrants trying to cross illegally while the other components of CBP often encounter migrants who aren’t trying to evade capture. Of course, not all migrants apprehended by Border Patrol are trying to escape detention, but they are more likely to.

Border Patrol apprehended 84,190 migrants from VCNH countries in December 2022, the month before Biden announced his new border plan. In February, those numbers fell by 98 percent to 2,050 (Figure 3). The number of migrants from other non-VCNH countries apprehended by Border Patrol fell just 8 percent from 137,503 to 126,827 over the same period but rose slightly from January to February.

The number of VCNH migrants apprehended by Border Patrol fell over the entire period that humanitarian parole was available for each country (Figure 4). Biden’s border plan resulted in the number of Cubans and Nicaraguans apprehended falling by 99 percent, Haitians by 32 percent, and Venezuelans by 77 percent.

Biden’s border plan reduced chaos along the Southwest land border in a short period. That’s good for its own sake, helps clear the air for a serious immigration debate, and is politically astute for Biden, which means that the incentives for good policy are politically aligned and sustainable. Second, the Biden plan increases legal immigration when U.S. labor demand is still high. Third, it defunds criminal networks and cartels by channeling many migrants into the legal system and away from the black market. If President Biden extends humanitarian parole to Hondurans, Salvadorans, Guatemalans, Colombians, and Ecuadorians, then he could make even more progress in reducing illegal migration and chaos along the Southwest border.

Government spending in the United States is enormous. Federal and state governments spent over $9 trillion in 2022 on the welfare state, defense, health care, education, and other areas. Taxes and borrowing fund that spending, the latter being a delayed tax increase or spending reduction. Such a large government raises a vital question regarding immigration: Do immigrants consume more in government services than they pay in taxes? In other words, do immigrants impose a burden on taxpayers? In our recent paper, “The Fiscal Impact of Immigration in the United States,” we investigate this question and find that immigrants pay more in taxes than they consume in benefits, on average.

Many researchers have grappled with this question. Many years ago, I spent an entire summer reading every academic paper and report on the topic I could find. Later, the National Academy of Science (NAS) published a report in 2017 that included a robust fiscal model. Unfortunately, because of the time it takes to produce such a report and delayed government data releases, most of the NAS analyzed years up to 2013 and then projected forward.

Although the NAS report analyzed data from almost a decade ago, it is still widely cited because the issue is so important. Therefore, my colleagues and I decided to update it. We acquired the NAS model from the scholars who produced it and replicated their results. We then produced two different models included in the paper – an Updated Model and a Cato Model. Both models analyze the historical, current, and projected impact of immigration on the public fisc. We then present the projected fiscal impacts in net present value terms (NPV).

The Updated Model updated the NAS results for the year 2018. The only significant methodological change we made is that we could only consider government spending and taxes over the next 30 years, while the NAS report considered the next 75 years. We had to make this change because the NAS model relies on Congressional Budget Office (CBO) projections for future government spending and tax revenue, and they only publish 30-year projections now. The results of the Updated Model are similar to those of the NAS. The Cato Model makes other methodological changes based on more recent research by other scholars and our own judgments. This post will explain the Cato Model, the methods we used to construct it, and the results.

Methodology

The Cato Model begins on page 132 of the paper. We make several methodological changes from the NAS based on new findings and our own judgment to better measure and model the fiscal impact of immigration (Box 6 contains our changes). Although we made several changes, three are very important to notice. The first is classifying the young U.S.-born children of immigrants as native-born Americans in the second generation rather than in the first generation (immigrants). This choice is controversial as some argue that U.S.-born dependent children should be counted in the immigrant generation because they wouldn’t be here without the immigrants. That’s a fair point until you realize the same argument applies to every generation. It’s more accurate and easier to classify immigrants as immigrants and native-born Americans as natives, so we did that.

The second significant change we made is how we predict the final education levels of young individuals. Few individuals have completed their educations by age 15, for instance. The ultimate level of education is important to estimating the fiscal impact because more educated people, on average, earn higher wages, pay more in taxes, and consume fewer benefits. The NAS assigned immigrants their parent’s education level until age 25, after which it predicted their ultimate level of education through regressions based on their country of origin and other factors. The Cato Model took it one step further and assigned ultimate education levels to immigrants under 25 with that predictive regression.

The third major change we made was to incorporate an important insight based on research by economist Michael Clemens. He argued that the NAS report undercounted the taxes paid because of immigrants working in the United States by overlooking basic microeconomics:

Intuitively, after a firm has set its demand for labor and capital to maximize profits, suppose it raises its labor demand by one to hire an immigrant. Without general‐​equilibrium shifts in prices or productivity, this increase in labor demand would by definition reduce profits if it occurred without also hiring capital—such as buying an additional computer or renting additional retail space for the worker to use. That additional capital must generate additional capital income, in an amount bounded from below by the reservation price of capital, for a profit-maximizing firm. This yields bounds on the consequent capital tax revenue caused by the worker’s employment. The alternative, implicit assumption maintained by direct fiscal accounting methods is that firms pay wages to the marginal employed immigrant to reduce profits—sacrificing capital income they could have received with a different investment, and thus avoiding the consequent capital taxes.

