The Economic and Fiscal Impact of Repealing DACA

Executive Summary

Donald Trump has proposed eliminating or severely modifying the Deferred Action for Childhood Arrivals (DACA) program. Many Americans believe that the presence of unauthorized immigrants is harmful to the economy and would like to see steps taken to reduce their presence. However, a repeal or roll-back of DACA would harm the economy and cost the U.S. government a significant amount of lost tax revenue. We estimate that the fiscal cost of immediately deporting the approximately 750,000 people currently in the DACA program would be over $60 billion to the federal government along with a $280 billion reduction in economic growth over the next decade.

We arrived at our estimates by comparing and adjusting the characteristics of DACA recipients to similarly well-educated immigrants admitted through the H-1B visa program, a cohort that not only resembles the population of DACA recipients but whose own economic impact has been well-studied. We use the estimated budgetary and economic impact of H-1B visa workers and adjust it to reflect the age and earnings differences between the two groups to calculate our figures.

Background

President Obama created the DACA program in 2012 via executive action. DACA’s objective was to allow American residents who entered the country illegally as children to receive temporary protection from deportation, work permits, and an incentive to invest in their own human capital. The program only applies to those who have lived in the United States for five years or longer and do not have a criminal record. Essentially, these are people who never knowingly broke any law and have been productive and peaceful members of society since their arrival. The logic of the Obama Administration in creating DACA is that it makes little sense to expend time and resources trying to track down, arrest, and deport these people when they have not committed any crime save for being unwittingly brought across the border by others.

There is much legitimate debate in the United States over the role that immigration—both legal and illegal—plays in the economy, and what should be done about border security. Inseparable from this problem is the question of what to do with the undocumented immigrants already in the country, a sizeable population that is estimated to number 11 to 12 million.[1]

President-Elect Donald Trump has taken an absolutist position on the issue, vowing not only to build a wall with the intent of greatly reducing illegal entry from the Mexican border, but also to unilaterally nullify President Obama’s executive actions dealing with immigration, including the action which spawned DACA.

As with any sudden and dramatic shift in any policy, there are bound to be costs associated with implementation, as well as after-effects of the policy, not all of which are immediately intuitive. It is the goal of this paper to examine the costs that the wholesale repeal of DACA would impose on the American economy, both in terms of enforcement as well as the sudden loss of a large number of residents and their contributions to the domestic economy.

Privatize Washington’s Metro System

Some members of Congress are considering restructuring DC Metro’s management and oversight. Big reforms are needed given the disastrous service, safety, and financial performance of the system in recent years.

Why not privatize Metro? Countries around the world have been privatizing their transportation infrastructure in order to improve management and efficiency. Privatizing Metro buses would be straightforward, but even privatizing the subway system would not be an unheard of reform.

Hong Kong privatized its subway system in 2000. In a recent study on infrastructure, McKinsey reported:

Hong Kong’s MTR Corporation has defied the odds and delivered significant financial and social benefits: excellent transit, new and vibrant neighborhoods, opportunities for real-estate developers and small businesses, and the conservation of open space. The whole system operates on a self-sustaining basis, without the need for direct taxpayer subsidies.

MTR’s railway system covers 221 kilometers and is used by more than five million people each weekday. It not only performs well—trains run on schedule 99.9 percent of the time—but actually makes a profit: $1.5 billion in 2014. MTR fares are also relatively low compared with those of metro systems in other developed cities. The average fare for an MTR trip in 2014 was less than $1.00, well under base fares in Tokyo (about $1.50), New York ($2.75), and Stockholm (about $4.00).

That sounds pretty darn good. The average fare on the DC Metro is about $3. The on-time record of Metro is unclear, but in technical terms I think “crappy” best describes it. Note that Hong Kong’s 99.9 percent on-time record means that “of the average 5.2 million passenger trips made on the MTR heavy rail and light rail networks on each normal weekday, 5.195 million passengers safely reach their destinations within 5 minutes of their scheduled arrival times.” In 2014, “the system ran for 120 consecutive days without a single delay over eight minutes.” Wow.

