Immigrants Reduce America’s Deficit. Congress Should Take Notice.

Amid ongoing congressional debates—culminating, of course, in a partial shutdown—over Trump’s mass deportation agenda, one fact in particular should capture both Democrats’ and Republicans’ attention: immigrants provide an enormous boost to the country’s long-term economic and fiscal health, reducing our massive deficit by a third.

Off the bat, the Trump administration’s instincts on the economic effects of immigration are wrongheaded. “For decades, the structure of U.S. society, by intent and design, was remade to redistribute wealth, resources, property and opportunity from Americans to non-Americans,” Deputy Chief of Staff Stephen Miller said in December. It’s a compelling narrative, but it’s simply incorrect.

The evidence for immigrants’ significant economic contribution to America is overwhelming. Indeed, a new study published recently by the Cato Institute, analyzing three decades of fiscal policy for the first time, finds Deputy Chief Miller’s logic precisely backward: foreigners are creating wealth and redistributing it to Americans. The study finds that immigrants reduced the U.S. debt by nearly a third, or $14.5 trillion, from 1994 to 2023. 

Without immigrants, federal debt would already be more than 200 percent of GDP — a level some analysts fear could trigger a debt crisis.

In the Trump administration’s telling, each new immigrant to the United States introduces a host of new costs, principally borne by the federal government in the form of additional public spending. Yet a big chunk of government spending is what economists call “pure public goods,” which don’t increase just because a new person enters the country. We would, for example, have to pay our military and interest on past debt even if the immigrant population had shrunk.

From there, we can see that the average person in the United States paid more in taxes than they received from the government in services — which includes everything from education and welfare to roads and police. Therefore, if an immigrant’s fiscal impact is no worse than the average, they reduce the debt.

And that is indeed the case. Immigrants pay more than the average in taxes and receive less than the average in services, greatly reducing the deficit every year since 1994 when the detailed government data series begins. On the revenue side, immigrants paid higher-than-average taxes because their employment rate was 12 percentage points higher than that of the U.S.-born population. So, there was more income to be taxed.

On the spending side, the story is the same. While many believe immigrants must be a huge fiscal drain because they are more likely to live in poverty, it’s important to remember that federal law prohibits many noncitizens—primarily those here illegally—from receiving welfare. The truth is that immigrants receive only about the population average in “needs-based” assistance.

This near-average level of needs-based assistance is more than offset by the fact that they receive 34 percent less than the average in public retiree benefits. That isn’t due to age: immigrants are only slightly less likely to be of retirement age. Instead, it’s because many noncitizens are barred from applying for these benefits based on their legal status and only rarely work for the government, so they aren’t eligible for expensive public pensions.

Immigrants are also much less likely to be in prisons or jails, reducing incarceration costs. But the far greater savings come from education. The average age at arrival for immigrants was about 25, after their education is typically over, so immigration gives the country fully educated workers ready to enter the labor force—effectively for free.

It’s a far cry from the administration’s assertion that immigrants impose a public cost.

We still don’t know what kind of deal Congress will strike on immigration. But the data are clear that immigrants can have impressively positive effects on the government’s finances. They also point to a possible compromise along the lines of the bipartisan Dignity Act, sponsored by Reps. Maria Elvira Salazar, R‑Florida, and Veronica Escobar, D‑Texas, which would give currently deportable immigrants without serious criminal records the right to stay, work, and pay taxes with little access to public benefits. A proposal along those lines would have much more positive fiscal effects than the current mass deportation strategy.

Whatever deal is ultimately struck, Congress should not overlook the enormous fiscal upside from immigrants. The day of reckoning on America’s debt is coming. It would be better to meet it with some reinforcements.