Higher levels of immigration are boosting the U.S. economy and will reduce the deficit by about $1 trillion over the next decade.
In its semiannual forecast of the country’s fiscal and economic conditions, released this week, the Congressional Budget Office slightly lowered its expectations for this year’s federal budget deficit. The CBO now expects the federal government to have a deficit of $1.5 trillion, down from the $1.6 trillion deficit previously projected.
That reduction is due in part to stronger-than-expected economic growth, which the CBO attributes to “more people working.” The labor force has grown by 5.2 million people last year, “primarily due to higher net immigration.”
More immigrants will also help reduce future budget deficits, which are expected to average $2 trillion annually over the next 10 years, meaning any help is desperately needed.
Changes in the workforce over the past year will translate into $7 trillion of increased economic output over the next decade, according to the CBO. Dear All“and revenues will be about $1 trillion higher than they would have been otherwise.”
“The higher potential GDP growth rate over the next five years is primarily due to rapid growth in the labor force, reflecting an increase in the net immigration rate,” concludes the CBO, which expects higher immigration levels of normal until at least 2026. .
Of course, this isn’t exactly rocket science. More workers equals more economic output and more growth, which in turn leads to more tax revenue to help offset some of the federal government’s seemingly insatiable spending appetite. Economics can be pretty confusing sometimes, but that formula is as simple as it gets.
Today’s U.S. population is trending older, straining old-age benefit programs and meaning fewer productive workers in the economy. Fortunately, that’s not true for the country’s immigrants: “A large proportion of recent and projected immigrants are expected to be between the ages of 25 and 54, adults in their prime working years,” the CBO reports.
It also matches what other studies have repeatedly shown: More legal immigration grows the economy, helps fund government programs, and does not put pressure on social or entitlement programs.
Unfortunately, the same Congress that bears the most responsibility for the poor fiscal state of the federal government is also a major obstacle to increasing legal immigration that could help solve some of that fiscal mess. This week’s stunningly rapid collapse of a proposed immigration bill is just the latest example.
Meanwhile, the CBO’s assessment of how immigration has boosted economic growth further underscores problems with how the CBO assesses the economic impact of immigration proposals. As Reason As reported last week, the CBO is systematically understating the benefits of immigration when rating legislation because Congress does not allow it to use a more sophisticated method to project how immigrants contribute to the economy. This is not the only reason why comprehensive immigration reform has difficulty passing, but it certainly does not help.
In effect, this agreement amounts to the CBO only being able to account for the economic growth created by immigrants already here, but then being prohibited from assuming that future immigrants will similarly help grow America’s economic pie. That’s silly.
With a national debt of more than $34 trillion and another $20 trillion in borrowing expected over the next decade, Congress needs a plan to address the budget deficit that goes far beyond simply increasing immigration.
Still, it is impossible to deny that higher levels of immigration are an economic victory for the country and for the taxpayers who have to bear the burden of federal debt. Anyone who says otherwise is not serious.