That stellar performance induces strong demand for the Hong Kong system, which in turn generates high fare revenues. The ratio of passenger fares to operating costs is a high 185 percent, which means that fares fully cover operating costs and part of capital costs. MTR raises other funds for capital from real estate deals under which it gains from land value increases near stations. The Hong Kong system is profitable and unsubsidized. By contrast, the average ratio of fares to operating costs for U.S. subway systems is just 46 percent, and the systems are heavily subsidized.

The MTR is probably the best-run subway system in the world. The system is an “immaculately clean, well-signposted, cheap, regular, convenient system.” And there’s free Wi-Fi in most stations.

The system is so admired that MTR has been contracted to run systems in other cities. CNN says: “MTR Corporation now operates the London Overground, and two lines of the Beijing Metro, as well as parts of the Shenzhen and Hangzhou Metro systems in China, the Melbourne Metro in Australia and the Stockholm Metro in Sweden … London Overground enhanced its punctuality from 88.4% in 2007 to 96.7% in 2013 after MTR took over its operation for a year.”

Can we get MTR Corporation to expand into Washington? Metro Board Chairman Jack Evans wants a federal takeover of Metro, but how about a private takeover?

Protesting Trump’s Inauguration

Massive preparations are underway here in the District of Columbia for Donald Trump’s inauguration. Temporary fencing is going up along with bleachers and roadblocks. In addition to thousands of well-wishers, thousands of protesters are expected. It will doubtless be an unforgettable day. 

It is worth remembering that before Mr. Trump can take any official action whatsoever, he must first take an oath to support and defend the Constitution. There are many other checks and balances in our system, but the oath of office is supposed to be the first line of defense. Mr. Trump can use the bully pulpit (and his Twitter account) to respond to his critics, but he must respect their right “to peaceably assemble, and to petition the Government for a redress of grievances,” as the First Amendment makes clear.

Can you imagine the outcry if Mr. Trump were to threaten to arrest protesters at his inauguration? It would be deafening—and fully justified. And yet, if you can believe it, there have been previous attempts to do just that. We should remember such episodes in our history.

In January 1997, Rev. Patrick Mahoney and a few other anti-abortion protesters planned to demonstrate along the sidewalks adjacent to President Bill Clinton’s inaugural parade route. When word got around about these modest plans, something had to be done. Mahoney and his Christian Defense Coalition received oral and written warnings that they would be arrested if they proceeded with their small protest. Shocked by such threats, Mahoney went to court to seek an emergency injunction to protect his group’s constitutional right to protest on the big day: January 20, 1997.

It soon became apparent that this story was bigger than a low-level bureaucrat trying to intimidate some guy that didn’t have any political connections. Attorneys trained at our best law schools arrived in court to double down. Yes, the local U.S. Attorney admitted, Randall Myers, counsel for the National Park Service, had informed Mahoney that his people wouldn’t be arrested if their signs offered congratulations to Clinton, but they would be arrested for signs containing any criticisms of Clinton. This blatant discrimination between viewpoints could be justified, said the local U.S. Attorney.

The Court of Appeals was pretty flabbergasted by such claims. Here is an excerpt from the unanimous ruling: “[A]ll constitutional authority supports the position we would have thought unremarkable, that a government entity may not exclude from a public forum persons who wish to engage in First Amendment protected activity solely because the government actor fears, dislikes, or disagrees with the opinions of those citizens. None of the authorities offered by the government is to the contrary. Indeed, none is on point.” Ouch! That’s a body slam in legal circles. And a well-deserved one.

Let’s fast-forward to recent news. Since Mr. Trump’s election, the left has been busy with plans to organize a resistance movement. California Assembly Speaker Anthony Rendon has promised to “lead the resistance to any effort that would shred the social fabric of our Constitution.” It was recently announced that California has retained former Attorney General Eric Holder to defend the Constitution from the Trump administration. That was not a wise move. In 1997, Holder was the U.S. Attorney in the District of Columbia. He was the one who tried to justify arresting protesters that were critical of President Clinton. If Holder is the Constitution’s defender, we’re in big trouble.

