A decade ago, Nobel prize-winning economist Milton Friedman admonished the Wall Street Journal for its idée fixe on open-border immigration policy. “It’s just obvious you can’t have free immigration and a welfare state,” he warned. This remark adds insight to the current debate over immigration in the U.S. Senate.
To be fully understood, Friedman’s comment should be viewed as applying not merely to means-tested welfare programs such as food stamps, Medicaid, and public housing, but to the entire redistributive transfer state. In the “transfer state,” government taxes the upper middle class and shifts some $1.5 trillion in economic resources to lower-income groups through a vast variety benefits and subsidies. Across the globe, this sort of economic redistribution is the largest, if not the predominant, function of government in advanced societies.
The transfer state redistributes funds from those with high-skill and high-income levels to those with lower skill levels. Low-skill immigrants become natural recipients in this process. On average, low-skill immigrant families receive $30,160 per year in government benefits and services while paying $10,573 in taxes, creating a net fiscal deficit of $19,587 that has to be paid by higher-income taxpayers.
There is a rough one-to-one fiscal balance between low-skill immigrant families and upper-middle-class families. It takes the entire net tax payments (taxes paid minus benefits received) of one college-educated family to pay for the net benefits received by one low-skill immigrant family. Even Julian Simon, the godfather of open-border advocates, acknowledged that imposing such a burden on taxpayers was unreasonable, stating, “immigrants who would be a direct economic burden upon citizens through the public coffers should have no claim to be admitted” into the nation.
There is also a political dimension to the transfer state. Elections in modern societies are, to a considerable degree, referenda on the magnitude of future income redistribution. An immigration policy which grants citizenship to vast numbers of low-skill, low-income immigrants not only creates new beneficiaries for government transfers, but new voters likely to support even greater transfers in the future.
The grant of citizenship is a transfer of political power. Access to the U.S. ballot box also provides access to the American taxpayer’s bank account. This is particularly problematic with regard to low-skill immigrants. Within an active redistributionist state, as Friedman understood, unlimited immigration can threaten limited government.
Many libertarians respond to this dilemma by asserting that the real problem is not open borders but the welfare state itself. The answer: dismantle the welfare state. The libertarian Cato Institute pursues a variant of this policy under the slogan, “build a wall around the welfare state, not around the nation.” Borders should be open, but immigrants should be barred from accessing welfare and other benefits.
But in practice, pursuit of these dual libertarian goals of opening borders and ending the redistributionist welfare state often leads to contradictions. The current Senate “comprehensive” immigration-reform bill, supported by the Cato Institute, actively demolishes existing walls between illegal immigrants and government benefits, granting some 12 million illegal immigrants (60 percent of whom are high-school dropouts) access to Social Security, Medicare, and, over time, to 60 federal means-tested welfare programs.
It also substantially increases the future flow of low-skill immigrants and gives them access to welfare and transfer programs. Far from building a “wall around welfare,” this legislation levels existing walls, builds a highway to Fort Knox, and shovels billions in taxpayer funds into the pockets of immigrants who entered this country illegally.
In a recent debate with Dan Griswold of the Cato Institute, I pointed out this paradox. Griswold replied that the key was to grant amnesty and open borders now and work on “building a wall around welfare” at some point in the future. The weakness of this response should concern all those interested in limiting the size of government.
While most open-border libertarians proclaim a desire to dismantle both borders and the welfare state, in practice what they offer is open borders today and a vague (and almost certainly illusory) promise to end the welfare state in the indefinite future. As Milton Friedman understood, open-border enthusiasts have the sequence wrong: Opening borders with the redistributionist state still intact will result in a larger and more confiscatory government. In response to libertarians who propose to open borders and dismantle the welfare state, practical conservatives should answer: “Go ahead. Dismantle the welfare state. As soon as you’ve got that finished, let us know, and then we’ll talk about open borders.”
Open-border enthusiasts sometimes claim that the 1996 welfare reform defanged the welfare system, eliminating the costs that low-skill immigrants impose on taxpayers. As one of the architects of that reform, I would warn that this view shows a serious lack of understanding of the limited scope of the 1996 welfare law, and, more importantly, a lack of appreciation of the magnitude of the redistributionist state.
Sen. Ted Kennedy understands that a steady stream of low-skill immigrants will help him build a much larger, tax-fueled government. It is a pity that so many foes of big government fail to appreciate this point.
— Robert Rector is a senior research fellow at the Heritage Foundation.