Immigration Reform and Entitlements

The 11 million illegal immigrants in the US have broken American laws. Ideally, however, reforming immigration has a broader contextual focus than punishing people’s judicial transgressions. The illegal status for millions of unlawful residents inhibits the prospects of the US economy. It also sways the legislative conversation away from other demanding issues, notably unsustainable federal spending. Hence, instead of enforcing the unfeasible solution of mass deportation, Congressional Republicans should compromise with Democrats on permitting (non-citizenship) work visas – and in return demand fiscal reform centered on budgetary cuts, thereby confronting the tax-and-spend liberalism of our time.

America’s historically tolerant immigration policy has made the narrative of a melting pot a proud feature of the country’s cultural identity. Encouraging newcomers has been a cornerstone in America’s evolvement into a global epicenter. The political leadership in both parties has recently attempted to grant undocumented immigrants a path to American citizenship. However, with significant resistance amongst Republican legislators, the House rejected Senate’s bipartisan Amnesty Bill of 2013.

Genuine immigration reform seems unlikelier now than it did in 2013. After Obama’s reelection win, the President has been rather absent in his promise of pursuing amnesty for undocumented immigrants. Republican prospects of controlling both chambers of Congress after November’s midterm elections will likely not initiate comprehensive immigration reform measures. Now, following House Majority Leader Eric Cantor’s surprising primary loss to immigration hard-liner David Brat, immigration has been increasingly taboo within the GOP.

Demand from the business community of the necessity of passing reasonable immigration reform complicates matters for Republicans, which might anger powerful supporters and donors with their populist anti-immigrant stance. Even the powerful pro-Republican trade group Chamber of Commerce has spent an enormous amount of resources persuading the Republican controlled House to pass functional immigration reform aimed at more work visas and a path to citizenship for illegal aliens. Pressure on GOP legislators to act will increase if they take over the Senate after the midterm election, but so will resistance among blue collar white voters.

From a optimal market economic perspective as a whole, economist Ludwig Von Mises accurately noted, “there cannot be the slightest doubt that migration barriers diminish the productivity of human labor.” Conservative pro-market legislators should recognize that immigration restrictions limit the potential of growth. If Republicans are willing to grant illegal aliens a path to citizenship, they could demand serious reduction in fiscal spending in return and limiting public benefits: the greatest way to ensure that productive individuals migrate to the US and that migration contributes to economic well being for all Americans.

Many fiscal conservatives in the GOP have plausible concerns with amnesty and an open-border policy. From an economic standpoint some of the issues raised by members of the Right is indeed candid in the current welfare-regime, particularly regarding unsustainable entitlement growth. Conservatives should nonetheless welcome substantial immigration reform that aim to secure right to work legally of all peaceful citizens within its border. They should use the opportunity to engage the public in to deeper conversations about genuine fiscal reform, and to articulate how an excessive welfare state inhibits the aim of resolving the current immigration mess, thus placing the pressure on Big-Spending Democrats.

Since Lyndon Johnson’s Great Society in the 1960s, in particular, the American welfare state has expanded extensively. The result is unsustainable entitlement expenditures, which surely make the immigration debate more complex. Social Security, the backbone of the American welfare state, is 32 % unfunded, according to Social Security`s own trustee report of 2013. This means that the current Social Security path will add $23 trillion to America’s already high debt levels (currently close to $18 trillion or more than 100 % of GDP). Medicare faces even a larger shortfall of staggering $43 trillion. The enormity of these numbers is certainly difficult to grasp, thus, simply put, Medicare and Social Security expenditures will consume all of America’s projected revenues by 2033.

The David Brat type of conservatives points to these grim outlooks by declaring that the US government must take care of Americans first. However, there is no contradiction between an inclination to shrink public spending and favoring legal work visas. On the contrary, the debate over amnesty provides perhaps the greatest opportunity to date to maturely discuss public-sector deficit issues, by articulating that the only way to have a generous and sustainable immigration policy in the long-term is to get the US public finances house in order. But conservatives should not try to fool American people by claiming that immigration is causing the current untenable shortcoming of the welfare state (unless they are national socialists of course). Hence, as a Wall Street Journal editorial stated (June 2013), immigration is imperative to improve Social Security finances:

The crux of the problem is that the ratio of workers to retirees is falling fast. While there were 16 workers for every retiree in 1950, the ratio now stands at a little under 3 to 1 and within 20 years when the baby boomers are age 65 or older the ratio will fall to about 2.5 to 1.

Immigrants help ease this demographic problem in three ways. First, most come here between the ages of 18 and 35, near the start of their working years. Second, few come with elderly parents (only about 2.5% of immigrants are over age 65 when they arrive), and the seniors who do come aren’t eligible for Social Security because they have no U.S. work history. Third, immigrants tend to have more children than do native-born Americans and their offspring will also pay into the system.

The economic overview of immigration is, nonetheless, vital to the intellectual and public sentiments towards migration. There is a false but unfortunately widespread economic belief that working immigrants “steal jobs” and thus reduce the national wealth. The reality is contrary; working immigrants produce important output that increases overall prosperity, while the ensuing demand compensate for the jobs they occupy. Immigration can be highly constructive in the creation of a robust and vibrant economy. However, central to the current immigration debate is the cost versus the gain to society.

Significantly, the overwhelming majority of Latin American voters prefer the Democratic Party. Not only does this make it politically less desirable for Republicans to grant amnesty to illegals, it also imposes a challenge for the national economy. In recent years, the Democratic Party has showed little seriousness on tackling America’s growing deficit and escalating welfare costs. Arguably, a main reason for why people are entering the US illegally is due to a lack of economic freedom (and hence security and opportunities) in their home countries. GOP, if it want to stay a viable party, should not grant citizenship to people that have crossed its borders illegally. Yet it gains nothing by keeping them in the dark. A work visa scheme will remain as a good compromise, which could pass despite resistance from immigrant hard-liners.

A minimum requirement for newcomers (and native citizens for that matter) should be to largely finance their own and their family’s lives. This correspondingly requires the US government to respect the free enterprise system by not interfering with people’s voluntary activities. Sadly, this is not the reality in present-day US – illustrated with America’s ongoing decline in economic freedom.

State-dependency is nonetheless not in accordance with an open-border policy. This is not to suggest that welfare handouts is a central incentive for newcomers or that public spending on immigration is a “net loss” economically. However, this is invariably the outcome of shortsighted policies. That is, policies that make the labor market more inflexible or otherwise limit the potential of the US’ entrepreneurial system. Popular perceptions that America is a free buffet, open to all in need, would cause a more hostile nativist environment within the US, which surely would not benefit immigrants.

Immigration reform and entitlement reform coincide, and conservatives should tie these issues closer together. By compromising with liberal legislators on immigration, Congressional Republicans should use the opportunity to demand genuine entitlement reforms.

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