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December 3, 2010
National Security
Defense spending accounted for about 20 percent of total federal spending in 2012. CBO analyzes the budgetary effects of proposed legislation related to national security and assesses the cost-effectiveness of current and proposed defense programs. CBO also evaluates federal programs and issues related to veterans.
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Immigration Policy in the United States: An Update
Abstract
This document updates the Congressional Budget Office's February 2006 paper Immigration Policy in the United States. It presents data through 2009 on permanent and temporary admissions of foreign nationals to the United States, the number and types of visas issued, the naturalization of residents, and enforcement of immigration laws—and makes comparisons with 2004, which was the most recent year for which most data were reported in the earlier paper.
Highlights
The Immigration and Nationality Act sets immigration policy in the United States on the basis of four general objectives:
- To facilitate the reunification of families by admitting people who already have a family member living in the United States,
- To attract workers to fill positions in certain occupations for which there are shortages,
- To increase diversity by admitting people from countries with historically low rates of immigration to the United States, and
- To provide a refuge for people who face the risk of racial, religious, or political persecution in their home country.
Immigration Policy in the United States: An Update
View more presentations from Congressional Budget Office.
The law allows foreign nationals to enter the United States to become legal permanent residents (LPRs) or to be in the United States for a specific purpose during a limited stay as temporary residents or visitors. To enter the country as a legal permanent resident, a national of a foreign country must obtain a visa. To enter the country as a temporary resident or visitor, a foreign national must obtain a visa, be a qualifying citizen of Canada or Mexico, or be a qualifying citizen of a country that participates in the Visa Waiver Program. (That program allows citizens of certain countries to travel to the United States for business or tourism for up to 90 days without having to obtain a visa.)
The law also outlines a process by which foreign nationals who have been granted legal permanent residence may apply to become naturalized U.S. citizens. In addition, the law establishes mechanisms to control the flow of legal entry into the United States, prevent the entry of individuals without authorization, and remove individuals who are in the United States without authorization.
Legal Permanent Residents
People granted permanent admission to the United States are formally classified as legal permanent residents and receive a document, commonly known as a green card, that certifies that status. LPRs are eligible to live and work in the United States, own property, and join the armed forces; eventually, they may apply for U.S. citizenship. In 2009, the United States granted LPR status to roughly 1.1 million people.
Foreign nationals who are eligible for permanent admission fall into one of five broad categories. Two of those categories--immediate relatives of U.S. citizens and family-sponsored preferences--are based on family relationships. Under a third category, employment-based preferences, workers with specific job skills are eligible for permanent admission. The fourth category is known as the Diversity Program, which allows individuals from countries with low rates of immigration to the United States to enter under a lottery-based system that provides a pathway for legal permanent residency. Finally, for humanitarian reasons, some foreign nationals are admitted to the United States as refugees or asylum-seekers; one year after obtaining asylum or refugee status, they may apply for LPR status.
People granted permanent admission include foreign nationals who entered the United States as legal permanent residents and those already present in the country who were granted LPR status. Of the people granted LPR status in 2009, about 463,000 (or 41 percent) were first-time entrants to the United States, and about 668,000 (or 59 percent) were already inside the United States. In 2009, foreign nationals who were born in Asia accounted for 413,000 (or 37 percent) of the people granted LPR status, and people who were born in North America (which includes Central America) accounted for 375,000 (or 33 percent).
The total number of permanent admissions in 2009 was about the average for the previous four years but 18 percent more than were granted such status in 2004. (Over the period from 2005 through 2009, the number of people granted LPR status averaged about 23 percent more than the number during the 20002004 period.) The number of immediate relatives of U.S. citizens who were granted LPR status increased by 28 percent from 2004 to 2009, accounting for nearly half of total permanent admissions in 2009. In contrast, the number of people admitted in the familysponsored preference category remained roughly constant from 2004 to 2009 and accounted for 19 percent of admissions in 2009. The number of individuals admitted on the basis of employment preferences decreased slightly between 2004 and 2009 and accounted for 13 percent of admissions in 2009. Admissions under the Diversity Program accounted for only 4 percent of the 2009 total and declined slightly from 2004 to 2009. The number of people admitted for humanitarian reasons, which constituted 17 percent of the permanent admissions in 2009, grew by almost 60 percent from its level five years earlier.
