How Does CBO Estimate the Effects of Proposed Legislation Affecting Immigration?

Posted by
Sam Papenfuss
March 27, 2017

When CBO’s Director testified at Congressional hearings at the beginning of February, he was asked some questions about how CBO analyzes potential changes to immigration policy. Because answers during Congressional hearings must be brief, this blog post provides additional information.

What Factors Does CBO Consider When Estimating the Economic Effects of Proposed Legislation Affecting Immigration?

In 2013, CBO published an economic analysis of the Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744). That act would have revised laws governing immigration and the enforcement of those laws, allowing for a significant increase in the number of noncitizens who could lawfully enter the United States permanently or temporarily. The bill also would have created a process for many currently unauthorized residents to gain legal status, subject to their meeting conditions specified in the bill.

CBO’s economic analysis was based on the agency’s cost estimate of S. 744. Both analyses, which were conducted in collaboration with the staff of the Joint Committee on Taxation, illustrate the types of effects that CBO examines when legislative proposals would have a substantial effect on the economy. Relative to current law, enacting S. 744 would have:

  • Increased the population, the size of the labor force, and employment;
  • Decreased average wages through 2024 and increased them thereafter;
  • Slightly raised the unemployment rate through 2020;
  • Boosted the amount of capital investment;
  • Raised the productivity of labor and of capital; and
  • Resulted in higher interest rates.

What Factors Does CBO Consider When Estimating the Budgetary Effects of Proposed Legislation Affecting Immigration?

As CBO explained in a 2015 report, legislative changes to immigration policy could have a significant effect on the size and composition of the U.S. population (including children who are born to foreign-born people in the United States and who are consequently citizens). As a result, participation in federal programs and the payment of taxes could change. For that reason, and depending on the scope of the proposal, CBO considers various factors when estimating the budgetary consequences of legislation affecting immigration, including the demographic and labor-force characteristics of foreign-born people, their eligibility for and participation in federal programs, their tax liability, and changes in the economy. If proposals were combined into a single, more wide-ranging immigration bill, estimates of the budgetary effects would take into account the complex interactions among the various provisions; the net effect would not be a simple summation of the individual effects.

Sam Papenfuss is a Deputy Assistant Director in CBO’s Budget Analysis Division.