The Cato Model thus captures some of the total tax effects of immigration that other models have difficulty apportioning. This methodological change is just the first step in accounting for the total fiscal costs and benefits of immigration that we will expand in future iterations of the Cato Model.

Results

It’s best to start with the current results of the Cato Model for the year 2018 compared to earlier years analyzed using the same methods. Table 25 reports subpopulation size for each generation, per capita receipts and outlays, and net fiscal impacts for each generation at different levels of government in 1994, 2013, and 2018. If the ratio of receipts to outlays is greater than 1, that subpopulation pays more taxes than it receives in benefits.

The receipts-to-outlay ratio for the first generation is greater than 1 for every level of government and in total, meaning that the first generation pays more taxes than it consumes in benefits. To put their impact in perspective, in 2018, the average per capita fiscal contribution of first-generation immigrants was $16,207. In contrast, the average drain was $11,361, resulting in a net positive fiscal impact of $4,846 per immigrant in 2012 dollars. Multiplied by the number of immigrants present in 2018 (45.4 million), this amount results in a cumulative net fiscal impact of +$220 billion. Adjusted for inflation, that number is 1.2 percent of U.S. GDP in 2018 ($18.7 trillion in 2012 dollars) and 3.7 percent of all 2018 government spending ($6.031 trillion in 2012 dollars). The former number is roughly in line with the Organisation for Economic Co-operation and Development’s 2006–2018 estimates, which are 1 percent for the United States and between plus or minus 1 percent for most OECD countries

The fiscal impact in 2018 and earlier years is a good starting point. However, the temporal nature of tax receipts and outlays can change the picture dramatically. For example, the young and the elderly consume more government benefits in the form of education and welfare when young and entitlements and health care when older. They also pay less in taxes when younger and older. The Cato Model finds that immigrant individuals who arrive at age 25 and who are high school dropouts have a net fiscal impact of +$216,000 in net present value terms over the next 30 years, which does not include their descendants. Including the fiscal impact of those immigrants’ descendants reduces those immigrants’ net fiscal impact to +$57,000. By comparison, native-born American high school dropouts of the same age have a net fiscal impact of −$32,000 that drops to −$177,000 when their descendants are included (Table 31).

On the opposite side of the educational spectrum, the positive fiscal impact of immigrants with more than a bachelor’s degree is $1.254 million in NPV terms and $1.114 when including their descendants. To show how much the age of arrival matters for the net-fiscal impact, a high-school dropout immigrant who arrived at age 50 imposed a −$37,000 cost, but his descendants only cost −$1,000 due to the limits of the 30-year projection and because not many people have children at age 50 or later. An immigrant with more than a bachelor’s degree has a positive impact of +$589,000 – less than half if he’d arrived at age 25. An immigrant’s age of arrival and level of education matter the most for predicting their net-fiscal impact.

Another important factor to consider is how to apportion the cost of public goods. In economics, public goods are non-excludable and non-rivalrous, which means that people can’t be excluded from benefiting from the goods and one person’s consumption doesn’t reduce another person’s consumption. Education is not a public good under this definition because students can be excluded from school and they consume educational resources that other students could consume. The classic public goods example is national defense. A person benefits from national defense as they’re covered by air defense systems and the nuclear deterrent by being present in the United States, for example. Beneficiaries can’t be excluded if they don’t pay – think of how impractical it would be to defend your house against and enemy army but not your neighbor’s house. Your consumption also doesn’t diminish the national defense of others. We can all think of cases where the public goods argument for national defense doesn’t hold, but it’s the best case of a human-supplied public good.

For a fiscal analysis, researchers need to figure out how to apportion the costs of public goods. For example, are the costs apportioned equally among immigrants and natives? Do immigrants pay the marginal cost? Or do they pay nothing because the cost of public goods would have been incurred regardless? We present these findings in our paper, but we focus on the results that do not apportion the costs of public goods provision to immigrants in the form of consumption of government benefits because it’s unlikely that more immigrants mean the U.S. government would boost national defense spending. Does a larger immigrant population require more nuclear weapons? Probably not. Figure 28 shows our results for all immigrants, recent immigrants, and native-born Americans. Interestingly, recent immigrants have a more positive fiscal impact.