One of the reasons that our Bill of Rights is in trouble is because there are not many people or organizations that make a principled defense when it is attacked. Let’s resolve to do better going forward.

For related Cato scholarship, go here, here, and here.

(In)digesting the DeVos Confirmation Hearing

I got my dinner and a show last night. The dinner was fine, but the show? Not so great. Not much substance was covered in the DeVos confirmation hearing before the Senate Health, Education, Labor and Pensions committee, and when meaty issues were brought up they were too often smothered in gotcha questions and commentary rather than meaningful discussion.

A good part of the hearing was occupied by bickering over each committee member only getting one, five-minute questioning period, and whether or not that was committee tradition or an effort by the GOP majority to protect the witness. Maybe that’s insightful stuff if you care about the politics of all this—though I doubt it—but it doesn’t tell us one whit about where the nominee stands on the federal role in education.

The good news is that when DeVos was asked about her views on federal policy, she was deferential to states and districts. I don’t recall her stating resolutely that the Constitution leaves ed power to the states and the people—she stated little resolutely—but she hit the right notes. Included in that was telling committee chair Lamar Alexander (R-TN) that she would not use the power of her office to try to coerce school choice. She said she would try to convince Congress to push choice—an unconstitutional goal, but at least using the constitutionally correct process—but she would not try to do it unilaterally.

Postdoctoral Fellowship in Foreign Policy

Like the foreign policy commentary you see here on Cato’s blog? If you’re a PhD candidate or recent PhD, you should consider applying for our visiting research fellow position.

The Defense and Foreign Policy department is seeking candidates for a visiting fellow post. This one-year paid fellowship allows candidates to expand upon the policy implications of their dissertation research, and contribute to the work of the Cato defense and foreign policy department.

In order to apply, candidates must be either A.B.D. PhD candidates or a recent PhD graduate in political science, history or a related field, and must have authorization to work in the United States.

Candidates should also share Cato’s commitment to moving U.S. foreign policy towards prudence and restraint, and the policy implications of their work should be broadly compatible with a pragmatic, realist or restrained approach to foreign policy. You can find more information about Cato’s work on defense and foreign policy issues here.

During their time at Cato, the visiting fellow is responsible for:

  • Producing one scholarly paper (8,000-10,000 words) in the Institute’s Policy Analysis series on a foreign policy issue (which may or may not be part of the fellow’s dissertation)
  • Organizing at least two events
  • Authoring op-eds and blog posts
  • Handling media requests on international security issues

Fellows will work from Cato’s Washington, D.C. offices for the 2017-2018 academic year. Predoctoral fellows will receive $40,000, and postdocs will receive $50,000 in addition to health care coverage. Ideally, the fellow’s work at Cato would overlap considerably with his or her dissertation, making the fellowship useful both for policy research and finishing or refining the candidate’s dissertation.

If you are interested in applying, please submit a C.V. and a writing sample via Cato’s online application system no later than February 15, 2017. The application can be found here.

Fair Housing or Federal Agency Running Riot?

In case you missed it, Ben Carson has been labeled as being “at odds with fair housing.” During his senate confirmation hearing last week, Carson was required to defend his position on Affirmatively Furthering Fair Housing (AFFH), the Department of Housing and Urban Development’s (HUD’s) controversial 100-page-plus contemporary interpretation of the Fair Housing Act.

It may sound appalling that anyone anywhere would be against fair housing. Still, there are sane reasons to object to the rule. Carson suggested a couple of possibilities; for example, he worries about Washington, D.C. administrators demanding that local communities “go looking for a [racial] problem” when no evidence of such a problem exists a priori.

If you don’t like intemperate federal agencies running riot, there is another process-related objection that Carson missed: AFFH may insert the federal agency into policy areas not even remotely authorized by the legislation it purportedly interprets.

