Responding to President Trump’s cancellation of the Deferred Action for Childhood Arrivals (DACA) program, Congress is moving toward a compromise that could legalize the DREAMers in combination with more immigration enforcement and cutting legal immigration through the RAISE Act. This blog estimates the fiscal effects of these policies. The following estimates are based on the 75-year NPV estimates (3 percent discount rate) of immigrants and their descendants for all levels of government as calculated in table 8–14 in the National Academy of Sciences (NAS) report on the economic and fiscal impact of immigration. Legalizing the DREAMers reduces deficits while more enforcement and the RAISE Act increases them.
Table 1 displays my results in two ways: “Current Base” and “Base Zero.” The “Current Base” column shows the fiscal effects with a base of the current fiscal effect with “No DREAM & No DACA (Current).” The “Base Zero” column shows the fiscal effects of the various policies relative to a base of zero whereby the “No DREAM & No DACA (Current)” is set to zero and the fiscal effects are displayed relative to zero. “Base Zero” is a clearer estimate of how these policies will affect deficits relative to the current policy “No DREAM & No DACA (Current).” The “Current Base” column provides a frame of reference. The cost of the border wall, mandatory E‑Verify, and the RAISE Act start at “Base Zero” in both columns because they are currently not in effect.
There are about 2.3 million DREAMers and their current fiscal NPV is +$497 billion (Table 1, Current Base). That means that they and their descendants will pay that much more in taxes than they will receive in benefits over the next 75 years. That number is positive because the DREAMers arrived at a young age. Under a clean DREAM Act that legalizes all DREAMers without any educational standards, the fiscal NPV of deficits improves by $117 billion (Table 1, Base Zero). Legalizing all of the former 700,000 DACA recipients increases net revenue by a net $35 billion up to $532 billion (Table 1).
In contrast, immigration enforcement policies have a large and negative fiscal impact on budgets. Immigration enforcement is expensive to run, increases regulatory costs, and lowers economic output that then diminishes tax revenue. The cost of building and maintaining a border wall is $74 billion, the regulatory cost of mandatory E‑Verify is $89 billion, and the RAISE Act would cost $2.3 trillion in net-foregone revenue. Deporting 700,000 DREAMers will diminish future tax revenue by $158 billion, including the cost of $12,500 per deportation.
The preferred and more politically realistic policy combination for many immigration restrictionists is to legalize the 700,000 DACA kids in exchange for a border wall, mandatory universal E‑Verify for all new hires, and the RAISE Act. That deal would increase 75-year deficits by a present value of $2.4 trillion from current the current base of zero. These findings are similar to those of my colleague Ike Brannon but presented over a different time horizon according to the NAS methods.
Table 1
Net Fiscal Impact of Different Immigration Policies, 75-year NPV
Policy Decisions |
Net Fiscal Impact |
|
Current Base |
Base Zero |
|
DREAM Act |
+$614 billion |
+$117 billion |
Legalize DACA Kids |
+$532 billion |
+$35 billion |
No DREAM & No DACA (Current) |
+$497 billion |
Base Zero |
Deport 700,000 DACA Kids |
+$339 billion |
-$158 billion |
Border Wall |
-$74 billion |
-$74 billion |
E‑Verify |
-$89 billion |
-$89 billion |
RAISE Act |
-$2.3 trillion |
-$2.3 trillion |
Wall, E‑Verify, RAISE, & Legalize DACA Kids |
-$1.9 trillion |
-$2.4 trillion |
Sources: NAS Table 8–14, Current Population Survey, Author’s Calculations.