Immigration stalemate: The economic toll

Senate Majority Leader Mitch McConnell of Kentucky speaks to reporters on Feb. 24, 2015, in the Capitol in Washington, D.C.
Ngan Mandel | AFP | Getty Images
Senate Majority Leader Mitch McConnell of Kentucky speaks to reporters on Feb. 24, 2015, in the Capitol in Washington, D.C.

The ongoing stalemate over U.S. immigration policy is getting costly.

Congressional Republicans continued on Tuesday to debate a potential funding cut for the Homeland Security Department to block President Barack Obama's executive order deferring the deportation of millions of unauthorized immigrants.

If they follow through with the threat, the shutdown could sideline some 30,000 administrators and other workers. Most workers would be exempt, as another 200,000 fall into essential categories such as Border Patrol, Secret Service and Transportation Security Administration. Those workers would remain on the job but without pay until the funding standoff is resolved.

Obama warned Monday that the payroll suspension would be felt hardest in regions covered by border patrol, port inspection and airport security agents.

"It will have a direct impact on your economy, and it will have a direct impact on America's national security because their hard work helps to keep us safe," Obama said.

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The president's order to defer deportations was put on hold last week by a federal judge, who sided with officials from Texas and 25 other states that took the White House to court. The administration is appealing the ruling but has suspended plans to allow undocumented immigrants to apply for legal status.

The loud, ongoing legal and political debate unfolding over immigration reform often overlooks one very important impact from letting more foreigners come to live and work in the U.S.

Read MoreImmigration stalemate: The economic toll

Many researchers believe it's good for the economy.

The economic case for a major immigration overhaul is that with an expanded workforce, the economy will grow more rapidly and the government will collect more in taxes, lowering the federal deficit.

And because immigrants tend to be younger, on average, than the general U.S. population, the influx of new workers would help offset the economic burden of the rising cost of caring for an aging population.

The president's executive order would allow more than 4 million undocumented immigrants to apply for a program that protects them from deportation, and another 1 million people would be protected from deportation under other provisions. Those include expansion of an existing program for young immigrants who came to the United States as children. The order lifted the age limit for people who qualify.

While Republicans in Congress oppose the measure, some business groups, including the U.S. Chamber of Commerce, argue that the move doesn't go far enough and urged Congress to enact a complete overhaul.

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"Successfully competing for the world's best talent and hardest workers will be indispensable to our efforts to grow the economy and expand jobs and incomes for all Americans," said U.S. Chamber of Commerce President and CEO Thomas Donohue on the group's website. "Executive actions cannot adequately fix our broken immigration system."

While there's general agreement that comprehensive reform would boost economic growth, the impact of piecemeal measures like the president's deferred action order aren't as clear. The last comprehensive package, approved by a Democrat-controlled Senate in 2013, would have boosted the number of authorized workers in the U.S. labor force by about 11 million people (or 3 percent) by 2023 and by 16 million (about 4 percent) by 2033.

In the short run, that added population would increase the cost of a variety of government services. But those would be more than offset by the higher taxes collected on the increased wages earned by newly arrived workers.

One widely cited study by the Congressional Budget Office last year found that, if enacted into law, the comprehensive immigration reform package approved by the Senate last year would boost economic output by an additional 3.3 percent in 2023 and by 5.4 percent in 2033.

The CBO estimated that the reforms called for in the Senate bill would shrink the federal budget deficit by $197 billion over the coming decade and by roughly $700 billion in the decade after that.

But the president's deferred action policy would cover only a fraction of immigrants covered by comprehensive reform. And because the measure is only temporary—and subject to reversal by the next president in 2016—the long-term benefits are far from certain.

Without a long-term agreement over comprehensive reform, the economic drag of an aging workforce could become very costly.

The relatively robust pace of U.S. growth appears to be bucking the trend of the rest of the developed world in the short run. Though the American job and housing markets continue their halting recovery, the engines of growth are slowing in the rest of the world. From Europe to China to Japan, global growth has so far resisted efforts to shake off the lingering effects of a massive debt hangover that followed the credit crisis of 2008.

But the U.S. shares the same long-term demographic headwind now confronting policymakers in Europe and Japan. As the population ages, younger people aren't entering the labor force fast enough to replace the older workers who are retiring. And there are fewer younger taxpayers to cover the cost of providing retirement income and health care for those older workers.