Surging Immigration Will Reduce Deficits by $1 Trillion

New Congressional Budget Office data shows how higher-than-expected immigration is a win for the economy and the federal budget.

Higher levels of immigration are boosting America's economy and will reduce the deficit by about $1 trillion over the next decade.

In its semi-annual 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 run a $1.5 trillion deficit, down from the $1.6 trillion deficit previously forecast.

That reduction is due in part to higher-than-expected economic growth, which the CBO attributes to "more people working." The labor force has grown by 5.2 million people in the past year, "mostly because of 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.

The changes in the labor force over the past year will translate into $7 trillion in greater economic output over the next decade, the CBO estimates, "and revenues will be greater by about $1 trillion than they would have been otherwise."

"The higher growth rate of potential GDP over the next five years stems mainly from rapid growth in the labor force, reflecting a surge in the rate of net immigration," concludes the CBO, which expects higher than normal levels of immigration through 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 appetite for spending. Sometimes economics can be quite confusing, but that formula is about as straightforward as can be.

America's current population is trending older, which strains old-age entitlement programs and means fewer productive workers in the economy. Thankfully, that's not true of the country's immigrants: "A large proportion of recent and projected immigrants are expected to be 25 to 54 years old—adults in their prime working years," the CBO reports.

It also tracks with what other studies have repeatedly shown: More legal immigration grows the economy, helps fund government programs, and doesn't strain entitlement or welfare programs.

Unfortunately, the very same Congress that bears most of the responsibility for the federal government's poor fiscal state is also a major hurdle to increasing legal immigration that could help solve some of that fiscal mess. This week's stunningly fast collapse of a proposed immigration bill is only the latest example.

Meanwhile, the CBO's assessment of how immigration has boosted economic growth further underscores the problems with how the CBO assesses the economic impact of immigration proposals. As Reason reported last week, the CBO is systematically underestimating the benefits of immigration when it scores legislation because Congress does not allow it to use a more sophisticated method of projecting how immigrants contribute to the economy. This is hardly the sole reason why comprehensive immigration reform struggles to get passed, but it certainly does not help.

Indeed, this arrangement amounts to the CBO only being able to account for economic growth created by immigrants who are already here—but then being prohibited from assuming that future immigrants will similarly help grow America's economic pie. That's just silly.

With a national debt of over $34 trillion and another $20 trillion in borrowing expected over the next decade, Congress needs a plan for addressing the budget deficit that goes well beyond simply increasing immigration.

Still, it is impossible to deny that greater levels of immigration are an economic win for the country—and for taxpayers who have to shoulder the burden of federal borrowing. Anyone saying otherwise is not being serious.