The Congressional Budget Office (CBO) released its reports on the Senate’s immigration reform bill (S. 744) on Wednesday, with several positive predictions for the pro-immigration crowd. For one, the first CBO report said federal budget deficits will be decreased by $197 billion from 2014–2023, due to “changes in direct spending and revenues.”
Specifically this is because of an increase in federal direct spending by $262 billion and an increase in federal revenues by $459 billion – “largely from additional collections of income and payroll taxes, reflecting both an increase in the size of the U.S. labor force and changes in the legal status of some current workers.” In other words, more citizens mean more tax money.
An estimated 8 million illegal immigrants would achieve legal status if S. 744 is passed by 2023 – a number which the CBO says won’t affect the U.S. population much, but will certainly affect the economy. Future population estimates from the CBO show that by 2023 there would be a net increase of 10.4 million residents, which includes the addition of 1.6 million temporary workers and their dependents. Overall, the CBO estimates there will be an increase of 6 million workers (about 3.5 percent) by 2023 and around 9 million workers (about 5 percent) by 2033.
The overall GDP of the U.S. will be 3.3 percent higher by 2023 and 5.4 percent higher by 2033 if the law passes (compare that to a decrease of 0.7 percent in 2023 if the status quo remains), according to the CBO’s estimates in the second report. These estimates are based on the assumption of increased population. Average wages, however, will decrease by .1 percent in 2023, but be .5 percent higher in 2033. The reason for this, according to the CBO’s analysis, is because the “new workers would be less skilled and have lower wages, on average,” but would develop their skills over time.
Overall, the CBO found that S. 744 would “increase the size of the labor force and employment, increase average wages in 2025 and later years (but decrease them before that), slightly raise the unemployment rate through 2020, boost the amount of capital investment, raise the productivity of labor and of capital, and result in higher interest rates.”
It's a very straightforward concept: By increasing the number of working-age citizens by naturalizing those here illegally, those citizens will in turn pay taxes and increase federal revenue, while injecting fresh capital into the economy.
However, although the CBO found that “unauthorized residents [will] find it harder both to enter the country and to find employment while unauthorized,” the decrease in illegal immigrants will only be around 25 percent (page 23 of the first report). This would be due to “other aspects of the bill [that] would probably increase the number of unauthorized residents – in particular, people overstaying their visas issued under the new programs for temporary workers.”
While the fiscal outlook of the report will give momentum to the pro-immigration side, the fact that the CBO is estimating only a 25 percent decrease of the net annual flow of illegal immigrants will not sit well with the anti-immigration reform side. And that matters, especially after Speaker John Boehner’s plan to enforce the Hastert Rule, the House’s disregard of the Senate’s bill, and the Senate’s own internal struggles over border security.
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