Department of State - Immigration Fiscal Impact Statement

By Edwin S. Rubenstein
Volume 18, Number 2 (Winter 2007-2008)
Issue theme: "What price mass immigration?"

[All articles in this Immigration Fiscal Impact Statement series can be viewed in a single pdf document]

The State Department’s mission is to “[c]reate a more secure, democratic, and prosperous world for the benefit of the American people and the international community.” Cite.

Visa Fraud Prevention

While the Department of Homeland Security administers U.S. immigration law within the United States, the State Department is responsible for adjudicating visas overseas. In fact, the State Department’s consular corps plays such an important role in immigration control that it is often referred to as the “Other Border Patrol.”

Spending on diplomatic and consular programs is estimated at $4.943 billion in the 2008 budget. It is the most expensive item listed in the State Department’s budget summary. Cite.

As is brought out below, the system doesn’t work well. About half of all illegal aliens entered the United States legally after being vetted by State Department consular officers in their home country. Despite the interview and document verification process, they overstayed their visas.

Failure to identify visa abuses reflects an inherent conflict of interest in the State Department’s mission—that is, its twin roles as both the nation’s chief diplomat and enforcer of visa policy. Shifting the latter function to Homeland Security would enhance national security as well as the efficiency of immigration law administration.

Consular officials have three principal areas of immigration law responsibility: non-immigrant visas (most commonly, “tourist” visas); immigrant visas (the first step toward obtaining a “green card”); and anti-fraud activities relating to visa issuance.

Non-immigrant Visas

The vast majority of individuals who enter the country every year are non-immigrants. For 2004 the Department of Homeland Security estimated that there were 179 million non-immigrant admissions—that is, entries by foreign nationals authorized for temporary stays.  Cite.

The vast majority of them —148 million—are Canadians and Mexicans who have Border Crossing Cards that allow them to cross the border for short stays, including daily commutes to work. Another 30.8 million are tourists, businessmen, and students who enter on non-immigrant visas.

A State Department consular officer must ascertain whether a non-immigrant visa applicant is from his stated country of origin and determine the likelihood that the applicant will not overstay his visa. Cite.

In making this determination, the officer interviews the applicant while also relying on his knowledge of the economic and social conditions in the applicant’s country, the applicant’s supporting documents—and intuition.

The interviewing officer will issue the visa if he is convinced that the applicant’s ties to his home country necessitate his return (and if the applicant passes a computerized background check). Otherwise, the officer will deny the visa.

Immigrant Visas

Consular officers are also responsible for interviewing applicants for immigrant visas, which are the first step toward obtaining permanent U.S. residency or a green card. As with non-immigrant visas, the law provides for different types of immigrant visas, from family-based and employment-based visas to so-called diversity visas issued by lottery to citizens of many countries. Although Homeland Security prepares and approves the initial paperwork in the United States, State Department personnel interview applicants at the U.S. consulate in their country of origin.

For family-based visas, which constitute the majority of immigrant visas, the verification process centers around the affidavit of support: Visa applicants must be sponsored by one or more family members who pledge to support the immigrant financially for an initial period. (The law prohibits issuance of a visa to an alien likely to become a “public charge.”) If the sponsor’s income falls below established poverty guidelines, the visa application is supposed to be rejected.

In practice, consular officers routinely ignore this provision and issue visas to applicants whose sponsors are already living well below the poverty line, before the added burden of newcomers. Cite.

This blind eye explains, in part, why immigrants are a large and growing presence in the U.S. poverty population.

Visa Fraud

Document fraud is the most common violation in the immigration process. Applicants throughout the world use fraudulent means to obtain visas. Compared to the cost and danger involved in using the services of a professional alien smuggler for an illegal border crossing, it is easier and safer for an would be immigrant to pay a $45 visa interview fee and mislead a consular officer who has received training in cultural sensitivity and interview courtesy. Cite.

Non-immigrant visa fraud typically consists of fake documents or information regarding prior visa applications or stated purpose of visits to the United States.

Fraudulent immigrant visa applications mostly involve fake relationships, but can also involve fake supporting documentation.

