Wednesday, September 13, 2017

Are DREAMers Net Contributors?

People often claim that "DREAMers," aka DACA recipients, are a boost to the economy. The Center for American Progress (CAP) says that deporting DACA recipients will cost $433.4 billion over ten years, and CATO says $283 billion.

The problem, however, is the lack of context. What does this actually mean per capita? Well, let's do some back-of-the-envelope calculations.

According to Trading Economics, U.S. GDP in 2016 was $18,569.1 billion dollars. We will assume a modest 3% growth rate in the future.
I say this is modest because the average annual growth from 2009 to 2016 was 3.68%. I calculated this by taking the overall growth over 7 years (18569.10 divided by 14418.74 equals 1.2878 or 28.78% growth over 7 years) and taking the 7th root (1.2878^(1/7) = 1.0368 or 3.68% growth per year).

Under this assumption, the GDPs for 2017 will be $19126.17 billion and the GDPs for the next ten years will be:
2018 19699.96
2019 20290.96
2020 20899.69
2021 21526.68
2022 22172.48
2023 22837.65
2024 23522.78
2025 24228.46
2026 24955.32
2027 25703.98
The total GDP for the decade 2018 to 2027 will be $225,837.94 billion, or approximately $226 trillion.

According to Wikipedia, the U.S. Population in 2017 is estimated at 325,365,189. Assuming a growth rate similar to that of 2000-2010, let's say the the population will be 10% bigger in 2027. That would bring it to about 358 million. This includes everyone, children, the elderly, the unemployed.

The number of DACA recipients is estimated at 800,000. The CAP study is based on 741,546 people leaving (645,145 of whom are workers). The Cato study is based on an estimate of 750,000 people. That comes out to between .207 and .2095 percent of the U.S. population. Using the lower number, .207 per cent of the GDP for 2018-2027 is $467.8 billion.

In other words, unless the contributions of DACA recipients are more than $467.8 billion over ten years, they are actually reducing per capita GDP. And remember, this is using the population figure for the end of the period and assuming modest economic growth, both of which would tend to make the per capita GDP smaller and therefore make the DACA recipients' contributions look bigger in comparison. And of course, this is not counting how much collateral population growth letting DACA recipients stay versus deporting them will create - if half of DACA recipients have one kid (who won't be contributing economically at all for at least about fifteen years), that would mean that DREAMers would have to make $701.7 billion to keep per capita GDP flat.

The point is, getting rid of the DACA recipients would reduce the size of the overall U.S. economic pie, but it would reduce the number of people eating the pie by a greater percentage. Most of the discussions of the "economic benefits" or immigration tend to act as if the immigrants simply produce value for the native population without consuming anything.

Now this analysis does not conclusively show that there is no economic benefit to Americans from DACA recipients - that would depend on how much of the recipients' productivity is consumed by the recipients themselves. However, they would have to consume less than the average American for there to be any surplus at all, and perhaps significantly less if the CATO rather than the CAP study is correct. Then there is the issue of how the surplus is distributed, and whether there are winners and losers in the system. And all of this is assuming that economics is the only measure here.

In short, the benefits of allowing DACA recipients to stay are greatly exaggerated and may not exist at all. Don't let economists use half-calculated figures and incomplete statistics to trick you.

That is all.

Sunday, September 03, 2017

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