Back to news. Bill Barnes sent me a piece by Jonathan Tepperman in the New Republic last week, in which he uses the Negroponte nomination to once again revive the issue of the Salvador option. I have a lot of reactions, and it does seem more nuanced than most pieces on the issue, but still somewhat flawed. However, I think once I get a few other things out of the way, I'll try to write something a bit more final on this issue (i.e., not just random blog entries.)
Eric Umansky notes today this story in the New York Times, which is about the closest I'll come to saying anything on the social security debate:
As the debate over Social Security heats up, the estimated seven million or so illegal immigrant workers in the United States are now providing the system with a subsidy of as much as $7 billion a year.Okay, this is so fascinating, I'm going to quote a bit more.
While it has been evident for years that illegal immigrants pay a variety of taxes, the extent of their contributions to Social Security is striking: the money added up to about 10 percent of last year's surplus - the difference between what the system currently receives in payroll taxes and what it doles out in pension benefits. Moreover, the money paid by illegal workers and their employers is factored into all the Social Security Administration's projections.
Illegal immigration, Marcelo Suárez-Orozco, co-director of immigration studies at New York University, noted sardonically, could provide "the fastest way to shore up the long-term finances of Social Security."
Starting in the late 1980's, the Social Security Administration received a flood of W-2 earnings reports with incorrect - sometimes simply fictitious - Social Security numbers. It stashed them in what it calls the "earnings suspense file" in the hope that someday it would figure out whom they belonged to.
The file has been mushrooming ever since: $189 billion worth of wages ended up recorded in the suspense file over the 1990's, two and a half times the amount of the 1980's.
In the current decade, the file is growing, on average, by more than $50 billion a year, generating $6 billion to $7 billion in Social Security tax revenue and about $1.5 billion in Medicare taxes.
In 2002 alone, the last year with figures released by the Social Security Administration, nine million W-2's with incorrect Social Security numbers landed in the suspense file, accounting for $56 billion in earnings, or about 1.5 percent of total reported wages.
Social Security officials do not know what fraction of the suspense file corresponds to the earnings of illegal immigrants. But they suspect that the portion is significant.
"Our assumption is that about three-quarters of other-than-legal immigrants pay payroll taxes," said Stephen C. Goss, Social Security's chief actuary, using the agency's term for illegal immigration.
Other researchers say illegal immigrants are the main contributors to the suspense file. "Illegal immigrants account for the vast majority of the suspense file," said Nick Theodore, the director of the Center for Urban Economic Development at the University of Illinois at Chicago. "Especially its growth over the 1990's, as more and more undocumented immigrants entered the work force."
Using data from the Census Bureau's current population survey, Steven Camarota, director of research at the Center for Immigration Studies, an advocacy group in Washington that favors more limits on immigration, estimated that 3.8 million households headed by illegal immigrants generated $6.4 billion in Social Security taxes in 2002.
A comparative handful of former illegal immigrant workers who have obtained legal residence have been able to accredit their previous earnings to their new legal Social Security numbers. Mr. Camarota is among those opposed to granting a broad amnesty to illegal immigrants, arguing that, among other things, they might claim Social Security benefits and put further financial stress on the system.
The mismatched W-2's fit like a glove on illegal immigrants' known geographic distribution and the patchwork of jobs they typically hold. An audit found that more than half of the 100 employers filing the most earnings reports with false Social Security numbers from 1997 through 2001 came from just three states: California, Texas and Illinois. According to an analysis by the Government Accountability Office, about 17 percent of the businesses with inaccurate W-2's were restaurants, 10 percent were construction companies and 7 percent were farm operations.
Most immigration helps Social Security's finances, because new immigrants tend to be of working age and contribute more than they take from the system. A simulation by Social Security's actuaries found that if net immigration ran at 1.3 million a year instead of the 900,000 in their central assumption, the system's 75-year funding gap would narrow to 1.67 percent of total payroll, from 1.92 percent - savings that come out to half a trillion dollars, valued in today's money.
Illegal immigrants help even more because they will never collect benefits. According to Mr. Goss, without the flow of payroll taxes from wages in the suspense file, the system's long-term funding hole over 75 years would be 10 percent deeper.