Illegal visa document mills are usually located close to the American embassyand are well known to consular officers. Although visas aren’t issued when false documents are detected, fraudulent applicants are rarely reported to the local police. Cite.

These would be easy cases to prosecute, and the image of a bogus applicant being detained or arrested could have a huge impact on others contemplating this crime.

The System Doesn’t Work

In recent years 1.0 to 1.5 percent of foreign nationals who entered on non-immigrant visas have overstayed.  Cite. That implies 250,000 to 350,000 illegal aliens each year—or as much as 45 percent of the annual increase—are overstayers. All of these individuals successfully passed the State Department’s screening process.

Given the institutional culture in which State Department consular officers work, this is not surprising. Cite. It is hard to imagine two more incompatible functions than diplomacy and rigorous enforcement of U.S. immigration laws. Diplomacy requires tact, negotiation, compromise, and conciliation. By contrast, law enforcement requires strict adherence to the letter of the law and intolerance of criminal conduct. Cite.

For a consular officer, fighting visa fraud is an inconvenient obstacle to the diplomatic mission. This may explain why 70 percent of non-immigrant visa applications reviewed at the Mexico City embassy are approved—an absurdly high figure in light of the fact that half of illegals in the United States are from Mexico.

It is impossible to focus on both priorities. The State Department should be allowed to practice “diplomacy,” and its visa issuance responsibilities should be transferred to Homeland Security.

Refugee Admissions Program

A refugee is a person who has crossed an international border and is unwilling or unable to return home because of past persecution or a well-founded fear of persecution due to his race, religion, nationality, membership in a particular social group, or political opinion.

The Refugee Admissions Program (USRAP) is administered by the State Department’s Bureau of Population, Refugees, and Migration (PRM). PRM relies on multilateral organizations, non-governmental organizations (NGO)s, and other government agencies to facilitate the resettlement of displaced people in the United States.  Cite.

Many of the non-profit organizations funded by this program were created by the refugees themselves—a potentially massive conflict of interest.

The 2008 budget allocates $774 million for “Migration and Refugee Assistance”—up from $750 million the prior year.

Since 1975 USRAP has resettled more than 2.6 million refugees in the United States. Cite. Each year the President consults with Congress to determine the number of refugees the United States will aim to resettle in the following year. This consultation sets in motion a complex process that identifies, screens, and prepares refugees for whom resettlement in the United States is deemed the best option.


Refugee arrivals declined sharply in the years immediately following the attacks of September 11, 2001 (9/11). Since 2003 they have nearly doubled, although still below pre-9/11 levels:

Less than 500 Iraqi refugees were admitted during the three years 2003 to 2005. This trickle may soon become a torrent: In May 2007 PRM announced “The U.S. Refugee Admissions Program is currently expanding its capacity to consider Iraqi refugees for resettlement in the United States.” Cite.

Iraqis must leave Iraq in order to apply for admission as a refugee. This is consistent with the definition of “refugee” as someone who has crossed an international border.

A May 2007 State Department statement  urges Iraqi asylum seekers located in third countries to “register with the nearest United Nations High Commissioner for Refugees (UNHCR). Cite. UNHCR has the international mandate to provide protection and assistance to refugees and can provide a protection document and possibly other assistance if needed. For a small number of extremely vulnerable individuals, this could include referral to the USRAP or another country’s resettlement program. UNHCR will identify individuals for resettlement referral based on an assessment of their vulnerability at the time of registration.”

But the “small number” of refugees selected for resettlement in the United States turns out not to be small at all: UNHCR has made the commitment to the U.S. to refer 7,000 Iraqis in Jordan, Syria, Egypt, Turkey, and Lebanon to the U.S. Refugee Admission Program for consideration for resettlement by September2007. This is the number that is expected to be received in the first tranche of referrals. However, the U.S. expects to receive additional referrals after the first 7,000 have been submitted, and 7,000 is not a limit on the number of Iraqis the U.S. will consider for the USRAP. We are also exploring other avenues of access to the USRAP in addition to UNHCR referrals. Cite.

Note that 7,000 is “not a limit” on the number of Iraqi refugees to be admitted to the United States.

