What Is The Cato Institute?
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In an era of heated debates over borders, budgets, and belonging, one think tank has delivered data that challenges entrenched narratives. The Cato Institute’s February 2026 white paper, “Immigrants’ Recent Effects on Government Budgets: 1994–2023”, authored by David J. Bier, Michael Howard, and Julián Salazar, concludes that the U.S. immigrant population—legal and illegal—generated more in taxes than it consumed in benefits every single year for three decades. The cumulative result: a staggering $14.5 trillion fiscal surplus in real 2024 dollars ($10.6 trillion in direct net taxes plus $3.9 trillion in avoided interest on public debt).
Immigrants paid roughly 17% more in taxes per capita than native-born Americans while costing 26% less in benefits (excluding pure public goods like national defense).0
This isn’t a snapshot; it’s a longitudinal deep dive using an updated version of the respected National Academies of Sciences, Engineering, and Medicine (NASEM) fiscal model, refined with three decades of Current Population Survey data, BEA aggregates, and careful adjustments for corporate taxes, property values, mixed-status households, and more. Even low-skilled immigrants and noncitizens (roughly half undocumented) contributed positively. Including the second generation, the surplus was still $7.9 trillion. Without immigrants, U.S. public debt would likely exceed 200% of GDP today.
This research demands attention—not because it settles every policy question, but because it forces a reckoning with evidence over anecdote.
The Cato Institute: Origins, Authority, and Libertarian DNA
The Cato Institute stands as one of America’s most influential independent think tanks. Founded in January 1977 in San Francisco by Edward H. Crane, Charles Koch, and economist Murray Rothbard, it was originally conceived as a vehicle to inject rigorous, principled libertarian ideas into public policy debates. The name derives from Cato’s Letters, 18th-century British essays by John Trenchard and Thomas Gordon defending liberty against tyranny—echoing the Roman senator Cato the Younger, who opposed Julius Caesar’s authoritarianism.
Cato relocated to Washington, D.C., in 1981 and has grown into a powerhouse with scholars, publications, media outreach, and Capitol Hill engagement. Its core mission remains promoting individual liberty, free markets, limited government, and peaceful international relations. While often associated with the Koch network and free-market economics, Cato prides itself on non partisanship—critiquing both major parties when they expand government or restrict freedoms. It has championed causes ranging from criminal justice reform and drug legalization to school choice, trade liberalization, and, notably, more open immigration policies grounded in economic freedom and individual rights.
Cato’s authority stems from its commitment to empirical research. Its scholars publish peer-reviewed papers, books, and policy analyses that frequently cite primary data sources like Census surveys, OMB figures, and academic models. The immigration study exemplifies this: it builds transparently on the NASEM 2017 framework while addressing its limitations (e.g., narrower public-goods definitions, exclusion of non tax revenues, and problematic attribution of second-generation costs to immigrants). Critics on both left and right sometimes dismiss Cato for ideological leanings—libertarians generally favor higher immigration levels because labor mobility expands opportunity and efficiency—but the data here is transparent, replicable in principle, and conservative in several assumptions (overstating some costs, excluding dynamic growth effects). This lends weight: even a libertarian-leaning institution producing pro-immigration findings invites scrutiny precisely because it contradicts nativist assumptions from other quarters. Cato’s influence is evident in its citations across academia, media, and policy circles; it shapes conversations by prioritizing evidence over emotion.
Unpacking the Research: Methodology, Findings, and Caveats
The Cato team employed a static fiscal accounting model that assigns tax payments and government expenditures to individuals based on nativity, citizenship, age, and education. Data spans the CPS Annual Social and Economic Supplement (1994–2023), matched to aggregate revenues and outlays from official sources. Key innovations include:
- A 70/30 split on corporate taxes (favouring labor incidence over dividends).
- Attribution of indirect property tax boosts from immigration-driven housing demand.
- Careful handling of mixed-status households and eligibility rules.
- Exclusion of “pure public goods” (defense, interest on pre-existing debt, etc.—about 29% of spending) from per-immigrant costs, as population growth doesn’t proportionally increase these.
