REVIEWSrnThe Cost of Madnessrnby Virginia Deane AbemethyrnThe New Americans: Economic,rnDemographic, and Fiscal Effectsrnof Immigrationrnedited by James P. Smithrnand Barry EdmonstonrnWashington, D.C.: National AcademyrnPress; 448 pp., $49.95rnThis compendium on immigrationrnby editors of the National ResearchrnCouncil (NRC) includes the work of 14rnscholars, among them economists, demographers,rnand sociologists. At leastrnone of the contributors is a strong advocaternof high levels of immigration, whilernanother has recently criticized currentrnpolicy for ignoring the decline in skillsrnand levels of education among recentrnimmigrants.rnDespite the balanced appearance ofrnthe report, its findings immediately becamerna political hot potato. The NewrnYork Times, always a reliable advocate ofrnmass legal immigration and generousrnpublic benefits for immigrants (as well asrnthe publisher of Abe Rosenthal’s occasionalrnpaean to illegal aliens) trumpetedrnthe economic benefits of immigration—rnnet additions to Gross Domestic Productrnin the range of one to ten billion dollarsrnannually—while leaving it to other publicationsrnto put these figures in perspective:rnE Magazine and National Reviewrnhave noted that one to ten billion dollarsrnamount to a drop in the bucket of a $7.6rntrillion annual economy. This net economicrnincrement, moreover, is the residualrnof an annual wealth transfer of $140rnbillion to owners of capital, and $133 billionrnaway from wage and salary earners.rnGeorge Borjas has discovered that this redistributionrnof wealth is caused by wagerndepression and labor displacement effectedrnby immigration, although therntransfer of wealth from lower- and middle-rnclass Americans to wealthy ones isrnplainly contrary to the trend of publicrnpolicy over the last 60 years. A more recentrnstudy by the Rand Corporation ofrnCalifornia, where about one-third of allrnimmigrants are concentrated, finds thatrn”1 to 1.5% of [California’s] adult nativebornrnpopulation has left the labor forcernor become unemployed because ofrnimmigration.” The NRC report, whilernciting few local labor market effects, acknowledgesrn—as documented by WilliamrnFry of the University of Michigan —rnthat many black and white displacedrnAmericans have fled the state.rnThe fiscal effects of immigration arernundesirable. California and New Jersey,rnas states with large immigrant populations,rnare the object of careful analysis byrnthe NRC, whose report for 1994-95rnshows an immigration-related, additionalrnannual tax burden of $1,174 on everyrnhousehold in California headed by a native-rnborn American. Assuming that thernfiscal burden were shared nationally, therntax burden per native household wouldrnrise into the range of $ 15 to $21 for everyrnmillion immigrants. This apparentlyrnmeans that the 27 million foreign-bornrnpersons now in the United States costrneach native household $405 ($15 x 27 =rn$405) or more in added taxes (a figure,rnhowever, that does not correspond to thernlower number reported on page 293 ofrnthe study). Overall, the NRC estimatesrnimmigration to impose an annual net fiscalrncost of 15 to 20 billion dollars orrnmore, if California’s expensive, statemandatedrnwelfare benefits and its preponderancernof Mexican and CentralrnAmerican immigrants, who average lessrnthan an eighth-grade education, are extrapolatedrnnationwide.rnYet these figures are partial, and alreadyrnoutdated. The report assumed arnreduction in immigrant welfare and supplementaryrnincome entitlements passedrnby the 1996 Congress and signed intornlaw by President Clinton. But in 1997,rnlawmakers restored most of these cuts inrntransfer payments to all immigrantsrnlegally resident in the United States byrnAugust 1996. The NRC’s accounting ofrnthe fiscal burden chargeable to immigrationrnalso ignores the added social welfarernspending on behalf of unemployed orrn”discouraged” Americans displaced byrnimmigrants.rnAdditionally, the cost appears farrngreater if the accounting charge for publicrngoods (which constitute 23.7 percentrnof all federal outlays, including nationalrndefense, public health, and other categories)rnare assigned on a pro rata basis tornimmigrant-headed households, as isrnstandard practice with native households.rnThe rationale for not doing so isrnthat expenditures are fixed and do notrnvary with population numbers. Assumingrnthe independence of these expendituresrnfrom the volatile immigrant populationrnis, however, simplistic. Whornwould ignore the public health burdenrnof a large foreign population whosernmembers are much more likely than thernnative population to be infected with diseasesrnsuch as tuberculosis, hepatitis Brnand C, and mosquito-transmitted malaria?rnTuberculosis is a renewed threat inrnNew York City, for example, where therncost of control has gone from close to zerornin the early 1980’s to upward of $50rnmillion annually.rnThe decision to exempt immigrantsrnfrom a pro rata accounting charge forrnpublic goods seems overly facile, but thernsame cannot be said of a second majorrnaccounting strategy involving the cost ofrnimmigration throughout the immigrants’rnexpected lifetimes and those ofrntheir descendants. In fact, immigrantrnparticipation in Social Security hasrnforseeably negative consequences sincerntoday’s working immigrants will age andrnbecome beneficiaries of that system.rnSeventy percent of immigrants are lessrneducated or less skilled than the averagernnative-born American, meaning thatrntheir individual Social Securit- contributionsrnare below average when comparedrnwith payments made by others inrnthe labor force. Since Social Security isrna redistributive system, people who contributernless receive a proportionately largerrnbenefit relative to their contribution.rnIt follows that the system incurs largerrnnet liabilities for low-wage earners thanrnfor high-wage ones, and that immigrantsrnas a category account for a particularlyrnonerous liability because the vast majorit-rnare low-wage earners. Professor DonaldrnHuddle estimates that immigrantsrncontributed $ 12.66 billion (17 percent ofrntheir taxes) to Social Security in 1994,rnwhich made them eligible (under therncurrent system) for up to $23.16 billionrnin benefits. Thus, the net Social Securityrnliability attributable to immigrants inrn1994 was $10.5 billion. Although thernbenefits-to-contributions ratio is likely tornbe reduced across the board, low-wagernearners, such as most immigrants, will al-rnAPRIL 1998/29rnrnrn