Blog on the Run: Reloaded

Monday, September 6, 2010 7:23 pm

Illegal immigrants and Social Security: Good news/bad news

Filed under: Weird — Lex @ 7:23 pm
Tags: ,

Bruce Krasting, writing at Zero Hedge, takes note of a Washington Post article on the contributions of illegal aliens to Social Security.

The short version: A lot of illegal immigrants are paying money into the Social Security Trust Fund that they will never see. That’s bad news for them and good news for Social Security.

BUT, they’re paying so much in that it’s making the Social Security Trust Fund look like it’s in better shape than it actually is. That’s bad news for Social Security, particularly if that money were returned to the immigrants and their employers.

But wait, there’s more. Krasting thinks this article isn’t appearing by accident — that the Obama administration sees a way to leverage this situation to come up with a way to “bribe” opponents of immigration reform into going along. Really. He writes:

We know that the actuaries at the Fund have been aware of the magnitude of this issue for a very long time. The question I have is, “What did they do about it?” We need to understand what this means in terms of anticipated future benefit payments. There are two possibilities:

(1) The Fund knew the money was from illegal workers but chose to close their eyes. For the purposes of calculating future liabilities they assumed that everyone, including the illegal workers, would someday get benefits. But they won’t. This would imply that the future liabilities of the Fund are much smaller than has been projected. This “good” news would have to be offset with the reality that the “true” assets of the fund are significantly overstated.

(2) The Fund knew all along that the benefits that are associated with these illegal receipts are never going to be paid and therefore it has reduced the liabilities associated with this to some degree. This would essentially make a fraud of all of the SS accounting. I doubt (hope) that this is not the case. To restate both assets and liabilities would create a very big credibility gap for SS.

I have said repeated that nothing happens in D.C. by chance. That every nuance must be looked at closely. They all have meaning. In my opinion the WaPo article shines a very bright light on SS. They have been knowingly overstating assets and financial conditions for years. What possible motive could be behind this Labor Day weekend bombshell? My guess:

The Administration will use the Goss revelation to prove to the American people that illegal workers have made a major contribution to the US economy via the taxes they paid to SS. This will be done to blunt the growing tide of ire among those who actually live here. There could be another chapter to this story. It could be the ticket whereby some illegals get legal. The cost for a Green Card would be that the applicant would have to (among other things) agree to give up their rights to any future SS benefits based on prior contributions made to SS. They would be entitled to benefits based solely on what they were taxed in future years. Any previous contributions (both employer and worker) would be given up as a penalty. This thinking would set up the possibility for two extraordinary outcomes.

(I) If SS eliminated the future liabilities associated with the estimated $320b of excess contributions and they were allowed to keep those tainted contributions SS would be transformed overnight to an overfunded position of significant proportions. It would be so significant that the Fund could reduce the current 12.4% PR tax by 20-30% for the next three to four years. That would have a meaningful impact on the economy.

(II) America would get paid $350b (P+I) [principal + interest] for allowing a significant number of workers to become legal. Many would still gripe. But the tradeoff of a partial tax holiday for 150mm workers and their employers would shut down much of the opposition.

The Administration needs a win-win on the economy and immigration. Steve Goss at the Trust Fund may have given them the opportunity to do that. Stay tuned. It does not get much weirder than this.

Given the volatility of both Social Security and immigration as election-year issues, this may or may not get weirder but definitely is going to get more interesting.

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2 Comments

  1. There were 91 coments to the Wapo article you linked

    I didn’t read them all but I’m guessing that the first 6 on page one are representative of the others.

    gringagran wrote:
    What a bitter irony. Not only are we expected to go broke (as we are here in Los Angeles)…taxpayers paid for virtually all ob/gyn maternal cost for tens of millions of foreign national’s babies since the early ’90’s (gratitude anyone? No? None? Really?)….Edward expects us to thank them…that’s rich!

    His idea is that I can thank an illegal immigrant for my upcoming SS retirement. Gee, I see a lot of people lining us to send money back to the home country…in the billions annually, did they mean to route it toward the US govt.SS program?

    This “Op-Ed” is so thoroughly loathsome and irksome and he is dead serious.

    Somebody ought to say thank you. A bitter, galling irony and show us that some put the needs and deeds of foreign nationals living here WAY ahead of citizens; even those in need during these tough times. I’m sure the illegal immigrants here are always considering altruistic plans for our retirement benefits…except when they 100% are not..EVER.
    9/5/2010 9:16:47 PM

    amdactivist wrote:
    How many are going up to an employer who you suspect hiring illegals and demanding they hire citizens instead of illegal aliens. If local, i will personally approach employers and hand them a flyer about E-verify and the penalties for hiring illegal aliens. After a few days I go back again and see if they still hiring them or any change in their hiring practice. If not, I approach them again and hand them my list of 15 different agencies where I report them to. They looked shocked and ask what this is all about. MY answer is “I am the middle man between you and ICE and 15 other agencies and leave. It works almost every time.. They start hiring american citizens..
    9/5/2010 7:46:44 PM

    doylea444 wrote:
    Eward Schumacher-Matos quotes Stephen C.
    Goss, chief actuary of the Social Security Administration,that S.S. trust fund received 12 $billion in payments from illegal immigrants in 2007.
    He does not mention, however, that of the
    approximately 44 $billion paid out yearly
    via the Earned Income Tax Credit, 1/4-1/3
    is “improperly paid” according to the GAO,
    let’s say 13 $billion. Immigrants,legal
    and illegal, got 26% of E.I.T.C. money in
    2008, roughly 11 $billion. technically,you
    need a valid S.S. number to apply for
    E.I.T.C. But it’s thought that up to
    75% of illegals have fraudulent numbers
    and that many use them, with little scru-
    tiny by the IRS, to get E.I.T.C. payments
    of up to $4800/ year for a family with 2
    children.
    We should ask Mr. Goss for an estimate
    of how many $billions of this are going to
    illegal immigrants.
    Also ask him how much Americans would
    be paying into SS if they held the illegal’s jobs-likely the 12 $billion and
    more.
    And they would not be draining billions
    in remittances out of our economy back
    to their homelands.

    9/5/2010 3:56:06 PM

    PennyWisetheClown wrote:
    This article is so stupid and flat out wrong that even Wapo is trying to hide it.
    9/5/2010 10:26:53 AM

    rcohen1 wrote:
    Ed, get a life! Most illegal immigrants are working under the table!
    9/5/2010 8:36:52 AM

    deemontgomery1 wrote:
    If the illegal were not using an identity stolen from a legal citizen to pay into Social Security, a legal American citizen would have his job and pay into Social Security. Same result. I have personally observed that there is no job an American will not do.

    What has this country come to when someone such as Matos can use mainstream media to put a positive spin on identity theft?

    Yes, “someone ought to say thank you.” It is not the persons Matos suggests.

    Comment by Fred Gregory — Monday, September 6, 2010 8:27 pm @ 8:27 pm

  2. I’m not defending the quality of the original op-ed. Krasting does a good job of teasing out both the practical and the political ramifications of the facts/estimates in the op-ed.

    Comment by Lex — Tuesday, September 7, 2010 10:25 am @ 10:25 am


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