Immigration Reform: A Boon to Social Security?
On the eve of the Senate Judiciary Committee marks up the Gang of Eight’s immigration bill, Stephen Goss, the Chief Actuary of the Social Security Administration, provided a preliminary breakdown of the legislation’s impact on Social Security. In his response to a request made by Senator Marco Rubio (R-FL), Goss analyzes the bill’s treatment of immigrants currently living in the U.S. without documentation, changes to legal immigration classification and limits, and measures for border enforcement and employment verification. Of the 11.5 million immigrants without documentation, Goss estimates about 8 million will initially be granted Registered Provisional Immigrant (RPI) status, enabling them to work and pay taxes but not receive government benefits such as Social Security, Medicare, and low-income assistance until they complete a 13-year citizenship process.
Under the current framework, Goss estimates that by 2024 over 6.5 million new workers will be paying into Social Security through payroll taxes. Over the next ten years, this amounts to a net increase of roughly $243 billion to the Social Security trust funds. Meanwhile, enrollment in Social Security will slowly increase -- by 2024 there would be an estimated 683,000 new beneficiaries.
Source: SSA
While most of the legislation's provisions would be revenue-increasing, those related to border enforcement and employment verification would reduce the number of workers and future beneficiaries and therefore reduce revenue.
As the SSA works on developing 75-year estimates that would enable a better understanding of the effect on the long-term solvency of the Social Security trust funds, the letter indicates that the legislation will likely be a net positive overall. This would help to shore up the trust funds, which are currently projected to be insolvent by 2033 (OAS) and 2016 (DI). Goss explains:
Over this longer time frame, benefits will become more significant for those with additional earnings taxed and credited. However, over this same longer time frame, the additional births for the increased population under this bill will have substantial positive effects. Overall, we anticipate that the net effect of this bill on the long-range OASDI actuarial balance will be positive.
Goss also provides estimates for the impact the bill would have on Medicare payroll taxes. According to the letter, Medicare HI tax revenue would increase by $64 billion through 2024. However, SSA does not provide any information about how much Medicare spending would increase. Lawmakers will have to wait until CBO releases its analysis for net Medicare impact.
This new data sheds more light on the budgetary impact of immigration reform legislation may have, much of which depends on the economic assumptions used as we discussed earlier this week. In all, the SSA analysis projects that employment would increase by 3.22 million and GDP would increase by 1.63 percent by 2024. It's important to note that these estimates could also change as the legislation gets amended and when SSA releases a new set of assumptions in its annual Trustees Report, possibly due out sometime this month. Still, this provides the first glimpse of the kind of fiscal impact of the Border Security, Economic Opportunity and Immigration Modernization Act of 2013.
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