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change in the future. Today's Social Security benefits may be more generous than benefits in the future, so we cannot use current benefits to infer the burden that today's immigrants will ultimately impose on the system when they age.
Third, the outcome of the static calculation depends both on the relation of taxes to expenditures at each age over the life cycle and on the relative numbers of immigrants of each age in the population. Because patterns of expenditures and taxes differ over a lifetime, no single snapshot can accurately depict the impact of any individual cohort of immigrants if the population's age structure changes over time. For example, education spending relates primarily to the school-age population, and income tax payments relate to the working-age population. Consequently, increasing cohort size will overstate the cost of educational expenditures relative to the revenue from income taxes when these children enter the labor market. However, because any single cohort receives its education benefits earlier than it pays income taxes, the failure to discount income taxes overstates revenues relative to education spending. In general, unless the rate of growth of populations plus productivity equals the appropriate government discount rate, these effects will not cancel one another.
Fourth, because the government's budget need not be balanced over any particular time period, a deficit (or surplus) will develop equal to the difference between revenues and expenditures. There is no obvious way to assign the incidence of a deficit in a static calculation; if expenditures exceed revenues, this is not an "error" to be corrected. Yet we know that running a budget deficit today alters the fiscal policy choices tomorrow.
Many static calculations suffer from an additional, serious problem if they are based on the analysis of households with immigrant heads. In this case, they miss the effect of the adult native-born children of immigrants who do not live in households headed by immigrants, as we mentioned in Chapter 6. Because these younger people are likely to be making substantial contributions to the fiscal balance, their omission biases the results toward negative outcomes. This difficulty is not intrinsic to the approach, however.
These problems highlight the inherent limitations of static calculations, but they also point to a solution. Using the static as a starting point, we can project revenues and expenditures into the future, taking account of differences in individuals, policies, cohort sizes, and budget deficits to arrive at a more meaningful calculation that assigns revenues and expenditures to groups of immigrants at each date. This approach will yield the net impact of each group, based on the present value of these annual flows.
The methodology of dynamic calculations of incidence is, to a large extent, simply the methodology of static calculations. Initially, we must go through the same exercise of estimating the marginal tax payments and benefits by age of