For policymakers, we added a table that shows how much of a reduction in welfare spending (Box 5 in the paper defines welfare) would be required to make immigrants fiscally neutral, grouped by education at the state/​local, federal, and total levels (Table 34). Fiscally positive cohorts are recorded as “N/A.” For others, even reducing their welfare receipts to zero would not be enough, so the box says “>100%.” The columns in Table 34 examine different levels of government and whether or how public goods and taxes on capital are included. Thus, policymakers can improve the fiscal impact of immigration by reducing welfare spending on immigrants and estimate the effects under different cost-accounting scenarios.

Conclusion

The United States faces a considerable fiscal challenge with the explosive growth in government spending, the escalation of entitlement payments, and slower demographic growth. How immigrants impact the fiscal state of the U.S. government is important for policymakers and the public to consider when evaluating different reforms to get the U.S. government onto a sounder fiscal footing. Our paper “The Fiscal Impact of Immigration in the United States” is the first in a new series of Cato papers that analyze the fiscal impact of immigration. It’s 248 pages of information, data, explanations, figures, and charts that show immigrants pay more in taxes than they receive in benefits, on average. In the coming years, we will update the Cato Model with new data and CBO projections. Immigrants pay more taxes than they consume in benefits on average, but the results differ based on their age of arrival in the United States and their ultimate level of education.

Yesterday, I testified before the House Committee on Homeland Security, and over more than three hours, several viral-internet-video-hungry Republicans attacked me and my testimony directly—often personally—without giving me any opportunity to respond. Rep. Clay Higgins (R‐LA) even questioned whether Democrats bred me “in a laboratory experiment.” A Washington Examiner reporter called it “a lecture, not a hearing.”

I was there to explain my research demonstrating that expanding legal immigration is the solution to the chaos caused by waves of illegal immigrants trying to cross the southern border between the United States and Mexico. I was also trying to explain the data that show the illicit drug fentanyl isn’t smuggled in by illegal immigrants, but instead by American citizens at legal ports of entry.

But if I tried to speak, I was talked over and gaveled down. So below are some brief responses to some of what the hostile Representatives said.

“The most generous country in the world”

Rep. Higgins (R‑LA): [You’re] whining on about broken immigration system… We are the most generous, compassionate, wealthy western nation in the world on immigration.

The U.S. ranks in the bottom third of wealthy countries for its foreign‐​born population share. This even counts our “generosity” toward illegal immigrants who we tried to ban. Rep. Higgins even cited Canada as having the more extreme policy.

But more than 21 percent of Canadians are foreign‐​born (compared to the U.S. at less than 15 percent). To catch up to Canada’s rate, the U.S. would have to admit more than 20 million immigrants tomorrow.

Further, Canada lets in more humanitarian immigrants per capita, more families per capita, and far more employer‐​sponsored individuals. It lets in more lower‐​skilled immigrants and more higher‐​skilled immigrants. It is also easier to correct one’s status in Canada.

“If I could arrest you…”

Rep. Higgins: Secretary Mayorkas, if I could arrest you for violations of Louisiana revised statutes, I would. LA RS 14.32 Negligent homicide.”

Rep. Higgins was blaming Mayorkas (and also me) for fentanyl deaths. Alejandro Mayorkas did not become Homeland Security Secretary until February of 2021. Fentanyl deaths spiked in 2020. These deaths include the Republican witness’ children who died from fentanyl in July 2020 when the borders were “closed.”

In my statement, I explained this spike in fentanyl deaths occurred because President Trump’s border policies banned most travel from Mexico. With fewer available trips and more scrutiny on each trip, drug traffickers switched from heroin to the more potent fentanyl because fentanyl can supply the same market with 50 fewer trips. Fentanyl seizures went from a third of the combined fentanyl and heroin seizures to over 90 percent. If you want to put blood on anyone’s hands, it should go on the hands of (illegally acting) Secretary Chad Wolf under President Trump.

Mass illegal immigration “is what you wanted”

Rep. Dan Bishop (R‑NC): This is what you wanted. This is what you’ve advocated for years.

I asked Rep. Bishop for a citation for this claim, and he said he would provide one. But he did not. In fact, illegal immigration is a direct consequence of shutting off legal immigration. People who want immigration to be illegal can’t complain when illegal immigration happens. It’s what they created.

Specifically, banning asylum over the last three years has meant that no one has any reason to turn themselves into Border Patrol, triggering a surge of evasion at the border. It’s the policies that Rep. Bishop are advocating for that are creating more illegal migration. I described how opening up legal migration would reduce illegal migration, as has recently been the case with Haitians seeking asylum.

“You’re strengthening the cartels.”

Rep. Bishop (R‑NC): You are strengthening the cartel with your ideology.