- Projections for education costs and future earnings convergence.
Results are striking. Immigrants generated $24.2 trillion in taxes against $13.6 trillion in costs (net +$10.6 trillion). Annual surpluses grew from $158 billion (1994) to $572 billion (2023, inflation-adjusted). In 2023 alone: $1.3 trillion taxes vs. $761 billion benefits. College-educated immigrants drove the bulk (+$11.7 trillion), but non-college graduates still delivered +$2.8 trillion. The 1990–1993 arrival cohort alone netted +$1.7 trillion over 30 years. Noncitizens contributed +$6.3 trillion including interest savings.55
Immigrants’ advantages: higher workforce participation (12% employment rate edge), younger age profile (fewer old-age benefits), and lower per-person costs in education, welfare, and incarceration despite higher poverty in some subgroups. They pay substantial payroll, sales, property, and indirect taxes—even undocumented workers via consumption and withholding.
Differences from NASEM’s 2013 snapshot (which showed negatives in some scenarios) arise mainly from second-generation attribution, nontax revenues, and public-goods treatment. Cato’s refinements flip the sign to strongly positive. The study is conservative: it ignores broader economic growth, innovation, and entrepreneurship spurred by immigrants, and over-attributes certain costs.
Caveats exist. Fiscal models are static and don’t fully capture wage effects on natives (debated in literature), long-term assimilation, or regional strains (e.g., border communities or schools with high English-learner populations). Public goods like infrastructure can become congested. Yet the 30-year track record—surpluses every year, deficit reduction by roughly one-third—undermines claims of systemic “drain.”
The Roots of the Stigma: “Stealing Jobs” and Economic Damage Myths
The notion that immigrants “steal jobs” and damage economies is one of the most durable fallacies in political economy: the lump of labor fallacy. This assumes a fixed number of jobs in an economy—like a pie sliced into pieces—so newcomers must take shares from natives. Economist David F. Schloss critiqued it in the 1890s, but it predates him. It ignores how immigrants expand demand (as consumers, entrepreneurs, and workers in complementary roles), create new jobs, and fill gaps natives avoid or cannot fill at prevailing wages.
Historical origins trace to 19th-century nativism. In the U.S., Irish and German influxes in the 1840s–50s sparked the Know-Nothing Party, blaming immigrants for wage depression amid industrialization. Chinese workers on railroads and mines faced virulent racism, culminating in the Chinese Exclusion Act of 1882—the first major race-based immigration ban—fueled by labor unions and fears of “coolie” competition. Early 20th-century Southern and Eastern European arrivals prompted eugenics-tinged quotas in the 1920s Immigration Act, framed as protecting “American” jobs and culture during post-WWI economic anxiety.
Economic downturns amplified the narrative. The Great Depression saw Mexican repatriation campaigns. Post-1965 Hart-Celler Act shifts toward family and Latin American/Asian migration revived fears, especially in low-skilled sectors. The 1980 Mariel Boatlift (Cuban influx to Miami) became a natural experiment; most studies (e.g., by David Card) found minimal or no negative wage/employment effects on natives, with immigrants complementing rather than substituting labor. Yet media and politicians often highlighted anecdotes over aggregates.
Labor unions historically opposed immigration to protect member wages, while some businesses favored it for cheap labor—creating strange bedfellows in restrictionism. Modern variants appear in claims about automation, globalization, and “great replacement” theories, often ignoring that native fertility declines and aging populations create structural labor shortages. Empirical consensus from economists (Peri, Borjas debates notwithstanding) shows small negative effects on low-skilled natives at most, offset by gains for others, overall GDP growth, and innovation. Immigrants raise native wages on average by increasing productivity and demand. The stigma persists because it feels intuitive (visible job competition) and serves political mobilization, despite data showing immigrants’ net positive fiscal and dynamic contributions.
