The Congressional Budget Office (CBO) recently released its latest Budget and Economic Outlook covering the period from 2024 to 2034, outlining fiscal projections for the United States for the next ten years. The report underscores that the deficit is expected to start at $1.6 trillion in fiscal year 2024 and escalate steadily, reaching $2.6 trillion by 2034. While the persistent rise in the deficit is concerning, the report also emphasizes the positive impact of immigration on expanding the labor force and fostering economic growth.
These latest projections suggest a continuous expansion of the labor force through 2026 fueled by increased immigration. Notably, the arrival of immigrants counteracts reductions in the labor force due to an aging population. That’s because a significant portion of recent and projected immigrants fall within the 25-54 age group — people’s prime working years.
The CBO has also revised its projections of net immigration upward, now estimating the potential labor force to be 2.7% larger by 2027 than it projected last year. Sustained high rates of net immigration through 2026 are expected to contribute to economic expansion, adding an average of approximately 0.2 percentage points to the annual real GDP growth rate from 2024 to 2034.
The CBO illustrates immigrants’ economic contribution through their spending power, particularly in the housing sector. As immigrants often initially reside with family or friends before gradually establishing their own households, the anticipated immigration rates from 2022 to 2026 are expected to sustain demand for new homes into the late 2020s. Therefore, the CBO forecasts an average of 1.7 million housing starts annually between 2026 and 2029.
Notably, the CBO was not alone in spotlighting the economic role immigrants play. In an interview with CBS News, Federal Reserve Chair Jerome Powell emphasized the impact immigrants have on our workforce, declaring, “Frankly, just in the last year, a big part of the story of the labor market coming back into better balance is immigration returning to levels that were more typical of the pre-pandemic era.” Powell’s remarks highlight the valuable role immigrants play in both the labor force and the broader economy.
While the Congressional Budget Office’s latest projections emphasize the ongoing challenge of rising deficits over the next decade, they also underscore the significant role immigration plays in shaping America’s economic landscape. Immigrants not only contribute to the expansion of the labor force but also stimulate economic growth through their spending, particularly in sectors like housing.