The Economics Of The Border Wall

Michael Kurth Friday, December 21, 2018 Comments Off on The Economics Of The Border Wall
The Economics Of The Border Wall

The signature pledge of Donald Trump’s presidential campaign was that he would build a “big, beautiful wall” along our entire border with Mexico to keep out illegal immigrants. It had tremendous appeal to his supporters, who chanted “build the wall” at his campaign rallies. But it also fired up emotions of the political left, where it was seen as racist and xenophobic.  

Now, two years later, we have caravans of “asylum seekers” from Central America trying to force their way across our Southern Border. But still no wall.

The hang-up is not that most people want open borders. A recent Harvard-Harris poll found that 76 percent of registered American voters do not believe the United States should have “open borders,” and 61 percent said current U.S. border security is “inadequate.” The issue is whether a wall such as the one President Trump envisions is the most cost-effective way to secure our borders.

A wall would not be cheap. Last January, Trump asked Congress for $25 billion to start building it. That did not include the cost of land acquisition. Opponents of the wall claim the final cost would be closer to $60 billion. 

In this age of multi-trillion dollars federal budgets, one might say “a billion here, a billion there; what’s it matter?” But remember, a billion is a thousand million. 

Congress refused Trump’s funding request, and instead approved $1.6 billion for enhanced border security. Now the president is threatening to shut down the government unless Congress approves an additional $5 billion for wall construction in fiscal year 2019.  

Part of his urgency is that the Democrats will take control of congress in January. This bickering over the wall is more about partisan politics than border security. Politicians make their living by promising people “free” stuff paid for with other peoples’ money. Trump promised his supporters Mexico would pay for the wall. But that is not going to happen any more than Santa is going to show up on Christmas Eve with a bag full of presents for me.  

In the real world, there are trade-offs: in order to build Trump’s border wall, Congress will either have to raise taxes, cut spending elsewhere or borrow the money from countries like China and Saudi Arabia. None of these actions are politically popular. 

If the politicians want to maximize the benefits from our government’s spending, they should consider the wall as a rational investment decision. It would be an asset that could yield benefits for years to come. One should look at the flow of benefits over time, and not just the up-front cost of building it.

Let’s say construction of the wall would cost $35 billion and it would yield benefits of $3.5 billion per year; that would be a 10 percent return on investment. This should be weighed against the return from investing the $35 billion elsewhere — such as education, infrastructure, military defense, health care, space exploration and development, improvement of the environment, etc. The money should be invested where it has the highest return.

What are the benefits of a border wall? Most proponents would put keeping unauthorized persons from crossing our southern border at or near the top of their list. According to the U.S. Border Patrol, in 2017 it apprehended 303,916 persons who crossed the border illegally; 10 percent of those had some form of criminal record. 

But it’s not clear how many the border patrol didn’t catch. Customs and the Border Patrol try to estimate those numbers by examining surveillance footage, evidence of movement (footprints, overturned rocks or litter) and reports from local residents. In 2015, they claimed an 81 percent success rate, which implies that only 57,744 got past them. 

But other estimates are not as optimistic: they range from a 40-60 percent apprehension rate. This suggests that between 200,000 and 350,000 people managed to evade the Border Patrol.  

This does not necessarily mean the number of unauthorized immigrants in the U.S. is increasing because it doesn’t take into account those who returned home. According to the Pew Research Center, there were 10.7 million unauthorized immigrants living in the United States in 2016; this was down from a peak of 12.2 million in 2006. Pew attributes the decrease primarily to the number of Mexicans returning home. (The only region that showed a significant increase was Central America, primarily El Salvador, Guatemala and Honduras.)  

How cost-effective would a wall be at stopping unauthorized entry into the U.S.? If one assumes a $3.5 billion annual cost of capital and $1 billion in operation and maintenance expenses in order to keep out 250,000 unauthorized immigrants, then the cost per immigrant would be $18,000. The Border Patrol’s budget is currently $3.8 billion. It apprehends 300,000 illegal entrants a year, which comes to $12,667 per apprehension. This is not unrealistic, because one might expect it to be costly to apprehend those who get past the Border Patrol. (It’s called the law of diminishing returns).

Approximately 90 percent of unauthorized border crossings are made by people and families coming to look for work. Whether these people are a burden or benefit to our economy is subject to debate. But the bigger concern is those with criminal records. In FY17, CBP officers and Border Patrol agents arrested 20,131 criminal aliens, and another 10,908 individuals who were wanted by law enforcement authorities, including 536 who were affiliated with a drug gang. Agents seized 1.59 million pounds of marijuana; 273,580 pounds of cocaine; 66,617 pounds of methamphetamine; 5,760 pounds of heroin; and 1,485 pounds of fentanyl.

A wall probably would be a significant deterrent to those crossing the border in search of low-skill, low-wage jobs. But I suspect it would do little to disrupt the flow of illegal drugs and drug traffickers. Increasingly, the most dangerous drugs are coming from Asian pharmaceutical labs. 

We have three coasts and a northern border with Canada through which people can enter our country. As long as drugs are highly profitable, the drug lords will find a way to get them here. The same goes for Middle-Eastern terrorists: there is more than one way to enter the U.S. if they are determined to carry out their mission.

What Congress should be discussing is how to reform our immigration laws to achieve the same result as a wall, but at a much lower cost. Border security is a serious issue, and it deserves more than a multi-billion dollar symbolic response — especially when we have so many other pressing needs for our scarce federal dollars.

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