Q&A: Immigration’s Impact on Budget & Economy

Q&A: Immigration's Impact on Budget & Economy

With U.S. Senator Chuck Grassley

Q: What is the Congressional Budget Office (CBO)?

A: In 1974, Congress passed the Congressional Budget Act, creating a non-partisan arm of the legislative branch to crunch numbers that inform the federal budget process. For 50 years, the Congressional Budget Office (CBO) has provided independent analyses of budgetary and economic issues that lawmakers use to shape public policy. As Ranking Member of the Senate Budget Committee, I pushed to have the CBO Director appear before the committee to discuss the nation's budget outlook for the first time in four years. In July, I welcomed the CBO Director to testify and answer questions. At my annual 99 county meetings, Iowans regularly express their frustration with Washington's reckless deficit spending that puts taxpayers on the hook for trillions of dollars of debt. Don't forget interest payments on the debt will exceed $1 trillion next year, more than we spend on the military. Imagine how money going out the door in interest payments could be put to better use for national security, tax cuts for hardworking families, border security, and services for the American people.

Instead of tackling deficit spending and the national debt, the Senate Budget Committee in the 118th Congress, under Democrat control, has devoted its time and resources to climate change, which is the responsibility of the Senate Environment and Public Works Committee. I was glad to have the CBO Director appear before the committee to cut to the chase on our national debt. The United States is at a crucial fork in the road. We need to stop Washington's spending addiction and focus on accelerating work, savings, and investment. With the fiscal mess looming before us, the sooner we start digging out of this fiscal hole, the better.

Q: What did the recent CBO report say about immigration's impact on the federal budget?

A: CBO examined the recent immigration surge that started in 2021 and analyzed its effects on the federal budget and U.S. economy. For starters, CBO initially expected net migration of foreign nationals to continue at the annual average of 200,000 people a year. However, with the open border policies pushed by the Biden-Harris administration, it's not surprising the agency projects the net immigration of foreign nationals will exceed that rate by more than 8.7 million people from 2021-2026. The nonpartisan report looks at the nation's immigration surge through the lens of a 10-year window and its effect on the economy and federal revenues, mandatory spending and interest on the debt.

The pace of immigration we've seen under the Biden-Harris administration will increase net spending for federal mandatory programs and apply upward pressure on interest rates. According to CBO, the estimated effect of the immigration surge over the next 10 years will add $177 billion in federal mandatory spending, which includes programs such as Medicaid, SNAP (originally called the Food Stamp Program) and Social Security, plus another $101 billion primarily because of higher interest rates on the debt. CBO estimates that about 60 percent of the 8.7 million people who are part of this immigration surge will be eligible for some or all federal benefits by 2034, including Social Security, tax credits to subsidize health insurance, Medicaid and nutrition assistance. That doesn't take into account discretionary spending for agencies that provide immigration-related services and programs, such as the Department of Homeland Security and the Department of Justice. In 2024, federal spending reached $37 billion, compared to $31 billion in 2019, for these accounts. All told, CBO estimates the budgetary pressure on discretionary programs would be roughly $200 billion from 2024-2034. The effects of the surge in immigration also place steep budgetary pressure on state and local governments who see spending on education, health care, and housing outpace incoming revenue.

As for the overall economy, CBO estimates the current immigration surge will initially reduce wage growth while putting upward pressure on interest rates and prices, particularly for housing. But like many economists, CBO sees immigration as a positive in the long run to help grow the economy, increase wages, and bring in more tax revenue for the federal government. That's certainly true of legal immigration. At my annual county meetings, I often hear from employers about the challenges they face to hire workers. A shrinking labor pool makes it difficult for businesses to innovate and thrive. Strengthening pathways for legal immigration can help meet that demand.

The problem is that while there's good evidence legal immigration strengthens our economy, most of the 8.7 million people who are part of the current surge are in the United States unlawfully. CBO cautions that its estimates of the effects of the current immigration surge are very uncertain because we don't know much about these illegal immigrants or how well they'll comply with other laws. The reckless flow of illegal immigration emboldens dangerous cartels and sows seeds of distrust that undermine America's welcome mat for legal immigration that for generations has strengthened our economy and enriched our nation's tapestry in communities across the country.

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