2016 Economics: Trump’s Immigration Plan

The campaign for the office of the 45th President of the United States is nearing its end, and both candidates claim that they have the plan for economic growth.

Donald Trump argues that the nation has been on the wrong track for decades due to weak and corrupt leaders. He proposes that the country needs massive tax breaks, renegotiating of trade deals, immigration reform, and more in order to deliver GDP growth of over 4% once again.

On the other hand, Hillary Clinton praises President Obama’s oversight of the economic recovery since that Great Recession and hopes to build on that progress. She proposes making the tax system more progressive in order to fund programs and legislation that will spark growth from the middle class out. These plans include a higher minimum wage, free public college, reforming the Affordable Care Act, and more.

These candidates see the current economy in different ways and prescribe opposing views to deliver future growth. Many think tanks and organizations have taken their stab at figuring out which plan would deliver the most growth sometimes to different conclusions. Through economic theory and data, another analysis here can hopefully deliver more perspective on the plans. In this article, we shall dissect Trump’s plans and how they could potentially affect the economy.

According to his campaign website, Donald Trump outlines a few ways that he believes would deliver robust economic growth. We shall analyze each of his policy proposals separately and discuss how combined they could potentially deliver expansion or recession. Beginning with:

Immigration Reform

As I argue in Illegal Immigration’s Impact, the issue of immigration involves many possible benefits and setbacks. Many Trump supporters would probably voice frustration that undocumented immigrants are bringing into the country drugs, crime, and theft of American jobs. The conclusion we need to come to in deciding which policy route to take is whether the benefits outweigh the setbacks. Donald Trump hopes to eliminate all setbacks of illegal immigration.

First in that plan is the “impenetrable physical wall on the southern border…Mexico will pay for the wall.” In my other article, I outline how such a wall would cost up about $12.6-$25 billion in construction costs and an annual $750 million in maintenance–at least $15.75 billion over five years. Of course, Trump claims that Mexico will pay this cost somehow, but most pundits do not believe this to be realistic. As of this week, Trump now says Mexico will “reimburse” the United States for the wall, which is undoubtedly more ambiguous.

The goal of this border wall is to end all illegal immigration and drug trafficking across the southern border. As I argue in my other article, the wall would likely not cover all of the border due to intervening rivers, mountains, wildlife habitats, and Native American burial grounds. However, we can theorize that the wall–along with underground sensors–would end almost all inflow. To ensure the effectiveness of the wall, Trump would need to increase border patrol agents; he plans to hire 5,000 more employees costing $4.3 billion.

As for illegal immigration ending, it is worthy to note that 2014 actually saw net-zero illegal immigration over the border and recent years have actually seen the undocumented population decline.

FT_15.07.23_UnauthImmigrants

An unintended consequence of building a border wall is that undocumented immigrants will not have that easy route to return back to Mexico and other South American countries. Since Donald Trump’s new immigration plan does not include a mass deportation force anymore and requires that undocumented immigrants leave the country to be eligible to apply for legal status, being able to return over the border would be one of the easiest routes to do so. Otherwise, undocumented immigrants would have to formally negotiate with foreign countries in order to allow them to even return; they may not be willing to do leaving undocumented immigrants in the United States illegally and without the ability to become legal or obtain employment.

Thus, the economic impact of the border wall is complicated. It would cost the federal budget approximately $15.75 billion over five years. The wall on its own would not decrease the undocumented population and possibly prevent it from declining if not for a deportation force since immigrants would not be able to return to Mexico over the border. If Trump does hope to bring back his previous proposal of a deportation force, that would cost $100-300 billion and require up to 20 years to remove millions of undocumented immigrants.

As for ending illegal drug trafficking, ending all inflow over the southern border could actually deliver positive economic, financial, and public health results. The government estimates that illicit drug use costs the healthcare industry $11 billion annually and the overall United States economy $193 billion annually. Now, there is not enough data to determine from where all these drugs come, especially since this is after all an illegal industry. However, research finds that most of the U.S.’s heroin, cocaine, and marijuana is imported from Mexico and South America. Likely the importing occurs over the southern border. This is an especially pertinent issue to New Hampshire, which saw 439 drug-related deaths last year. A border wall-provided that it includes surveillance of potential underground tunnels and attempts to fling drugs over the wall–could siphon off this illegal drug trafficking.

Economics is an extremely complicated social science as there are so many moving parts; eliminating or adding one variable could affect many other variables in a domino effect. Therefore, no economic analysis can perfectly capture all the potential effects of a policy. For example, building the border wall would be a massive infrastructure investment, which would cost $27.5 billion over ten years but would also employ many middle-class construction workers. That employment would have a multiplier effect throughout the economy putting money into the pockets of those workers. Funding a deportation force or hiring more border patrol agents would do the same for employment of Americans. The calculations needed yet difficult to compute are those that conclude how much these benefits and costs outweigh one another.

As for paying for the wall itself, Trump outlines on his website that he would threaten Mexico by prohibiting all money transfers from undocumented immigrants to their families in Mexico. An estimated $25 billion are formally transferred from the U.S. to Mexico annually. Trump’s proposal is to prohibit this transaction by requiring that financial services require paperwork that proves that the money sender is legally in the country; undocumented immigrants could no longer send money to their families who may be in other countries. Leveraging this against Mexico, Trump would demand that Mexico pay the U.S. government for the wall. Then, the money transfer regulation would not be put into effect. This plan could work in that many poor Mexicans depend on this foreign money and its absence could harm Mexico’s economy. However, $25 billion is just 2% of Mexico’s gross domestic value. Mexico may take that hit, but it is a possible method for persuading Mexico to pay for the wall.

