The millions of immigrants who have surged into the United States since Joe Biden became president will have momentous effects on the economy and budget over the coming decade, according to a new official budget report.
The nonpartisan Congressional Budget Office released a detailed report Tuesday that found the U.S. will have brought in some 8.7 million more immigrants between 2021 and 2026. The CBO's findings are noteworthy because they represent an effort to account for all the immigrants who have arrived via the overridden southern border in recent years, a development that other official government statistics have struggled to capture.
The CBO concluded that the increase in migration will have some salutary fiscal effects. It will translate to greater economic output, more government taxation and spending, and smaller federal budget deficits over the next decade. The report, though, did not examine state and local budgets, which are thought to be at greater risk of being undermined by mass migration, and it found mixed effects of the migration surge on wages.
Compared to the CBO's baseline, the surge will increase nominal gross domestic product by $8.9 trillion from 2024 to 2034, according to the agency, and the overwhelming majority of that increase is owed solely to the larger population base. Some $1.5 trillion of the GDP boost is due to greater labor force participation of the surge population.
Additionally, because of the wave of immigration, the government’s baseline projections on budgets, taxes, and spending have changed. The CBO sees deficits falling, on net, by $900 billion from 2024 to 2034.
“Some of the effects on the budget result from the increase in the number of people paying taxes and collecting federal benefits,” the CBO report reads. “Other budgetary effects stem from changes in the economy over that period that are brought on by the surge, including increases in interest rates and in the productivity of workers who are not part of the surge.”
The rise in immigration means that government tax revenue is expected to grow by $1.2 trillion more than expected over the next decade. The projected annual increase in tax revenue will grow over the next 10 years and reach $167 billion, 2.2% of total revenues, in 2034.
The immigration surge will add $300 billion in spending for federal mandatory programs and net spending for interest on the debt over the coming decade, according to the new projections.
“Most notably, spending for interest on the government’s debt increases, primarily because of the higher interest rates resulting from the surge in immigration,” the CBO found. “In total, projected outlays in 2034 are boosted by $50 billion because of the surge.”
The immigration surge will also be felt across the country’s labor market, and initially, the lowest-paid U.S. workers will be put at a disadvantage.
The CBO found that growth in average hourly pay from 2024 to 2031 will be about 1% to 1.5% slower as a result of the immigration surge. That is, in large part, because recent arrivals have, on average, less education and earn lower wages.
Wage growth for those already in the U.S., mainly U.S. citizens, will also be affected by the surge, although the degree to which will be affected differs by education.
For those with a high school education or less, wage growth will slow over the next two years because the uptick in the supply of workers with similar skills will depress that growth, according to the CBO.
“Workers who have more than 12 years of education see little change in their wage growth in the initial years of the surge,” the report reads. “The increase in workers with less education increases the demand for more-educated people to work with them, and the resulting upward pressure on wage growth roughly offsets the downward pressure that stems from a greater supply of workers with similar skills.”
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However, after 2026, wage growth for the U.S. workforce that was not part of the surge is expected to increase slightly because of higher overall productivity from the immigration surge. The projected increase in productivity is set to boost wage growth for all groups of workers in the longer term and will even more than offset the short-term reductions in wage growth for some groups.
The CBO report comes in a critical election year as former President Donald Trump is likely facing Vice President Kamala Harris after Biden announced he would no longer seek a second term. Immigration is one of the major issues on voters’ minds.
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