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The politics of immigration reform in the United States are principally about big things and decades long time horizons: human rights, economic competitiveness, nationalism and the viability of the Democratic and Republican voting coalitions.But they’re also about the country’s demographics — and thus its fiscal health.
Given how completely the federal budget has dominated national politics for the past two years, it’s worth examining what impact comprehensive immigration reform would have on the country’s finances.
After all, if immigration reform would reduce deficits, then the very scolds who have identified the national debt as the most urgent matter facing the country will have at least one good reason to support it.
A quick look back at recent scholarship and previous comprehensive immigration proposals — broadly similar to the framework the Gang of Eight has agreed to — suggests reform will strengthen some of the country’s most popular social programs, and, depending upon how it’s devised and implemented over time, might even reduce deficits over the coming decade.
Take the immigration reform bill Congress considered in 2007. According to the Congressional Budget Office, it would have increased spending on social programs by about $22.7 billion over 10 years. But CBO, along with the Joint Committee on Taxation, also estimated that it would increase revenues by $48.3 billion during the same period.
So the population changes the immigration reform itself would have triggered in 2007 would have reduced deficits by $25.6 billion.
That analysis excludes the expected implementation cost of the reforms, which were not included in the reform bill itself but were left to future Congresses to appropriate. As the centre on Budget and Policy Priorities noted in 2007, the cost of implementing the bill was expected to run about $43.4 billion over 10 years, costs Congress would have had to approve through the annual appropriations process.
Assuming those expenditures would have been added to overall discretionary spending levels — that Congress wouldn’t have reduced spending elsewhere in the government to keep overall discretionary spending from rising as a result of comprehensive immigration reform — immigration reform would have been a net deficit increaser.
But times have changed since 2007. In 2011, Congress passed legislation imposing caps on annual appropriations for the ensuing 10 years. The implementation costs of comprehensive immigration reform in 2013 will likely have to be squeezed into a fixed discretionary budget — not added to it. In other words, those additional expenditures will have to be offset somewhere else.
A critical point here is that both in 2007 and now, reform proponents realise there’s no political upside to a reform proposal that increases the deficit. As the 2007 experience suggests, if legislators want immigration reform to score as a deficit reducer, they’ll be able to write it such that it will.
The 2013 version of reform contains provisions that would undoubtedly increase government revenue. For instance, the Gang of Eight framework insists that “[c]urrent restrictions preventing non-immigrants from accessing federal public benefits will also apply to lawful probationary immigrants” — the status that will be provided to immigrants between passage of the law and their eventual “pathway to citizenship.”
But in order to earn probationary legal status, immigrants will have to pay back taxes, and once they’re granted probationary legal status, they’ll have to pay taxes, even though they remain ineligible for benefits.
Moreover, past immigration reform efforts would have likely strengthened Social Security. CBO concluded that if the 2006 comprehensive immigration reform bill had passed, the program’s “finances [would have] generally improved because additional revenues are collected before new benefit payments are made.”
Immigration reform thus helps improve the demographic imbalance that deficit hawks warn will make the program’s existing financing and benefit formulas unsustainable.
There are other budgetary and economic benefits as well. In a 2010 report for the liberal centre for American Progress, Raúl Hinojosa-Ojeda concluded (PDF) that comprehensive immigration reform would boost GDP by 0.84 per cent — about $1.5 trillion over 10 years.
Additionally, the report finds, “The real wages of newly legalized workers increase by roughly $4,405 per year among those in less-skilled jobs during the first three years of implementation, and $6,185 per year for those in higher-skilled jobs,” according to CAP’s model.
“The higher earning power of newly legalized workers translates into an increase in net personal income of $30 to $36 billion, which would generate $4.5 to $5.4 billion in additional net tax revenue.”
There are some important unknowns, though. One stems from the fact that the government is in the process of implementing the Affordable Care Act — a law that will provide people granted citizenship or green cards under immigration reform new benefits, but few financing obligations.
It’s much too early to say what the budgetary implications of these new ACA beneficiaries will be. But, again, those benefits won’t begin flowing until the long probationary period is over.
Using sleight of hand designed to make comprehensive immigration reform appear to be a budget buster, conservative critics warn that amnesty will increase government spending. This is true — making more people eligible for federal benefits increases government spending. But it ignores the revenue half of the equation and thus elides the likelihood that immigration will actually be narrowly beneficial to the country’s fiscal health.
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