Other ways Trump proposes getting Mexico to pay for the wall do not hold as much water. He argues that threatening Mexico with trade tariffs could work in the same way, but economists agree that tariffs end up hurting American middle-class workers in the short term possibly causing recession. Another method Trump proposes is the cancellation of visas for Mexicans, but the United States economy depends on those skilled workers and tourists. Lastly, Trump proposes raising fees on visas and border-crossing cards, but this would stifle legal immigration and commerce that occurs near the border.

Included in the cost of his immigration plan is more than just the cost of the wall.

For example, Trump wishes to end “catch and release.” This proposal relates to the fact that some law enforcement agencies detain undocumented immigrants that they catch, but those agencies cannot afford to detain them for long. Thus, those immigrants are released without being deported. Trump would increase funding for these agencies so that immigrants are able to be detained until they are deported. This plan is estimated to cost $14.4 billion.

While Trump does not advocate for a deportation force anymore, he still proposes a tripling of ICE deportation officers in order to remove criminal immigrants and the estimated 40% of all undocumented immigrants who are overstaying their visas. This hiring would cost $10.8 billion. In order to keep track of visa immigrants in the future, Trump proposes a $6.1 billion biometric tracking system. Other programs would cost another $3 billion.

Costs of Trump’s Plan (over 5 years)

The Border Wall: At Least $15.75 Billion (if U.S. pays)

Increased Border Patrol Agents: $4.3 Billion

Ending Catch and Release: $14.4 Billion

Tripling ICE Agents: $10.8 Billion

Biometric Tracking System: $6.1 Billion

Other Programs: $3 Billion

Loss of Border Commerce from Visa Fee Increase: Undetermined Cost

Loss of Tax Revenue from Undocumented Immigrants: $60 Billion

Loss of Economic Consumption from Undocumented Immigrants: Undetermined Cost

Loss of Social Security Contributions: Net $60 Billion

Lower employment: 8.1 million fewer immigrant workers (undetermined replacement by American workers)

Lower wages in some economic sectors: Undetermined Amount

Higher prices on some goods: Undetermined amount (due to ending inexpensive immigrant labor)

The Border Wall Not Allowing Immigrants to Leave: N/A

–Total Cost if Mexico Pays for the Wall: At least $158.6 billion

–Total Cost if U.S. Pays for the Wall: At least $174.35 billion

Benefits of Trump’s Plan (over 5 years)

Economic Multiplying from Border Patrol & ICE Agent Employment: Undetermined Benefit

Ending Undocumented Immigrant Use of Emergency Rooms: Approximately $21.5 Billion (if all immigrants were deported; could also be remedied via allowing immigrants to purchase insurance)

Ending Illicit Drug Inflow and Effect on Healthcare Industry: $1,020 Billion

Ending stress on infrastructure/resources due to increased population: Undetermined cost (depending on how many immigrants are deported or leave)

Higher wages in low-skill sectors: Undetermined amount

–Total Benefit: At Least $1,041.6 Billion Saved or Gained

Conclusion

Sadly there are many costs and benefits that are simply too broad to determine specifically. The loss of undocumented immigrants being in the U.S. would cause loss of low-cost labor, loss of consumption, and loss of wages in some economic sectors. These costs could increase the price tag of Trump’s plan dramatically. As for the financial benefits, estimating the multiplier effect of employing more immigration agents, ending stress on resources, and increasing wages for low-skill sectors may be dramatic as well. Employing those workers would have to still outweigh the $15 billion cost to the government. Certainly when adding in the economic benefit of ending illicit drug importing, the benefits are substantial.

But without that addition, the costs of Trump’s plan could outweigh the benefits. Perhaps the best way to reap the benefits–especially of ending illicit drug importing–and reduce the costs is to strengthen border security and not to deport non-criminal, working immigrants. Trump says that he would focus deportation for criminals and visa overstays, but he would also ban all other undocumented immigrants from being able to work here. Allowing the visa overstays to remain here and not prohibiting undocumented immigrants from working could reduce the cost of Trump’s plan.

That altered plan would reduce the costs of ending “catch and release” and of employing ICE agents since tripling would not be needed for removing only criminals; though, that would also reduce the multiplier effect from that employment. This plan would also keep sales tax revenues, Social Security tax revenues, low-cost goods, higher employment, and consumption spending due to undocumented immigrants. Furthermore, if drug trafficking could be ended with increased border security and not a wall, that cost would be reduced while the benefit would remain. Allowing immigrants to purchase health insurance would keep that benefit as well.

It seems as though ending drug trafficking is the most significant cost to the economy, and that could be fought without deporting the undocumented population. Trump’s plan of removing tax-paying, working, consuming immigrants would be a significant cost that could very well offset any benefits. Thus, it is reasonable to deduce that some elements of Trump’s plan would deliver significant economic benefit, but other elements would bring substantial cost as well. cropped-new-logo.jpeg

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