CBO Says “S.744 Would Boost Economic Output” – Overall Good for the Economy
The Congressional Budget Office (CBO), a non-partisan government office that evaluates the cost of any potential legislation, recently released a summary and report on the economic impact through the next 20 years of S.744, the Border Security, Economic Opportunity and Immigration Modernization Act. What’s the verdict? Over the long run, S.744 would significantly fix our nation’s economic woes! It would decrease our federal budget deficit by $197 billion over the next 10 years and a total of $700 billion from 2024-2033. Here’s a quick summary of the effects of enacting S.744 quoted from the summary report:
- Increase the size of the labor force and employment,
- Increase average wages in 2025 and later years (but decrease them before that),
- Slightly raise the unemployment rate through 2020,
- Boost the amount of capital investment,
- Raise the productivity of labor and of capital, and
- Result in higher interest rates.
Employment and Wages
- Size of the Labor Force: our country will grow larger by about 10 million people in 2013 and 16 million in 2033 and anticipate the new immigrants would participate in the labor force at a higher rate than adults in our current population.
- Average Wages: would be lower by .1% in 2023 but higher by .5% in 2033. As our country expands with more workers in the next decade, more capital would be infused into our economy, thereby driving up wages. Wages may be slightly depressed in the first decade after enactment, although the differences in wages between native and foreign-born will diminish over time.
- Relative Wages: would slightly decline by .3% for workers in the bottom fifth of the distribution of skilled workers (lower-skilled workers who did not complete high school). Meanwhile, relative wages for higher-skilled workers (completing high school, college and above), would increase by .5%.
- Employment and Unemployment: unemployment will likely increase from 2014 to 2020 but thereafter, S.744 would have no effect on unemployment rates. In other words, the first six years after passage we’ll see the greatest effects on unemployment rates before the data normalizes. CBO postulates the employment rates will be affected by these factors:
- Movement of workers from one skill to another. This would occur when out of status or undocumented workers obtain legal status.
- Minimum wage would affect how quickly employers hire. (But this applies with or without the passage of S.744.)
- Increase in a demand for labor may lag behind demand for goods/services.
CBO reiterates that different sectors of the economy will experience different unemployment rates. Moreover, over the long run, the unemployment rate would inevitably mirror the growth of our labor force (3.5 percent in 2023 and 5% in 2033 according to estimates).
Investments and Interest Rates
S.744, if enacted, would boost our capital stock by 2% in 2023 and 5% in 2033. The extra capital investments would come from private savings as a result of more workers who will be saving their hard earned money. Additionally, the federal government would save money from more revenue generated as a result of a greater demand in their services. CBO estimates that the revenues from admitting highly skilled workers coupled with the fines and government filing fees from the illegal immigrant population (RPI, LPR and Naturalization applications) would generate a significant amount of income for the government. What will the government do with all this revenue?
Our country’s overall productivity level will increase by .7% in 2023 and 1% in 2033. The theory behind this is that the large influx of high-skilled immigrants would help boost innovation which would result in increasing economic output.
Important Numbers to Consider
CBO also reported S.744 would have an overall increase in the inflation-adjusted GDP rate by 3.3% in 2023 and 5.4% in 2033 despite border security efforts costing $5 billion, with $1.5 billion allotted for southern border fences and $750 million to expand employment eligibility verification programs.
What will the Senators have to say about the report during their floor debates? What will the critics and proponents say? Can we afford not to act? Please send me your comments.