The table below provides a comparison of the original Fair Housing Act language and AFFH language, so that you can decide for yourself:

Fair Housing Act of 1968 (original legislation) Affirmatively Furthering Fair Housing of 2015 (HUD’s re-interpretation)
1)    Prohibits landlords from discriminating against minority tenants. 1)    Stated objective is to “replace segregated living patterns with truly integrated and balanced living patterns [within cities].” 
2)    Uses the word “segregated” or “segregation” a total of 0 times. 2)     Uses the word “segregated” or “segregation” a total of 126 times and urges“overcoming historic [geospatial] patterns of segregation.”
3)    The original FHA law uses the word “zoning” just 1 time, wherein it instructs the HUD Secretary to refer discriminatory local zoning or land use laws to the Attorney General so that he/she can file a lawsuit. 3)    The AFFH mentions “zoning” 53 times, wherein it suggests that communities change their zoning to improve racial integration (not a bad suggestion, but a departure from the original law).
4) The original FHA law uses the word “affirmatively” 2 times. Each time, it asks executive departments and agencies to administer their programs and activities in a way that affirmatively furthers “the purposes of this subchapter,” where the subchapter focuses on prohibiting a discriminatory relationship between landlord/seller and tenant/buyer. 4) The AFFH rule uses the word “affirmatively” 423 times, wherein it redefines the term to mean “replacing segregated living patterns with truly integrated and balanced living patterns” and “transforming racially and ethnically concentrated areas.”
5) The original FHA law uses the word “concentration,” referring to the concentration of poverty or concentration of minorities in cities, 0 times. 5) The AFFH rule uses the word “concentration” 56 times and urges “reducing racial or ethnic concentrations of poverty.”

HUD believes the rule merely implements the Fair Housing Act’s intent.  You can form your own view.

Victory for Kids: School Choice Safe in Florida

This morning the Supreme Court of Florida declined to hear McCall v. Scott, the Florida teachers’ union lawsuit against the state’s popular scholarship tax credit, which helps nearly 100,000 low-income students attend the school of their choice. That means the lower court’s decision dismissing the lawsuit stands, and the law is safe from further challenge on these grounds.

As I wrote back in August, the union and its allies had alleged that the scholarship program unconstitutionally supported a “parallel” system of public education and violated the state constitution’s historically anti-Catholic Blaine Amendment, which prohibits publicly funding religious schools. However, the trial court judge rejected this claim, holding that the plaintiffs lacked standing to sue because the scholarships were privately (not publicly) funded and that they were unable to prove that the scholarship program adversely impacted the district school system. The union appealed but the appellate court unanimously upheld the lower court decision. (For a more detailed explanation of the history of the case and the tax credit, see here.) Today’s state supreme court decision is the proverbial nail in the coffin for the union’s legal challenge.

Supporters of the scholarship program expressed their satisfaction this morning:

“The court has spoken, and now is the time for us all to come together to work for the best interests of these children,” Doug Tuthill, [president of Step Up for Students, Florida’s largest scholarship organization], said in a statement. “We face enormous challenges with generational poverty, and we need all hands on deck.”

After the lawsuit was filed in 2014, supporters of the program — including parents and clergy members — waged a full-court press supporting the program. Almost exactly a year ago, they staged a massive rally in Tallahassee.

“On behalf of all the scholarship children, their families and their clergy in the Save Our Scholarships coalition, I commend the state Supreme Court on their wise application of the law,” Reverend R.B. Holmes of Bethel Missionary Baptist Church in Tallahassee, said in a statement. “We look forward to working together with all parties to improve the educational outcomes of low income children in our state.”

School choice is safe in Florida. But just north of the panhandle, Georgia’s scholarship tax credit faces a similar legal challenge. Oral arguments in Gaddy v. Georgia Department of Revenue are scheduled for next week, which just happens to be National School Choice Week. For justice to prevail, the Georgia Supreme Court should dismiss that case as well.