The Protagonists of the Debate

Illegal immigrants, who have paid more than $1 trillion into Social Security, help the system stay solvent, says the Center for American Progress (CAP). The American Enterprise Institute (AEI), however, challenges what the CAP says.

Social Security’s One-Way Street

In the CAP view, contrary to what opponents of immigration reform say, that illegal immigrants don’t contribute their fair share in taxes while they drain government tax-supported benefits, in fact undocumented workers help keep the Social Security trust fund financially in the black. They pay into the system typically on false social security identification numbers on which they never can collect benefits. Their contributions, often withheld over many years of employment, meanwhile support the system and keep its benefit payments going to the retired and disabled.

Obama’s Executive Order

President Obama’s 20 November 2014 executive order initiates a process that eventually may legalize and authenticate 5,000,000 immigrants, allow them to apply for work permits, and acquire valid Social Security numbers. In that event, the Social Security Administration (SSA) in effect will lose some revenue in the form of money from people paying in and never collecting.

Disposition of the Lost Contributions

This lost money will not be an insignificant amount. When the SSA cannot credit payroll contributions to a verifiable number, they go into the Earnings Suspense File. A 2013 CAP study reported that this suspense file has accumulated an estimated trillion dollars in uncredited contributions.

Not all such “unmatched” or uncredited money comes from illegal workers, concedes the CAP, but there can be little doubt that a significant portion of suspense file proceeds does and that the actual contributors never will see any benefit from these fruits of their labors.

In mathematical terms, five percent of the American work force, some 8.1 million people, is undocumented. Thirty-eight percent of the 8.1 million pay Social Security taxes amounting to about $12 billion annually, the CAP estimates, a fine financial cushion for aging Americans.

Recovery of the Lost Contributions

The SSA chief actuary told the Daily Beast that unauthorized immigrants will sustain the Social Security by not only their own contributions but also those of succeeding generations from their children, who will be natural born citizens from day one.

The Congressional Budget Office said the bipartisan Senate bill passed last year with 68 votes would cut the deficit by $820 billion over 20 years. Obama’s executive order would allow legalized workers to collect benefits when they reach retirement age, a long way away for many of them, and millions of legalized young workers brought into the system and paying taxes into it for decades before becoming eligible to collect benefits from it would offset any potential loss.

Some say the SSA’s worst problem is that there are fewer Americans paying into the system than there are those retired or about to retire and in need of support, so for that reason an increased number of people working and paying into the system would be better for everybody.

A Favorable Financial Forecast

A social security expert at the Brookings Institution says that 75 years into the future the legalization of some five million immigrants by executive order would be like a boost in population, which is typically a positive good for the SSA trust fund, as is an increase in net migration of young working people into the system. In this way immigrants are the lifeblood of the American economy.

Opponents of everything but deportation or self-deportation say these people rely on government benefits or take jobs from workers born in the USA. Many immigrants without legal documentation work surreptitiously off the books, under the table, unauthorized and in fact prohibited by the established, official order. This unlawful arrangement suits short-sighted employers because they avoid paying their fair share of taxes on such clandestine, unofficial employees.

Obama’s executive order would move these workers from what Brookings Institute scholar William Galston calls the gray into the sunlit economy. Bringing people in their 20s and 30s into the official system to pay taxes for 30 and 40 years is a good thing according to common sense, he says.
Common sense is often missing from the emotional debate over illegal immigration. As Americans face two great demographic shifts, the graying and the browning of America, the economic benefits from legalizing millions of people must be clear to those affected directly and to Americans generally.

The Contrary Viewpoint

So argues the CAP, but the AEI presents an opposing view based on the same facts. The AEI agrees that illegal immigrants who pay SSA taxes cannot receive benefits from their payments, which are good for SSA finances. Legal immigrants, on the other hand, pay less in taxes than they receive in benefits.

By “comprehensive immigration reform” politicians usually mean that illegal immigrants would receive amnesty, a path to citizenship, or some form of legalization. So millions who under current law cannot receive benefits would begin to receive benefits that would stress SSA finances. Second, the flow of legal immigrants into the USA likely would increase. As these pay less in taxes than they receive in benefits, their increased numbers would be no financial plus either. And so, concludes the AEI, the logic of saving social security through immigration, which at first may make sense, falls apart under a close look.

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Beeraj Patel, Esq.

Partner at KPPB Law
Beeraj Patel's philosophy is simple - make it easy for talented and ambitious individuals to have access to immigration materials so that they can make the choice which is right for them.
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