Immigration and the deficit

A bit over a month ago, the Heritage foundation put out a report that concluded that immigration reform would cost the US trillions of dollars. A slightly more scholarly report by the CBO finds:

Combining those figures would lead to a net savings of about $175 billion over the 2014–2023 period from enacting S. 744.

On balance, CBO and JCT estimate that those changes in direct spending and revenues would decrease federal budget deficits by about $700 billion (or 0.2 percent of total output) over the 2024–2033 period. In addition, the legislation would have a net discretionary cost of $20 billion to $25 billion over the 2024–2033 period, assuming appropriation of the necessary amounts. According to CBO’s central estimates (within a range that reflects the uncertainty about two key economic relationships in CBO’s analysis), the economic impacts not included in the cost estimate would further reduce deficits (relative to the effects reported in the cost estimate) by about $300 billion over the 2024–2033 period.

Hmm, who should I believe–the CBO or a guy who thinks Hispanics have lower IQ and who believes IQ measure intelligence? Tough choice. The report also finds:

CBO estimates that, by 2023, enacting S. 744 would lead to a net increase of 10.4 million in the number of people residing in the United States, compared with the number projected under current law. That increase would grow to about 16 million by 2033. CBO also estimates that about 8 million unauthorized residents would initially gain legal status under the bill, but that change in status would not affect the size of the U.S. population.

Taking account of all economic effects (including those reflected in the cost estimate), the bill would increase real (inflation-adjusted) GDP relative to the amount CBO projects under current law by 3.3 percent in 2023 and by 5.4 percent in 2033, according to CBO’s central estimates. Compared with GDP, gross national product (GNP) per capita accounts for the effect on incomes of international capital flows and adjusts for the number of people in the country. Relative to what would occur under current law, S. 744 would lower per capita GNP by 0.7 percent in 2023 and raise it by 0.2 percent in 2033, according to CBO’s central estimates.

CBO’s central estimates also show that average wages for the entire labor force would be 0.1 percent lower in 2023 and 0.5 percent higher in 2033 under the legislation than under current law.

They explain this last bit:

The estimated reductions in average wages and per capita GNP for much of the next two decades do not necessarily imply that current U.S. residents would be worse off, on average, under the legislation than they would be under current law. Both of those figures represent differences between the averages for all U.S. residents under the legislation—including both the people who would be residents under current law and the additional people who would come to the country under the legislation—and the averages under current law for people who would be residents in the absence of the legislation. As noted, the additional people who would become residents under the legislation would earn lower wages, on average, than other residents, which would pull down the average wage and per capita GNP; at the same time, the income earned by capital would increase. CBO has not analyzed the full economic effects of the legislation separately for the incomes of people who would be U.S. residents under current law.

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