Illegal immigration and Social Security/Medicare
In a previous post, I mentioned an effective way to curtail illegal immigration—require all employees to be screened through E-Verify—and some reasons why it won’t be adopted. Another disincentive to deterring illegal immigration is that it subsidizes Social Security and Medicare:
“ . . . illegal immigrants as a group are net contributors who partially pay into the trust funds while receiving little in return, but amnesty would transform them into net drains who receive more in benefits than they contribute in taxes. CIS has estimated the per-recipient cost of this dramatic change in status to be $129,000 in present value. If 10 million illegal immigrants receive amnesty, the total cost to Social Security and Medicare would be roughly $1.3 trillion, equivalent to a one-time transfer of 6 percent of GDP.”
I doubt this subsidy is much on the minds of those who prefer the status quo and peformative political posturing over real solutions to illegal immigration, but it is another disincentive to solving the problem.
Illegal immigration subsidizes Social Security and Medicare
Medicare (and other publicly funded healthcare/insurance programs) seems to me a more intractable issue. If people are here and old and sick, well what are we going to do about?
Just tell them to pay for it out of pocket? Decide that now would be the moment to get them a ticket for Honduras? Gain effective control over the borders and wait 30 years and offer amnesty on an “effective date” basis could protect Social Security….benefits start January 1, 2055 based on contributions from that date forward. Walking away from prior contributions is just part of the deal. Not saying that ought to be the plan, (well the part about border control should be) but you could do it. Hard to imagine with healthcare though.
@Eric,
Not sure what you’re trying to say here. The contributions that undocumented workers make into SS/Medicare can never be claimed as benefits, since in such cases, the SS #s are fake.
As for border control, that already *is* the plan. It’s not working well, which is precisely why there are undocumented workers paying into SS/Medicare with fake IDs.
My point is really that you could cut back full social security benefits in a future regularization of these migrants as simply part of the “deal”, but hard to see how to do it with healthcare. As for the border, walls work which is probably why there was so much opposition. The Iron Curtain was hugely effective. We use walls in every international airport or cruise ship port. It would be nice if the neighbors respected the border, but they are very accustomed to not doing so. Control of the border no question has a bit of subjectivity to it. Find a level where there is a good consensus that our nation is in effective control of who gets in. We are far from that today.
The Iron Curtain worked because the guards shot people trying to get past it.
@Jack,
That was in Berlin. There were many miles of border between the GDR and West Germany.
Back in the mid-’90s, I was an external on a dissertation committee in Geneva, and another committee member then drove me to his university in the former GDR to give a seminar. On the way, I asked him to tell me when we crossed the border from West to East Germany. He told me I would know, and indeed I did. On the West side, there were houses and street lights. At the former border, all that disappeared, and it was dark forest by the road for several miles before it opened up into farmland. It was certainly difficult, but not impossible, to cross the border in these rural places.
Many people escaped from the USSR, too. Guards may have shot *at* people, but for the determined, the borders were immense and porous.
Joel,
In the 60’s I was stationed near Nuremberg and was aware of the “iron curtain” and its impact along the Czech border. Unless it was patrolled, it didn’t work at all.
I thought many irregular immigrants have legitimate Tax Identification numbers. Not sure if SS contributions go under those or just income tax. In any case, that $1.3T is kind of a showstopper but you conceivably can put on another kind of show to get around it. On healthcare funding, I think it would simply be self-delusional not to account for it as best as possible under any scenario.
@Eric,
Again, I don’t know what you’re trying to say here.
How would an undocumented worker obtain a legitimate Tax Identification number? What does the word “legitimate” even mean for an undocumented worker?
“Not sure if SS contributions go under those or just income tax.”
Take a look at your paycheck stub. There’s “FICA” and there’s income tax. SS contributions go under FICA.
Eric:
What would they do in Europe? A place which has far less resource available to fund healthcare.
