Give Me Your Tired, Your Young...
By Bryan Caplan
Americans have severe misconceptions about what the welfare state does. They believe that it cares for the poor. But in fact, it primarily cares for the old.
I shared this misconception before I studied economics. My undergraduates have it before I disabuse them. And yet another excellent survey by the Kaiser Family Foundation shows that my experience is representative. Asked to name the two largest chunks of the federal budget, the leading responses are foreign aid and welfare. Social Security comes in fifth.
Table 16: Americans' Views Of The Two Largest Areas Of Federal Government Spending Spending Type % Selecting Area as One of Two of the Largest Areas of Federal Spending Foreign aid 41% Welfare 40% Interest on fed. debt 40% Defense 37% Social Security 14% Health 8%
So what? For one thing, if Americans understood these basic facts, it would arguably undermine support for the welfare state. People imagine that the welfare state is saving the poor from starvation, when it is primarily showering money on the elderly, regardless of need. The poor would not be much worse off after abolition than they are now, because we don’t actually do much for them.
But there is another effect of these budget misconceptions that I did not grasp until recently, when I began reading Julian Simon’s classic, The Economic Consequences of Immigration. (A close substitute is available online). One of the main reasons why people oppose immigration is that they believe that immigrants burden domestic taxpayers. Simon calculates that, contrary to popular belief, they don’t.
Impossible? Not at all. Simon explains that immigrants are usually young when they arrive. That means that they pay Social Security, Medicare, and similar taxes for decades before they start to collect. How can that balance out all the extra welfare that immigrants use? Part of the answer is that they don’t use that much more. But the most compelling answer is to connect the basics of the budget to the basic facts about immigrants’ demographics:
1. The welfare state primarily helps the old, not the poor.
2. Immigrants are moderately more likely to be poor, but vastly less likely to be old.
3. Expected net effect of immigration on the budget: Positive.
When you analyze this further, you may realize that immigration is often a bad deal for border states even though it is a good deal for the country overall. Programs for the old are federal, but state governments and the feds share responsibility for programs for the poor. That’s yet another good reason to ignore the border states’ angry demands for stricter border controls.
P.S. Illegals turn out to be an especially good deal for natives. According to Simon, most of them still have Social Security and Medicare taxes deducted from their earnings. But since they don’t have valid SS numbers, they are unlikely to ever collect their old-age benefits. As is so often the case, these reviled scapegoats more than pull their own weight.