Repealing Obamacare will increase the deficit by $109 billion over 10 years.

That was a headline from a CBO report in May when Republicans voted on full repeal of Obamacare.  Somehow, when it comes to ascertaining the costs of wrongheaded policy, CBO wants us to engage in willing suspension of disbelief.  The most costly entitlement will actually reduce the deficit, they claim.  In Washington, up is down and down is up.

We are now seeing the same thing with the amnesty/immigration deform bill.  You need not be an actuary to understand that 11 million poor illegals and tens of millions of other poor legal immigrants and guest workers, along with their American-born children, will wind up receiving a lot more in benefits that they pay in taxes.  Yet, CBO will have you believe that this bill will actually reduce the deficit over 10 and 20 years by $197 billion and $700 billion respectively.  In fact, the only main costs in this bill are the border security provisions.

Well, if you take their estimate to its logical conclusion, we should double the number of illegal immigrants, thereby doubling the level of deficit reduction.  Also, countries like Mexico should be economic superpowers by now. It’s this sort of dyslexic bean counting that has led to $17 trillion in debt.

When determining whether a population would be a net contributor or a net recipient to the tax/benefit structure we have in this country, you have to understand that tax/benefit structure.  All conservatives agree that when the income level is relatively low, those individuals will be net recipients; hence, the progressive system that everyone on the right rails against.  Yet, somehow, when that simple fact is extrapolated to new immigrants, some of these people get disgruntled.

But CBO fails to factor in the degree of progressivity to our tax system even for the native population.  In 2011, CBO issued an analysis showing that our tax and government transfer system had become less redistributive since 1979.  At the time, I showed that, in fact, the share of income taxes paid by the top 1% grew from 19% to 36.7% while the share of the bottom 50% shrunk from 7% to 2.25%.  Meanwhile, government transfer payments have exploded since 1979.

But somehow CBO found that our system had become less redistributive since the growth of refundable tax credits and welfare programs.  With that in mind, it’s no enigma that they believe a low-income group of aliens will also be net contributors.

Here are some other points to consider:

• Within 5 years of passage, anyone who came here under the age of 16 (with no maximum age cap) will be eligible for citizenship along with their spouses and children.  Those who have already been deported but otherwise eligible for the Dream Act will enjoy that status as well.  Additionally, all illegals who are Ag workers will get green cards in 5 years.  That represents a huge population of young, poor people who will be eligible for every program within the 10-year budget frame, plus in-state tuition and student loans.
• If you score the letter of the law, those immigrants who represent a public charge would be denied eligibility.  The reality is that the numerous waivers will void out that requirement.
• Much of the cost – both in terms of public services and welfare – will be borne by the states.  That is obviously not reflected in the cost estimate of the federal budget.
• No cost estimate has attempted to ascertain the cost of birthright citizenship.  Every RPI, new legal immigrants, or guest worker can secure benefits on behalf of American-born children.  The industries want these people so they can pay them slave wages.  As such, they will all be eligible for the programs after they have American-born children.  And Jeb Bush might even suggest that they are “very fertile.”
• The most revenue and economic growth will come from high-skilled immigration, a small component of the bill, and the area of immigration where there is a broad agreement on the economic benefits.  Yet CBO admits that “the new workers would be less skilled and have lower wages, on average, than the labor force under current law.”
• There is no way that the Treasury will ever recover all that revenue from the fines and fees.  The bill grants the secretary of DHS wide discretion to wave those fines if they would cause hardship.  Anyone who thinks that an application will be turned down because the alien is unable to afford the fine is living in a dream world.
• Obviously, this score doesn’t take into account the long-term effects of retirement costs.  Again, forgetting about immigrants for a moment, low-income workers receive a lot more in Social Security benefits than they put in.  Ditto for Medicare.

After reading this cost analysis, I’m reminded of the comments from former CBO director Douglas Holtz-Eakin: “I used to joke that the estimate was based on whatever my mood was in the shower that morning.”