As Virginia grapples with a budget deficit brought on by the current recession, state and local policymakers would do well to keep in mind that immigrant communities are a potent force for economic recovery. Immigrants, and the adult children of immigrants, already contribute billions of dollars to the state economy each year as workers, taxpayers, consumers and entrepreneurs. These contributions would be even greater if currently unauthorized immigrants had a pathway to legal status, thereby drawing all of them into the tax system. Moreover, newly legalized workers could earn higher wages, further increasing their tax contributions and the amount of money they have to spend in Virginia businesses. For these reasons, the debate over immigration reform that is about to ensue in the U.S. Congress is very relevant to state and local governments struggling with budget crises.

A broad measure of the economic power wielded by immigrant communities is the purchasing power and entrepreneurship of Latinos and Asians (most of whom are either immigrants or the children of immigrants). According to the U.S. Census Bureau, more than 49,000 Virginia businesses owned by Latinos and Asians generated sales and receipts of $11.2 billion, and employed nearly 100,000 workers, as of 2002 (the last year for which data is available). In addition, the Selig Center for Economic Growth at the University of Georgia estimates that the purchasing power of Latino and Asian consumers in Virginia totaled $28.2 billion in 2008.

Some critics of immigration reform argue that, regardless of statistics about Latinos and Asians, we would be better off economically without the roughly 12 million unauthorized immigrants in the United States — an estimated 300,000 of whom live in Virginia. These critics tend to discount the economic contributions that unauthorized immigrants make as workers, consumers and — yes — taxpayers, too. For instance, the Commonwealth Institute estimates that half of Virginia’s unauthorized immigrants pay federal or state taxes amounting to between $260 million and $311 million per year, plus an additional $119 million to $142 million per year in taxes paid by employers on behalf of unauthorized workers.

Nevertheless, opponents of immigration reform advocate either the mass deportation of unauthorized immigrants, or the nationwide implementation of a mandatory employment-verification system that, presumably, would make it impossible for unauthorized immigrants to get a job and therefore persuade them to go home. Leaving aside the many humanitarian and human-rights issues involved, neither of these options is cost-effective.

The Center for American Progress estimates that the mass deportation of all unauthorized immigrants in the country would cost more than $200 billion over five years. And this figure doesn’t count the economic impact on businesses (and their workers) of suddenly losing that many unauthorized consumers. The Perryman Group estimates that Virginia would lose $11.2 billion in expenditures, $5 billion in gross state product, and nearly 63,000 jobs if its unauthorized workers and consumers were to disappear.

As for creating a mandatory employment-verification system, the Congressional Budget Office analyzed a 2007 legislative proposal to do just that, and concluded that not only would it have cost $23.4 billion over 10 years to implement, it would have decreased federal revenue by $17.3 billion over the same period as more workers were paid “under the table.” More importantly, the Government Accountability Office points out that the federal “E-Verify” employment-verification system that critics of immigration reform want to make mandatory is incapable of detecting identity fraud in which one person presents valid identity information belonging to another person. To top it all off, E-Verify relies on Social Security databases that the Social Security Administration’s Inspector General estimates contain errors on 12.7 million native-born U.S. citizens.

So, what makes the most economic sense in the middle of a recession? Spending hundreds of billions of dollars to deport millions of unauthorized workers and consumers? Spending tens of billions of dollars to implement an employment-verification system which would incorrectly flag millions of U.S. citizens as not being authorized to work, not detect identity fraud, and result in less tax revenue being collected from unauthorized workers than is now the case? Or comprehensive immigration reform that includes a pathway to legalization and increases both the tax contributions and purchasing power of formerly unauthorized workers and consumers?

Walter Ewing, Ph.D., is a Senior Researcher at the Immigration Policy Center in Washington, D.C.