The Volokh Conspiracy
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Immigration Massively Reduces Budget Deficits
A new Cato Institute study provides the most comprehensive analysis of this issue to date.
A new Cato Institute study provides a comprehensive overview of the fiscal impact of immigration to the United States over thirty years, and finds that immigrants have reduced budget deficits by a massive $14.5 trillion from 1994 to 2023. Here is the authors' summary of the results:
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Every year from 1994 to 2023, immigrants have paid more in taxes than they received in benefits.
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Immigrants generated nearly $10.6 trillion more in federal, state, and local taxes than they induced in total government spending.
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Accounting for savings on interest payments on the national debt, immigrants saved $14.5 trillion in debt over this 30-year period.
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Immigrants cut US budget deficits by about a third from 1994 to 2023, and fiscal savings grew to $878 billion in 2023 (Figure 1).
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Noncitizens accounted for $6.3 trillion of the $14.5 trillion debt savings.
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College graduate immigrants accounted for $11.7 trillion in savings, while non–college graduates accounted for $2.8 trillion.
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The cohort of immigrants entering from 1990 to 1993, just before data collection began in 1994, was fiscally positive $1.7 trillion, and was still positive after 30 years in 2022–2023 (Table 1).
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Even including the second generation (see Box 1 for definitions), who are mostly still children who will become taxpayers soon, the fiscal effect of immigration was positive every year.
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Immigrants in all categories of educational attainment, including high school dropouts, lowered the ratio of deficit to gross domestic product (GDP) during the 30-year period.
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Without the contributions of immigrants, public debt at all levels would already be above 200 percent of US GDP—nearly twice the 2023 level and a threshold some analysts believe would trigger a debt crisis.
My Cato colleague David Bier (one of the coauthors of the study) provides further analysis of the results here. There are previous studies on this topic, such as the Congressional Budget Office's analysis in 2024. But the new Cato study is notable for its comprehensive nature, covering effects on all three levels of government, and separately considering many different types of immigrants, including both legal and illegal, immigrants with different education and skill levels, and more.
The overwhelming nature of the evidence here should all but bury the fiscal case for immigration restrictions, though I expect restrictionists to keep making the argument, regardless. I made some additional points against the fiscal argument for restrictionism in this post, and in greater detail in Chapter 6 of my book Free to Move: Foot Voting, Migration, and Political Freedom.
Obviously, there are many other rationales for immigration restriction, such as claims that immigration increases crime, spreads harmful cultural values, damages political institutions, and more. Restrictionists also argue that governments have a general right to exclude migrants for any reason they want, either because governments are analogous to homeowners, or because a particular ethnic or racial group are the true owners of a given country, and thereby have a "self-determination" right to exclude members of other groups. I critique these arguments and others in Chapters 5 and 6 of Free to Move and in various other publications, such as this one.
By the same token, I do not believe that the positive fiscal impact is the best rationale for ending or reducing immigration restrictions. In my view, it is far less significant than the immense negative impact of immigration restrictions on liberty and human welfare, including that of receiving-country natives, as well as that of would-be migrants.
But the fiscal case for restrictionism has special significance for some types of libertarians and conservatives who cannot otherwise rationalize the massive restrictions on liberty imposed by immigration restrictions, and therefore love to quote Milton Friedman's misleading line that "[y]ou cannot simultaneously have a welfare state and free immigration." It turns out you can, and immigration actually eases the fiscal burden of welfare spending.
