Ask Democrats why they support open borders, and they will
invariably respond: "Because we need immigrants to pay for our
pensions." This argument is a sham. The data are
conclusive: immigration will not save America's welfare system. It
will bleed it dry.
John
Cassidy sums up the sham argument in his piece for the New
Yorker:
Demographers
and economists have been warning that the aging baby-boomer population presents
a serious challenge to the nation's finances, as the ratio of seniors to
working-age adults – the age-dependency ratio – rises. The reason is
straightforward: Social Security and Medicare are largely financed on a
pay-as-you-go basis, which means that some of the taxes paid by current workers
are transferred to current retirees. If the dependency ratio rises,
the financial burden on the working-age population also increases.
Cassidy's
diagnosis of the problem is correct. America's population is aging,
and this is a problem because America's welfare state is structured like a
giant Ponzi scheme. Although taxpayers contribute to the system
throughout their lives, they never see this money. Instead, they pay
for the previous generation's retirement with assurances that the next
generation will pay for theirs. Welfare is a vampire that requires
fresh blood to survive. This is the root of Cassidy's error.
Cassidy
proposes three possible solutions. First, America could "reduce
the level of retirement benefits significantly – but that would be very
unpopular and difficult to achieve politically."
Second,
Cassidy suggests raising the workforce participation rate, which he notes has
fallen from 64.6 to 60.4 percent since 2000. He says this could work
temporarily, but it is just a bandage solution – eventually, people will
retire. True.
After
dismissing the above options, Cassidy settles upon increasing immigration as
the best way forward:
The
final option is to welcome more immigrants, particularly younger immigrants, so
that, in the coming decades, they and their descendants will find work and
contribute to the tax base. Almost all economists agree that immigration
raises G.D.P. and stimulates business development by increasing the supply of
workers and entrepreneurs.
Basically,
immigrants will replace the sons and daughters Americans never had, thus
perpetuating the current system indefinitely. This is a bizarre
conclusion to draw for the simple fact that immigrants are a net burden on the
welfare state.
The
preponderance of data shows that immigration
and socialism are incompatible.
A
2017 study from the National
Academies of Sciences, Engineering, and Medicine found that although
America's immigrant population is (theoretically) revenue-neutral, most
immigrants are actually a drain on the system. The economic impact
of immigrants follows a Pareto distribution. Commonly known as the
80:20 Rule, this just means that a hyper-productive few immigrants provide most
of the economic gains, while the majority of immigrants contribute (less than)
nothing.
Specifically,
half of all immigrants actually receive more in government
handouts than they pay in taxes, while another third contribute roughly as much
as they receive. Only ~15 percent of immigrants contribute to the
economy in a meaningful way. Cassidy overlooks the significance of
this non-linear data: if immigration as a whole is revenue-neutral, then
increasing the immigration rate will do nothing to save the welfare system.
When
it comes to immigration, less is more.
Other
major studies reach similar conclusions. For example, a study
conducted by Denmark's
Ministry of Finance found that immigrants are a net drain on the
nation's welfare state. In fact, non-E.U. immigrants, and their
descendants, consumed 59 percent of the tax surplus collected from native
Danes. This is not surprising, since some 84
percent of all welfare recipients in Denmark are immigrants, or their
descendants.
Another
major study from the University
College of London found that immigrants in the U.K. consumed far more
in welfare than they paid in taxes. The study looked at the
Labor government's mass immigration push between 1995 and 2011. The
researchers found that immigrants from the European Economic Area made a small
but positive net contribution to the British economy of £4.4 billion
during the period. However, non-European immigrants (primarily from
South Asia, the Middle East, and Africa) cost the British economy a net £120
billion.
Together,
these studies show that mass immigration undermines domestic welfare systems
for the simple fact that most immigrants take more than they
give. Cassidy is clearly wrong.
Finding Narnia
Cassidy's
argument is also based on a false dilemma: his three solutions are not
the only options. In fact, none of them is even
the best option.
To
"pay for our pensions" Americans do not need entitlement
reform, a higher workforce participation rate, nor
immigration. America needs economic growth – real, sustained
economic growth, the sort driven by the invention
and adoption of better technology.
Unlike
immigration, which grows the economy in a linear way, technology can cause
exponential growth. Consider the Industrial Revolution: Edmund
Cartwright's power loom increased the productivity of British textile weavers
by a multiple of 40. To grow the economy an equal amount via immigration,
Britain would have needed to import 39 additional weavers for every British
weaver. Clearly, technology is the better option – yet Cassidy
argues in favor of immigration.
If
Americans want to save the welfare state, then they need to restrict
immigration and grow the economy. Period.
Spencer P Morrison, J.D., B.A. is a writer and independent intellectual
with a focus on applied philosophy, empirical history, and practical economics. He
is the author of Bobbins,
Not Gold and the
editor-in-chief of the National Economics Editorial.
https://www.americanthinker.com/articles/2018/11/immigrants_will_not_fund_our_retirement.html
