Immigration reform will cut deficit, but will that sway skeptics?

Immigration reform may not just be about policy or political sense, it may be about cutting deficits, too – a finding that could boost momentum for reform at a critical point in the immigration debate on Capitol Hill.

The bipartisan Senate immigration bill would shave just under $200 billion off the federal deficit in the next decade, according to an analysis by the nonpartisan Congressional Budget Office, and hack another $1 trillion off the deficit in the following 10 years.

At $200 billion, the legislation would amount to about a fifth of the spending cuts called for by the “sequester,” the automatic budget cuts mandated by Congress in the summer of 2011.

“This debunks the idea that immigration reform is anything other than a boon to our economy and robs the bill’s opponents of one of their last remaining arguments,” said Sen. Charles Schumer (D) of New York, in a statement.

While opponents of the Senate bill found much to dislike in the CBO’s report – including the estimate that the bill would only stop about a quarter of expected illegal migration over the next decade – the official arbiters of the cost of congressional legislation found the bill would have many salutary effects on the nation’s economy.

Newly legalized workers, more temporary workers, and a simultaneous increase in more high-skilled immigration will all help boost gross domestic product (GDP) by 3.3 percent by 2023, the CBO estimates, and the influx of highly skilled labor will boost the productivity of the overall labor force through anticipated technological advancements. Overall, the Senate version of immigration reform increase the US population by 10.4 million people by 2023, the CBO says.

In terms of the federal budget deficit, the immigration bill will increase government spending by about $262 billion over the next 10 years, as newly legalized immigrants and more legal immigration boost those eligible for federal health-care spending and refundable tax credits.

But that increase is eclipsed by a $459 billion increase in government revenues over the same period, as an increase in legal migration means more US taxpayers and as the nation’s estimated 11 million undocumented people pay several thousand dollars in fines in order to normalize their status.

However, the CBO finds that the legislation would slightly depress average wages for American workers over the next dozen years before providing an upward boost to wages from that point forward. In addition, the immigration law would "slightly raise"  the unemployment rate through 2020, CBO says.

Opponents of the legislation seized on this finding of proof of their long-held complaint that the bill would hurt American workers.

The CBO analysis shows the bill would be the “biggest setback for poor and middle-class Americans of any legislation Congress has considered in decades,” said Sen. Jeff Sessions (R) of Alabama, in a statement.

That’s not quite what the CBO found, however. Those Americans in the middle of the skills continuum would be less affected than those at the higher and lower end, the CBO found, as high- and low-skilled workers would increase more on a relative basis. Overall, the bill’s impact would be to knock 0.1 percent off average US wages by 2023 relative to current expectations.

"The estimated reductions in average wages and per capita gross national product for much of the next two decades do not necessarily imply that current US residents would be worse off, on average, under the legislation than they would be under current law," the CBO report concludes.

While Washington is abuzz about deficit reduction, the CBO points out that the costs of the bill aren’t borne only by the federal government, however.

Private entities would bear some $700 million in annual costs to implement the legislation, according to the CBO. While the CBO did not specify which aspects of the legislation would be most costly, the bill requires several sweeping changes for employers such as mandatory workplace employment verification known as E-verify.

The bill’s opponents say taking the CBO score as the final tally of the measure misses important costs like those on the private sector or on state and local governments.

“CBO’s score also necessarily fails to capture one of the most significant fiscal impacts this bill would have: the immediate fiscal burden on cities and states,” said Senator Sessions. “When illegal immigrants are first legalized, they will become almost instantly eligible for local and state programs at a great cost to taxpayers.”

And while the CBO isn’t usually in the business of evaluating border security strategy and effectiveness, the bill offers that the legislation would cut back on illegal migration by only 25 percent versus current law.

Given the promises of a tightly controlled border from the bill’s authors, opponents of the legislation seized on that finding as more evidence that the legislation’s security provisions were weak.

The prospect of immigration reform has set off a blizzard of reports with sharply different estimates of its likely costs and benefits. The CBO’s analysis puts the costs and benefits of the immigration bill in the most moderate light of any of the analyses offered so far.

The conservative Heritage Foundation argued that the bill, which its analysts and its political arm bitterly oppose, would cost some $5.5 trillion over the next 50 years, using an expansive view of government spending that roped everything from Social Security and Medicare spending to community services, such as a per-person share of police costs.

By contrast, conservative economist Douglas Holtz-Eakin, a former CBO director, estimated the bill could shave $2.5 trillion off the deficit in the next decade alone.