As IPI’s own Merrill Matthews has so ably reported, the federal Congressional Budget Office now estimates that the federal budget deficit will exceed $1 trillion annually over the next 10 years.
Almost all the news is bad. But there’s one little bit of good news in the CBO’s February report. The CBO’s economists estimate that because of higher immigration, growth of real GDP will be higher. Specifically, says the CBO:
Most of the increase in the projected population reflects larger net immigration. That greater immigration is projected to boost the growth rate of the nation’s real gross domestic product (GDP) by an average of 0.2 percentage points a year from 2024 to 2034, leaving real GDP roughly 2 percent larger in 2034 than it would be otherwise.
Immigrants tend to be younger and, therefore, tend to be employed. Without this higher number of immigrants, estimates the CBO, economic growth over the next 10 years would have averaged about 1.8 percent annually. But higher immigration would increase economic growth during those years to a slightly less anemic annual rate of 2 percent. In other words, we pay a price in terms of economic growth for a lower supply of labor.
With higher growth, of course, come higher tax revenues, although reading the CBO’s report is like looking at the output of a black box. CBO Director Phill Swagel elaborated on the effect of immigration earlier this month. He stated:
The labor force in 2033 is larger by 5.2 million people, mostly because of higher net immigration. As a result of those changes in the labor force, we estimate that, from 2023 to 2034, GDP will be greater by about $7 trillion and revenues will be greater by about $1 trillion than they would have been otherwise. We are continuing to assess the implications of immigration for revenues and spending.
A $1 trillion reduction in the federal debt is no longer a lot, but it’s nothing to sneeze at.
Of course, the status quo is highly dysfunctional: Allowing immigrants to come into the country while forbidding them to work. We could do much better: get rid of the regulation that says people seeking asylum—unless they’re from Cuba, Ukraine, Haiti, Nicaragua, or Venezuela—must wait six months before working. If other asylum seekers were put on the same footing as people from those five countries, they could work right away and would be contributing to economic growth even sooner. That would also save on a lot of food and housing expenses paid for by local governments.
There are, of course, other factors in the debate over immigration. But it’s good to see the CBO acknowledges that immigration is a net plus for economic growth.
February 28, 2024