Not sure but what I took to be irregular migrants to Spain were going to a municipal clinic near my apartment in Madrid. Was it funded by the city or national government? Suspect it was city but using mostly national level grants. That’s kind of my point: one way or another people in your country will get healthcare. Maybe not the very best, but they’ll use healthcare at levels that will require public funding. I guess that the result is simply a bit more de facto rationing of care in certain areas. Another 3 weeks to get knee surgery; a bump up in denials for hip replacements; less intensive mental health counseling and the like. You get what you always got, but a bit less of it.
CIS claims to be non-partisan, but they sure seem to have an anti-immigration lean to me.
Diving into the report on which their headline is based, their calculations on the cost of benefits for immigrants who receive amnesty are their own, not from SSA. They increase the benefit from average because Hispanics live longer than the average US citizen. However, they do not decrease the benefit based on the effect of income on longevity. They also appear to assume that all immigrants will stay even though it has been reported that many illegal immigrants do return home later in life.
They also claim that counting future immigration is invalid – a Ponzi scheme – even though Pay As You Go is how Social Security is structured.
@Arne,
The topic of this thread is illegal immigration. Legal immigration is a different issue.
“They also claim that counting future immigration is invalid – a Ponzi scheme – even though Pay As You Go is how Social Security is structured.”
Yeah, the right-wing “Ponzi scheme” epithet to describe Social Security is a lie. Anyone who calls SS a Ponzi scheme understands neither SS nor Ponzi schemes. And as for legal immigrants, if they’re older, they benefit from the SS payment structure.
Again, my post is about illegal immigration, undocumented workers and how it subsidizes SS and Medicare.
Joel:
Arne is one of the SS experts similar to Dale.
Joel,
My response is directly on topic. I followed the link from CIS that you posted and read the underlying analysis. The CIS point that the different ways that amnesty for illegal immigrants could be handled will impact SS is correct. Some of their underlying assumptions make me distrust the actual numbers.
Arne:
What do you see in the impact to Social Security? Certainly if they become users of SS, they would take from the excess funds attributed to them and which go uncollected. Is there something else?
@Arne,
The CIS link I posted is mostly about legal immigrants. There is a section on illegal immigration, which is the reason I cited it. I didn’t cite it because of the amnesty arguments. I cited it because of the recent figures on how much money flows into SS and Medicare from undocumented workers who will never benefit. Those figures align well with figures I’ve seen over the past couple of decades. I just chose this link because of recency. I don’t know or care about the rest of the article.
You quoted:
“If 10 million illegal immigrants receive amnesty, the total cost to Social Security and Medicare would be roughly $1.3 trillion”
@Arne,
I did. And it refers to illegal immigrants, just as I said. I quoted it because if $1.3 trillion is the total cost after a hypothetical amnesty, then ipso facto, $1.3 trillion is the amount estimated to flow to SS and Medicare in the present *absence* of amnesty.
Hope that helps.
Per Dale Coberly:
The projected cost of SS by 2098 is about 6% of GDP. current cost is about 4% for about 60 million beneficiaries.
I don’t have at hand the cost of Medicare including non FICA contributions but i suspect an extra ten million recipients would not double the cost of that either…so, just as a guess I would bet that 6% of GDP “one time transfer” is spread out over 20 years making the actual per year cost about 0.3% of GDP.
“if $1.3 trillion is the total cost after a hypothetical amnesty, then ipso facto, $1.3 trillion is the amount estimated to flow to SS and Medicare in the present *absence* of amnesty”
But if you look at the underlying analysis, it turns out that is not what they calculated.
Arne
you are right. the article linked to gave me the creeps. it’s not worth taking the time and effort to refute it in detail, and i don’t have the heart for it anymore, but the “ponzi scheme” gives you an idea of the quality of their thought.
