The NAS report does not conduct the final calculation that adds up the economic gains and compares that number with the fiscal burden. But anyone with a pencil and the proverbial back of an envelope can do so using the numbers in the report. Immigrants have both a labor-market impact and a fiscal impact. Do the economic gains generated by working immigrants outweigh the fiscal burden that immigrants impose?
The report concludes that there is a short-run fiscal burden. Across all levels of governments, the annual burden ranges from a minimum of $43 billion to nearly $300 billion, depending on what is assumed.
But what does the report say about the “immigration surplus,” the increase in wealth accruing to the native population as a result of immigration? As immigrants enter the labor market and reduce the wage of natives, they increase profits for the employers. Plus the immigrants themselves produce additional output, generating even more profits. In the end, the aggregate wealth of natives — both workers and firms — rises, and there is a redistribution of wealth from workers to firms. The NAS report their estimate of the immigration surplus in chapter 4:
Immigrant labor accounts for 16.5 percent of the total number of hours worked in the United States, which . . . implies that the current stock of immigrants lowered wages by 5.2 percent and generated an immigration surplus of $54.2 billion, representing a 0.31 percent overall increase in income that accrues to the native population.
That short paragraph contains a lot of important information. First, the immigration surplus is relatively small, about $54 billion. Unfortunately, the report avoids giving a transparent estimate of the size of the wealth transfer from workers to firms, reporting instead that, on average, wages went down by 5.2 percent. It would be better if they had reported the actual number of dollars involved in that transfer. That number, it turns out, would be about $500 billion. So, yes, immigrants created an additional $54 billion worth of new wealth, but a byproduct of that creation was a wealth transfer of half a trillion dollars.
I would add a huge caveat to the $54 billion estimate of the surplus. It ignores all the externalities that immigrants create along the way. The externalities are both good and bad. The good: The entry of extremely high-skill immigrants surely accelerates innovation, makes us more productive, and has a beneficial impact on economic growth. The bad: The entry of some high-skill immigrants, such as those who enrolled in flight schools and learned to fly planes and then flew them on September 11, 2001, can make us all much worse off. The NAS did not even try to quantify the value of all the many positive and negative externalities (and, in fact, neither has anybody else). So, in the end, all we really have to go on is an estimated surplus of $54 billion in the short run.
If we then take the report’s estimates of the surplus and the fiscal burden at face value, it is self-evident that the impact of immigration on the aggregate wealth of natives is, at best, a wash. Instead, the impact of immigration is distributional. Those who compete with immigrants are effectively sending billions and billions of dollars annually to those who use immigrants.
There is a lot of temptation, particularly in the middle of a presidential campaign in which immigration is one of the core issues that completely differentiate the two candidates, to spin aspects of the NAS report in ways that will further a particular narrative. There are enough scenarios in the NAS report that would enable the construction of practically any factoid. As always, it is crucial to open that hood and look inside before you buy into it.
http://www.nationalreview.com/article/440334/immigration-national-academies-sciences-report-fiscal-economic-impact-native-born