If Washington put a moratorium on legal immigration, the Social Security system would collapse, according to a new report brought out by a non-partisan research organization.
Over the next 75 years, new legal immigrants entering the United States will provide a net benefit of $611 billion in present value to America’s Social Security system, says the report released on Feb. 15 by the non-partisan National Foundation for American Policy (NFAP).
Even as anti-immigrant activists mobilize to stop President Bush from legalizing “Guest workers,” and even as the president is revving up support for privatizing aspects of Social Security, this new report, based on official Social Security Administration (SSA) data, says raising immigration levels could help reduce the Social Security deficit.
The report from the Virginia-based NFAP, entitled ‘The Contribution of Legal Immigration to the Social Security System,’ may stir the debate over both immigration and Social Security when it claims that, “Maintaining or increasing current levels of legal immigration significantly aids the Social Security system, while imposing an immigration moratorium or reducing legal immigration would worsen the solvency of Social Security, harm taxpayers and increase the size of the long-range actuarial deficit of the Social Security trust fund.”
According to the report, “Government data document that a moratorium on legal immigrants entering the country could devastate the Social Security system by ballooning the size of the actuarial deficit by almost one-third – 31 percent – over a 50-year period,” and that to compensate for this loss of revenue, Americans would have to pay higher Social Security taxes equaling $506 billion in present value over 50 years and $611 billion over 75 years.
Such a tax increase, the author of the report and executive director of NFAP, Stuart Anderson, contends, would cost an American earning $60,000 in 2004 more than $1,860 in higher payroll taxes over the next 10 years. It warns policymakers that any significant reduction in legal immigration would make any reforms to the system “far more difficult to achieve.”
Back in 1996 Congress was considering a 41 percent reduction in legal immigration. Such a step, Anderson warns, “would increase the actuarial deficit by 13 percent over 50 years and require $212 billion in tax increases (in present value) over 50 years (and $246 billion over 75 years) to make up for the lost revenue caused by the severe legal immigration reductions.”
On the other hand, increasing legal immigration would provide a “significant boost” to Social Security, the report maintains.
Nay sayers on immigration will take note that a 33 percent increase in legal immigration would mean that an American earning $60,000 in 2004 could have his or her Social Security taxes reduced by $600 over 10 years (or $360 in the case of a 160,000 legal immigration rise) and Social Security would maintain the actuarial balance that is currently projected over that period, according to the report.
If legal immigration levels were increased by 33 percent (an additional 264,000 immigrants a year), the Social Security deficit would be reduced over 50 years by 10 percent.
Halting legal immigration to the United States, on the other hand, would reduce both the growth rate of the U.S. labor force and the rate of the country’s economic growth (the rate of growth of the nation’s Gross Domestic Product) by approximately one quarter of one percent (0.25 percent) per year, initially, a notable amount, the report finds.
Social Security benefits to current retirees are funded primarily out of the taxes paid by today’s workers. “For that reason, additional workers are extremely beneficial to America’s ‘pay as you go’ system. Immigrants typically arrive near the start of their working years and may contribute to the system for up to four decades before receiving any benefits,” the report states.
The report places an added weapon in the hands of Democrats and even some Republicans who have been opposed to the changes so far proposed by the president.
Particularly in light of the aging Baby Boom generation that is threatened with lesser benefits once they retire, the report says, “Legal immigrants and their descendants make important positive contributions to America’s Social Security system.”
Senator Chuck Hagel (R-NE) requested the data from SSA and handed it over to Anderson, and it was funded by the California-based Merage Foundation for the American Dream.
Even as Congress is gripped with both immigration and Social Security issues, the NFAP is providing copies of the report to all the members of the House and Senate Judiciary Committee, the Senate Finance Committee, and the House Ways and Means Committee.
In a statement issued at the release of the NFAP’s report, Senator Sam Brownback (R-KS), who is a member of the Senate Judiciary Committee and the Joint Economic Committee, noted, “This study reminds us that, while we must keep our borders safe and secure against those who would do us harm, we must also keep our nation open to the legal immigrants who play a crucial role in our country’s growth and prosperity.”