Temporary Residents and Visitors
Temporary admission to the United States is granted to foreign nationals who seek entry for a limited time and for a specific purpose, such as tourism, diplomacy, or study. In addition, foreign nationals who meet certain criteria may be permitted to work in the United States for a limited time that depends on the type of visa they receive. However, foreign nationals with temporary visas are not eligible for citizenship, and to remain in the United States on a permanent basis they would be required to apply for permanent admission.
The federal government reports two types of data on foreign nationals who enter the United States as temporary residents or visitorsthe number of temporary visas issued and the number of temporary admissions. The number of visas issued indicates the potential number of foreign nationals who may seek admission to the United States (excluding a large number who do not require a visa). The number of temporary admissions indicates the number of times that foreign nationals enter the United States, thus counting frequent travelers multiple times.
About 5.8 million visas for temporary admission to the United States were issued in 2009. Twenty-four percent were for temporary residents and 76 percent were for visitors. Although the number of visas issued in 2009 was 755,000 (or 15 percent) higher than the number in 2004, it was down by almost 800,000 (or 12 percent) from the 6.6 million visas issued in 2008. The decrease was most likely a result of the global recession: Fewer visas were issued for business, for tourism, and for employment.
The number of legal temporary admissions was much greater than the number of visas issued. The Department of Homeland Security (DHS) estimates that there were 163 million legal temporary admissions to the United States in 2009. That estimate includes 126 million admissions not requiring visas by Canadians traveling for business or tourism and certain Mexicans with Border Crossing Cards. It also includes about 36 million admissions of foreign nationals who were required to complete an Arrival/Departure Record (known as an I-94 form); about 16 million of those admissions were individuals who entered under the Visa Waiver Program, and the rest had visas. Many individuals had multiple admissions because they departed and reentered the United States during the same year.
The number of legal temporary admissions in 2009 was the lowest since DHS began reporting those data in 2003 and was about 10 percent less than the number admitted in 2004. The numbers presented throughout this document represent the flow of foreign nationals into the United States in accordance with U.S. immigration law. Information on the departures of temporary residents and visitors after their authorized stay is currently not recorded. Official estimates are available only on departures of LPRs.
Naturalization
Legal permanent residents may become citizens of the United States through a process known as naturalization. To become a naturalized citizen, an applicant must fulfill certain requirements set forth in the Immigration and Nationality Act. In general, any legal permanent resident who is at least 18 years old and who has maintained the specified period of continuous residence and presence in the United States can apply for naturalization. In 2009, about 744,000 people became naturalized U.S. citizens, well below the number naturalized in 2008 but close to the average for the past five years. Of the 2009 total, the largest percentages of people were born in Mexico (15 percent) and India (7 percent).
Enforcement of Immigration Policy
In addition to regulating the legal admission of permanent residents and temporary residents and visitors, U.S. law specifies policies for individuals in the United States without legal authorization. People found to be in the United States in violation of immigration law may be allowed to depart voluntarily or may be removed from the country through a formal process of adjudication, which can include the imposition of penalties (such as fines), a prohibition against future entry, or both.
In addition, individuals convicted of certain crimes can be imprisoned before they are removed from the United States.
The Department of Homeland Security is responsible for enforcing immigration law and acts to arrest, detain, return, and remove foreign nationals who violate U.S. laws. In 2009, about 580,000 people who were arrested or detained returned voluntarily under the supervision of a DHS official to their home country or to another country, a figure that is well below the number in recent years. Also in 2009, about 393,000 people were ordered removed, which is 63 percent more than were ordered removed in 2004. Of those 393,000 removals, 107,000 were carried out using an expedited process designed to speed up the removal of people attempting to enter the country illegally. In 2009, about two-thirds of total removals were for noncriminal violations, such as a lack of proper documentation, and the other one-third were for criminal violations of U.S. laws. (Although various estimates exist, there is no way to count the total number of individuals who enter the country illegally or how many of them leave voluntarily.)
