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CBO Report: Immigration Reform Will Shrink the Deficit and Grow the Economy

Independent analysts underscore that commonsense immigration reform is good for the budget, good for the solvency of Social Security, and good for economic growth. Alan B. Krueger is the Chairman of the Council of Economic Advisors

Today, the independent Congressional Budget Office released its score of the Senate’s bipartisan immigration bill, providing even more evidence that commonsense immigration reform is good for the budget and good for economic growth.

CBO estimates that fixing our broken immigration system will reduce federal deficits by about $200 billion over the next 10 years, and about $700 billion in the second decade. The CBO analysis made clear that the additional taxes paid by new and legalizing immigrants would not only offset any new spending, but would be substantial enough to reduce the deficit over the 20-year window. A significant portion of the new taxes would be paid by previously undocumented immigrants. While many of these workers already pay federal taxes, millions more will pay payroll taxes once they are able to obtain legal status and work above board.

CBO also found that commonsense immigration reform will increase real GDP by 3.3% in 2023, and 5.4% in 2033, a real increase of roughly $700 billion in 2023 and $1.4 trillion in 2033, due to higher labor force participation, increased capital investment, and increased productivity resulting from “technological advancements, such as new innovations and improvements in the production process.” 

CBO’s score follows other recent independent analyses which underscore that passing commonsense immigration reform is also one of the best, and often overlooked, ways to strengthen the solvency of the Social Security trust fund.

In a letter on May 8th, the Social Security Chief Actuary stated that the bipartisan Senate immigration bill will strengthen the solvency of the Social Security Trust Fund in the short run and the long run by reforming the legal immigration system and increasing by millions the number of currently-undocumented workers who will be paying payroll taxes. The Chief Actuary  wrote, “Overall, we anticipate that the net effect of this bill on the long-range OASDI [Social Security] actuarial balance will be positive.”

Because most immigrants are young, additional immigration helps balance out the increase in retirees-per-worker that will occur as the Baby Boom generation retires. That’s why the recently-issued 2013 Social Security Trustees Report finds that increased immigration strengthens Social Security. The Trustees Report shows that an increase of about 25 percent in annual net immigration flows would reduce the 75-year Social Security imbalance by 7 percent. Conversely, a 25 percent decrease in immigration would increase the 75-year imbalance by 8 percent. It’s also why a recently published analysis in Health Affairs concluded that “Encouraging a steady flow of young immigrants would help offset the aging of the U.S. population and the health care financing challenge that it presents.”

And these tangible economic and budget gains come on top of the other benefits of building a 21st century immigration system: strengthening our national security, spurring job creation, promoting innovation, and ensuring that America maintains its leadership position in having the most talented workforce in the world.

The President urges Congress to quickly move this bill forward, so that commonsense immigration reform becomes a reality as soon as possible.