Economies Thriving on Immigration from the South
“From the south” often means Latin American flows in the North American context. The United States provides the clearest example. Agriculture—especially labor-intensive fruits, vegetables, and nuts—relies overwhelmingly on Mexican and Central American workers. Estimates put immigrants at ~70%+ of U.S. crop workers. The Bracero Program (1942–1964) formalized this during WWII labor shortages, importing millions of Mexican men; its legacy endures via H-2A visas and undocumented labor. Without this workforce, crops rot, production falls $30–60 billion annually in some models, food prices rise, and imports surge (Mexico itself supplies much U.S. fresh produce). Construction, hospitality, meatpacking, and caregiving similarly depend on Southern labor, sustaining entire industries and regional economies in California, Texas, Florida, and the Midwest.66
Remittances flow back: Mexico receives tens of billions yearly from the U.S., stabilizing households and boosting local development, though brain drain and family separation pose challenges.
In South America, Chile offers a compelling case. Inflows from Peru, Bolivia, Colombia, and especially Venezuela (post-2015 crisis) have measurably lifted GDP growth by 0.15–0.30 percentage points annually in host countries. Migrants fill labor shortages in agriculture, services, and construction, expand the tax base, and increase consumption. Studies from ECLAC and the World Bank highlight higher migrant household spending in segments and formal business creation (e.g., Venezuelans in the Dominican Republic generating thousands of jobs). While strains on services occur, medium-term fiscal and growth offsets are evident. Similar dynamics play in Colombia, Peru, and Ecuador with Venezuelan migration—labor supply meets demand in expanding economies.
Broader patterns: Aging, high-income economies need younger workers; Southern migration provides demographic vitality. Intra-regional flows in Latin America demonstrate mutual benefits when integration policies facilitate formal employment.
Most Requested Demographics and Skill Sets
Demand varies by sector and policy. High-skilled STEM fields top formal requests in developed nations. In the U.S., H-1B visas overwhelmingly go to computer-related occupations (software developers, systems analysts—~66% of approvals), followed by engineering and architecture. India and China dominate, supplying talent for tech giants; immigrants comprise disproportionate shares of STEM workers, patent holders, and Nobel laureates. Employers seek young, highly educated professionals in AI, programming, data science, and engineering to drive innovation amid domestic shortages.
From the “south,” demand skews toward mid- and low-skilled essential workers: agriculture (Mexicans/Central Americans for harvesting), construction, food service, elder care, and hospitality. These fill physically demanding roles with chronic native shortages. Demographics prized: working-age adults (18–45), adaptable, with strong work ethic; education ranges from basic literacy to advanced degrees. Points-based systems (Canada, Australia) prioritize youth, education, language, and skills—favoring STEM but also trades. Europe seeks both high-tech talent and care workers.
Overall, the most requested profile blends youth, education/experience in shortage occupations, and integration potential. Southern migrants often excel in complementary low-skilled roles that sustain high-skilled economies.
Advice for Immigrants Seeking Greener Pastures
Pursue legal pathways relentlessly—visas, asylum where merited, family sponsorship, or points systems. Invest in marketable skills: English proficiency, vocational training, STEM education, or trades in high demand. Arrive with a mindset of contribution, not entitlement: work hard, pay taxes, build networks, and integrate culturally while preserving heritage. Entrepreneurship and second-generation mobility amplify success. Avoid underground economies that expose you to exploitation and legal risk.
Understand that greener pastures require effort. Economies reward productivity; fiscal studies prove immigrants’ net value when they participate fully. Focus on long-term assimilation—education for children yields the biggest returns.
As the ancient Greek philosopher Heraclitus observed: “There is nothing permanent except change.” Life is flux; seeking new opportunities embodies this eternal truth. Embrace transformation, adapt, and flow toward prosperity—your journey enriches both origin and destination when pursued with integrity and diligence.
In conclusion, Cato’s research illuminates immigration’s fiscal reality: a powerful engine of surplus, not drain. Myths endure, but evidence and history favor openness paired with smart policy—securing borders, prioritizing skills, enforcing rules, and welcoming contributors. The data invites nuance over polarization. Greener pastures await those ready to till new soil.
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Campbell Kitts
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