In "The Lifetime Fiscal Impact of Immigrants" (2024), the Manhattan Institute (MI) constructed a sophisticated model to estimate the likely lifetime fiscal effect of new immigrants on the US federal budget. MI concludes that the average immigrant will be fiscally positive a modest $10,000 in present value over a lifetime but that immigrants without a bachelor's degree will be extremely fiscally negative. MI projects that the recent increase in migration will cost the federal government over $1.1 trillion over a century. A careful review of MI's model finds that this result hinges on several unlikely assumptions, such as new arrivals causing large, immediate increases in defense spending, and no increase in corporate tax payments. When more realistic assumptions are adopted, MI's model indicates that young, low-skilled immigrants will produce a positive lifetime contribution to the federal budget. For instance, the fiscal effect for a 22-year-old high school dropout changes from a negative $315,000 to a positive $45,000. After making revisions, including accounting for lower rates of benefits usage by immigrants, the model predicts the new group of unlawful entrants will likely be positive an aggregate $4.9 trillion.
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- 22
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- United States of America
Table of Contents
- The Basic Premise: Deport two-thirds of America? 4
- Issues with the Manhattan Institute's Basic Model for All Immigrants 4
- Including military spending as “benefits” caused by immigrants 4
- Excluding significant tax revenue streams 7
- Misattributing child and earned income tax credits 8
- Indexing negative income tax payments to productivity 8
- Assuming that low-skilled immigrants were just as likely to emigrate as high-skilled 9
- Accounting of interest costs 10
- Adopting more realistic assumptions leads to very different results 10
- Issues with MI’s estimate for illegal immigrants 13
- Assuming that recent illegal immigrants will be as uneducated as those a decade ago 13
- Assuming illegal immigrants have the same age distribution as all other immigrants 14
- Assuming illegal immigrants will receive entitlements at the average rate 14
- Not accounting for the interest costs on deportation spending 14
- MI’s model shows that the effect of recent illegal immigration is positive. 15
- Problems with MI’s policy conclusions 16
- Not accounting for the indirect economic effects of immigration 16
- Proposing inefficient policy solutions 17
