More Immigrants Boost Economy, Reduce Budget Deficit, Congress’ Nonpartisan Scorekeeper Says

A “surge” of immigrants has boosted the U.S. economy recently and is projected to add almost $9 trillion to it through 2034, the nonpartisan Congressional Budget Office said in a new report Tuesday.

The CBO, in an update to budget and economic forecasts made in February, said the current level of immigration of “other foreign nationals” was well above historical patterns and would continue to add to the overall size of the U.S. population, providing more workers for the labor force and thus boosting the economy.

The CBO said the net immigration rate of “other foreign nationals,” a category including undocumented migrants, had risen from around 200,000 annually to 1.9 million in 2022, and is now projected to hit about 2.4 million this year. That spike is expected to decline to previous levels after 2026, the office said.

CBO said it took a look at how the economy and the federal budget would look if immigration stayed at the old 200,000 annual level from 2024 to 2034, compared to new projections that factor in the current surge in immigration. The $8.9 trillion difference between them pencils out to a 2.4% jump in the country’s gross domestic product, the report found.

Most of the gain, $7.8 trillion, would occur simply because the U.S. population would be bigger, the CBO said. Increases in the proportion of the population working and in productivity would also add slightly to the economy. But the the increase in immigration is also projected to also result in more lower-paying jobs, which would be a slight drag on economic growth.

“Increases in the supply of workers put downward pressure on wages, particularly for people with 12 or fewer years of education. That downward pressure is stronger for immigrants in the surge than for other workers, such as U.S. citizens, because immigrants have a weaker bargaining position when negotiating with employers,” CBO said.

Immigration has become a heated issue in the 2024 election campaign. President Joe Biden’s decision to allow some immigrants, undocumented spouses of U.S. citizens, to stay in the country without fear of deportation was praised by some Democrats as humane, even as they’ve slammed his other recent border policy moves.Republicans have cited it as another example of Biden hampering efforts to close the border to undocumented immigrants. In polling, immigration remains a big concern for voters.

Economists are increasingly turning to immigration as an explanation for how the U.S. economy withstood a long series of interest rate hikes in the years after the peak of the COVID-19 pandemic without falling into a recession.

“The labor force in 2033 is larger by 5.2 million people, mostly because of higher net immigration. More workers mean more output and that in turn leads to additional tax revenue,” CBO Director Phillip Swagel said in February.

A bigger economy would also help the federal budget picture slightly, CBO said. State and local governments, on the other hand, could see more pressure on their bottom lines.

“Research has generally found that increases in immigration tend to raise federal revenues more than federal costs but tend to increase the costs of state and local governments more than their revenues,” CBO said.

CBO estimated the increase in immigration would trim about $900 billion off the 10-year deficit compared to historical immigration levels. While a big number, it pales in comparison to the more than $20 trillion in overall debt that the CBO expects the federal government will run up over the next 10 years.

Specifically, the agency said the “surge” would see $1.2 trillion more in federal taxes and other receipts, which would be partially offset by a $300 billion boost in spending.

Elsewhere in the report, the CBO said the government continues to face high budget deficits. As of June, the shortfall is set to total about $1.9 trillion, a 27% increase from the CBO’s February forecast. The office attributed that higher figure to rising student loan costs, financial cleanups of failed banks and, in part, higher annual spending and outlays for Medicaid.