How do CBO’s federal estimates compare with its analysis of state and local fiscal impacts from the 2021–2026 immigration surge?
Executive summary
The Congressional Budget Office’s federal estimates find that the 2021–2026 immigration surge boosts federal revenues enough—after accounting for higher mandatory spending and interest—to lower projected deficits by about $0.9 trillion over 2024–2034, while its state and local analysis shows that the same surge produced net fiscal pressure at the subnational level in the near term, with costs exceeding revenues by roughly $9–10 billion in 2023 depending on the measure used (CBO) [1] [2]. Put simply: CBO estimates a net fiscal gain for the federal government over a decade but a modest, immediate net cost for state and local governments concentrated in services such as education, shelter, and health care [1] [2] [3].
1. Federal picture: a decade-long net fiscal benefit driven by revenues outpacing costs
CBO projects that the surge—an incremental 8.7 million “other-foreign-national” arrivals relative to pre‑2020 trends—adds substantially to the tax base and raises federal revenues over the 2024–2034 window, and after accounting for increased mandatory spending and higher interest costs the agency estimates a net deficit reduction of about $0.9 trillion over that period [1] [4]. The agency’s federal analysis emphasizes long-run demographic and earnings effects: more workers translating into higher payroll and income-tax receipts and elevated GDP, even as some surge cohorts initially earn less and take time to converge to median wages [1] [5].
2. State and local picture: immediate service costs more than local revenue gains
CBO’s dedicated report on state and local budgets finds a different short‑term balance: for 2023 the surge had the potential to raise state and local revenues by $18.8 billion while increasing spending by $28.6 billion under an alternative broader measure—yielding a net cost of about $9.8 billion—and CBO’s other accounting produced similar findings that local costs for education, shelter and emergency services outpaced receipts [2] [3]. The agency also reported that from 2021 to 2023 the cohort generated roughly $10.1 billion in state and local taxes but incurred about $19.3 billion in costs, a pattern CBO highlights as consistent with prior research that immigration tends to produce net fiscal gains federally while imposing short‑term strains at the state and local level [3] [6] [5].
3. Why the divergence: timing, program scope, and eligibility rules
The discrepancy between federal and subnational impacts reflects three methodological and institutional realities CBO documents: federal benefits and tax gains accrue over a longer horizon and include broad mandatory programs and future payroll contributions, whereas state and local costs are concentrated and immediate—K‑12 schooling, emergency shelter, local health and law enforcement—and many immigrants are ineligible for large federal transfers in the near term, shifting costs downward to localities [5] [2] [7]. CBO also excluded discretionary federal spending effects from its baseline analysis, a choice that understates potential near‑term federal operational pressures while making the long‑run fiscal balance clearer [8].
4. Measurement caveats and alternative readings
CBO presents multiple measures and explicitly notes limitations: its state/local report offers an “alternative” measure that adds property‑tax effects, broader economic activity, and nonbudgetary costs, producing the $18.8B revenue and $28.6B spending figures and a near‑term net cost [2]. Partisan actors have seized different fragments—some emphasizing the federal $0.9 trillion deficit reduction as confirmation of benefits, others highlighting municipal shelter bills and the 2023 net local cost to argue the surge imposed burdens—so interpretation depends on which horizon and set of programs one prioritizes [1] [8] [9].
5. Bottom line and policy implications
CBO’s own synthesis is that the surge produces broadly positive federal fiscal effects over a decade while imposing measurable, concentrated costs on state and local governments in the immediate term; that pattern aligns with prior academic work and is built into CBO’s baseline assumptions, but it leaves policy room for targeted federal assistance to offset local strains if political actors choose to do so [5] [1] [2]. CBO’s dual findings—longer‑term federal gains versus short‑term subnational pressure—are not contradictory but complementary: they map different timeframes, program scopes, and eligibility rules, and they explain why debates about the surge often look so polarized depending on whether commentators focus on Washington or city hall [1] [2] [8].