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  1. #1
    Senior Member HAPPY2BME's Avatar
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    Social Security Analysis of Immigration Bill Opaque and Too Narrow

    The Heritage Foundation
    By Rachel Greszler
    June 4, 2013

    Proponents of the Senate immigration bill have been touting a recent analysis by the Social Security Chief Actuary which alleges a $4.6 trillion immigration boon for Social Security’s 75-year financial outlook. Despite a total lack of transparency in the actuarial analysis, a number of problems are quite clear—the largest being a failure to account for all future costs.

    The Analysis Focuses on Specific Time Horizons

    The Social Security System operates on a pay-as-you-go basis, meaning individuals pay taxes into the system decades before they receive anything in return. So regardless of how much they receive in comparison to what they pay in, the addition of any new group of taxpaying workers benefits Social Security’s solvency in the short run. Adding the impact of those workers’ children can extend the positive benefit indefinitely.

    However, the Social Security actuaries fail to account for all of the additional benefits that new immigrants and their offspring will eventually draw from the system. This is like acquiring new credit cards and adding the newly available credit as assets but not subtracting the money spent on those cards as future liabilities.

    Rather than considering the effects of immigration on Social Security over a certain time horizon, the Social Security actuaries should provide a closed-group analysis of immigrants’ effects on Social Security. Such an analysis would fully incorporate both the added taxes paid and benefits received by immigrants under the proposed bill.

    The Analysis Fails to Include the Immigration Bill’s Impact on Medicare

    Social insurance for the elderly consists primarily of Social Security and Medicare. While both programs are highly insolvent, Medicare is a much larger liability for the federal government. The average worker who retires today will receive more than three dollars in Medicare benefits for every one dollar of Medicare taxes paid.[1] By 2030, this ratio will approach four dollars in benefits per dollar of taxes paid.

    Unlike Social Security, in which benefits are based in part on tax contributions, Medicare benefits are the same regardless of workers’ payroll tax contributions, and Medicare taxes support only a small portion of Medicare benefits. Consequently, adding millions of workers with below-average wages (and thus below-average payroll tax contributions) would place an especially large drain on Medicare’s already frightful long-run finances—as well as the federal budget as a whole.

    The Analysis Lacks Transparency on Assumptions

    Just as Social Security’s trust fund is more like a black box than a lockbox, so too are the assumptions used in this actuarial analysis.

    The initial May 8 letter to Senator Marco Rubio (R–FL)[2] provides a few top-line assumptions, including the estimated number of new immigrants, change in tax revenues, and change in Social Security beneficiaries, but it provides no information on the assumptions that generated these estimates. Furthermore, the subsequent long-run forecasts were not made publicly available. The only long-run information shared with and reported by The Wall Street Journal is the net impact over 25 years and 75 years.[3]

    Questionable Wage Assumptions.

    The 10-year figures show that the actuaries assumed an average wage for undocumented workers of $34,400 in 2015. This figure is extremely high. The average wage of undocumented workers in 2010 was around $25,000.[4]

    Because of the progressive nature of Social Security, in which the benefit formula multiplies low-level wages by 90 percent and the high wages by only 15 percent, the high wage assumptions for undocumented workers produce higher lifetime payroll tax contributions and bias the analysis in favor of higher net immigrant contributions.[5]

    Potentially Overstated Birth Effects.

    The analysis does not reveal any specifics about its birth effect assumptions other than stating that “the additional births for the increased population under this bill will have substantial positive effects.”

    It is obvious that the birth effects for a generic increase in immigration would have a positive effect on Social Security’s finances because the children of new immigrants would contribute Social Security taxes that would presumably be more than sufficient to cover the benefits paid to their parents, but this is not true of undocumented workers.

    Children who are born to undocumented workers living in the U.S. are treated automatically as U.S. citizens and therefore incorporated into the Social Security system upon obtaining their first jobs. Legalizing their parents would not have any effect on their participation in the Social Security system.

    The Net Drag of Incorporating Many Undocumented Workers. While many undocumented workers operate off the books and do not pay taxes, a Heritage Foundation study estimates that 55 percent of undocumented workers are already contributing to Social Security.[6] These undocumented workers are currently not entitled to any benefits based on the taxes they pay, but if they become legal through amnesty, they will be eligible for future benefits.

    Thus, a majority of the undocumented workers who would be made legal through the proposed bill would be pure liabilities to the Social Security system; they would pay little, if anything, more in taxes than they otherwise would, but they would be eligible for full Social Security benefits.

    Congress Should Demand a Realistic Analysis

    To understand the proposed immigration bill’s true effects on U.S. entitlement programs, lawmakers should request a revised, closed-group analysis of the proposed immigration bill’s effects on both Social Security and Medicare, including the details of the actuarial assumptions.

