According to just-released CBO projections, passage of the latest version of the DREAM Act would increase budget deficits by around $26 billion by 2027. The bill would grant legal status to young people commonly known as “DREAMers”—an estimated 2 million undocumented immigrants who arrived in the United States as children, many of whom received temporary protections under the Deferred Action for Childhood Arrivals program, or DACA. The bill is one of several introduced this year to make those temporary protections permanent after President Trump’s decision to end the DACA program.
The CBO estimate is largely based on a projected increase in federal benefits that DREAMers would enjoy as lawful permanent residents, such as Medicaid, SNAP, and health insurance subsidies. However, this projection uses an incomplete basis for evaluating the fiscal impact of the legislation. CBO compares the costs of legalizing DREAMers to a baseline in which they continue to work in the United States as undocumented immigrants, rather than the potential scenario of increased deportation and emigration. The latter scenario would likely lead to far greater costs than those associated with passing the DREAM Act, especially in lost productivity and economic growth. Previous BPC economic analysis has shown that stepped-up enforcement without efforts to increase legalization would lead to a reduction in GDP, a smaller labor force, and higher federal budget deficits. It is important to note that the CBO estimate applies only to the DREAM Act itself, as the other pieces of legislation meant to protect the DREAMers all have different eligibility criteria, which would impact CBO projections.
The Bill’s Provisions
The DREAM Act would grant an eight-year “conditional permanent resident status” for undocumented immigrants who arrived in the United States as children before the age of 18 and are enrolled in a K-12 or postsecondary institution or possess a high school degree or GED. They would also have to pass a criminal and terrorist background check and medical exam. After receiving provisional status, the bill would allow recipients to apply for a green card if they complete military service, are employed for three years, or complete at least two years of postsecondary education and demonstrate English proficiency, as well as pass a test on American history and the U.S. political system.
The bill’s requirements have a direct impact on the number of individuals eligible for provisional status. Whereas DACA’s eligibility pool was limited to around 800,000 people due to year-of-arrival and age requirements, the DREAM Act is more generous in that it would grant provisional status to around 1.3 million additional DREAMers who did not qualify for DACA and are currently living in the United States undocumented. Within this group, the Migration Policy Institute estimates that 1.7 million individuals would be eligible for a green card.
According to CBO, enacting the DREAM Act would increase direct federal spending by $26.8 billion over 10 years—largely because many DREAMers would become eligible for a variety of federal benefits, such as Medicaid, SNAP, and health insurance subsidies that are only available to legal permanent residents and citizens.[footnote]It is worth noting that CBO’s previous forecast of the 2010 version of this bill projected that it would lead to budget savings over ten years. This is because under the previous version, provisional status lasted ten years as opposed to eight years in the current bill. Because CBO only handles ten-year projections, many of the costs associated with legalizing the DREAMer under the previous bill (e.g., eligibility for federal benefits) occurred outside of their forecasting window.[/footnote] According to CBO, these increases would be only partially offset by higher tax revenues from increasing the number of individuals with work authorization. CBO estimates the bill would increase federal tax revenues by $900 million and add $4.7 billion to Social Security revenues, leading to a $25.9 billion increase in the federal deficit.
CBO’s analysis provides an incomplete picture of the economic context surrounding the legislation. Specifically, CBO is comparing the bill to a baseline in which the DREAMers would remain in the United States as undocumented immigrants without considering the possibility that many of them, without government protection, would be deported or otherwise leave the country. As BPC’s research has indicated, undocumented immigrants tend to be a net positive for the federal budget, as they pay federal taxes but are ineligible for many of the benefits enjoyed by U.S. citizens and lawful permanent residents. As such, any bill that legalizes large numbers of undocumented immigrants would lead to additional costs compared to a scenario in which they remain working illegally.
However, if high levels of DREAMers were deported or emigrated, the workforce would shrink, leading to lower economic growth, declining tax revenues, and a decrease in the worker-to-retiree ratio, making it even more difficult to support America’s rapidly-aging population. Indeed, according to modeling from BPC, deporting all undocumented immigrants in the United States would shrink the economy by close to 6 percent over ten years relative to current projections. Based on these estimates, removing the 800,000 DREAMers alone could lead to roughly a 0.4 percent decline in economic growth over this span.
Other studies support these conclusions. According to the Cato Institute, repealing DACA would lead to a $60 billion decline in federal budget revenues over 10 years. Similarly, the Brookings Institution estimates that the arrest and removal of 800,000 DREAMers would lead to an additional $10 billion in federal enforcement costs. Although DHS has stated that the DREAMers are not being actively targeted, growing enforcement actions and a 30 percent rise in arrests from over the past year indicate that many will likely face deportation.
Given the Trump administration’s tough line on immigration enforcement, inaction from Congress will increase the likelihood that large numbers of DREAMers become subject to deportation over the next decade, and possibly to others leaving of their own volition. CBO’s analysis does not take this possibility into account, meaning that their projections should be viewed as just one piece of a larger economic puzzle. Ultimately, lawmakers should also consider the economic costs of a smaller workforce, which would likely outweigh those associated with passage of the DREAM Act.