CBO Report Cites Economic Benefits Of Immigration Reform
A new Congressional Budget Office report finds real economic benefits from immigration reform.
The Congressional Budget Office came out with a report late yesterday that cites a wide variety of economic benefits from immigration reform, a report that arguably helps the advocates of reform in the Senate and elsewhere make their case:
WASHINGTON — Congressional budget analysts, providing a positive economic assessment of proposed immigration law changes, said Tuesday that legislation to overhaul the nation’s immigration system would cut close to $1 trillion from the federal deficit over the next two decades and lead to more than 10 million new legal residents in the country.
A long-awaited analysis by the Congressional Budget Office found that the benefits of an increase in legal residents from immigration legislation currently being debated in the Senate — which includes a pathway to citizenship — would outweigh the costs. While the report was a clear victory for immigration proponents, it came just hours after Speaker John A. Boehner raised potential new obstacles for the bill, saying he would not bring any immigration measure to the floor unless it had the support of a majority of House Republicans.
The report estimates that in the first decade after the immigration bill is carried out, the net effect of adding millions of additional taxpayers would decrease the federal budget deficit by $197 billion. Over the next decade, the report found, the deficit reduction would be even greater — an estimated $700 billion, from 2024 to 2033. The deficit reduction figures for the first decade do not take into account $22 billion in the discretionary spending required to implement the bill, however, making the savings slightly lower.
The report was immediately seized on by backers of the bill as a significant boost to its prospects. Senator Charles E. Schumer, Democrat of New York, one of the bill’s authors, said the report “debunks the idea that immigration reform is anything other than a boon to our economy.”
The budget office also found that in the next decade the legislation would lead to a net increase of about 10.4 million permanent legal residents and 1.6 million temporary workers and their dependents, as well as a decrease of about 1.6 million unauthorized residents.
Conservatives had expected that an analysis of the second decade — when immigrants would begin to qualify for federal benefits — would bolster their argument that the costs of an immigration overhaul were unwieldy, but that turned out not to be the case in the economic analysis.’
As you might expect, reaction to this report depends upon which side of the immigration debate you happen to be on. For example, Ezra Klein sees this as a big boost for the Senate bill:
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.
As does Kevin Drum, although he’s not quite as enthusiastic about the report as Klein:
Compared to its baseline estimates, CBO also projects that if the immigration bill is passed, GDP will increase a bit over the next decade; wages will go down a bit but then rise in the decade after that; capital investment will rise; and the productivity of labor and of capital will go up. All of these effects are fairly small, however. Economically, a pretty reasonable takeaway is that immigration reform would probably have a positive effect, but not a large one.
On the right, the reaction to the report is, of course, quite different ranging from the skepticism expressed by Hot Air’s Allahpundit to the those like John Hinderaker who believes that the report actually helps the opponents of immigration reform:
Behind these rather antiseptic observations lies a human tragedy: falling wages and rising unemployment for the very segment of American society that has struggled the most in recent years. On top of that, the nation’s welfare system will be severely strained. While newly-legalized immigrants will not immediately be eligible for federal welfare benefits, that does not apply at the state and local levels. Those welfare systems will be overwhelmed with millions of new claimants-the cost to be borne, of course, by the taxpayers.
I don’t doubt that the CBO’s report understates the extent of the devastation that will be wrought by the Gang’s legislation, but the picture it paints is clear enough. Why, one wonders, would anyone support such a destructive proposal? Anyone, that is, other than a Democratic politician who is salivating at the thought of millions of new Democrat voters?
Finally, in a subsequent post to the one noted above, Klein argues that the report helps the political case for immigration reform to at least some degree, while also helping to point out what the real objections to immigration reform are:
Ultimately, the CBO report rips a layer of artifice from the immigration debate. Few critics of immigration reform really base their opposition on concerns about the deficit or the economy. Their real concern with immigration is cultural and sociological. But that’s dangerous political ground. It’s easier to frame opposition using the bloodless language of the budget than the combustible language of national character and composition.
That’s the real damage the CBO did to the anti-immigration caucus. It took the bloodless language of the budget away from them. It left them only with their real concerns — the ones they’d prefer not to emphasize. That will perhaps lead to a slightly more truthful debate about immigration reform, but one that is much more dangerous for the anti-reform side, and for the Republican Party.
I’m not quite as gung-ho about the report as Klein is, mostly because I’ve always been skeptical about the real predictive value of long-term economic forecasts when it comes to telling us what is likely to happen ten or twenty years down the road. Nonetheless, the economic benefits of increased immigration are something that has been well-documented by economists on both sides of the political aisle, and the fiscal benefits of legalizing millions of wage-earning people currently living in the shadow economy seem rather self-evident. The report establishes both of these effects quite clearly, and also tends to demolish quite handily the rather specious economic arguments advanced by opponents of immigration reform, and immigration generally. To that extent, it arguably does provide at least some measure of political support to proponents of reform trying to get something through Congress and onto President Obama’s desk before the end of the year.
That doesn’t mean, of course, that the CBO guarantees smooth sailing for immigration reform from this day forward. For one thing, while it’s true that immigration reform will be good for the economy as a whole, it’s likely true that there are going to be some sectors of the economy that will be significantly disrupted by the introduction of newly legal immigrants into the mainstream economy. Low-wage and low-skill workers, for example, are likely to find themselves competing for work with people who are just as willing as the are to take low wages to get a foot in the door. That’s essentially the argument that Hinderaker makes above, but it strikes me as ironic that conservatives are making that kind of an argument. The conservative economic argument has traditionally been one that has recognized the impact that change can have on some sectors of the economy while at the same time benefiting the economy as a whole. The answer to such disruptions, economists like Friedman and Hayek that conservatives admire would say, isn’t to try to stop the change, but to accept it and recognize the benefits to the economy as a whole rather than the limited impact on one sector of it. If the right is abandoning that principle of economics to make their case against immigration reform, then it strikes me that they are conceding that they don’t really have an economic argument against immigration reform.
As Klein notes in his post today, it’s rather apparent that the real opposition to immigration reform is more cultural than it is economic. A CBO report about the economic benefits of immigration isn’t going to persuade people who come to the debate from this perspective any more than similar arguments have persuaded opponents of immigration in the past. Nonetheless, as Klein says, it will tend to reveal the arguments against reform for what they really are, and that can’t be good politically for a party that dedicates itself to defeating immigration reform