The Macroeconomic Impact of DACA
by Charles Frantes on October 4, 2017 at 11:25 AM
It’s not just the DREAMers who will be adversely affected if congress does not legislate some kind of policy to replace DACA; it’s the US economy as a whole. Deporting DACA recipients is not only a significant waste of federal funds, but will lead to a substantial cut in government tax revenues and economic productivity. While politicians garner votes by claiming that deporting illegal immigrants will create more jobs for Americans, economists argue quite to the contrary.
Alex Nowrasteh at the CATO institute estimates that the fiscal impact of legalizing all of the former 700,000 DACA recipients is an increase in net government revenue by $35 billion up to $532 billion. On the other hand, deporting all of the DREAMers would diminish future tax revenue by $158 billion. By directly contributing to government revenues through paying the same federal taxes as American citizens while lacking entitlement to the same benefits like welfare and Medicaid, DREAMers have a net positive fiscal effect on the United States’ government. Ironically, when evaluating the net cost of DACA recipients, studies often include the amount spent on educating them through public US institutions. Does it really make sense to deport these English speaking, culturally American individuals after US tax dollars helped pay for them to become trained and skilled enough to make valuable contributions in the American workforce?
Not only do DACA recipients stimulate the American economy by simply spending the income they earn from their legal employment, they pay rent, tuition, buy homes, cars and various goods and services, which generates income for American businesses. Some DACA recipients have even started small businesses of their own, demonstrating entrepreneurial spirit and truly taking advantage of the American dream. It is important to remember that because of the enrollment requirements of DACA, most, if not all, of DACA recipients are contributors to our society. They are not asking to receive anything but the opportunity to learn, work, and live in America completely legally without bearing the looming threat of deportation from the nation they consider their home. If DACA is not replaced with comparable legislation and DREAMers lose this right, many of them will resort to working under the radar out of fear of prosecution from ICE, undoubtedly leading to less government revenue when they stop paying income taxes.
One of the main arguments against allowing DACA recipients to maintain their work eligibility is that these hundreds of thousands of DACA workers are taking away jobs from hundreds of thousands of unemployed Americans. This argument is fatally flawed by the economist-coined “lump of labor fallacy,” because it assumes that there is a fixed amount of work available in the American economy. In reality, population expands the economy and creates its own jobs. For example: a larger population that needs to buy more groceries will increase demand on grocery stores. This increased demand will in turn generate more revenue for the shop and lead to the hiring of more grocers to handle the increase in business.
In addition to creating economic growth, many immigrants provide a competitively priced source of tax-paying labor to American businesses, improving efficiency in relatively competitively-disadvantaged sectors of the economy. When American businesses are forced to pay their workers more than foreign businesses are paying their workers for the same work, American businesses can become uncompetitive on a global scale. As a result, American businesses are forced to either watch demand for their overpriced goods fall on the global and domestic market, or outsource their operations to countries with more competitive labor. If American corporations are forced to outsource in order to stay in business, then American jobs are lost and more money leaves the US economy. When corporations have access to competitively efficient labor at home, they can create more jobs for Americans, keep those wages circulating in the American economy, and offer lower prices on higher quality American goods to consumers at home and around the world.
As opposed to the narrative of economic winners and losers that the political left often tries to paint, DREAMers earning money does not equate to Americans losing money. The American economic picture is more dynamic than that. In the spirit of free market economics and capitalism that has led America to such great success so far, allowing these highly qualified individuals to work in the US will spur healthy competitiveness and increased overall productivity in the United States’ economy. Considering the rapidly growing US economy with labor shortages in many sectors, DREAMers ought to be valued as productive and employable contributors who will strengthen America’s businesses and economy while adding billions of dollars to its GDP and tax revenues.
In light of these facts, business-friendly Republican members of Congress should take it upon themselves to legislate DACA into law before Trump’s Deadline. As President Trump said, “Congress now has 6 months to legalize DACA (something the Obama Administration was unable to do). If they can’t, I will revisit this issue!”