March 27, 2005

Privatization and Immigration

Fun headline from yesterday's Washington Post: "Conservatives Split on Debate Over Curbing Illegal Immigration." Well fun headline if you like watching GOP infighting. Or if you're interested in immigration. Or if you think "curbing" is a bizarre word. Otherwise, maybe not all that fun. Moving on, though, there seems to be some real confusion about immigration from some of my fellow Californians:
House Rules Chairman David Dreier (R-Calif.) got a jolt during his 2004 reelection campaign, when radio hosts in his outer Los Angeles district decided to make him a "political human sacrifice" for his immigration views, Dreier said, accusing him, among other things, of advocating Social Security benefits for illegal immigrants.

"I said to myself, nobody's going to believe I want to give Social Security checks to people who are here illegally," Dreier recalls.
Let's clear this up. Most immigrants—and because it's California, "immigrants" means "Mexican/Central American immigrants", mostly—don't receive Social Security, of course. How's that? Because most of them end up moving back to Mexico (or Central America) before they retire. Now, it's true that immigrants from Europe, etc., can work here a number of years, pay payroll taxes, and when they retire receive some contribution from the United States in the form of a pension check, even if they move back home. Not Mexico or Central America, though, because we've never signed totalization agreements with those countries.

So, many Mexican/Central American immigrants who work here shell out taxes for Social Security, but never get a single cent back. (The U.S. Treasury has no way of keeping track of the actual figures here, but it's a lot of money.) Same goes for those much-maligned illegal immigrants who happen to pay payroll taxes (though many don't, since they're for obvious reasons kept off payroll). Spelled out real slow for the kids in Dreier's hood: Border-hopping immigrants strengthen the system, not weaken it. That's why boosting immigration, which is great for many other reasons, improves Social Security's long-term balance.

Now there's an interesting question as to how this will all change if privatization ever passes. Presumably, the instant you start putting money into a private account, that money is yours. Entonces, most Mexican immigrants will actually start receiving something from Social Security—namely, the amount they accumulate in their private accounts—even if they never receive retirement benefits.

Alas, the White House is still too Cowardly Lion-ish to put forward an actual plan on Social Security, so I can't figure out how the actual mechanisms would work here, but it seems that under privatization, immigrants put a bigger drain on the system than they do now, get more out of it, and there's a very real possibility that illegal immigrants could get private accounts as well (with false documents, say). Those aren't reasons the why I oppose privatization, obviously, but I dunno, maybe folks in Dreier's district might like to hear about all this.
-- Brad Plumer 5:01 PM || ||