Immigration cuts could dent US economy at crucial time, experts say

Lawmakers could put a dent in the U.S. economy if they move forward with proposals to cut immigration, experts warned.

A bipartisan Senate deal to tighten border security and reduce immigration has stalled over objections from House Republicans, who are pushing for even tighter limits.

As the GOP pressed for more aggressive action to keep thousands of immigrants from crossing the border, experts argue such policies could dampen economic growth and deepen demographic issues holding back the American workforce.

“The vast majority of population growth that we have in the U.S. right now is from immigration,” Wendy Edelberg, director of The Hamilton Project and a senior fellow in Economic Studies at the Brookings Institution, said in an interview.  

“This is a key reason why our labor force grew in the past couple of years, and if it continues, it will be a key reason why our labor force continues to grow,” she added. 

The Congressional Budget Office (CBO), the nonpartisan budget scorekeeper, pointed to higher immigration in a recent report as a key source of new workers and boost to economic output.

The CBO estimated the labor force would grow by more than 5 million people over the next decade mainly due to increased immigration. The agency said it also projected a smaller federal budget deficit over the next 10 years than previously, partly because of the immigration surge. 

Altogether, U.S. gross domestic product is on track to increase by nearly $7 trillion and federal revenue is set to rise by $1 trillion thanks to the immigration surge.

Despite immigrants’ well-documented positive economic effects, management of their arrival has become a political hot potato.

Republicans have largely blamed President Biden’s border policies for the rise in migration from and through Latin America, but high numbers of border encounters are in large part a result of economic and governance disparities between the U.S. and other countries.

And an immigration system designed to contain irregular immigration from Mexico has struggled to adapt to changing migration demographics, even as successive administrations have pumped money into border and interior enforcement.

The steep upward trend in border encounters began in 2019 under President Trump, though encounters plummeted because of the pandemic in 2020, as both the U.S. and Mexico went through degrees of shutdowns.

The 2019 spike continued through the first three years of the Biden administration, more or less impervious to U.S. border policy changes, though crossings lulled briefly last summer after the end of Title 42, the Trump-era pandemic expulsion authority that was maintained by Biden.

Immigration numbers have swelled past their early-2000s highs by official accounting; border officials recorded 1.6 million encounters in 2000 – then known as “arrests.”

Immigrants who crossed the border at the time were more likely to attempt to sneak through rather than turn themselves in to Border Patrol to seek asylum, and were more likely to be single Mexican adult males looking for work.

From 2014 onward, U.S. officials began to encounter more family units and children, first from the so-called “Northern Triangle” — Guatemala, Honduras and El Salvador — and progressively more people from countries beyond Central America, particularly Venezuela, and the Caribbean, particularly Haiti and Cuba.

Most immigration experts agree those trends — and the globalization of Latin American paths — are largely driven by conditions in expelling countries and the aftermath of the coronavirus pandemic.

But how long the surge will last remains an open question for experts. 

In its recent projections, the CBO predicts the surge will last into 2026. But even CBO Director Phillip Swagel acknowledged that surge is a “source of uncertainty” in their estimates. 

Advocates are looking to the coming presidential election as a key indicator of what immigration policies could look like in the near future, particularly as Biden and Trump head toward a likely rematch in November.

“It’s going to revolve around what happens with the election in November,” Cris Ramón, a senior advisor on immigration at UnidosUs, said in a recent interview, predicting a “very strong emphasis on shutting down legal migration, and adopting even more hard-line policies at the border” under a potential second Trump term.

Ramón said the border is a political issue that could add to Biden’s list of challenges to reelection, and described Democratic “reversion” to focusing on “single-issue bills on immigration” as opposed to more comprehensive efforts — like the so-called Gang of Eight border and immigration reform bill of 2013. 

At the time, on both sides lauded that package, also known as the Border Security, Economic Opportunity, and Immigration Modernization Act, for measures they say would have boosted border security, provided pathways for citizenship, while growing the economy. 

The CBO also released an analysis of an iteration of the bill in June 2013 detailing its projections of a larger labor force and higher GDP if the bill passed. 

That package followed a pattern of comprehensive immigration reform negotiations, where increased border and interior enforcement was generally traded for work permits for the existing undocumented population, plus improvements to the legal immigration system to accommodate new arrivals.

Senate negotiations leading up to the recently doomed border deal took a different approach: Democrats asked for fewer and more targeted improvements to the immigration system, and conceded reforms to the asylum system that would have limited the number of people allowed to claim asylum.

The Senate border package would have also funded immigration processing in an attempt to reduce the backlog of applications and speed up the asylum process, but overall it would have likely led to fewer migrants receiving work permits through asylum. It’s unclear whether it would have deterred migrants from attempting the journey.

“The intent of that was to slow the flow of immigration,” Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, said in an interview. “And I think the practical effect of that would have been — or would be if it passes — that we’ll get less overall economic growth.”

While experts generally agree that higher immigration could help grow the economy, the math can get trickier when examining the potential impact of immigration on some federal spending.

“What we’re seeing with this route of immigration, what CBO thinks is happening is, in the near term, the immigration increases the size of the economy but reduces the size of the economy per person,” Goldwein said while discussing the recent CBO report.

“And in the long term, it maybe increases both.” 

“When young immigrants come to the country, assuming that they’re working legally, or are able to illegally acquire a Social Security number, they pay taxes. And so those taxes reduce the deficit, and then as they get older, they’ll eventually collect Social Security and Medicare,” Goldwein added.

Edelberg also said that although she is certain “immigration boosts aggregate economic growth,” she added that “there are many things that people care about besides the size of GDP.” 

Edelberg pointed to a December 2022 policy proposal she co-authored with Tara Watson, an economist with Brookings, that looked at how states and local governments could be paying a disproportionate cost for immigration compared to the federal government, and ways to redirect “federal gains from immigration toward those communities.”  

“While immigration is great for the aggregate economy and in fact, great for the federal budget, certain kinds of immigration put a significant burden on localities that don’t get all of the revenue benefits, but certainly feel all of the spending challenges that greater immigration creates,” Edelberg said.