Cato Institute Study: 30 Years of Immigration Saved America $14.5 Trillion in Deficits

by Nomad

 

A recent Cato Institute study (published February 2026 by David J. Bier and colleagues) delivers a striking message: Over the past three decades (1994–2023), immigrants—both legal and undocumented—have been a major fiscal asset to the United States, not a burden.

The Cato Institute is a well-known American think tank that promotes libertarian ideas. Because of its heavy focus on free-market economics and funding ties to conservative donors (like the Koch family) it is generally thought of as a right-wing organization. 

However, they consider themselves libertarian in their policy positions, typically advocating diminished government intervention in domestic, social, and economic policies and decreased military and political intervention worldwide. 

That's the reason why this study raised a few eyebrows.

The researchers built on the respected National Academies of Sciences model, analyzing real historical data from federal, state, and local budgets across those 30 years. They tracked taxes paid versus benefits received (including welfare, education, healthcare, pensions, and more), and factored in savings from reduced government borrowing.

The Headline Numbers

• Immigrants generated a cumulative fiscal surplus of $14.5 trillion (in inflation-adjusted 2024 dollars). This breaks down to $10.6 trillion in direct net gains (taxes paid minus benefits received) plus $3.9 trillion saved on interest payments because the government borrowed less.

• Every single year from 1994 to 2023, immigrants paid more in taxes than they consumed in government benefits—and the positive gap grew over time, hitting a record high in 2023 (around $878 billion that year alone). 

• Without immigrants, U.S. public debt (all levels of government) would stand at roughly 205% of GDP—nearly double the actual 2023 level. That threshold is often cited as a point where debt could spiral into a full-blown crisis.

• Immigrants cut overall U.S. budget deficits by about one-third (33%) in real terms over the period.
  

Who Contributed—and How Much?

The positive impact held across groups, challenging many common assumptions:

• College-educated immigrants drove the largest share: roughly $11.7 trillion in debt reduction.

• Non-college-educated / low-skilled immigrants (including high-school dropouts) still delivered a net positive: $2.8 trillion in reduced debt. No educational category was a net negative.

• Noncitizens (including undocumented immigrants) accounted for $6.3 trillion of the total savings. Undocumented immigrants alone reduced deficits by at least $1.7 trillion.

• Even when including the second generation (mostly U.S.-born children of immigrants, who are still young and not yet full taxpayers), the fiscal effect remained positive every year.

Why Do Immigrants End Up Being Net Contributors?

Several structural factors make the difference:

• Immigrants arrive at working age (average around 25), so they enter the workforce quickly, have high employment rates, and pay substantial taxes—often more per person than their population share would suggest.

• They use fewer costly benefits:
  • Lower access to old-age entitlements like Social Security and Medicare (due to arrival timing, status restrictions, or fewer government pensions).
  • About half the per-person education spending (they enroll fewer K-12 years on average).
  • Average or below-average use of needs-based programs (welfare, Medicaid, food assistance, etc.), despite higher poverty rates in some cases—largely because undocumented status blocks eligibility.
• Pure public goods (like military spending) don't rise much with extra people, so adding productive workers improves the overall balance.

This isn't just theory—the study uses conservative assumptions and focuses strictly on direct fiscal flows (not broader economic growth from immigration, which would make the numbers even more positive).

Bottom Line for Policy

The data flips the script on decades of claims that immigrants "drain" resources or drive deficits. Instead, they've subsidized the U.S. government, helping keep debt manageable and averting worse fiscal trouble. As Bier and team put it: "Immigrants are subsidizing the U.S. government."

If you're worried about long-term budget sustainability, the evidence suggests restricting immigration isn't the answer—cutting spending (especially on high-cost entitlement programs) while maintaining or expanding productive immigration flows could be far more effective.

No word about taxing the super-rich from the Cato Institute, of course. The Tax Policy Center (TPC), another think tank based in Washington, has estimated that a proposed wealth tax could raise $6.8 trillion in additional net revenue over the next decade, an average of $680 billion annually. 

This 30-year historical look provides one of the clearest, data-driven pictures yet: immigration, as it has actually occurred, has been a powerful fiscal stabilizer for America.

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