@Arne,
OK, then what *is* the impact of current undocumented worker contributions to SS and Medicare? Please supply a link to the underlying analysis. The percent of GDP is irrelevant. What is relevant is the impact of these contributions to SS and Medicare.
which cannot be determined from the article. but can be determined by looking SS percent of GDP assuming we have any idea what the article;s “one time transfer equal to 6% of GDP means.
i tried my best guess. what is your conclusion?
as a percent of GDP
according to 2022 Trustees Report
|
SUM OASDI GDP$ HI
for year income cost balance
2099 4.44 5.87 -1.43 1.86 1.97 -.11 6.30 7.84 -1.54 551,856
2100 4.44 5.87 -1.44 1.86 1.97 -.10 6.30 7.84 -1.54 574,472
note i have not studied this, so i don’t know if there is something hiding in the figures i have missed
if i have understood Joel’s “one time transfer” and assume it is cost of 20 years extra deficit (having nothing else to go on) this would be 0.3% increase in the required tax rate. insignificant given all the unknown factors and low probability of the subject event.
when i typed in the comment it look fine, but after it posted it came backscrambled. if you wanted to unscramble it the top line should be YEAR…OASDI….HI…SUM, and the second line should be
income…cost…balance under EACH of the top line’s categories.so third line would read
2099 4.44 5.87 -1.44 and so on.
hope that clears everything up.
well that sure worked out good.
ignoring the table, the projected cost of OASDI PLUS HI for 2100 is 7.84% of GDP.
I don’t have any idea what period the “one time transfer” is supposed to cover, but if it’s 20 years the per year increase in SS deficit would 0.3% of GDP. insignificant, given unknown feedbacks, unknown other “events,” and unlikelihood of proposed policy change.
well, everyone seems to have left the building. which is probably best.
as i said above, i have not studied this so I could easily be wrong, just suggesting things to look at, here is another way, off the top of my head:
they say the “one time transfer” would be 1,3 trillion in present value or 6% of GDP. since 6% of GDP is the cost of the entire SS program projected for 2097, their figure seemed wildly unlikely to me. More likely they mean the present value of the cost of “amnesty” over the 75 year actuarial window.
since the present value of the entire deficit in SS costs vs expected income is about 20 Trillion dollars and can be paid for with a 4% increase in the payroll tax, i would expect that a one trillion dollar “immigration deficit” (round numbers) could be paid for with a tax increase of 1/20 of 4% of payroll or 0.5% (round numbers). since payroll it about 1/3 of GDP 0.5% of payroll is about 0.5%/3 of GDP or about 0.16%.
since these are rounded numbers based on a top of the head “analysis” it could all be wrong, but i bet it wouldn’t be very wrong. and calling a 1.3 trillion dollar cost 6% of GDP is complete nonsense if not deliberate deception.
and calling SS a ponzi scheme is damned nonsense. [by the way, the actual cost of the present deficit in SS over the 75 year window is 3.6% of payroll, if I remember (not guaranteed). calling SS a ponzi scheme assumes the world will stop in 2097 or whenver the non partisan expert liars can kill SS, whichever comes first.
From a SSA report, undocumented workers paid in $13B in 2010. Total income from the 2010 report was $791B. 1.6 percent. Considerably less than the impact of dealing with the upcoming shortfall, but not just a rounding error.
I have no idea about the trend. I could not answer the question from just the annual reports. Hope that helps.
Arne;
Yours and Dale’s thoughts on SS are very much appreciated. It would have been nice to hear Bruce’s words on the topic also. Perhaps, I should resurect a post of his sometime?
Thank you for your response.
I suspect you could find a post of Bruce’s that talked about illegal immigration being a subsidy for SS. But it has been years now since Bruce has posted.
Arne
On illegal immigration and if there was a post by Bruce, I could possibly find it by doing a search. There are rougly 22,000 commentaries out there as written by various authors. When I get my computer back, I will search for one using the words illegal immigration and immigration.