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Potential Costs of Veterans' Health Care
Highlights
Potential Costs of Veterans’ Health Care
The Department of Veterans Affairs (VA) provides health care at little or no charge to more than 5 million veterans annually. Medical services are provided through the inpatient and outpatient facilities run by the Veterans Health Administration. Those services include routine health assessments, readjustment counseling, surgery, hospitalization, and nursing home care.
The Congressional Budget Office (CBO) projects that the future costs for VA to treat enrolled veterans will be substantially higher (in inflation-adjusted dollars) than recent appropriations for that purpose, partly because more veterans are likely to seek care in the VA system but mostly because health care costs per enrolled veteran are projected to increase faster than the overall price level. Under two scenarios that CBO examined, the total real resources (in 2010 dollars) necessary to provide health care services to all veterans who seek treatment at VA would range from $69 billion to $85 billion in 2020, representing cumulative increases of roughly 45 percent to 75 percent since 2010.
Although veterans from recent conflicts will represent a fast-growing share of enrollments in VA health care over the next decade, the share of VA’s resources devoted to the care of those veterans is projected to remain small through 2020, in part because they are younger and healthier than other veterans served by VA.
Background
To provide health care services, VA depends on discretionary funding that the Congress provides in annual appropriation acts. Although eligibility for VA health care is based primarily on veterans’ military service, VA may, and does, adjust enrollment according to the resources available to it.
The Veterans’ Health Care Eligibility Reform Act of 1996 (Public Law 104-262, 110 Stat. 3177) mandated that VA deliver services to veterans who have service-connected conditions, to veterans unable to pay for necessary medical care, and to specific groups of veterans, such as former prisoners of war. The legislation permitted VA to offer services to all other veterans to the extent that resources and facilities were available; it also required VA to develop and implement an enrollment system to facilitate the management and delivery of health care services.
VA’s enrollment system includes eight categories that determine veterans’ eligibility and priority for access to health care. The highest priority is given to veterans who have service-connected disabilities (priority groups 1 through 3, or P1 through P3); the lowest priority is given to higher-income veterans who have no compensable service-connected disabilities, that is, no conditions that are disabling to the degree that VA provides compensation (P8).
The number of veterans treated by VA climbed rapidly following the enactment of the 1996 law, increasing from 2.9 million in fiscal year 1995 to 4.5 million in 2003. By 2003, VA no longer had the capacity to adequately serve all current enrollees, prompting the Secretary of Veterans Affairs to suspend further enrollment of some higher-income veterans (those in P8); VA eased that restriction in 2009 to allow some of those veterans to enroll. (Enrolled veterans typically have more than one source of health care available to them and choose to use VA for only a small portion of their health care, relying on other sources such as Medicare, employer-sponsored insurance, or the Department of Defense’s TRICARE program.)
Current Resources
A total of $44 billion was appropriated to VA for 2009 to provide medical services to veterans and to conduct medical research. That amount was increased by 8 percent, to $48 billion, for 2010. VA has requested an appropriation of $52 billion, an additional 8 percent, for 2011. The average annual increase was more than 9 percent from 2004 through 2009.
One group of veterans—those who have deployed or will deploy to overseas contingency operations (OCO), which include Operation Iraqi Freedom, Operation New Dawn, and Operation Enduring Freedom in Afghanistan and related activities—are of particular interest as policymakers and others attempt to determine the extent of the war-related medical conditions of those veterans and the resources required to treat them. Those veterans accounted for only about 6 percent of all patients in 2009 and 3 percent of the total dollars obligated for veterans’ health care in that year. Of the $43 billion obligated in 2009, VA estimates that it obligated $1.5 billion to care for OCO veterans. VA further estimates that those obligations will rise to $2.0 billion in 2010, $2.6 billion in 2011, and $3.3 billion in 2012.
Projecting Future Costs
This CBO report examines prospective demands on VA and projects the resources the agency would need to provide medical care to all enrolled veterans during the next 10 years, 2011–2020. (The report does not attempt to predict appropriations for VA.) Although the focus of this report is on the resources VA would need to treat all enrolled veterans, CBO has also separately projected the portion of those resources that would be needed to treat the veterans of the ongoing overseas contingency operations.
