Immigration Is a Good Thing, But Who Pays?

There is an important but unanswered question associated with President Obama's executive order on immigration. Will the approximately five million undocumented immigrants covered by the President's action be eligible to receive welfare benefits? And if so, how much will those benefits cost?

In his speech announcing the new policy, the President said not to worry. While he was clear that undocumented immigrants would not be eligible for Affordable Care Act subsidies, the President appeared to deny the new group (mostly parents of children born in the United Sates) other kinds of federal benefits. "This deal does not," the President said, "offer the same benefits that citizens receive."

The official policy released by the Department of Homeland Security backs up the president's words -- and lack of detail. "This memorandum confers no substantive right, immigration status or pathway to citizenship. Only an act of Congress can confer those rights," says Jeh Johnson, Secretary of Homeland Security in the November 20 memo announcing the new policy.

But that is not the end of the story. There is a lot of wiggle room in the term "benefits" especially when some benefits are provided through the tax system. Low wage workers covered by the President's plan are likely to be eligible for the Earned Income Tax Credit - one of our nation's largest transfer programs for low income Americans. Even if there is an attempt to prevent eligibility for the EITC, I doubt the Internal Revenue Service, which admits that the current program has 20% payment error rate, is capable of discerning this group of non-citizen immigrants who would not be eligible from another group that is eligible.

But an even bigger question is what will happen at the state level. States are sure to come under pressure to offer state-funded benefits to the covered group. State law in New York, for example, requires that anyone residing in the state "under the color of the law" cannot be denied state funded assistance for which they are otherwise eligible. This would include the group of immigrants who will now be determined to be here legally because of the President's new program. Receiving benefits will, of course, be contingent on whether they are otherwise eligible due to low income and other factors, but a high proportion of those eligible under the President's plan have incomes below 200 percent of the federal poverty level which means it is likely that a significant proportion of the covered group could be eligible for means tested benefits.

In 2013, when Congress was seriously considering the proposed comprehensive immigration reform, which also expressly denied federal welfare benefits to undocumented immigrants who were to be offered a path to citizenship, New York City's welfare agency (which I used to run) examined the cost to state and city welfare programs of including this new group in state funded welfare expenditures, an outcome we were convinced would be required by state law. The conclusion was not cheap - $540 million in annual costs by 2019 if the legislation had passed. As is always the case when examining welfare spending, the overwhelming bulk of these costs were due to higher Medicaid expenditures and since Medicaid is so expensive in New York City, the increased costs accounted for less than 2 percent of the annual Medicaid cost of more than $28 billion.

This discussion will play out in other states in different ways with different results but at least for some it will lead to higher welfare costs and caseloads, and for all, there will be great pressure to offer benefits to the covered group. "Coming out of the shadows," as the President calls what will happen for the people he is trying to help, may also mean deciding it's safe to apply for welfare.

The best part of the President's speech last week was when he spoke approvingly of our country's long history of welcoming and benefitting from immigrants, and he is right. Immigrants have clearly helped to make our nation great. I saw their contributions every day during my time as New York City's welfare commissioner. The growth in foreign born population in New York City is, along with less crime and welfare and improved schools, one the essential keys to that city's resurgence during the past twenty years.

But the President notably left out any mention of why immigrants would want to come to the United States in the first place -- greater freedom for instance, or the rule of law, or a democratic form of government that works better than what they had lived under. That kind of pro-United States rhetoric is probably too much for the President's lack of enthusiasm for American exceptionalism. But there is one aspect of American life that the President and his supporters would herald -- the extension of government provided welfare benefits. The determination to extend government benefits is why the policy the President announced last week will lead to an increase in the size and cost of welfare.