Making E-Verify Mandatory: The Perfect Storm

In addition to the controversy over the ARRP position on Social Security, there are other issues affecting retirement that surface via immigration legislation. Scott Hochberg has given Angry Bear permission to post his article from this weekend from Huffington Post. (hat tip coberly)

Making E-Verify Mandatory: The Perfect Storm for Crippling the Social Security Administration and Jeopardizing the Social Safety Net by Scott Hochberg

There has been much recent buzzing about AARP’s ambiguous, half-denied statements about their (new?) willingness to cut Social Security benefits, and rightly so. As the largest membership organization of seniors in the country, AARP’s tactical gamble could be an unfortunate game-changer in any deficit deal negotiated behind closed doors in Washington.

But believe it or not, one of the biggest threats to Social Security this summer could come from an entirely different direction, from an initiative whose main target is not even related to social program spending. I’m talking about E-Verify, a proposed system for curbing the legal employment of every single undocumented worker in America. While seemingly immigration-related, a mandatory E-Verify program could cripple the Social Security Administration (SSA) by concurrently draining already-limited funding while imposing heavy burdens on one of the most efficient government programs in existence. Oh yes, and it would threaten the timely distribution of all new Social Security benefits.

For those not familiar with it, E-Verify is a tool designed to prevent the employment of undocumented workers in the United States. Employers run the personal information of new hires though the E-Verify electronic system, which is connected to the SSA master database of Americans with Social Security numbers. In its developmental stages, the program has been optional for employers, but new legislation proposed by Rep. Lamar Smith (R-TX) would make it mandatory. This would be dubious policy for a number of reasons, and many diverse groups, from the pro-immigrant community to businesses and agricultural companies, have come out against it.

One key message of these groups that is often overlooked is that E-Verify would add significant responsibilities and workload to an agency that is already overworked and underfunded. The Social Security Administration is one of the most efficient government agencies, operating at less than 1 percent overhead costs. Forcing SSA to handle the administrative nightmare of E-Verify is worse than the usual conservative position of “starving the beast” — it is more like starving the beast and making it run a marathon while carrying a 50 lb. backpack. That’s because in addition to drastically increasing the responsibilities SSA would be faced with, the agency is already dealing with massive budget cuts that limit its administrative capacity. There are three compelling lines of argument against mandatory E-Verify:

1. Mandatory E-Verify would cost American workers their jobs and create confusion at SSA.

When E-Verify finds an inconsistency between a name and that person’s work authorization, it issues a “tentative nonconfirmation” (TNC), after which an employee has several days to contact SSA or DHS to correct the error or risk losing their job. Unfortunately, a significant number of these TNCs are issued in error. (Errors are usually due to clerical mistakes from inputting data, especially with hard-to-spell names or ones that have been hyphenated or changed, as well as errors by the workers themselves when filling out government forms.) In 2010, of the 16 million E-verify queries by employers, 128,000 (0.8 percent of the total) required the employee to go to SSA or call DHS to fix the problem. Of those 0.8 percent errors, 0.3 percent were discovered to be in error and were later corrected. But 0.5 percent — over half of all errors — were falsely issued “final nonconfirmations,” essentially forcing their employer to wrongly fire them. 0.3 percent may not sound like very many, but with a total American workforce of 154 million, that translates to over 770,000 jobs lost. (Tyler Moran, Policy Director of the National Immigration Law Center, has a thorough explanation of how many workers would be affected, and why it is so hard for workers to challenge the system.)

So what does this mean for SSA? It translates to an already overburdened staff that now has to deal with hundreds of thousands of extra calls and office visits, sometimes entailing a lengthy review process for individual cases. In 2008, when there were only 7 million E-Verify queries, 88,000 people called the 1-800 number or visited SSA due to E-Verify errors. If the program were mandatory, SSA would have to review 154 million records in the initial implementation period: if the rate of people calling SSA was the same as 2008, that would be nearly 2 million more calls into the agency during that period alone.

2. SSA is already underfunded and overburdened, and cannot afford to take on the consuming and perpetual E-Verify project.

SSA has long been underfunded. Agency administrative expenses alone have been shorted 8 of the last 10 years (compared with the amount it requested of Congress to operate at full capacity). There was a particularly huge cut in 2011, almost a billion dollars below the required level, that was part of the last-minute compromise between Speaker Boehner and the Democrats a few months ago.

Because of those negotiations, SSA has already had to take several measures to limit its regular operations because it simply can’t afford them — many of which (ironically, although perhaps not unintentionally) will increase costs further. For one, last month the agency stopped sending out annual earnings statements to all workers under 65. (Leave aside the fact that they only cost SSA $30 million in 2011, and help millions of Americans with their retirement planning while double-checking that SSA has the correct data for them.) The agency still expects that it will experience increased call volume from confused people wondering why they didn’t get their statements and hoping to confirm their information either in person or on the phone.

E-Verify proponents often claim, in response, that SSA would be funded to keep up with its new responsibilities. While that’s theoretically possible, it’s unlikely, given the Republicans’ current impulse to cut every government program in sight. It’s easy to imagine a scenario whereby SSA is forced to cut even more of its regular operations in order to accommodate the new E-Verify agenda. Critical goals of the agency, such as reducing the unacceptably long backlog for pending claims, would have to be ignored further into the future. Or maybe it was the point all along to cripple the administration of Social Security benefits themselves and attack this extremely popular program through the back door.

3. E-verify would remove millions of taxpayers from the pool that pays into Social Security, thus weakening the solvency of the Trust Fund.

As we’ve seen, the point of E-Verify is to remove illegal workers from legal employment, likely ending their tax contributions to Social Security and other federal revenue streams. This is a wasted opportunity, as any undocumented worker that pays taxes provides a net gain to the system (since they don’t collect benefits). As we all should know by now, undocumented workers are not going to leave the country when E-Verify comes knocking. They fill an important niche in our economy and are here to stay — the only difference is that more of them will be funneled into the underground economy, or miscategorized as (partially tax-exempt) independent contractors. One 2008 bill that would have made E-Verify mandatory without a pathway to legalization would have decreased federal revenue by $22 billion over 10 years.

Of the approximately 8 million undocumented workers, it is estimated that about two-thirds of them pay payroll taxes into the Social Security Trust Fund, accounting for $12 billion in 2007. (The Trust Fund is the total pot of surplus money paid into Social Security that is not immediately sent out as benefits, now totaling $2.7 trillion.) In sum, undocumented workers have contributed somewhere between $120 and $240 billion to the Trust Fund, accounting for 5.4 to 10.7 percent of its total assets. In addition, these workers tend to be younger than the average American, so the impact of their tax contributions will grow as the Baby Boomers retire and the percentage of seniors in America rises from 12 percent to 18 percent. According to the chief actuary of SSA, without the contributions of undocumented workers, the Trust Fund would run out of assets six years earlier than estimated in the 2010 Trustees Report. That’s staggering.

According to most experts, mandatory E-Verify wouldn’t affect those who already receive Social Security benefits, because current beneficiaries receive their checks through a mostly automatic process. But this much is sure: nearly everyone else would be affected. It is anyone’s guess how SSA would respond to being buried with new caseloads at a time when, even pre-E-Verify, “unprecedented workloads combined with declining budgets [have] damaged [the agency’s] service delivery,” according to the SSA Commissioner himself. I’ll leave it to the immigration experts to suggest how E-Verify needs to be improved before making it mandatory — but for now at least, mandatory E-Verify is the surest way to threaten the social safety net with paralysis. Let’s hope that if E-Verify makes it through the Senate without comprehensive reform attached, Obama will roll out the veto on this one.

Scott Hochberg