Undocumented immigrants will boost economy, lower deficit, CBO says

The growing undocumented immigrant population in the U.S. will lower the deficit by nearly a trillion dollars over the next decade, according to a study by the Congressional Budget Office (CBO).

CBO’s projections are based on the net sum of economic activity generated, taxes paid and benefits allotted to the immigrant groups included in the study.

The nonpartisan agency estimates a net population increase of 8.7 million such immigrants between 2021 and 2026, averaging an increase of 1.7 million people per year above the pre-2020 average annual net immigration of 200,000.

CBO based its projections on the economic effects that surge group of 8.7 million people is expected to have between 2024 and 2034.

The report excludes immigrants who receive or are eligible for legal permanent resident status, non-immigrant foreign nationals on temporary work visas or asylees, instead focusing on people paroled at or between ports of entry at the border, visa overstayers and undocumented immigrants who entered the country without encountering U.S. border officials.

That group is expected to generate $1.175 trillion in increased federal revenue in the 2024-2034 period and $270 billion in mandatory outlays and net federal spending for a net decrease of $897 billion in the federal deficit.

The economic effects of that population are expected to increase over time: from 2024 to 2028, the projected net deficit reduction due to their presence is $296 billion.

CBO’s projection divides the budgetary effects of undocumented immigrants into two categories: the taxes directly paid by that population, and the economic growth spurred by the immigrants roles as consumers and in the labor market.

Between 2024 and 2034, CBO projects the immigrants in the surge population will pay $788 billion in taxes and generate $387 of extra federal revenue through their effects on the overall economy.

Their effect on mandatory outlays and net spending for interest — how much the immigrants’ presence will cost the federal government — is also divided in two, the cost of benefits themselves and the costs related to the economic effects of the increased population.

CBO estimates that the federal government will spend $177 billion on benefits for that population between 2024 and 2034, a number that will grow over time as the immigrants and their children become eligible for more government benefits.

The group’s effect on interest payments is estimated to decrease the deficit by about $4 billion in the 2024-2028 period, but trend upward in the second half of the decade, leading to a spending increase of $101 billion in the whole 2024-2034 period.

CBO estimates the net effect of taxes paid minus benefits allotted will reduce the deficit by $611 billion between 2024 and 2034, and the collateral economic effects of undocumented and paroled immigrants will reduce the deficit by $285 billion over that time period.

Though CBO did not produce a projection for state and local budgets, the balance of tax revenue versus benefits allotted will depend on the benefit structures in each state, according to the report.

“Researchers have generally found that increases in immigration tend to raise the federal government’s revenues more than its costs but increase state and local governments’ costs more than their revenues,” it reads.

“CBO expects that general pattern to hold for the immigration surge considered in this report—the additional 8.7 million people in the other-foreign-national category who migrate to the United States or remain in the country after an authorized stay from 2021 to 2026 and their U.S.-born children”

But the report added the overall local budgetary effect of the specific group of 8.7 million people could split from that norm, in part because the group is predominantly made up of working-age people, who tend to use fewer social services and pay more taxes than children or older people.

CBO’s estimate of a net population growth of 8.7 million people estimates that roughly half that population arrived between 2021 and 2023, and the other half is arriving between 2024 and 2026. The researchers ran their numbers predicting a return to the long-term average of annual net undocumented and paroled immigration of 200,000 people per year.

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