Immigration is a central electoral issue in 2024. The Republican candidate, Donald Trump, promises to apply a tough hand against migrants and promises mass deportations; while the Democrat, President Joe Biden, has just tightened asylum conditions in a turn that has surprised organizations and citizens. Although the current political discourse does not play in favor of immigrants, the numbers say otherwise. The United States Congress, through its Budget Office (CBO), highlights the positive benefit of immigration for the growth of the economy and its help in reducing the federal budget deficit in the next decade .
Regarding the deficit, the calculations indicate that the balance is positive for the State because the large federal accounts will be nourished with income that will increase by about 1.2 trillion dollars until 2034. Mainly that contribution will come from the taxes paid by the immigrants on salaries that will be low initially but will grow over time. Added to this is the fact that its presence also has a positive effect on the GDP, which will grow by around 8.9 billion, 2.4% more and will increase general revenue.
In the conclusions of the Budget Office, a technical body of the legislature, it is also noted that the effect will not be the same at the level of States and municipalities due to the need to direct resources to serve this new population. The costs of social programs and net interest on the debt will rise by about 300,000 million to serve the newcomers. More money will have to be dedicated to tax credits for the purchase of health insurance in the Obamacare market, to tax credits such as the earned income tax credit (the EITC) and child deductions, in addition to spending on Medicaid and children’s health ( CHIPS), nutrition programs (ETB), Medicare and education. Some areas in which not all immigrants are automatically benefited.
The list of expenses is long but the bill is much less large than the income, so the reduction in the net deficit will be about 900,000 million. The CBO economists, who remember that there are many uncertainties about the accounts, believe that the immigration of people without a work permit is 8.7 million higher than estimated for the period 2021-2026 and their projections pass because at least the half get authorization to work.
The CBO has not analyzed the effects of the June 4 executive action limiting asylum claims at the border, but is working on it. He also plans to publish the effect of the arrival of undocumented immigrants on state and local budgets, something that traditionally increases costs. The increase in undocumented arrivals is expected to have an impact on education and health spending, which are the highest spending categories in state budgets. At the local and state level, income will also increase, but less since at those levels half of that of the Federal State is collected.
Challenge in accounts
Jay Powell, the president of the Federal Reserve, has also spoken repeatedly about this positive effect of immigration, referring to the increase in the active population. However, in general the State accounts present many challenges for the coming years. The deficit of two trillion in 2024 will rise to 2.8 trillion 10 years later to be the equivalent of 7% of GDP, double what it has been on average in the last five decades.
The most important expenses—Defense, Health and Social Security—are the ones with the worst political solution and the last two are expected to rise the most while discretionary spending will be reduced. The State debt, which is already equal to 99% of GDP, will be 122% in 2034.
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