Republicans should build a wall around the welfare state

Congress is hurtling toward a colossal showdown over the federal budget. The House budget blueprint instructed the Committee on Energy and Commerce to find $880 billion in spending cuts, which requires reforming Medicaid. However, some Republicans like Sen. Josh Hawley (Mo.) oppose “anything that results in cuts to actual work beneficiaries.”

Even President Trump said that Medicaid won’t be touched. But without the cuts, Congress could not continue with the Trump tax cuts enacted in 2017. 

Before any of this can materialize, the Senate must first agree to the House budget resolution, with both chambers resolving their differences. That’s where the politics get complicated. But the politics can be simple: Focus on excluding non-citizens from welfare programs. 

Non-citizens include illegal immigrants, legal immigrants on green cards and other migrants here on work permits or other visas. The call for $880 billion in cuts is not specific to components of Medicaid or other welfare programs; the number is merely a target that the Energy and Commerce Committee needs to hit. The committee could meet much of this goal and assuage Hawley’s worry by cutting all non-citizens from Medicaid and other welfare and entitlement programs.

Non-citizens don’t use much Medicaid, but they shouldn’t be using any. Our recent research published at the Cato Institute found that non-citizens used about $2,100 per year in Medicaid on average, over 16 percent below the more than $2,500 consumed by native-born Americans annually.  

In 2022, non-citizens received an estimated $50.3 billion of Medicaid benefits — about $35.6 billion in federal money and the rest from state coffers. Ideally, no non-citizens should receive any Medicaid from state or federal funding, but states do have that discretion with their own state funds. Our back-of-the-envelope calculation suggests that kicking all non-citizens off Medicaid would save about $355.9 billion over ten years.

Still, the Senate could go further by restricting all non-citizen access to other federal welfare programs. We estimate that non-citizens consumed about $59.8 billion in other welfare benefits in 2022 — far below what native-born Americans do per capita, but a substantial sum nonetheless. Removing non-citizens from all welfare and entitlement programs, not just Medicaid, would save about $1 trillion over the next decade.

Cutting non-citizens out of Medicare and Social Security could be politically tricky, so it may be best to start by cutting them off from means-tested welfare. That easier move would save $461.2 billion over ten years. 

To remove all non-citizens from welfare rolls, the committee wouldn't need to start from scratch. They could simply adopt Rep. Glenn Grothman’s (R-Wis.) Safeguarding Benefits for Americans Act from the last Congress.

Immigrants generally pay more in taxes than they consume in benefits, partly because they consume less welfare than native-born Americans. Kicking all non-citizens off welfare would boost those fiscal benefits even higher by reducing the outlays.

Immigrants also have positive economic effects beyond government budgets. The U.S. population would start declining in the mid-2030s without immigration, which would have negative economic, demographic and social implications — so their presence staves off that day. The other economic benefits of immigration are enormous, from a larger economy to higher wages and world-class firms started by immigrants like Jensen Huang, Elon Musk and many others.

The House budget blueprint supports pouring an extraordinary $200 billion into border security and interior immigration enforcement over the next decade. Such a move is fiscally irresponsible and will have little impact on border security as the number of border encounters has declined precipitously over the last year. Instead of being distracted by a phantom border problem, Congress should build a wall around the welfare state instead of around the country.  

Alex Nowrasteh is the vice president for economic and social policy studies at the Cato Institute. Jerome Famularo is a research associate at the Cato Institute.