Immigrants have always played a critical role in America’s economy. Today, they may play a more important role than ever as the native-born workforce ages and its birth rate slows. In the coming decades, immigrants and their children are expected to make up a greater share of our labor force and contribute significantly to economic growth. One in four infants, toddlers, and preschoolers has at least one immigrant parent.
Despite these demographic and economic realities, the Trump administration has proposed or supported policies that would restrict legal immigration—either directly, through proposals to limit the number of green cards or temporary visas issued each year, or indirectly, through such measures as a proposed expansion of the “public charge” rule.
Curbing legal immigration could slow economic growth and deprive important public programs, including Social Security, of crucial tax revenue. In a recent analysis, for example, we found that the immigration reductions proposed by the RAISE (Reforming American Immigration for Strong Employment) Act would reduce Social Security’s already-insufficient trust funds. Such potential consequences should be part of the larger discussion of how immigration policy changes affect not simply immigrant families and communities but the broader economy.
What is the public charge rule?
The rule currently considers green card applicants a “public charge” if they have relied primarily on cash benefits to cover living expenses or have been institutionalized in a long-term care facility. The revised rule, ostensibly aimed at promoting self-sufficiency and protecting US taxpayers, would expand the scope of benefits to include Medicaid, the Supplemental Nutrition Assistance Program, housing assistance programs, and possibly the Children’s Health Insurance Program. Public charge tests would apply to both green card and temporary visa applicants.
Officials would also use an applicant’s personal characteristics to predict the likelihood of future reliance on federal benefits. Applicants who are younger than 18 or older than 62, who have incomes below 125 percent of the federal poverty level, who lack a high school diploma or private health insurance, who have certain medical conditions, or who do not speak English well could have those characteristics weighed as “negative factors” and potential reasons to be denied lawful permanent residency or entry into the US.
The rule underwent a 60-day public comment period that ended December 10, 2018. Officials are now reviewing more than 200,000 submitted comments.
The Migration Policy Institute found that 69 percent of lawful permanent residents that have been in the United States for less than five years have at least one of the negative factors listed in the proposed rule, and 43 percent have two or more, suggesting that the proposed rule could significantly cut the number of legal immigrants admitted to the US.
Other recent policy initiatives would also reduce legal admissions. The RAISE Act, introduced in 2017, proposes to cut legal immigration in half over a 10-year period by eliminating certain family-sponsored categories and ending the diversity visa lottery program.
Restricting immigration is projected to hurt Social Security and other programs
Reducing immigration, whether through legislation or regulation like the public charge rule, could reduce the labor force and harm the US economy, affecting many industries and sectors. Limiting immigration reduces the taxes immigrants pay that help finance key public programs, including Social Security. Immigrants contribute billions in federal taxes each year.
In the case of Social Security, which is funded through payroll taxes, restricting immigration inflows would shrink the number of taxpaying workers because most newly arriving immigrants are of working age and join the labor force. Because Social Security is mostly funded on a pay-as-you-go basis, the program relies on payroll taxes from current workers to pay benefits to current retirees, people with disabilities, and their dependents and survivors.
Besides current tax receipts, Social Security also relies on its reserves—or trust funds—to pay benefits. Our analysis using DYNASIM (the Dynamic Simulation of Income Model), one of the Urban Institute’s microsimulation models, found that the immigration reductions proposed by the RAISE Act would reduce Social Security’s already-insufficient trust funds. Revenues would fall faster than expenditures, raising the present value of Social Security’s unfunded future obligation by $1.5 trillion—13 percent—over the next 75 years. Restricting immigration would require additional Social Security benefit cuts or tax increases to balance the system.
Given the nation’s current demographic trajectory and the economy’s reliance on immigrants and their children to finance programs like Social Security, restricting immigration—either by legislation or by regulation—could hurt us all.