ICYMI: WALL STREET JOURNAL: IMMIGRATION REFORM WILL IMPROVE SOCIAL SECURITY'S FINANCES
WSJ Editorial Board: "How big a bonus are we talking about? Enormous. We asked Stephen Goss, Social Security's chief actuary, to estimate the value of the 1.08 million net new legal and illegal immigrants that currently come to the U.S. each year. He calculates that over 25 years the trust fund is enriched in today's dollars by $500 billion and the surplus from immigration mushrooms to $4 trillion over 75 years."WSJ: Editorial: A $4.6 Trillion Opportunity
June 2, 2013
Immigration reform will improve Social Security's finances.
The Senate immigration bill has ignited a debate over the fiscal costs of reform, with some conservatives claiming costs far exceed the benefits. We think that's wrong, and one place to look for evidence is the costliest of all federal programs, Social Security. As some 75 million baby boomers prepare to retire, immigrants will be crucial to keeping the federal pension program afloat.
As too few Americans understand, Social Security is not a pre-funded retirement system and there is no "lock box" with money set aside for each worker's retirement. It operates as a pay-as-you-go system.
Benefits paid out each year roughly match payroll tax revenues collected, at least until the program goes into annual deficit in a few more years, and the so-called trust fund only contains IOUs that the government owes itself. Those IOUs don't help. The Social Security Administration estimates that the present discounted value of the 75-year shortfall of promised benefits beyond the taxes expected to be collected is $8.6 trillion.
The crux of the problem is that the ratio of workers to retirees is falling fast. While there were 16 workers for every retiree in 1950, the ratio now stands at a little under 3 to 1 and within 20 years when the baby boomers are age 65 or older the ratio will fall to about 2.5 to 1.
Immigrants help ease this demographic problem in three ways. First, most come here between the ages of 18 and 35, near the start of their working years. Second, few come with elderly parents (only about 2.5% of immigrants are over age 65 when they arrive), and the seniors who do come aren't eligible for Social Security because they have no U.S. work history. Third, immigrants tend to have more children than do native-born Americans and their offspring will also pay into the system.
These facts are confirmed in the latest report of the Social Security trustees released last week. They conclude that the program's long-term funding shortfall "decreases with an increase in net immigration because immigration occurs at relatively young ages, thereby increasing the numbers of covered workers earlier than the numbers of beneficiaries."
Full editorial available here.