As reported by the Senate Committee on the Judiciary on May 28, 2013, including the amendments made in the star print of June 6, 2013

S. 744 would revise 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 on both a permanent and temporary basis. Additionally, the bill would create a process for many individuals who are present in the country now on an unauthorized basis to gain legal status, subject to requirements specified in the bill. The bill also would directly appropriate funds for tightening border security and enforcing immigration laws, and would authorize additional appropriations for those purposes.

Estimated Impact on the U.S. Population

CBO estimates that, by 2023, enacting S. 744 would lead to a net increase of 10.4 million in the number of people residing in the United States, compared with the number of people projected under current law. That net increase comprises an increase of about 10.4 million permanent residents; an increase of about 1.6 million temporary workers and their dependents; and a decrease of about 1.6 million unauthorized residents. (CBO estimates that about 8 million unauthorized residents would initially gain legal status under the bill, but that change in status would not affect the size of the U.S. population.)

Estimated Impact on the Federal Budget for 2014 Through 2023

The increase in the number of legal residents stemming from the bill would boost direct spending for federal benefit programs; direct spending for enforcement and other purposes also would rise. Under the bill, federal revenues would be higher as well, mostly because of the larger size of the labor force. Finally, implementing the bill would require an increase in discretionary funding (that is, funding subject to annual appropriation actions) for immigration-related activities.

CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting S. 744 would generate changes in direct spending and revenues that would decrease federal budget deficits by $197 billion over the 2014?2023 period (see Table 1 on page 12). CBO also estimates that implementing the legislation would result in net discretionary costs of $22 billion over the 2014?2023 period, assuming appropriation of the amounts authorized or otherwise needed to implement the legislation. Combining those figures would lead to a net savings of about $175 billion over the 2014?2023 period from enacting S. 744. However, the net impact of the bill on federal deficits would depend on future actions by lawmakers, who could choose to appropriate more or less than the amounts estimated by CBO. In addition, the total amount of discretionary funding is currently capped (through 2021) by the Budget Control Act of 2011; extra funding for the purposes of this legislation might lead to lower funding for other purposes.

Specifically, CBO and JCT estimate that enacting S. 744 would have these budgetary effects:

• Increase federal direct spending by $262 billion over the 2014?2023 period. Most of those outlays would be for increases in refundable tax credits stemming from the larger U.S. population under the bill and in spending on health care programs?particularly for the Medicaid program and for subsidies provided through insurance exchanges created under the Affordable Care Act (ACA).
• Increase federal revenues by $459 billion over the 2014?2023 period. That increase would stem largely from additional collections of income and payroll taxes, reflecting both an increase in the size of the U.S. labor force and changes in the legal status of some current workers.

• Decrease federal budget deficits through the changes in direct spending and revenues just discussed by $197 billion over the 2014?2023 period. Because enacting the bill would affect direct spending and revenues, pay-as-you-go procedures apply. Those procedures consider only the on-budget effects of legislation and not the off-budget effects, such as the effects on Social Security taxes and spending.

  The on-budget effects would amount to increased direct spending of $259 billion and increased revenues of $245 billion, resulting in on-budget deficits that would be $14 billion greater than under current law over the 2014-2023 period. (About $3 billion of the on-budget direct spending would be designated as an emergency requirement under the bill. See Table 8 on page 54 for the estimate of budgetary effects that are subject to pay-as-you-go procedures.)

• Lead to net federal discretionary costs for immigration-related activities of about $22 billion over the 2014?2023 period, assuming appropriation of the amounts authorized or otherwise needed to implement the legislation.

Following the long-standing convention of not incorporating macroeconomic effects in cost estimates?a practice that has been followed in the Congressional budget process since it was established in 1974?cost estimates produced by CBO and JCT typically reflect the assumption that macroeconomic variables such as gross domestic product (GDP) and employment remain fixed at the values they are projected to reach under current law. However, because S. 744 would significantly increase the size of the U.S. labor force, CBO and JCT relaxed that assumption by incorporating in this cost estimate their projections of the direct effects of the bill on the U.S. population, employment, and taxable compensation.

The bill also would have a broader set of effects on output and income that are not reflected in this cost estimate. Those additional economic effects include changes in the productivity of labor and capital, the income earned by capital, the rate of return on capital (and therefore the interest rate on government debt), and the differences in wages for workers with different skills. Those effects and their estimated consequences for the federal budget are described in a report accompanying this cost estimate.

Estimated Impact on the Federal Budget Beyond 2023

CBO and JCT generally do not provide cost estimates beyond the standard 10-year projection period. However, S. 744 would cause a significant number of people to become eligible for certain federal benefits in the decade following 2023, so CBO and JCT have extended their estimate of the effects of this legislation for another decade.

The additional amount of federal direct spending stemming from enactment of S. 744 would grow after 2023 as more people became eligible for federal benefits as a result of the bill. CBO estimates that the net increase in the U.S. population under S. 744 would total about 16 million by 2033. The additional amount of federal revenues owing to the legislation also would increase after 2023. On balance, CBO and JCT estimate that those changes in direct spending and revenues would decrease federal budget deficits by about $700 billion (or 0.2 percent of Gross Domestic Product) over the 2024?2033 period. In addition, the legislation would have a net discretionary cost of $20 billion to $25 billion over the 2024?2033 period, assuming appropriation of the necessary amounts.

Therefore, pursuant to section 311 of the Concurrent Resolution on the Budget for Fiscal Year 2009 (S. Con. Res. 70, 110th Cong.), CBO and JCT estimate that changes in direct spending and revenues from enacting S. 744 would not increase the on-budget deficit by more than $5 billion in the first 10-year period starting in 2023.

The effects of immigration policies on the federal budget are complicated and uncertain, and they become even more so as they extend farther into the future. According to CBO’s and JCT’s estimates, enacting the legislation would produce net on-budget savings in the years leading up to 2033; however, it is impossible to project to what extent that trend would persist after 2033. Therefore, CBO and JCT did not construct a comprehensive estimate of the budgetary effects of S. 744 beyond 2033. As a result, we cannot determine whether enactment of S. 744 would lead to an increase in on-budget deficits of more than $5 billion in any of the three 10-year periods starting in 2033.

Intergovernmental and Private-Sector Mandates

S. 744 would impose several intergovernmental and private-sector mandates as defined in the Unfunded Mandates Reform Act. Most of those mandates would fall on employers and other entities that hire, recruit, or refer individuals for employment. CBO estimates that the aggregate annual costs of the mandates imposed on public entities would fall below the intergovernmental threshold (which is $75 million in 2013, adjusted annually for inflation). However, CBO estimates that the aggregate annual costs of the mandates imposed on private entities would total at least $700 million once the mandates were fully in effect, probably by 2016; the costs thus would exceed the private-sector threshold (which is $150 million in 2013, adjusted annually for inflation).

The substantial increase in population that would occur if S. 744 is enacted would have many other effects (both negative and positive) on the budgets of state, local, and tribal governments, but CBO does not estimate the overall effects of legislation on the budgets of those governments.