Arne:
I saw them. When I am up again, I will post a copy of one and also the link so you can read the original. Right now, here is a comment of Bruce’s from 2010.
“Under the current rules the Trustees are supposed to recommend action to Congress anytime either fund goes out of Short Term Actuarial Balance which for combined OASDI will be around 2026, and any fix programmed in reduce the cash transfers ten years out significantly. So there is no reason we can’t keep those cash transfers at a level that is not much higher than those we are seeing in 2010 and projected to see in 2011. If we can fund an Afghan war that has less than majority support surely we can find equivalent funding to redeem a legal obligation to (as you point out) tens of millions of voting seniors.”
Note the year of the potential shortfall of Accounting Shortfall estimation. There is no “piggy bank” full of $dollars. There is an accounting of what goes in and out of the measured SS funds. From 2026 to 2034/35 shortfall? What else is occurring and not being accounted for?
Well for one thing, illegal immigration is a part of this growth. Just make up a SS# (employer) and pay into it. It would be interesting to study. I would have to do some extensive work to find the other inputs besides the impact of illegal immigration. An estimation by Bruce in 2009 for 2020. Note the numbers and the dates.
“I want to highlight that last point. Per the 2008 Report legal immigration for 2006 was estimated to be 950,000 with illegal immigration adding another 380,000 for a total of 1,330,000 adding to a total population equalling 306 million. Under Intermediate Cost assumptions those numbers are projected to settle out at 750,000 and 380,000 by 2020 (1,130,000 out of 345 million people) and to an ultimate 750,000 and 275,000 or 1,025,000 new immigrants out of a 2085 population estimated at 481 million.” Bruce’s post: “Lady Liberty Douses Her Torch: Social Security and Immigration Policy”
If you are not aware (others Arne), Bruce Webb died a decade ago(?). His articles can still be found on Angry Bear by doing a search for Social Security + Illegal or legal immigration.
I thought Bruce must have passed, but I never saw a notice and could not find one when I looked.
@Arne,
Yes, it is somewhat helpful, although I was looking for something considerably more recent than 13 years ago. That’s why I cited the CIS report as an estimate. But it suffices to make my point that illegal immigration *is* a subsidy for SS and Medicare.
An important distinction between the $13B and the remaining $778B is that none of the undocumented workers who contributed will ever make claims.
Arne
thank you for your “somewhat helpful” answer to the question the author was loooking for. I was thrown off track by the link to the article that seems more interested in making it look like amnesty would be a huge horrible great big extra cost to Social Security, an easier way would have been to make the reasonable assumption that the “one time transfer” referred to the present value of the 75 year accounting period that the Trustees use. If I got that right, the “actuarial deficit” over that time is 3.6% of payroll or 22 Trillion in “present value”. since payroll is about 1/3 of GDP, the deficit would by about 1.2% of GDP.
the cited article claims the effect of amnesty would be present value 1.3 Trillion, that suggest it would be 1.3/22 of the actuarial deficit w/o amnesty or 0.2% of payroll 0.07% of GDP.
Since this now appears to not answer the question Joel was actually asking, I will just put it up as an answer to what the cited article was implying…if, of course, i have not made any mistakes–no longer guaranteed.
more speculation:
if the additional income from undocumented aliens was 1.6% of total income to SS, which is 13 or so percent of payroll (includes taxes not FICA) then the additions income is 0.13% of payroll…reasonably close to the 0.2% cost of amnesty, does that mean the taxes paid by current illegals who get no benefits would cover the extra costs of amnesty, that is paying benefits to those aliens now taxed but not getting benefits? SSA probably has an answer to this better than mine because they look seriously at all the unintended consequences. while this would not change the extra “deficit” implied by amnesty by the cited article, it would at least stop the rest of us from getting a freebie on the backs of wetbacks. that extra two tents of a percent would amount to an extra two dollars per week out of an income of a thousand dollars per week. truly a crushing burden on the young.