Refugees have already emerged as a large and growing fiscal burden. They are immediately eligible for various government welfare programs, and the evidence is clear that they stay on them. Moreover, they start chain-migrating relatives under the “family reunification” provisions of current law.

In absolute terms, the largest migration of refugees to these shores occurred during the Cold War. Millions of displaced persons fled Eastern Europe after the Soviet takeover. To embarrass the Soviet Union, the United States passed the Displaced Person (DP)Act of 1948, enabling DPs to enter the United States as refugees. From 1945 to 1960 668,000 European refugees came here. Cite.

After declining in the 1960s and 1970s, the European influx resumed after 1980, spurred by the Soviet Union’s collapse and war in the Balkans.

A total of 1.5 million European refugees became permanent U.S. residents between 1945 and 2002. This represented 0.3 percent of the 1950 population of Europe.

But other regional conflicts have triggered much larger refugee movements relative to population. Here, for example, is the cumulative refugee total received by the United States as of 2002, expressed as a percent of the home country’s population at the (approximate) year of the conflict:

-  9.9 percent of Cuba’s population since 1960

-  2.0 percent of Bosnia’s population since 1990

-  1.6 percent of Vietnam’s population since 1970

-  0.3 percent of Somalia’s population since 1990

The State Department’s efforts on behalf of
displaced Iraqis could presage a refugee influx of similar magnitude. Applying these population shares to Iraq’s current 25 million population, we generate a plausible range for the number and timing of Iraqi refugees settling in the United States:

-  75,000 Iraqi refugees by 2016 under the Somali refugee scenario

-  500,000 Iraqi refugees by 2016 under the Bosnian scenario

-  560,000 Iraqi refugees by 2036 under the Vietnam scenario

-  2.5 million Iraqi refugees by 2044 under the Cuban scenario

Fiscal Impact of Iraqi Refugees

The fiscal year (FY) 2008 budget contains $774 million for “Migration and Refugee Assistance”—up from $750 million the prior year.

The lion’s share of the public costs associated with refugees occurs at the state and local level, where refugees are eligible for a wide array of social programs and benefits—including access to public education.

In recent testimony before the House Judiciary Committee, Robert Rector estimated the fiscal deficit of households headed by immigrants who lack a high school diploma—a reasonable proxy for refugees. Cite. Rector finds that the average uneducated immigrant household:

-  Receives$30,164 in government benefits

-  Pays $10,573 in government taxes

-  Generates a fiscal deficit of $19,588 ($30,164 less $10,573)

Under the “Cuban scenario,” 2.5 million Iraqi refugees could eventually settle in the U.S.

This translates to 625,000 Iraqi (4-person) refugee households, implying that the fiscal deficit (benefits received less taxes paid) for Iraqi refugees could equal $12.1 billion (625,000 × $19,588). More than half of this deficit—$6.7 billion—occurs at the state and local government level.

Bottom line: $12 billion a year, or about 0.1 percent of current GDP, could eventually be transferred from native taxpayers to Iraqi refugees. ■


About the author

Edwin S. Rubenstein, president of ESR Research, economic consultants, has 25 years of experience as a business researcher, financial analyst, and economics journalist.  Mr. Rubenstein joined the Hudson Institute, a public policy think tank headquartered in Indianapolis, as director of research in November 1997.  While at Hudson he wrote proposals and conducted research on a wide array of topics, including workforce development, the impact of AIDS on South Africa's labor force, Boston's "Big Dig" the economic impact of transportation infrastructure, and the future of the private water industry in the United States.

As a journalist, Mr. Rubenstein was a contributing editor at Forbes Magazine and economics editor at National Review, where his "Right Data" column was featured for more than a decade. His televised appearances include Firing Line, Bill Moyers, McNeil-Lehrer, CNBC, and Debates-Debates.  In The Right Data (National Review Press, 1994), Rubenstein debunks many widely held beliefs surrounding the distribution of income, government spending, and the nature of economic growth.

Mr. Rubenstein is also an adjunct fellow at the Manhattan Institute where he is principal investigator in the institute's ongoing analysis of New  York state's budget and tax structure.  He also published a newsletter devoted to economic statistics and contributed regularly to The City Journal, the Manhattan Institute