CBO: Immigration reform is a free lunch

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June 18, 2013

Good news for immigration reformers: The Congressional Budget Office has scored the Senate immigration bill and concluded it will cut deficits by $200 billion in the first 10 years and $700 billion in the second 10 years.

This just got a little more likely. (Photo by Alex Wong/Getty Images)
This just got a little more likely. (Alex Wong/Getty Images)

How? In a word, growth. But in two words, population growth. CBO expects that passage of the bill would mean 10.4 million more U.S. residents in the next decade. To be clear, that's not a measure of newly legal residents. CBO isn't counting the newly legalized population — which they estimate at 8 million — as new residents. After all, those people are already here. The 10.4 million number only counts people who wouldn't otherwise physically reside in the United States.

The basic math of the CBO's report is that those new workers pay more in taxes than they take in benefits. To be precise, the bill increases government spending by $262 billion but increases revenues by $459 billion. And that's before accounting for economic growth above and beyond the direct effect on population.

Other parts of the report are slightly more mixed for the bill — but only slightly. For instance, CBO estimates that average wages would fall by 0.1 percent in the first decade, but rise by 0.5 percent in the second decade. But that's actually a bit misleading: That slight fall in in the first decade is driven by new immigrants who are making less than the average wage — even though their wage has gone way up as compared to what they were making before immigrating.

As for folks already here, CBO is careful to note that their estimates "do not necessarily imply that current U.S. residents would be worse off" in the first 10 years, and in the second 10 years, they estimate that the average American's wages will rise.

Unemployment follows a similar path: It rises slightly at the beginning, probably because the new immigrants are likelier to be unemployed, but is unchanged after that.

The bill's overall effect on the overall economy is unambiguously positive: CBO expects real GDP to increase by 3.3 percent by 2023 and by 5.4 percent in 2033. The reasoning here is a bit more complex: It's not just that the bill would mean more workers, but that it would mean more productive workers. CBO says that the law would "lead to slightly higher productivity of both labor and capital because the increase in immigration — particularly of highly skilled immigrants — would tend to generate additional technological advancements, such as new inventions and improvements in production processes."

This isn't just a good CBO report. It's a wildly good CBO report. They're basically saying immigration reform is a free lunch: It cuts the deficit by growing the economy. It makes Americans better off and it makes immigrants better off. At a time when the U.S. economy desperately needs a bit of help, this bill, according to the CBO, helps. And politically, it forces opponents of the bill onto the ground they're least comfortable occupying: They have to argue that immigration reform is bad for cultural or ethical reasons rather than economic ones.

Perhaps the best evidence of how unambiguously positive this report is for the law comes from the reaction of some House Republicans to the estimate. "Just got an e-mail from a House Republican reminding me that none of them trust CBO, so this doesn't much matter to them," tweets Politico's Jake Sherman.

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Dylan Matthews · June 18, 2013