It is the ban on legal migration that is empowering and enriching the cartels. The only reason why immigrants are paying cartels to cross is because they cannot enter legally. Rep. Bishop tried to say the cartels could just as easily control legal immigration, but we already know how the legal process plays out for the visa categories that already exist, and they are not controlled by the cartels. We could defund the cartels tomorrow by letting immigrants enter the country legally, but U.S. policymakers care more about stopping immigrants than about defunding cartels.

Don’t believe me? Ask the smugglers. They say the Title 42 expulsions to Mexico are good for them. It provides them with repeat customers.

“You’re for exploiting children.”

Rep. Bishop (R‑NC): I’m concerned about the children distributed across the country to homes that don’t care for them to go work in factories. That’s not the way it’s supposed to be. But it’s the result of what you’ve advocated.

The New York Times recently published a report on how some immigrant teenagers are working some difficult or dangerous jobs across the country. These kids came to the United States without their parents, and the Times explains why their parents aren’t here to support them: “Parents know that they would be turned away at the border or quickly deported.”

In other words, those who banned asylum for adults traveling alone and parents traveling with their children deserve the blame for this phenomenon. There is a relationship between bans on asylum for families and the share of children who enter without their parents.

The Times also explains that many children are working because they are in debt from payments to get brought through Mexico—another problem that legal immigration would solve. The chairman slammed his gavel down rather than let me provide this information to the committee.

“You said my kids asked for it.”

Witness, mother who lost her sons to fentanyl poisoning: I hear this man from the Cato Institute say, “It’s about demand.” What I hear is “They asked for it.”… They didn’t want fentanyl.

What happened to the witness’ family is a tragedy. In fact, I said states should legalize fentanyl test strips so people who don’t want fentanyl don’t accidentally take it. Demand for fentanyl—by the U.S. dealers— would go down if their consumers would refuse to use it or buy it from them.

We must also acknowledge that there is a broader demand for illicit drugs that is relevant as well. Doctors should be able to treat opioid addiction. As I noted in my written statement, these are measures that have already proven to be effective in other countries and in states, while border crackdowns only exacerbated the problem.

“Your statistics are wrong.”

Witness Sheriff Lamb: They say that 90% are happening at the checkpoints [meaning ports of entry]. In Arizona, it’s 52:48, so half is still between the checkpoints.

You can find the relevant statistics here. In January 2023, ports of entry seized 687 pounds of fentanyl in Arizona (Tucson field office). Arizona’s Border Patrol sectors (between ports of entry) in Tucson and Yuma seized three pounds. That’s 99.6% at ports. The Sheriff might be adding in seizures from local law enforcement in all of Arizona, but that would be quite misleading because they have no way to track the method of entry except in isolated cases.

According to the sheriff’s testimony, vehicles bring in most fentanyl in his county (Pima, Arizona—more than 50 miles north of the border). As I noted in my written statement, the DEA and other law enforcement agree that fentanyl is “overwhelmingly” brought in through legal points of entry, not through illegal migration routes.

You can read my full written statement here and watch the parts of the hearing that I was allowed to participate in here

Immigrating to the United States is the main way to escape poverty in many countries. For about 3 dozen countries, most of their not-in-poverty population lives in the United States. Indeed, under the developed world poverty standard of $30 per day, immigration is just about the only way to escape poverty for several nationalities. Since poverty is practically assured in their home countries, it should not surprise lawmakers that millions of people would risk everything to immigrate to the United States.

In 2019, only about 16 percent of people in the United States lived below the $30-per-day poverty line. This is somewhat higher than the 13-percent rate under the U.S. national standard (which is calculated somewhat differently). But for most countries, the poverty rates under the $30-per-day standard are well above 90 percent. The rates of what we in the developed world would call poverty are so high that the World Bank uses much lower thresholds to measure poverty rates in the developing world (for “extreme” poverty, about $2 per day).

Using data from the Census Bureau’s American Community Survey and from the World Bank tells us that a majority of the not-in-poverty populations born in about 40 countries live in the United States. Figure 1 graphs the 40 countries with the highest proportion of their not-in-poverty population in the United States. Nearly all Somalis—97.7 percent—who have escaped poverty (and who live in the United States or Somalia) live in the United States. Not-poor Cubans and Micronesians are also both over 97 percent in the United States. About 93 percent of not-in-poverty Haitians live in the United States.

Skipping to the bottom of Figure 1, thanks to recent economic growth, most not-in-poverty Mexicans live in Mexico, but nonetheless, 45 percent of Mexicans who have escaped poverty live in the United States. That’s astounding for a country with over 126 million people.

Table 1 shows detailed data for 130 countries for which the World Bank has data on poverty rates (and a few others—Cuba, Venezuela, Afghanistan, and Guyana—for which other sources were available). Strikingly, there are nearly 56 countries where at least a fifth of the country’s not-in-poverty population lives in the United States. Altogether about 41 million people born in other countries are living in the United States above the developed world poverty line.

