July 3, 2013
As passed by the Senate on June 27, 2013
CBO estimates that, by 2023, enacting S. 744 would lead to a net increase of 9.6 million in the total number of people residing in the United States, compared with the number of people projected under current law. The resulting increase in the number of legal residents would boost direct spending for federal benefit programs; direct spending for enforcement and other purposes would also rise. Under the act, federal revenues would be higher as well, mostly because of the larger size of the labor force. Finally, implementing the act would require an increase in discretionary funding (that is, funding subject to annual appropriation actions) for immigration-related activities.
CBO and JCT estimate that enacting S. 744, as passed by the Senate, would generate changes in direct spending and revenues that would decrease federal budget deficits by $158 billion over the 2014-2023 period (see Table 1, enclosed with this letter). CBO also estimates that implementing the legislation would result in net discretionary costs of $23 billion over the 2014-2023 period, assuming appropriation of the amounts authorized or otherwise needed to implement the legislation. Combining those figures would lead to a net savings of about $135 billion over the 2014-2023 period from enacting S. 744. However, the net impact of the legislation on federal deficits would depend on future actions by lawmakers, who could choose to appropriate more or less than the amounts estimated by CBO. In addition, the total amount of discretionary funding is currently capped (through 2021) by the Budget Control Act of 2011; extra funding for the purposes of this legislation might lead to lower funding for other purposes.
Following the long-standing convention of not incorporating macroeconomic effects in cost estimates—a practice that has been followed in the Congressional budget process since it was established in 1974—cost estimates produced by CBO and JCT typically reflect the assumption that macroeconomic variables such as gross domestic product (GDP) and employment remain fixed at the values they are projected to reach under current law. However, because S. 744 would significantly increase the size of the U.S. labor force, CBO and JCT relaxed that assumption by incorporating in this cost estimate their projections of the direct effects of the act on the U.S. population, employment, and taxable compensation.
S. 744 also would have a broader set of effects on output and income that are not reflected in this cost estimate. Those additional economic effects include changes in the productivity of labor and capital, the income earned by capital, the rate of return on capital (and therefore the interest rate on government debt), and the differences in wages for workers with different skills. Those effects and their estimated consequences for the federal budget are described in a report that accompanied CBO’s cost estimate for the version of S. 744 that was approved by the Committee on the Judiciary. Under the version that was passed by the Senate, those broader effects would differ only slightly from those estimated for the earlier version of S. 744.
CBO and JCT, in consultation with outside experts, have devoted a great deal of care and effort to analyzing the impact of changes in immigration policies, and the agencies strove to develop estimates of the effects of this legislation that are in the middle of the distribution of possible outcomes. Nevertheless, the actual outcomes would surely differ from these estimates in one direction or another. The projections of the budgetary impact and other effects of immigration legislation are quite uncertain because they depend on a broad array of behavioral and economic factors that are difficult to predict. In particular, the budgetary effects of S. 744 would depend significantly on: the number of people who would choose to immigrate to the country under the new categories; the number of unauthorized residents who would choose to obtain legal status; the number of people who would choose not to immigrate to the country because of changes in enforcement and other factors; the number of additional residents who would choose to work and the income they would earn; the number of additional residents who would be eligible for federal benefit programs and the rates at which they would take up benefits; and other factors.
Many aspects of CBO’s estimate for the Senate-passed legislation are the same as those for the committee-approved bill. Therefore, this letter focuses primarily on the changes relative to that previous estimate. All told, relative to the committee-approved bill, the Senate-passed legislation would boost direct spending by about $36 billion, reduce revenues by about $3 billion, and increase discretionary costs related to S. 744 by less than $1 billion over the 2014-2023 period.