Immigration has been a central issue over the last years as unprecedented numbers of unauthorized migrants crossed the southern border. But despite growing tensions in politics regarding this issue, a new Congressional Budget Office report shows that increased immigration to the U.S. will likely drive higher economic growth and labor supply, grow federal revenue and shrink deficits over the next 10 years.
The CBO's latest budget and economic outlook projects the net immigration of those without work authorization is on track to be 8.7 million greater than previously forecast from 2021 to 2026. They estimate that, because of this, the surge would cause GDP to be almost $9 trillion higher over the coming decade than would otherwise be the case.
This could push interest rates up by 0.1 percentage point in 2034.
"Those increases in GDP and interest rates are key drivers of projected increases in federal revenues and spending related to the [immigration] surge," CBO Director Phillip Swagel said in a statement.
Accounting for immigrants in the estimated surge and their children, the jump in immigration rates lowers deficits by $900 billion over the 2024-2034 period, while federal revenues are higher by $1.2 trillion, Axios reports.
Nevertheless, the U.S. budget outlook is still bleak, Axios argues. Deficits are expected to jump from an estimated $2 trillion in 2024 to $2.8 trillion ten years later. That means that by 2034, the deficit will amount to almost 7% of GDP— much higher than the 3.7% averaged over the past 50 years.
Similarly, debt held by the public will increase from 99% of GDP this year to 122% in 2034, the highest on record.
The report comes as growing literature shows the possible benefits to the U.S. amid increased immigration.
For instance, an analysis by The Hamilton Project argues that a spike in migration in recent years is what helps explain some of the surprising strength in the economy since 2022. Although the study doesn't account for the latest wave of immigration— which reached historic figures in 2023— it does show that the trend has had a positive impact on the labor force, and subsequently the economy.
That study shows that prior to the pandemic, the range of population and labor force participation projections from the Congressional Budget Office, the Bureau of Labor Statistics and the Social Security Administration suggested that sustainable employment growth would be between 60,000 and 140,000 additions per month. In 2023, however, employment growth averaged 255,000 per month.
Amid these numbers, some of the nation's leading economic policymakers, including those in the Federal Reserve, are attributing some of the easing of economic challenges to immigration.
"We've seen labor force supply come up quite a bit through immigration and through recovering participation," Fed chair Jerome Powell said last week. "That's ongoing, mostly now through the immigration channel."
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