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Immigration Reform Could Save Social Security

May
23
2006

In 2005, the looming insolvency of the nation’s Social Security system was just too great a threat for President Bush to ignore, so he tried to delicately touch the Third Rail of American politics. He got burned. But in tackling another controversial issue in 2006, immigration, George Dubya may save Social Security after all… for awhile.

Contrary to popular belief and some Democratic dogma, Social Security is not a retirement savings program. Social Security is a wealth transfer from one generation to another. Workers pay in today, and old folks take out immediately.

Federal entitlement programs, including Social Security and Medicare, amount to a $72 trillion unfunded liability for the Federal Government. Medicare starts paying out more than it takes in within four years, and Social Security will be operating at a deficit as soon as 2018.

These structural deficits in Social Security and Medicare are happening because of the changing demographics of the American public. When Social Security was started under President Franklin Delano Roosevelt, there were 16 workers for every retiree. Now, there are 3.3 workers per retiree and that number is projected to go as low as 2-to-1 before the system collapses on its own weight.

The best George Bush could come up with to find more young workers was ban gay marriage which, goes the logic, would encourage straight marriage which would, of course, encourage more procreation, ie chidlren. But even if that constitutional amendment were to pass the United States Senate this June, I don’t see how that will do a thing to encourage the amount of procreative monogamous sex which would be needed to fill the demographic gap facing the nation’s entitlement programs. Legislation is a long way from soft lighting and candles.

So – more seriously – how can we get more workers paying into the system? Previous proposals have focused on raising the retirement age, but that just gets any politician who mentions it accused of attacking old folks.

Oddly enough, by proposing sweeping immigration reform, George Bush may have stumbled upon an (at least temporary) answer to the Social Security solvency problem.

The Heritage Foundation claims that the Immigration Reform bill in the United States Senate could bring 100 to 200 million new Americans to the country over the next twenty years.

That’s a roughly 50% increase in the workforce – if my numbers are right. While it probably requires a government actuary to tell you what that means for Social Security, I’d have to imagine it keeps the system solvent for at least a couple decades – or until these new Americans start to retire 30 or 40 years from now…

That may not be the panacea that the private account program initially proposed by the administration may have been. But in terms of the proposals, or lack thereof, to keep Social Security solvent, it’s just about the best plan going.

Share  Posted by Scott Olin Schmidt at 2:38 PM | Permalink

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