The recent increases in VA’s medical budget have reflected factors that will probably affect future resource requirements. First, as is true for all U.S. health care, VA’s medical expenditures per enrollee have grown more rapidly than has the overall price level. Second, the ongoing deployments to combat operations in Iraq and Afghanistan have increased the number of veterans seeking care from VA. Third, VA has been easing restrictions on enrolling higher-income veterans (those in P8), in part because of concerns expressed by policymakers and others who believe that restrictions on enrollment have caused some veterans to be denied benefits that they deserve.
To account for some possible policy changes and for uncertainty about the number of veterans who will be enrolled and the growth of medical expenditures per enrollee, CBO presents two scenarios to capture some of the range of possible outcomes. The scenarios differ in their assumptions about the number of enrollees in the VA health care system and the costs of providing medical services. CBO also assumes that there will be no major changes in VA’s policies (except for a possible change in eligibility criteria) and that the enrollment of non-OCO veterans (except for higher-income veterans) and the percentage of total health care that veterans receive from VA as opposed to other sources, referred to as their "reliance on VA," follow current trends.
Scenario 1. The first scenario was crafted using assumptions about enrollment and medical expenditures per enrollee that generate lower resource requirements than Scenario 2. The assumptions about factors affecting enrollment include the following:
- VA’s eligibility, cost-sharing, and other policies are those in effect at the beginning of 2010. Those policies include the easing of enrollment restrictions that began in 2009 for veterans in priority group 8 who have no compensable service-connected disabilities and whose income is 10 percent or less above VA’s income thresholds.
- The number of troops deployed to overseas contingency operations, which currently include the military operations in Iraq and Afghanistan and related activities, drops to 30,000 by 2013 and remains at that number throughout the decade.
- VA’s medical expenditures per enrollee for each priority group grow in nominal terms at slightly more than 5 percent per year, about the same rate as that anticipated in the general population over the decade.
Scenario 2. CBO crafted the second scenario to illustrate potential policy changes and other outcomes that may result in higher resource needs for VA’s health care services. The assumptions for that scenario are as follows:
- VA changes its eligibility rules to allow veterans who have no compensable service-connected disabilities and whose income is 30 percent or less above VA’s income thresholds to enroll. Other than that change, all policies relating to eligibility, cost sharing, and other factors are those in effect at the beginning of 2010.
- The number of troops deployed to overseas contingency operations declines more slowly than in Scenario 1, dropping to 60,000 by 2015 and remaining at that number through the rest of the decade.
- VA’s medical expenditures per enrollee for each priority group grow initially at the rate VA assumed in preparing the Administration’s 2011 budget request that was transmitted in February 2010 and, in subsequent years, at an annual rate that is about 30 percent higher than that anticipated in the general population—a rate that exceeds the average rate experienced by VA from 2003 through 2007, before significant numbers of veterans from the ongoing conflicts had enrolled.
Potential Costs to Treat All VA Enrollees
Under Scenario 1, CBO estimates that total enrollment would grow from 8.0 million in 2009 to more than 8.8 million by 2016—an increase of about 10 percent—but would edge down to 8.7 million in 2020. The resources required to treat all enrolled veterans would be about $69 billion in 2020, nearly 45 percent higher than the $48 billion that has been provided for 2010.
Under Scenario 2, enrollment would be 620,000 higher in 2020 than in Scenario 1, with 340,000 new enrollees resulting from VA’s further relaxation of the restrictions on enrollment and 280,000 from the higher troop deployments. The resources required to treat all enrolled veterans would reach nearly $85 billion in 2020, or 22 percent more than under Scenario 1 and about 75 percent more than the amount provided for 2010.
What factors explain the difference of roughly $15 billion in the potential costs of the two scenarios in 2020? The disparity between the growth rates of medical expenditures per enrollee in the two scenarios accounts for the lion’s share of the difference—$13 billion. Extending eligibility to additional higher-income veterans who have no compensable service-connected disabilities would add just $1 billion to the costs under Scenario 1; because those new enrollees are drawn from a group that historically has cost less to treat than most other veterans, the additional resources VA would require would be relatively small. The higher troop levels for contingency operations under Scenario 2 would also add $1 billion; the increase in the number of enrollees would be small—only about 3 percent—and they too would use fewer resources than the average enrollee.