Of course, immigrants are not randomly selected, and higher-income people tend to immigrate, but given the poverty rates in these countries, “higher-income” would still place the vast majority of U.S. immigrants below the developed world poverty line in their home countries. Moreover, the total effect on poverty from immigration is actually even greater than these numbers imply for two reasons.

First, the data here only include people who immigrated to the United States, not other countries, so the total number of people escaping poverty through immigration from these countries anywhere in the world is even higher. Second, U.S. immigrants are sending about $150 billion in remittances back to their home countries every year. About a quarter of the GDP of El Salvador, Honduras, and Haiti, for instance, comes from U.S. remittances. So many people who fall into the “not-in-poverty” group abroad are only reaching that level of success thanks to U.S. immigration.

It’s worth adding that the reason that so many people can escape poverty in the United States is because this country has institutions and capital that allow them to approach their full economic potential. Stronger property rights, less corrupt governmental practices, and other aspects of free markets allow businesses to develop capital and technology that makes workers more productive. It is this productivity that translates into higher wages and less poverty.

No other single U.S. policy could have achieved these astounding results in alleviating poverty among people born in these countries, but these results are all the more incredible given that the United States has such an incredibly restrictive system for its population size. The United States ranks in the bottom third of wealthy countries for the share of its population that is foreign-born. For the United States to rise to just the median of those wealthy countries—where Canada, New Zealand, and Switzerland sit—more than 20 million people would have to move here overnight.

Proponents of the current restrictive system rarely directly grapple with the fact that they are condemning millions of people to lives of needless poverty. The United States is nowhere near “its limit” (whatever is meant by that). Millions of people could come to the United States, enjoy, and contribute to its economic success. The U.S. government should let them. They’d benefit, and we would too.

The total number of encounters along the southwest (SW) border with Mexico dropped by 37.9 percent in the month following President Biden’s new immigration and border plan. President Biden framed his plan as an immigration enforcement measure, but it was far more than that. Crucially, Biden vastly expanded legal migration to the United States by using the power of humanitarian parole that Congress explicitly gave presidents in 1952. Specifically, the Biden plan is allowing 30,000 migrants from Venezuela, Cuba, Nicaragua, and Haiti (VCNH migrants) to legally come to the United States each month.

VCNH migrants showing up at the SW border who were apprehended, inadmissible, or expelled declined by 75.8 percent in January 2023, of which only 27 days were covered by the new Biden border and immigration plan announced on January 5^th (Figure 1). The number of VCNH migrants showing up at the border fell to 22,082 in January of 2023, down from 91,330 in December 2022 – a drop of 69,248. This is consistent with Cato’s theory that legal migration deters illegal migration and border crossings. Non-VCNH migrants who do not have the humanitarian parole option fell 16.5 percent from 160,648 in December 2022 to 134,192 – a decline of 26,456.

Figure 2 shows the number of people who were apprehended, inadmissible, or expelled normalized to 1 in December of 2019, which is a better way to show the scale of the drop. VCNH migrants increased vastly more than others during the period covered by the data (December 2019-January 2023) and fell dramatically after the announcement of the Biden border plan.

VCNH migrants can apply for humanitarian parole from their home countries, and they must meet all health standards, be screened for security purposes, and have a U.S. sponsor. Once approved, they can fly to the United States rather than paying a smuggler to bring them to the U.S. SW border. Once here, they can reside for two years, they can apply for a work permit, and they have little recourse to welfare. Importantly, that two year residency can be extended at any time. If close to 30,000 people are admitted every month from VCNH countries then the Biden immigration and border plan could be the largest immigration liberalization since 1965.

Looking at the individual countries tells a slightly different story. Venezuelans have had some access to humanitarian parole since October 2022. The number of Venezuelans who came to the SW border without authorization dropped by 64 percent from October to November of 2022 but have since stabilized at between about eight thousand and nine thousand a month. Their numbers rose by 11.6 percent from December 2022 to January 2023.

However, the number of people showing up at the border from Nicaragua, Haiti, and Cuba dropped substantially from December to January (Figure 3). The number of Nicaraguans dropped from 35,387 in December to 3,377 in January, a 91 percent decline. Haitians dropped by 5,138 to 3,175, a 38 percent decline. Cubans dropped by 85 percent, from 42,653 in December to 6,433 in January. Those are enormous declines for people from countries most recently added to humanitarian parole.

Biden’s migration plan is a serious departure from earlier enforcement-only policies. Biden’s plan achieves several goals. First, it greatly reduces the chaos along the SW border. That’s good for its own sake, helps clear the air for a serious immigration debate, and is politically astute for Biden which means that the incentives for good policy are politically aligned and sustainable. Second, the Biden plan increases legal immigration when the U.S. labor market demands new workers. Third, it defunds criminal networks and cartels by channeling many migrants into the legal system and away from the black market – reducing the violations of human rights that often occur because of human smuggling.

