House debates immigration effect on local economies

A House Budget Committee hearing on Wednesday drew out two sides of thinking during a debate on the economic effects of immigration as the Republican majority hammered away on the costs.

“The Federation for American Immigration Reform has done a great job,” said Committee Chairman, Jodey Arrington R- Texas. “Studies suggest this cost is upwards of $400 billion, but their cost estimate is $150 billion. The lion’s share of that cost is borne by state and local governments.”

“State and local governments can’t borrow or print money like the federal government, so they have to balance their budgets by either absorbing this cost through raising taxes or they have to cut services to their citizens.”

Expert testimony at the hearing also included counterpoints to the economic effects of immigration.

“America has never needed immigrant workers like it needs them now,” said David Bier, director of immigration studies, Cato Institute. “Population growth is down 90% from its historic highs. America’s nine million open jobs are costing the U.S. economy more than a half a trillion dollars in economic output per year and we need immigrants to fill them.” 

Connections to the municipal bond market are related to the pulls and pushes of the immigration conundrum as cities in non-border states are also affected. 

“Municipalities have become overwhelmed by the increase in their population and are finding their budgets and the ability to provide basic services stretched to their outer limits,” said American Securities Association President & CEO Chris Iacovella, via a statement.

“If something doesn’t change, this will cause an increase in costs for municipalities and the people who call those communities home. “

Although the politics of immigration reform often grab the headlines, some market leaders see the issue in a more nuanced way.  

“It is a much more consequential issue, than most people understand,” said Tom Kozlik, managing director, head of public policy & municipal strategy, Hilltop Securities.

“From a financial perspective it can be a drain on resources. But in other situations, immigration is something that drives some state, regional, and local economies.” 

Municipalities which are already dealing with budgetary challenges due to a fall-off of federal, pandemic-related funding support are feeling another pinch from immigration costs. 

In February Illinois Comptroller Susana Mendoza launched a new online portal to track state spending on asylum seekers and found the state had spent more than $31.2 million on migrants since June 2023. The money went towards translation services, alarm system providers, and disaster response experts.  

Democrats pushed back, placing blame on Republicans for not using their majority in the House to pass meaningful legislation that might help alleviate the border crisis.

“To quickly recap, step one, Republicans demanded a border deal,” said Rep. Brendan Boyle, D – Pa. “Step two, they negotiated a border deal. Step three, when Trump ordered them to, they killed that border deal. And finally, step four. Here we are holding a hearing about how bad the border is.” 

Any legislation aimed at immigration reform would face a rocky road, as it would need to win Republican support in the House and then Democrat support in the Senate.