    —Rachel Greszler is Senior Policy Analyst in Economics and Entitlements in the Center for Data Analysis at The Heritage
    Foundation.

    http://www.heritage.org/research/rep...ocial-security
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  2. #2
    Senior Member HAPPY2BME's Avatar
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    In 1994 an article by then-Economics Professor Don Huddle of Rice University shows that mass immigration slowly but surely bankrupts Social Security, because Social Security is a "redistributive system". Redistributive means that those who earn and contribute less during their working lives receive relatively larger percentages back after retirement.

    Most immigrants are less educated than the average American and earn less. So they contribute less to Social Security and are due to receive back a larger percentage of their contributions. Every trade-off of that kind pushes Social Security into bankruptcy faster.

    __________________________________________________ _

    Mass Immigration Cost American Taxpayers $69 Billion Net and 2 Million Jobs in 1997
    Study by Dr. Donald Huddle Reports Legal Immigration of over 1 Million Per Year Accounts for over 62% of Costs

    State Costs to Taxpayers are Also Soaring (1996 Net Costs % up from 1992):

    California: $28 billion up 35%

    New York: $14 billion up 29%

    Texas: $7 billion up 37%

    Florida: $6 billion up 77%

    The first study of the net cost of immigration to American taxpayers in 1997 conducted by Dr. Donald Huddle, Professor Emeritus of Economics at Rice University, found that:

    The nearly 26 million legal and illegal immigrants settling in the United States since 1970 cost taxpayers a net $69 billion in 1997 alone, in excess of taxes those immigrants paid. This represents a cost of $260 in additional taxes paid by each U.S. resident or $1,030 in additional taxes paid by each family of four. This cost is a substantial increase over the net immigration costs of $65 billion ins 1996, $51 billion ins 1994, $44 billion in 1993, and $43 billion in 1992.

    Over 62% of the net national cost of immigration in 1996, $40.6 billion, was attributable to legal and legalized (amnesty) immigrants. Illegal immigration generates about 38%, $24 billion of the total net cost. Legal immigration levels are over one million per year, and rising.

    During 1996, approximately 2.3 million predominantly low-skill American workers were displaced from their jobs due to the continued heavy influx of immigrant workers since 1970. Taxpayers paid more than $15.2 billion in public assistance for those displaced workers in 1996, including Medicaid, Aid to Families with Dependent Children (AFDC), unemployment compensation, and food stamps.

    A net deficit of $8.5 billion dollars to the Social Security system in 1996 is attributable to the economic impact of the foreign-born population. Continued mass immigration threatens the solvency of the Social Security system.

    Net cumulative costs for the 1998-2007 decade are projected to reach $932 billion, an average of $93.2 billion per year, even with recent changes in welfare and immigration policies and a prosperous economy, if current mass immigration trends are allowed to continue.
    Breakdown for 1997 Costs of Legal Immigration

    Public Schools (Primary, Secondary, Higher, etc) $22.5 billion

    Bilingual Education, ESOL, ESL Education $ 3.3 billion

    Medicaid $12.8 billion

    AFDC (for legal and illegal immigrant's offspring) $ 2.4 billion

    Social Security $24.8 billion

    Supplemental Security Income $ 2.9 billion

    Housing Assistance $ 2.6 billion

    Criminal Justice $ 2.6 billion

    Jobs Lost by Americans $10.8 billion

    Other Programs $51.4 billion

    1997 Total Costs for LEGAL Immigration: $136 billion

    Add 1997 total costs for illegal immigration of $41 billion and subtract an estimated $108 billion in taxes paid by all immigrants (legal and illegal) in 1997 to obtain the overall net figure of $69 billion charged to you, and other American taxpayers.

    Other key facts regarding immigration are:

    1.) If current immigration trends continue, the current U.S. population of

    274 million will nearly double to over 500,000,000 by 2050. (The U.S. was 135 million at the end of WWII.)

    2.) Harvard Professor George Borjas demonstrated that mass immigration costs American workers $133 billion per year in wage depression and job loss.

    3.) The prestigious National Research Council found at the state and local levels (which bear most of the burden for K-12 education) the net fiscal burden of the average immigrant-headed household (i.e., after subtracting state and local taxes the household paid) was:

    $1,484 per immigrant-headed household in New Jersey (in the 1989-1990 fiscal year); and $3,463 in California (in 1994-1995)(p. 276-277)

    Why should we continue to allow our own working poor, homeless, and unemployed to continue to suffer from the job loss, wage depression, and other burdens imposed by mass immigration?

    http://www.carryingcapacity.org/huddlenr.html

    http://www.jstor.org/discover/10.230...21102361253891
    Join our FIGHT AGAINST illegal immigration & to secure US borders by joining our E-mail Alerts at http://eepurl.com/cktGTn

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