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Immigration Rule Fails Administration’s Own Cost-Benefit Test, May be Trump’s Most Expensive Regulatory Move

By Matt Kent

Deregulation and rigorous cost-benefit analysis are core values for the Trump administration, except when it comes to denying immigrants the right to live and work in the U.S. According to the Department of Homeland Security’s (DHS) own conservative estimate, the costs of the administration’s proposed “public charge” rule vastly outweigh the benefits.

On September 22, the DHS announced a new rule proposal to alter the considerations officials take into account when deciding an immigrant’s eligibility for a visa or green card. Under the proposal, applicants that are likely to use public benefits such as Medicaid could be effectively denied from coming to or remaining in the country. According to the DHS press release accompanying the proposed rule, it is designed to “protect American taxpayers.” However, DHS’s own cost-benefit analysis estimates that the rule would impose $386 million to $1.1 billion in costs over ten years, while producing almost no quantifiable benefits. On top of that, the agency acknowledges that the rule would result in a reduction of over $2 billion in annual payments from federal and state governments to immigrants – explicitly conceding that the spending reductions will result in a host of negative health, income, housing, and educational outcomes.

Cost-benefit analysis is routinely conducted for major rulemakings based on Clinton-era Executive Order 12866. The E.O. directs agencies to evaluate the effects of proposed rules and propose or adopt rules only if the benefits justify the costs.

The estimated costs of the proposed rule change largely rely on direct costs on the immigrant population subject to regulation. It’s estimated that the total annual impact of new paperwork, time dedicated to application, credit checks and fees on immigrants applying under the rule would range from approximately $45 million to $139 million, annually.

On the other hand, the list of benefits associated with the public charge rule is sparse. The official accounting statement lists one quantifiable benefit; the new rule would save immigrants about an hour (or around $35) because they’d no longer be obligated to fill out one particular form. For other benefits, the analysis simply restates the intent of the rule. In the press materials accompanying the proposed rule, DHS suggests there is a benefit to the decreased government spending resulting from prohibiting immigrants from receiving public support, but its own analysis details the complete opposite – reductions in government assistance will lead to a host of costly social ills.

In government parlance, less government spending is referred to as a reduction in “transfer payments.” Transfer payments are payments from one group to another that do not directly affect total resources available to society and thus do not count as costs or benefits. DHS estimates that the public charge rule will reduce government spending by $2.2 billion annually and $19 billion over ten years. To reach those figures, DHS uses a laughably lowball assumption that about 2.5% of affected immigrants will disenroll or forego public benefits as a result of the chilling effect of the rule. The analysis concedes that past actions regarding the rule, during the Clinton administration, resulted in reductions in enrollment between 21 and 54 percent. In other words, the spending reductions would be much larger in the real world – as would the resulting damage to immigrants and society at large.  DHS touches on the real life effects that will result from the anticipated reduction in assistance payments:

“Disenrollment or foregoing enrollment in public benefits program by aliens otherwise eligible for these programs could lead to:

  • Worse health outcomes, including increased prevalence of obesity and malnutrition, especially for pregnant or breastfeeding women, infants, or children, and reduced prescription adherence;
  • Increased use of emergency rooms and emergent care as a method of primary health care due to delayed treatment;
  • Increased prevalence of communicable diseases, including among members of the U.S. citizen population who are not vaccinated;
  • Increases in uncompensated care in which a treatment or service is not paid for by an insurer or patient; and
  • Increased rates of poverty and housing instability; and
  • Reduced productivity and educational attainment.”

For better or worse, regulators are bound by the cost-benefit considerations of E.O. 12866. Yet DHS’s own analysis doesn’t even attempt to make a rational case that the millions of dollars of direct costs imposed by the rule, not to mention the billions of dollars of real world costs to hardworking immigrants and their families, are justified. DHS makes patently clear that in this case, the costs are far beyond any quantifiable benefit. See below for the accounting statement pulled directly from the rule proposal. The entire episode points toward the conclusion that DHS and the White House are only concerned with achieving political outcomes even if it completely violates their own wrongheaded policies on limiting regulatory costs. For their purposes, it seems the benefit of denying immigrants a chance to live and work in America outweighs any cost.