Edward Conard

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Upside of Inequality Oxford Unintended Consequences

AI Summary. A review of the Manhattan Institute's model estimating that the average immigrant adds $10,000 in lifetime present value to the federal budget while less-educated immigrants are fiscally negative finds the result hinges on assumptions such as large immediate defense spending increases and no added corporate tax payments.

David Bier Cato Institute
Date Posted:
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Challenging @DanielDiMartino’s estimates of the federal fiscal impact of low-skilled immigrants, @David_J_Bier finds that all education groups have a positive impact. Instead of costing $315,000, a 22-year-old high school dropout contributes $45,000.

Do modeling assumptions drive estimates of immigrants' lifetime fiscal impact?

Core argument: The Manhattan Institute's "The Lifetime Fiscal Impact of Immigrants" (2024) estimates the average new immigrant is fiscally positive by about $10,000 in present value over a lifetime, while immigrants without a bachelor's degree are extremely fiscally negative.

In “The Lifetime Fiscal Impact of Immigrants” (2024), the Manhattan Institute (MI) constructed a sophisticated model to estimate the likely lifetime fiscal e!ect of new immigrants on the US federal budget. MI concludes that the average immigrant will be fiscally positive a modest $10,000 in present value over a lifetime but that immigrants without a bachelor’s degree will be extremely fiscally negative. MI projects that the recent increase in migration will cost the federal government over $1.1 trillion over a century. A careful review of MI’s model finds that this result hinges on several unlikely assumptions, such as new arrivals causing large, immediate increases in defense spending, and no increase in corporate tax payments. When more realistic assumptions are adopted, MI’s model indicates that young, low-skilled immigrants will produce a positive lifetime contribution to the federal budget. After revisions, including accounting for lower rates of benefits usage by immigrants, the model predicts the new group of unlawful entrants will likely be positive an aggregate $4.9 trillion.

Takeaways by Macro Roundup® AI

  1. The Manhattan Institute's "The Lifetime Fiscal Impact of Immigrants" (2024) estimates the average new immigrant is fiscally positive by about $10,000 in present value over a lifetime, while immigrants without a bachelor's degree are extremely fiscally negative.
  2. The Manhattan Institute projects that the recent increase in migration will cost the federal government over $1.1 trillion over a century, a result that hinges on assumptions including large, immediate increases in defense spending and no increase in corporate tax payments.
  3. Revising the Manhattan Institute's model with more realistic assumptions, including lower rates of benefits usage by immigrants, indicates that young, low-skilled immigrants will contribute positively to the federal budget over their lifetimes and that new unlawful entrants will be positive an aggregate $4.9 trillion.

Related Articles:

  • The Lifetime Fiscal Impact of Immigrants — A report estimates that a selectionist U.S. immigration policy—securing the border, reducing low-skilled immigration, and expanding high-skilled immigration—would cut future federal debt by trillions of dollars, providing over $2tn in net present value in the first year and over $200bn annually thereafter. Under the proposal, annual legal immigration falls from about 1m to roughly 860,000.
  • How Immigration Remade the U.S. Labor Force — The Congressional Budget Office estimates more than 9m people have migrated on net to the U.S. in recent years, nearly matching the prior decade's total and lifting population growth to almost 1.2% a year. Fewer than 30% are lawful permanent residents; without immigration, growth would be 0.2%.
  • Without Immigrants, US Working-Age Population Would Shrink — All net US employment growth since early 2020 has been among foreign-born workers, and without immigration the US working-age population would be shrinking — a pattern likely to persist for the rest of the decade. The jump in immigration appears to be enabling a soft landing that most economists had thought impossible.
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