The projections for both scenarios exceed the baseline projections that CBO constructs in accordance with the provisions set forth in the (now expired) Balanced Budget and Emergency Deficit Control Act of 1985. The baseline projections reflect the assumption that appropriations increase at the same rate as the employment cost index for the wage and salary component of VA’s budget and at the same rate as the gross domestic product price index for all other components.
In making its projections, CBO did not explicitly account for recently enacted health care legislation—in particular, the Patient Protection and Affordable Care Act (P.L. 111-148) and the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). Although there is considerable uncertainty regarding how the new legislation will be implemented, CBO conducted a preliminary analysis of how it might affect VA’s resource requirements. That analysis indicates that the new laws may either increase or decrease the number of enrollees—and therefore VA’s resource requirements—but in either case probably by only a small amount. On the one hand, the costs of obtaining health insurance will be lower for some veterans in the latter part of the coming decade, leading some of them to seek less care from VA than they would have without the recent legislation. On the other hand, to avoid financial penalties that may be assessed on people who do not have a required level of health insurance, some veterans who would otherwise neither enroll in VA’s program nor obtain other insurance might choose to enroll with VA. Neither of those effects is likely to be large enough to significantly affect the projections in this report.
Potential Costs to Treat Veterans of Overseas Contingency Operations
As part of its projections for the resources needed to treat all enrolled veterans, CBO separately estimated the portion of resources that would be required to treat veterans of overseas contingency operations. CBO estimates that between the time hostilities began and the end of 2020, VA would enroll a total of 1.4 million or 1.7 million OCO veterans under Scenarios 1 and 2, respectively. The annual resources (in 2010 dollars) required to treat OCO veterans would increase from an estimated $2.0 billion in 2010 to $5.4 billion in 2020 under Scenario 1 and to $8.3 billion under Scenario 2. Because OCO veterans are typically younger and healthier than the average VA enrollee, they are less expensive to treat. Accordingly, the resources devoted to OCO veterans would be a small share of outlays, consuming 8 percent and 10 percent of VA’s resources for health care services in 2020 under Scenario 1 and Scenario 2, respectively. As the OCO veterans age, however, CBO expects that their costs will be similar to those of other older veterans who use VA’s health care services.
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An Analysis of the Army's Arsenal Support Program Initiative
Abstract
The Congress created the Arsenal Support Program Initiative (ASPI) to help maintain the functional capabilities of the Armys three manufacturing arsenals, which are located in Rock Island, Illinois, Watervliet, New York, and Pine Bluff, Arkansas. A primary goal of the program is to enable commercial firms to lease vacant space at the arsenals once that space has been renovated, thereby encouraging collaboration between the Army and commercial firms as well as reducing the costs the government incurs to operate and maintain the arsenal facilities. Since the ASPIs inception, a number of commercial tenants have leased unused property at the arsenals; however, the financial benefits that the program has generated for the government have proved to be small relative to the programs funding.
In response to a directive from the Congress, the Congressional Budget Office (CBO)conducted a business case analysis of the ASPI, examining the programs costs, return on investment, and economic impact. In keeping with CBOs mandate to provide objective, nonpartisan analysis, this report makes no recommendations.
Highlights
The Congress created the Arsenal Support Program Initiative (ASPI) in 2001 to help maintain the viability of the Armys three manufacturing arsenals. Owned and operated by the federal government, those arsenalswhich are located in Rock Island, Illinois, Watervliet, New York, and Pine Bluff, Arkansasprovide a variety of services, including the manufacture, renovation, and demilitarization of weapons and other equipment. The broad intent of the ASPI is to encourage collaboration between the Army and commercial firms to preserve the arsenals capabilities and to reduce the costs to the government of operating and maintaining those arsenals. Originally established as a two-year demonstration program, the ASPI has subsequently been extended through a series of National Defense Authorization Acts. The program is currently scheduled to expire at the end of 2011.
