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FRONT PAGE CONTRIBUTOR

It’s our world, the CBO just lives in it

The first thing to keep in mind about the Congressional Budget Office estimate of costs and benefits for the “Gang of Eight” immigration bill – or any other estimate the CBO prepares – is that Congress is very good at gaming CBO estimates.  There are lots of little tricks that can be used to hide costs and inflate benefits, once you understand how the CBO is required to analyze legislation.  One of the simplest tricks is hiding the big costs of the bill beyond the standard 10-year window.  This tactic was used to great effect with ObamaCare, leading to absurd performances by talking-points robots who insisted the President’s health care boondoggle would actually reduce the deficit.  ObamaCare looks worse with each passing year, as the 10-year window moves forward, and the more poorly designed components of the legislation self-destruct.

That would happen with immigration reform too.  The CBO took its projection out to 20 years, and insists the immense wave of legalized immigrants will nevertheless be generating considerable net revenue for the Treasury, to the tune of an accumulated $700 billion.  But the first thing to go will be all those fines and back taxes we’re supposed to collect from the New Americans.  Neither of those efforts is going to produce much in the way of net revenue.  Anyone who seriously thinks a sizable number of low-income amnesty seekers would be thrown across the border for failing to pay their legalization fines and fees is out of his mind.

Even if that didn’t become a political football in the hands of Democrats eager to out-pander befuddled Republicans, where’s the incentive for illegal immigrants to pay big fines?  The CBO study also says the flow of illegal immigrants would be reduced by only 25 percent under the Gang of Eight bill.  That’s a big wave of fresh invaders to get lost in, and a lot of pressure building up for an even sweeter amnesty deal in a couple of years.  The CBO won’t score pressures like that, but you can bet vote-buying politicians will.

The CBO study also projects that legalization would drive down wages for existing American citizens, and increase their unemployment rate.  Why should we be interested in that?  Not only do we have endless high unemployment, but the American workforce has been shrinking.  Where are all these new citizens going to find the high-paying jobs that would generate all the deficit-reducing revenue anticipated by the CBO – more than enough to offset both the cost of government benefits, and the reduced tax revenue from a citizen workforce whose average wages are declining?

Surely some of the legalized aliens will want to become entrepreneurs and launch their own businesses… at which point they’ll find themselves staring into the beady eyes of the business-hostile Obama regulatory state.  There has been much controversy about whether or not legalized aliens should be eligible for ObamaCare.  If they are, it’ll mean huge taxpayer subsidies and stress on the ObamaCare-ravaged insurance system; if not, employers will actually have a huge financial incentive to prefer legalized aliens over legal immigrants and U.S. citizens, because they won’t have to worry about those expensive ObamaCare mandates.  But has anyone stopped to think about what happens when aspiring legalized entrepreneurs try to create some jobs, and have to start paying for ObamaCare, and complying with its towering stack of regulations?

The CBO tends to assume a high level of compliance with the fine points of legislation.  Programs are assumed to do what they promise, and people presumably follow their rules.  Not to put too fine a point on it, but a defining trait of the illegal immigrant is a willingness to ignore inconvenient laws.  The Gang of Eight bill envisions forgiving them for the various infractions necessary to function as an illegal immigrant, notably including identity theft and falsifying documents.  What level of voluntary compliance with the more burdensome requirements of a 10,000 page immigration bill should be assumed?

The core point in the much-maligned Heritage Foundation study about the costs of amnesty was its contention that it took a very long time for illegal immigrants to become net tax producers.  This is partly due to a phase of their lives the CBO didn’t fully consider in even the 20-year projection: retirement.  As the Heritage authors pointed out, native-born citizens and legal immigrants have a tough time becoming net tax producers, too – that’s one of the reasons we have mounting national debt, which gets really scary when the cost of unfunded entitlement liability are included:

The debate about the fiscal consequences of unlawful and low-skill immigration is hampered by a number of misconceptions. Few lawmakers really understand the current size of government and the scope of redistribution. The fact that the average household gets $31,600 in government benefits each year is a shock. The fact that a household headed by an individual with less than a high school degree gets $46,600 is a bigger one.

Many conservatives believe that if an individual has a job and works hard, he will inevitably be a net tax contributor (paying more in taxes than he takes in benefits). In our society, this has not been true for a very long time. Similarly, many believe that unlawful immigrants work more than other groups. This is also not true. The employment rate for non-elderly adult unlawful immigrants is about the same as it is for the general population.

Many policymakers also believe that because unlawful immigrants are comparatively young, they will help relieve the fiscal strains of an aging society. Regrettably, this is not true. At every stage of the life cycle, unlawful immigrants, on average, generate fiscal deficits (benefits exceed taxes). Unlawful immigrants, on average, are always tax consumers; they never once generate a “fiscal surplus” that can be used to pay for government benefits elsewhere in society. This situation obviously will get much worse after amnesty.

The Congressional Budget Office is saying the exact opposite: bringing this group of illegal immigrants “out of the shadows” will instantly transform them into net tax producers, to the point where they’ll reduce the federal debt burden more than an existing citizen population that can’t manage better than 63 percent labor force participation.  Quibble with either side’s exact numbers if you will – everyone’s ten, twenty, and fifty year projections is going to be filled with a lot of guesswork, and overlook plenty of unknown variables – but which basic model sounds more reasonable?  If amnestied illegals are deficit-slayers, why not throw open the borders and wave everyone through – double the number of illegals and let’s shoot for $1.5 trillion in deficit reduction over the next 20 years!  And even if the CBO model is more fundamentally accurate, why should the existing American electorate be interested in trading lower wages and higher unemployment for a few billion in deficit reduction?

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