Latest CBO Report Again Fails to Estimate the Total Cost of Illegal Immigration

FAIR Take | August 2024

Last month, the Congressional Budget Office (CBO) issued a report entitled, “The Effects of the Immigration Surge on the Federal Budget and the Economy.” The report aims to estimate how illegal aliens entering between 2021 and 2026 will impact the United States’ economy over the next decade. Its findings assert that the “immigration surge” will have a net positive impact on our economy through increasing revenue despite increases in mandatory spending. However, CBO’s estimates are incomplete as the report fails to consider several important factors impacting the fiscal burden of illegal immigration, namely discretionary spending and state and local costs.

The report is the most recent development in a congressional push for transparency on the real costs of the Biden-Harris Administration’s border crisis. In May, the House Budget Committee held a hearing to examine the cost of the border crisis where FAIR’s executive director, Julie Kirchner, served as an expert witness. Following the hearing, Budget Committee Chairman Jodey Arrington (R-Texas) sent a letter to CBO to request a full report on the direct spending effects of illegal migration on the federal budget, particularly its impact on entitlement programs.

Main Findings

In response to Chairman Arrington’s letter, CBO released its most recent report arguing that illegal immigration will benefit the economy over the next decade. The report concludes that the surge of illegal aliens will reduce the federal deficit by $897 billion, with revenues increased by $1.175 trillion and mandatory spending increased by $278 billion. Subtracting out payroll taxes dedicated to Social Security spending lowers the projected deficit reduction to $550 billion, before any of the discretionary or state costs are included.

According to the report, the size of the “surge population” is staggering. CBO estimates that from 2021 to 2026 this so-called surge population of illegal aliens entering the country will total 8.7 million people, with most of the illegal aliens, according to CBO, entering the United States as parolees, gotaways who were not encountered by Customs and Border Protection (CBP), or foreign nationals who overstayed their visas. By 2034, CBO also estimates that about 2 million children will be born in the United States to the surge population, bringing the total population size to more than 10 million. However, even with a dramatic spike in illegal immigration growth from 2021-2026, the report inexplicably concludes that by 2027 illegal border crossings will fall drastically to just 200,000 per year. This projection is the result of CBO’s “standard method of using information consistent with historical experience for its long-term projections.”

CBO also estimates that large portions of the surge population will be eligible for federal benefits at the expense of American taxpayers. According to the report, around 35 percent of the surge population will be considered qualified aliens upon arrival, and by 2034 about 60 percent of the population will be eligible for at least some federal benefits. After a five-year waiting period, qualified aliens may receive benefits under Medicaid, Social Security, Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and Federal Student Aid. On top of that, the surge population’s estimated 2 million U.S.-born children will be eligible for benefit programs immediately. CBO also estimates that around half of the surge population will receive employment authorization within six months of their illegal entry. In fact, in Fiscal Year (FY) 2023 alone, U.S. Citizenship and Immigration Services (USCIS) approved 2 million employment authorizations and “about 1.3 million of those applications were for people in the categories that immigrants in the surge population are likely to be in, such as asylum applicants and parolees.”

This spike in illegal aliens accessing federal benefits parallels testimony given by Ms. Kirchner in May. During her testimony, she discussed the massive costs that illegal aliens, specifically parolees, will rack up for American taxpayers. Parolees are immediately eligible for work permits, Social Security numbers, Obamacare, and tax credits. And after a five-year waiting period, those parolees can receive additional benefits under various taxpayer-funded programs. Further, Cuban and Haitian entrants—who make up 15 percent of CBO’s surge population—as well as Afghan and Ukrainian parolees, are exempt from that five-year waiting period. In her testimony, Kircher said that, “Parole has become a shadow immigration system. It is essentially supplanting the family and employment-based systems. They’ve created a completely separate system for hundreds of thousands of people who have no legal basis to enter this country.”

Finally, the CBO report estimates that the surge population will generate increased tax revenue and grow economic productivity over the next decade. According to the report, this population is projected to increase tax revenue by contributing $788 billion in income and payroll taxes. But at the same time that CBO estimates a massive tax revenue increase, the report concedes that, according to CBO estimates, “rates of compliance among the surge population are 15 percent lower for income taxes and 10 percent lower for payroll taxes, on average, than those among the total population.” Moreover, much of the revenue from Federal Insurance Contributions Act (FICA) payroll taxes is specifically set aside for Social Security and Medicare spending in the future. The CBO report, however, includes all payroll taxes as part of its overall revenue projections without accounting for long-term Social Security and Medicare costs. The report estimates that over the relevant time period, 2024-2034, Social Security costs will amount to just $1 billion and Medicare costs to $600 million. The report goes on to state, however, that while payroll taxes are expected to generate $443 billion in increased revenue, the vast majority of that, $348 billion, is dedicated to Social Security trust funds.

Shortfalls

While the report’s findings appear to demonstrate a net positive impact of the surge in illegal immigration, there are numerous gaps in the data CBO uses to make its estimates. As a result, the report falls short in delivering a well-rounded assessment.

First, the report fails to fully consider the impact of illegal immigration on discretionary funding through the appropriations process. CBO argues that despite the fact that discretionary appropriations will almost certainly be impacted by the border crisis, “no clear basis exists for projecting how the immigration surge will affect funding decisions.” This demonstrates a massive shortfall in CBO’s estimates as the border crisis has created immense pressure to appropriate increased funds to address the heightened flow and presence of illegal aliens. And, although the report does estimate that discretionary funding stemming from the surge in illegal immigration will total around $200 billion over the next decade, that is not included in the report’s final estimates.

CBO also fails to account for the skyrocketing costs of illegal immigration for state and local governments. Even though these costs are not included, the report notes that “increases in immigration tend to… increase state and local governments’ costs more than their revenues. CBO expects that general pattern to hold for the immigration surge considered in this report.” As detailed in FAIR’s recent cost study, the majority of the record costs from illegal immigration—over $100.4 billion—are borne by state and local governments. During May’s Budget Committee hearing, Kirchner showed that K-12 education of the children of illegal aliens costs taxpayers $70 billion annually, and medical expenditures for illegal aliens add another $22 billion. Failing to factor in state and local governments, who shoulder the largest costs, is a critical gap in CBO’s estimates.

Perhaps the most concerning, CBO concludes its report by noting that there are major sources of uncertainty in its estimates. The report argues that when calculating the impact of illegal immigration on the economy, there are a variety of unknown factors that could affect the legitimacy of their findings including: (1) the number of foreign nationals in the immigration surge; (2) the duration of the surge; (3) the characteristics of illegal aliens entering the country including age, family composition, education, and skills; and (4) how these aliens will affect overall economic productivity. In short, nearly every factor CBO uses in its report to measure the impact of illegal immigration on the economy is also a source of uncertainty that affects their final estimates.

Conclusion

CBO’s report vastly understates the true costs of the border crisis. Without accountability and meaningful change, the disaster at our borders will only continue to rack up costs at every level, and Americans will be forced to continue paying the price.