The principal outcome of the ASPI to date is that commercial tenants have begun to lease unused property at the arsenals, typically vacant buildings or portions of buildings that the Army has renovated specifically for that purpose. Tenants compensate the arsenals mostly in the form of negotiated rental payments or services in lieu of rent. As of 2009, a total of 46 tenants were leasing more than 200,000 square feet of space at the arsenals under the ASPI.
In recent years, however, policymakers have expressed concern that the ASPI is not fulfilling its objectives. In the conference report that accompanied the National Defense Authorization Act for Fiscal Year 2008, legislators noted that receipts generated by the ASPI to that point were small relative to funding provided for the program; they also stated that the program was not clearly bolstering the arsenals core missions. As a result of those concerns, the Congress directed the Congressional Budget Office (CBO) to conduct a business case analysis of the ASPI. In response to that directive, CBO examined the costs, return on investment, and economic impact of the program; those findings are presented in this report. The Congress also directed the Government Accountability Office (GAO) to investigate how effectively the ASPI was fulfilling its objectives and to provide recommendations on restructuring the program to support the arsenals core missions. GAOs findings appear in a separate report that was released in November 2009.
Although the Department of Defense (DoD) has not requested any funding for the ASPI in its annual budget submissions, the ASPI has received more than $87 million in funding from its inception in 2001 through 2010. As of the end of 2009, a total of $69 million had been obligated for the program and, of that amount, $54 million had been disbursed. Over 90 percent of the obligations made for the program have been for the purpose of renovating and improving arsenal properties and infrastructure, CBO estimates. Funding for the ASPI is not used to pay employees who work for the office that manages the program; those costs are paid out of the Armys operation and maintenance account.
To determine the financial impact of the ASPI on the federal government, CBO first estimated the receipts and other financial benefits that the program has generated for the government so far and those that might be generated in the future. CBO then calculated the present value of those cash flows using a discount rate that attaches a market price to the risk associated with those flows. That present value can be compared to the present value of the governmental outlays needed to make space available to tenants.
Under the assumptions that the ASPI will receive no additional appropriations for renovations after 2010 and that the government will continue to pay for marketing and administering the program, CBO estimates that, measured in 2010 dollars, the present value of outlays for the program through 2075 is $99 million and the present value of the financial benefits that the program will generate for the government is $47 million. The resulting net present value is negative $52 million, meaning that the total stream of financial benefits that the ASPI has generated for the government so far and can be expected to generate in the future will fall short of the up-front investment required to ready the arsenal properties for tenants. That estimate translates into a government subsidy for the program of about 50 cents for every dollar spent.
Should the Congress provide further funding for renovations after 2010, each additional 100,000 square feet of space that the Army renovated under the ASPI would cost about $16 million in 2010 dollars, CBO estimates. At a subsidy of about 50 cents for every dollar spent, that spending would result in a net cost to the government of about $8 million.
In terms of the programs broader economic impact, the ASPI positively affects the local economies in the arsenal regions in two ways: Government spending for the program probably leads to additional jobs for civilians and income for area businesses; and commercial tenants who relocate to the arsenal regions because of the program buttress economic activity in the area. However, because of a number of uncertainties, CBO could not reliably quantify the positive economic impact of the ASPI within the arsenal regions.
On a national basis, the ASPI has had little if any net economic impact, in CBOs judgment, because the program primarily causes shifts in resources from one region of the country to another. It is possible that the governments spending for the ASPI has simply displaced appropriations that would have been made for other purposes within the federal budget, in which case any net impact on the economy would have been minimal. Alternatively, even if the spending added to federal deficits, the economy was operating at or near capacity during much of the programs existence. To keep inflation in check under those circumstances, the Federal Reserve generally takes into account information about the governments spending when it makes decisions about interest rates, with the intention of offsetting the impact on the economy of short-term fluctuations in such spending. As a result, additional government spending under those circumstances would not produce sustained increases in overall economic activity and employment. In addition, nearly all of the tenants currently leasing space at the arsenals were already located in the United States before they decided to participate in the program. Although the relocation of those tenants probably created an economic gain in the arsenal regions, it also probably resulted in an economic loss in the regions in which the tenants were previously located.
A Comparison of OMB's and CBO's Technical Assumptions Used in Estimating Defense Spending
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