Until this point, the Biden administration has had a mixed record on immigration. We’ve criticized his policies where appropriate and also praised them. The Biden immigration plan isn’t perfect and it isn’t a long-term solution, but the humanitarian parole portion of it is a success of epic proportions.

Immigrant consumption of welfare benefits is one of the most serious economic objections to liberalized immigration. Milton Friedman famously said, “you cannot simultaneously have free immigration and a welfare state.” Elsewhere, he said, “The real hitch is in denying social benefits to the immigrants who are here.” Friedman went further when he argued that illegal immigrants are preferable to legal immigrants because the former don’t have access to welfare:

Mexican immigration, over the border, is a good thing. It’s a good thing for the illegal immigrants. It’s a good thing for the United States. It’s a good thing for the citizens of the country. But, it’s only good so long as it’s illegal.

At a basic level, there is a lot of wisdom in these points. The straight economic case for liberalized immigration is overwhelming because the median worker in the third world would earn wages about 4.1 times higher in the United States than in their home country. Immigrants have a small effect on the wages of native-born American workers mainly because immigrants don’t compete much with American workers, capital markets adjust well to increases in the number of workers, labor demand is relatively elastic, and immigrants increase demand – to say nothing about immigrants increasing GDP in the United States.

Wages are the most internationally distorted price because immigration restrictions prevent people from moving to locations with higher wages, which results in many trillions of dollars in lost production on the table annually. In a free market, goods or factors of production in a location with a lower price move or are moved to locations with a higher price, resulting in price convergence. This won’t work as well with workers as there are many other reasons why people live where they choose to, but immigration restrictions distort the labor market to an incredible degree by locking workers in countries where their wages are low. Immigrants earn higher wages in the United States because they are more productive here than abroad. Still, the United States also has a large welfare state that imposes extra costs on Americans – perhaps to such an extent that the economic benefits of immigration could be much less or even turn negative.

Michael Howard and I have a new briefing paper investigating immigrant consumption of means-tested welfare and entitlement programs and found those worries to be exaggerated.

As background, one must understand the truly massive scale of the U.S. welfare state. Total welfare state spending in the United States amounted to $2.6 trillion in 2020. In that year, the federal government spent roughly $2.4 trillion on welfare and entitlement programs, an amount equal to approximately 37 percent of all federal outlays, while the states spent an additional $229 billion. About $1.8 trillion of federal spending on the welfare state went to Social Security and Medicare, whose intended beneficiaries are the elderly, while the other roughly $600 billion went to means-tested welfare benefits, whose intended beneficiaries are the poor.

Immigrants consumed about 27 percent less welfare and entitlement benefits in 2020 than native-born Americans. Immigrants were 14.6 percent of the U.S. population and consumed just 11.1 percent of all means-tested welfare and entitlement benefits in 2020. Native-born Americans consumed $2.3 trillion of benefits in 2020, compared to $290.4 billion consumed by immigrants. All spending on means-tested welfare and entitlement programs would be about $635.5 billion less if native-born Americans consumed the same per capita dollar amount as immigrants.

2020 was a weird year because of the extra $2.1 trillion in COVID-19 spending that increased the denominator of total federal spending much more than the numerator of welfare spending. In 2019, the share of federal spending on the welfare state accounted for 51 percent of all federal spending. We expect that 2021 spending on the welfare state will be more similar to the 2019 share of federal expenditure than the 2020 share.

Our data primarily come from the Census Bureau’s 2021 Survey of Income and Program Participation, which covers the vast majority of U.S. welfare state spending. You can read our paper’s detailed methodology.

Detailed Results

The average value of welfare benefits per immigrant was $6,063 in 2020, or 27.3 percent less than the $8,335 average for native-born Americans. Figure 1 breaks down the numbers by type of welfare program. Immigrants consumed 36.9 percent less Social Security, 26 percent less Medicare, 10.7 percent less Medicaid, 11.5 percent less SNAP benefits, and 87.6 percent less TANF benefits than native-born Americans on a per capita basis. However, immigrants consumed 11.4 percent more in SSI benefits than natives, which translates to $19 more than natives on a per capita basis. Immigrants individually also consumed 42.9 percent more WIC benefits than native-born Americans, which translates to $7 more than natives per capita.

Immigrants still consumed less than natives when the entitlement programs of Social Security and Medicare are excluded from the analysis. The average immigrant consumed $2,273 in means-tested welfare benefits in 2020, about $310 less than the average American who consumed $2,583. That’s a difference of 12 percent.

Separating native-born and immigrant welfare consumption by age shows more detail. Figure 2 shows the per capita welfare cost for native-born American and immigrant children aged 0–17. Total welfare costs for immigrant children are 45 percent lower than for native-born American children, and the former consume less per capita than the latter for all programs.

