Reform the Welfare State, Don’t Enlarge It with Amnesty


Reform the Welfare State, Don’t Enlarge It with Amnesty

Jul 3rd, 2013 3 min read

Former Vice President for the Institute for Economic Freedom and Opportunity

Derrick Morgan is no longer a staff member at The Heritage Foundation.

Conservatives and libertarians both recognize the urgency of reforming the welfare state. Why, then, are some members of both camps so willing to add millions of people to our welfare and entitlements systems before we fix them?

I am talking about the proposed amnesty of 11 million people included in the so-called Gang of Eight’s Senate immigration bill. Obviously, throwing millions of new people into broken systems will make reform more difficult, not less, and cost taxpayers even more money that we do not have.

The Gang of Eight mindset has little interest in welfare reform. That became clear earlier this month when they chose not to force the Judiciary Committee to accept amendments that would have reformed our welfare state. One amendment that went down to defeat would have classified immigrants on Medicaid or food stamps as a “public charge.” The reason? Public charges are not, under law, eligible for residency.

The Republican Gang members had all the muscle they needed to defeat an amendment allowing new citizens to bring in same-sex “spouses.” Clearly, the Gang had plenty of juice. They just chose not to spend it on welfare reform – voting down amendments by Senators Ted Cruz (R-TX) and Jeff Sessions (R-AL) that would have at least lessened the strain on our safety net.

The amendment marathon left the clear impression that Gang of Eight devotees are content to stick by their deal and encourage amnestied immigrants along the path of the welfare state rather than toward opportunity.

How, then, could libertarians embrace this proposal? Some, one suspects, are in thrall to outdated notions of immigration and the modern welfare state. Facts are stubborn things, however. And they led libertarian economist Milton Freedman to say that America cannot have both open borders and the modern welfare state.

Our welfare state is fairly new. Even near the end of Franklin Roosevelt’s presidency in 1945, transfer payments (taking from some Americans to give to some others) accounted for about 5 percent of federal outlays, according to work by Nicholas Eberstadt at the American Enterprise Institute. Means-tested welfare programs were virtually unknown. That changed, gradually, until federal welfare programs exploded in the 1960’s with the advent of Lyndon Johnson’s “War on Poverty.”

Today, federal spending on transfer payments is about 2/3 of all federal. All together, federal and state means-tested welfare spending approaches $1 trillion per year.

The Heritage Foundation has calculated just how much money is redistributed through our spending and tax programs today. We undertook that same analysis to determine how much today’s illegal immigrants will pay in taxes, versus how much they will receive in government services and benefits under amnesty. The net result is a huge increase in fiscal debt—to the tune trillions of dollars. This is not because illegal immigrants are somehow inherently inclined to be “takers” rather than “makers.” It is true because the government now redistributes so much money from those with more income to those with less.

In our modern economy the key, on average, to higher earnings is education. Those with less education – whether they are immigrants or native born – tend to earn less (thus paying less taxes) and receive more in government services and benefits.

Immigrants in the post-WWII era were about as well educated as the American population as a whole. Some years ago, The Heritage Foundation’s Julian Simon wrote a paper analyzing the immigrant population using 1976 data. He found that, on average, immigrants’ educational attainment was higher than the native-born population. In large measure because of this fact, Dr. Simon found that immigration was a net positive fiscally for America at that time.

That situation is vastly different today. More than 50 percent of illegal immigrant household heads have less than a high school diploma and another 27 percent have only a high school diploma. That contrasts sharply with the native-born population, where only 9.6% heads of households have less than a high school diploma.

Among all households in the United States, those headed by someone who lack a high school degree on average receive more than $46,000 in benefits and services and pay about $11,500 in taxes. Amnesty would mean that millions more would qualify for the full panoply of means-tested welfare and entitlement programs.

These programs are already living beyond the taxpayers’ means—which is why, despite record high tax revenues, enormous deficits are the new normal. At the state level, Medicaid is the single largest budget item. Social Security is already paying out more than it takes in. Fiscally, things are going from bad to worse.

The bottom line is that we need to reform the welfare state before adding millions more to the broken system. Instead of a comprehensive approach that includes a costly and unfair amnesty that could lead to even more illegal immigration, Congress should proceed piece-by-piece with immigration reforms that make sense economically and fiscally, like a reformed legal immigration system.

Operating like that could also show that Washington can keep its promises. After all, the promises of the supposedly one-time-only amnesty of 1986 were border security and workplace enforcement – and we are still waiting for those promises to be kept.

--Derrick Morgan is vice president of domestic policy issues at The Heritage Foundation.

First appeared in the Orange County Register