Rescinding DACA Will Cost the US Economy $200 Billion

This article first appeared on the Cato Institute site.

Earlier this year my colleague Logan Albright and I estimated the economic and fiscal costs that a full and immediate repeal of DACA would impose on the federal government and the economy as a whole.

DACA stands for the Deferred Action for Childhood Arrivals, an Executive Order issued by President Obama that allowed the foreign-born children of illegal immigrants who migrated with their family to remain in the U.S. if they remain in school and subsequently obtain gainful employment.

We found that the aggregate economic cost would be over $200 billion and the cost to the government would be $60 billion, numbers we suggest are conservative.

Most of this high cost is driven by the fact that the “dreamers” tend to do well in school and as a result do well in the job market after they complete their education.

To shed some further light on this issue we recently updated our analysis to break down these costs by the individual states.

We began our original analysis by comparing DACA recipients to those immigrants who hold H-1B visas. These are high-skilled, well-educated immigrants who are demographically analogous to DACA students, all of whom must necessarily enroll in higher education programs in order to be eligible.

The average DACA recipient is 22 years old, employed, and a student. 17 percent of them are on track to complete an advanced degree. The college attrition rate of DACA recipients is miniscule compared to domestic students, an indication of the exceptional caliber of the DACA students and their degree of motivation, no doubt partly driven by the fact that dropping out of school for them can result in deportation.

H-1B holders are generally between 25 and 34, have an employment rate of nearly 100 percent, and have usually completed a college education. We posit that they are akin to what DACA recipients will look like in a few years’ time.

We used a study from the Hoover Institute that estimated the economic impact of expanding the H-1B visa program as our baseline for estimating the cost of DACA repeal. [1]

The two differences between this study and what we would like to do is that Hoover was considering an increase in numbers and we contemplate a (dramatic) decrease–an irrelevant difference for our purposes–and the two populations differ somewhat in size and salary, which does matter but is something that we can easily adjust for.

GettyImages-459316958 Isabel Medina, 41, a non-American citizen, with her sons Rayan (left), 6, and Jimmy Ortiz, 8, wait during a 'watch party' in Los Angeles, California on November 20, 2014 for US President Barack Obama's DACA announcement on executive action on immigration reform. From coast to coast, immigration advocates and impacted individuals celebrated the announcement on executive action with watch parties, rallies and press conferences. RINGO CHIU/AFP/Getty

If DACA recipients were completely analogous to H-1B holders, their removal would constitute a budgetary loss of $127 billion and a GDP loss of $512 billion.

DACA recipients, being younger and not completely finished with their education, earn on average roughly 43 percent of what H-1B holders earn. Also, the population of DACA recipients is about 750,000, compared to the 660,000 H-1B holders the Hoover study examined. Accordingly, we adjust our numbers by the lower wage and the higher population.

From this, we determined that, over a ten-year window, a repeal of DACA would cost the federal government $60 billion in lost revenue, and the impact on economy would total $215 billion in lost GDP. [2]

Our results were consistent with other work on the impact of DACA on the economy. For instance, a 2016 study published by the National Research Council [3] estimated the average long-term fiscal impact for immigrants who remain in the country for an extended period of time to be $59.3 billion, or within one percent of our own estimate.

To provide a bit more relevant data for policymakers, we have supplemented our original work by breaking down the fiscal and economic costs at the state level. Using data from a 2015 survey completed by the Center for American Progress, [4] we estimated the total cost of repealing DACA for each state based on the proportion of DACA recipients in each state. [5] Table One contains the breakdown of these state-level costs.

Of the 50 states, California will bear the highest cost, with over 30 percent of DACA recipients. Factoring in budgetary and economic effects, California’s total cost over a ten year window would be $84.2 billion.

It is important to note that these estimates are conservative, as DACA recipients will likely end up being more productive than their current salaries indicate, as they complete their degrees and gain experience in the workplace. Nor does this analysis factor in the enforcement cost of physically deporting recipients should the program be eliminated, which we believe would be significant.

The repeal or rollback of the DACA program would have a significant and negative fiscal and economic impact on the country, and disproportionately affect the various states in which DACA recipients are most prevalent.

 

Table 1: Cost of DACA Repeal By State 2018-2028

State Budget Cost ($m) Economic Cost ($m) Total Cost ($m)

AL      258                         924.5                            1182.5

AZ      2826                      10126.5                         12952.5

CA     18372                     65833                             84205

CO     768                           2752                               3520

CT      642                         2300.5                             2942.5

DC     900                          3225                               4125

DE     258                          924.5                              1182.5

FL      5910                        21177.5                          27087.5

GA     1158                        4149.5                              5307.5

HI      126                             451.5                               577.5

IA      258                             924.5                              1182.5

IL      1926                          6901.5                             8827.5

IN      642                            2300.5                             2942.5

KS     384                              1376                                1760

MA    258                              924.5                               1182.5

MD    642                             2300.5                              2942.5

MI     768                              2752                                 3520

MN    126                               451.5                              577.5

MO    126                               451.5                              577.5

NE    126                                451.5                              577.5

NJ     384                               1376                              1760

NM    258                                924.5                            1182.5

NV    126                                 451.5                              577.5

NY     10794                           38678.5                          49472.5

NC     2184                               7826                             10010

OH     126                                451.5                              577.5

OK     126                                 451.5                             577.5

OR     384                                 1376                              1760

PA      258                                  924.5                            1182.5

SC      258                                  924.5                            1182.5

TN      258                                   924.5                           1182.5

TX      5142                               18425.5                         23567.5

UT       384                                 1376                               1760

VA      1026                                 3676.5                           4702.5

WA     1800                                 6450                               8250

Ike Brannon is a visiting fellow at the Cato Institute who specializes in fiscal policy, tax reform, and regulatory issues. He was previously a senior fellow for the Bush Institute and before that was director of economic policy for the American Action Forum. Brannon has also served as the chief economist for the House Energy and Commerce Committee, chief economist for the Republican Policy Committee, senior adviser for tax policy at the U.S. Treasury, principal economic adviser for Senator Orrin Hatch on the Senate Finance Committee, chief economist for the Congressional Joint Economic Committee, and  senior economist for the Office of Management and Budget. He was also chief economist for the John McCain campaign in 2008 as well as an associate professor of economics at the University of Wisconsin, Oshkosh.

Logan Albright, Director of Research at Free the People, co-authored this report.

[1] http://www.hoover.org/sites/default/files/uploads/aafs/2013/05/Estimating-the-Economic-and-Budgetary-Effects-of-H-1B-Reform-In-S.744.pdf

[2] To conform to Congressional budget procedures we compiled a ten year aggregate cost.

[3] The Economic and Fiscal Consequences of Immigration ; National Academies Press, 2016.

[4] “Results of a Tom K Wong, National Immigrant Law Center, and CAP Survey” Center for American Progress Memo , June 2015.

[5] The CAP survey found that nearly the entire DACA population were in 35 states.

[6] Several states have the same estimates because they happen to have the same number of survey respondents in their states.

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