October 24, 2014

Costly Immigration Amendment Indulges Old Habits

  • The federal budget is an expression of our country's values. Where we choose to spend and at what levels, how and who we tax, and the borrowing we...

Legislation to revamp the nation’s immigration laws is on track for Senate approval this week after an expensive border security amendment passed a key procedural vote yesterday. The amendment would cut into the projected savings of the original legislation, providing $38 billion more for additional border security measures.

From that additional funding, $30 billion is allocated for hiring at least 19,200 additional border agents; the original bill required hiring 3,500 new agents. The rest of the funds are allocated for additional fencing along the southern border. Close to $6 billion of this spending would be offset by fees imposed for immigration services.

Although the amendment has helped create bipartisan agreement on immigration reform, it does so by indulging some old habits: Throwing money at a problem without careful scrutiny of whether the funds are needed or can be effectively deployed, and spending some of the legislation’s projected savings.

Last week the Congressional Budget Office (CBO), working with the staff of the Joint Committee on Taxation (JCT), projected that the original legislation could produce savings of about $197 billion over the next decade.

The CBO estimated that the legislation would lead to a net increase of 10.4 million in U.S. residents over the next 10 years, and an increase of 16 million by 2033.

With a larger population, spending on benefit programs -- particularly for health care and refundable tax credits -- would boost federal outlays by $262 billion over the next 10 years. In addition, CBO estimated that the bill would lead to another $22 billion of discretionary spending over that time, if fully implemented.

The increased spending, however, would be offset by income and payroll tax revenue increases of $459 billion.

The $214 billion of new revenue estimated to come from Social Security payroll taxes is classified as "off-budget." Without this amount, the bill has an "on-budget" deficit that is subject to the statutory pay-as-you-go requirement. The original bill had an on-budget deficit of $14 billion, which would likely be higher under the amended version due to the increased border security spending.

This week, the CBO said the border security amendment would lower deficits by roughly $40 billion less than the original legislation.

Because of the original legislation’s long-term effects, the CBO and JCT incorporated certain economic assumptions and extended budget estimates to 20 years instead of the usual 10-year period.

Projected changes in direct spending and revenues would decrease federal budget deficits by about $700 billion over the second decade. Certain economic impacts could further reduce deficits by about $300 billion in that decade.

The CBO and JCT expect there will not be a significant difference in the net reduction of the deficit over the 2024-2033 period between the original legislation and the border security amendment.