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Oh, good answer, on both counts. Is the second part something that people actually say out loud, though? Or is it something that they'll think, but then say something else?
Not sure what you mean by "the second part". The "illegal immigration is good so long as it's illegal" theory was part of a public speech originally, and it does sometimes get quoted out loud still, approvingly. The "we now give illegal immigrants a myriad of benefits" caveat is a common anti-immigration complaint, but I don't know if I've ever seen it specifically pointed out as making Friedman's argument obsolete; it's just pointed out as a general cost of both legal and illegal immigration. The pro-immigration side of that branch of the argument is just attempts to rebut it. E.g. in-state university tuition rates for DACA recipients might make sense economically if you consider DACA-to-legal-citizenship as a fait accompli; if they're not going anywhere either way then in the long run you might get more state taxes out of them as college graduates, even looking at NPV minus tuition subsidies.
By "the second part" I referred to "illegal immigration is good so long as it's illegal", as you inferred correctly. I'm just having a hard time imagining the modal pro-immigrant activist saying something like that, and in effect admitting that they're in support of a tiered system of citizens and non-citizens, where the former live the good life and the latter do the dirty work. It sounds like a very Motte-y argument, and I don't encounter those much in the wild.
It's very much a heavily libertarian pro-immigration argument; the modal pro-immigration activist is a left-winger who would be utterly horrified by it.
Even before the premises about welfare for illegal immigrants became dubious, the biggest sympathetic argument against Friedman was that this sort of "tiered system" was politically unsustainable in the US. Popular morality here includes a big mixture of Newtonian ethics and the Copenhagen Interpretation, so it doesn't matter how happy it makes utilitarians to see starving foreigners upgraded to much-less-impoverished guest workers, they'll be outnumbered by voters who see starving foreigners as someone else's tragedy but welfareless voteless guest workers as unconscionable apartheid.
The modal left-winger's main pro-illegal-immigration argument is much simpler: the immigrants will suffer much less in America than they do at home, and suffering is bad, so they should all get to come to America. It's a very compelling argument when you look at just the first-order effects, I have to admit. But there are a lot of both positive and negative second-order effects, and whether any of those make this idea unsustainable in some way is a more complicated question.
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