Figure 3 shows the per capita welfare cost for working-age immigrants and native-born Americans aged 18–64. The value of welfare benefits consumed by working-age immigrants is about 38 percent less than that consumed by working-age native-born Americans.

Figure 4 displays the per capita welfare cost for native-born Americans and immigrants aged 65 or older. Elderly immigrants consume, on average, about 19 percent less in welfare benefits than elderly native-born Americans. For Social Security benefits and Medicare, the two largest programs, elderly immigrants consume less than elderly natives; for most smaller programs and Medicaid, the opposite is true. This suggests that immigrants ineligible for Social Security and Medicare use cheaper means-tested programs as substitutes. Reducing means-tested benefits for elderly immigrants should be an easy lift for policymakers.

The Big Picture

Elderly immigrants consume more Medicaid benefits than elderly native-born Americans, but natives are more expensive than immigrants in the same age groups on a per capita basis for all other large programs and most smaller ones. Immigrants are already legally restricted from accessing most welfare programs for some years after their arrival, but minor legal changes along the lines we suggest here would significantly reduce immigrant access to all these programs. Rep. Grothman (R‑WI) has introduced multiple bills to end welfare access to non-citizens, which is second best to massively scaling back welfare for all.

In theory, immigrants who have immediate access to welfare benefits upon arrival can impose costs on native-born American taxpayers that could swamp their economic contributions. However, the lower immigrant consumption of welfare benefits is evidence that immigrants don’t impose so large of a cost – although it could and should be lower. Evaluating the net-fiscal effects of immigration – whether the taxes paid due to them being here is greater than their consumption of benefits – requires more complicated calculations and estimates. Stay tuned for those.

The Dynamic Political Effects of Immigrants on Welfare

The results above are only present in 2020, a single point in time, and some other years that other authors and I have studied. Although immigrants consistently consume less welfare and entitlement benefits than native-born Americans, the total size of the welfare state could be larger because of immigrant voting or their indirect effects on political outcomes. Thus, total spending on welfare for natives and immigrants could be much larger because immigrants are present in the United States. In a paper I wrote with Benjamin Powell and J.R. Clark on how the mass immigration of Soviet Jews to Israel affected economic freedom there, we found that immigrants caused a huge improvement in four out of five of the major measures of capitalism – except the size of government variable that worsened initially. We wrote:

The dip in the score for the size of government is unsurprising since these economic migrants were poorer than most of the native born and immediately qualified for welfare state benefits since they became full citizens upon arrival. Also, immigrants to Israel are less likely to generate “blow back” against the welfare state from veteran citizens because of the Zionist notion that the state is obligated to take care of all world-wide Jews when they return to Israel. The decline in economic freedom in this area was largely driven by the fact that transfers and subsidies rose from 16.7 to 22.8 percent of GDP over the decade, while marginal tax rates were also increased.

The size of government variable evened out in the long-run after the mass immigration of Soviet Jews ended in about 1995, falling “23 percent in the decade before recovering to 97 percent of its pre-migration wave score in 2005 and subsequently improving past its original level by 2010.” Even in Israel, the long-run effect was positive from an economic freedom perspective even though the short-run effect was negative.

There are a few reasons to doubt that immigrants would interact with the political system to produce a larger welfare state. The first is that increased immigrant-driven diversity could undermine broad political support for welfare or at least reduce support for expanding it – the “blow back” mechanism we mentioned above in the Israeli context.

A marvelous paper intended to see whether social scientists converge on the same results by using the same data asked 73 research teams to analyze the same cross-country data set to see whether immigrants reduced support for welfare. The paper provided a dismal view of social science as there was little agreement on the total effect immigrants had on support for welfare and wildly different methods that were often opaque. Still, hold your nose and look at the distribution of findings: 25.4 percent of papers found that the average marginal effect of immigrants reduced public support for welfare, 57.7 percent found no effect, and only 16.9 percent found a positive effect. The research that found a positive effect could still be the correct finding though. Although I’m less confident in the overall “blow back” literature because of this paper, the hypothesis is worth considering and is a possible reason to expect that more immigrants will not increase support for welfare.

The second reason to be skeptical that immigrants would increase the size of the welfare state is that immigrants undermine labor unions. In a recent working paper, my co-authors and I found that immigrants reduced “union density by 5.7 percentage points between 1980 and 2020, which accounts for 29.7 percent of the overall decline in union density during that period.” Immigration undermining labor unions is important here because unions have been an important force for progressive policy changes in the United States, including building support for a large welfare state. Workers who join a union become more progressive, are more skeptical of the benefits of markets, and are more anti-trade – and it’s due mostly to treatment effects and not selection effects. This is likely true in other countries, but I haven’t tested it and the literature is thin on this topic.

During the 1922 to 1968 period when immigration was heavily restricted in the United States, real per capita federal expenditures grew by 1,335 percent – 75 times more than the 45-year period after immigration was slightly liberalized in 1968. The New Deal and the Great Society, which created the federal welfare state, were passed when immigration was restricted. As Paul Krugman theorized, immigration restrictions “help[ed] to create the political conditions for a stronger social safety net.” He’s probably correct and free marketeers who support immigration restrictions because they fear that immigrants will undermine economic freedom and grow the welfare state should note that the correlations run in the opposite direction and at least deal with that rather than waste time on analyzing vague cultural variables. In American states from 1970–2010, we find that “larger immigrant shares of the population produce large reductions in the growth of real per capita tax revenue and outlays in the short run that moderate to smaller longer-term growth declines in both.”

The third reason to doubt that immigrants could increase welfare is the “keep ‘em happy!” effect. Many policymakers and voters think that mass immigration creates problems. The best way to keep people happy is to create jobs and the easiest way to do that is through liberalization. This is most obviously true in Jordan, where a sudden mass immigration of refugees in 1990–1991 equal to 10 percent of the pre-migration population resulted in the government undertaking concerted and radical economic liberalization, in part to make sure the new immigrants would have economic opportunities and to reduce the chance of social problems. Welfare is much more expensive, difficult to enact in the face of a potential “blow back” effect, and jobs make people happier.

Conclusion

The average immigrant consumed 27.3 percent less welfare than native-born Americans in 2020. Further reform should reduce that substantially by building a higher wall around the welfare state instead of around the country. Still better would be reducing or eliminating the welfare state for all but reducing or eliminating non-citizen access is a politically feasible first step. In the long-run, there are good reasons to think that immigrants won’t increase the size of the welfare state and compelling evidence that they would reduce support for it. Still, the net-fiscal effects are most important – watch this space for further developments on that important topic.

Customs and Border Protection (CBP) discovered 40 tunnels from 2017 to 2021, according to data obtained through a Cato Institute Freedom of Information Act (FOIA) request. CBP discovered these tunnels as former President Trump extended his 30-foot wall across hundreds of miles along the border. The former president was warned about the potential for tunnels but insisted that his wall would have anti-tunnel “technology.”

The annual figures reveal an interesting jump in tunnel discovery in 2020. As President Trump frantically built out over 300 miles of his border wall in 2020, the agency discovered nearly one new tunnel per month. The 11 tunnels discovered that year were the highest for the period. One of those 2020 tunnels was said to be the “longest ever discovered.” In 2022, one tunnel was found in “one of the most fortified stretches of the border.”

I wrote about tunnels in “Why the Wall Won’t Work.”

If not over or through, some crossers may opt to go under. Tunnels are typically used more for drug smuggling, but they still create a significant vulnerability in any kind of physical barrier. From 2007 to 2010, Border Patrol found more than 1 tunnel every month. “For every tunnel we find, we feel they’re building another one somewhere,” Kevin Hecht, a Border Patrol tunnel expert, told The New York Times last year. A wall would likely increase the rewards for successful tunneling as other modes of transit grow more expensive. Trump is unconcerned, asserting that “tunnel technology” will rule out any such subterfuge. Effective tunnel detection equipment is seen as the Holy Grail of Border Patrol enforcement, but the Homeland Security Department’s Science and Technology Directorate has so far concluded that no current technology for detecting tunnels beneath the border is “suited to Border Patrol agents’ operational needs.”

It’s interesting that the earlier data seem to indicate that the rate of tunnel discovery declined and that the border wall extension in 2020 may have briefly revitalized it.

These latest FOIA data supplement an earlier Cato Institute FOIA showing that the border wall is being breached nearly 11 times every day. The number of breaches reached 4,101 in 2022, the highest number recorded during that period. Breaches are obviously the far more common and easier method of avoiding the border wall, but tunnels serve as conduits for drug smuggling and can move very large numbers of people and goods quickly into cities where they can go undetected.

As I wrote in “The Border Wall Didn’t Work”:

The Trump border wall failed for all the predictable reasons. Immigrants used cheap ladders to climb over it, or they free climb it. They used cheap power tools to cut through it. They cut through small pieces and squeezed through, and they cut through big sections and drove through. In one small section in 2020, they sawed through at least 18 times that Border Patrol knew about in a month. They also made tunnels. Some tunnels were long, including the longest one ever discovered, but some were short enough just to get past the barrier.

The border wall has failed. It’s a wasteful project that cost $15 billion and is still requiring millions of dollars annually in upkeep. Yet the Biden administration is still building further sections of it. This project should end immediately, and the government should return the sections of the wall already constructed to the property owners from whom the land was taken.