Why More Immigrants Is an Answer to the Coming Boomer Entitlement Mess

I was born in 1946, just when the boomer wave began. Bill Clinton was born that year, too. So was George W. So was Laura Bush. And Ken Starr (remember him?) And then, the next year, Hillary Clinton. And soon Newt Gingrich (known as “Newty” as a boy). And Cher. Why so many of us begin getting born in 1946? Simple. My father was in World War II. He came home. My mother was waiting. Ditto for the others.

Sixty years later, we boomers have a lot to be worried about because most of us plan to retire in a few years and Social Security and Medicare are on the way to going bust. I should know because I used to be a trustee of the Social Security and Medicare trust funds. Those of you who are younger than we early boomers have even more to be worried about because if those funds go bust they won’t be there when you’re ready to retire.

It’s already starting to happen. This year Social Security will pay out more in benefits than it receives in payroll taxes. The tipping point came sooner than anyone expected because the recession has kicked so many people off payrolls. But it was coming anyway. And it adds new urgency to reforming Social Security — a task the president’s commission on the nation’s debt is focusing on.

So what’s the answer?

Fed Chair Ben Bernanke this week listed the choices. “To avoid large and unsustainable budget deficits,” he said in a speech on Wednesday, “the nation must choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.”

Bernanke is almost certainly right about “some combination,” but he leaves out one other possible remedy that should be included in that combination: Immigration.

You see, the biggest reason Social Security is in trouble, and Medicare as well, is because America is aging so fast. It’s not just that so many boomers are retiring. It’s also that seniors are living longer. And families are having fewer children.

Add it all up and the number of people who are working relative to the number who are retired keeps shrinking.

Forty years ago there were five workers for every retiree. Now there are three. Within a couple of decades, there will be only two workers per retiree. There’s no way just two workers will be able or willing to pay enough payroll taxes to keep benefits flowing to every retiree.

This is where immigration comes in. Most immigrants are young because the impoverished countries they come from are demographically the opposite of rich countries. Rather than aging populations, their populations are bursting with young people.

robert_reich.jpgYes, I know: There aren’t enough jobs right now even for Americans who want and need them. But once the American economy recovers, there will be. Take a long-term view and most new immigrants to the U.S. will be working for many decades.

Get it? One logical way to deal with the crisis of funding Social Security and Medicare is to have more workers per retiree, and the simplest way to do that is to allow more immigrants into the United States.

Immigration reform and entitlement reform have a lot to do with one another.

by Robert Reich

This article first appeared on Robert Reich’s Blog. Republished with permission

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Comments

  1. says

    What’s really hokey about this proposal has little to do with most objections posed above in prior comments.

    Social Security is starting to be in trouble now because of an imbalance in the basic SSI fund flows: payouts to ex-workers exceed payins from present workers. Reich proposes to reverse the imbalance by importing a stream of young immigrant workers.

    The imbalance in flows is a phenomenon independent of a lot of finger-pointing claims made above. It has nothing to do with proper or improper past borrowing by politicians from SSI funds. It also has nothing to do with whether the very rich are paying their fair share in taxes.

    One way to reverse the imbalance is to cut payouts (benefits); another way is to raise payins (required contributions). Reich’s proposal would accomplish the second approach, by increasing the number of contributing workers. He figures – I think correctly – that with massive legal immigration encouraged, we will on balance import many young workers, ready to work for low wages at jobs that could exist for them at those wages, and thereby SSI payins will increase.

    The problem is not that his scheme won’t work, but rather that it likely will – for the shorter term. For the longer term it will hook Social Security and its planning ever more firmly to unsustainable intensification of the existing Ponzi scheme, whereby our retirement benefits system relies fatally on an ever-growing work force, perpetual immigration, and ever-growing domestic and world population.

  2. Jeff Prosper says

    Well, 1st off, the new health care bill should remedy the the issue of baby-boomers living longer, so that problem may be fixed already.

    But the fundamental problem I have with your argument is the simple fact that right now, we don’t have enough jobs to go around for our legal citizens. If we can’t keep ourselves employed, how are we going to employ everyone else? Furthermore, the likelihood that an immigrant, legal or otherwise now-a days will collect more from the treasury in the form of various assistance programs then they will pay in taxes further solidifies this as a bad idea of epic proportions.

    I’m a generation X’er…and surely we will make our own mistakes in the long run. But quite frankly in my opinion, you screwed up big time baby-boomers. You elected and enabled the government officials that tapped into the social security “lock-box” time and time again. And now in desperation, you will do anything to save it at everyone else’s expense, including importing the poverty of other nations into the US. Sorry my friend, this will only increase the numbers of those dependent on the government…not decrease it.
    The baby-boomer motto must be “it’s all about me” because your conduct over the last forty years clearly shows you can care less about the generations after you.

  3. says

    I forgot to mention that I also don’t like paying taxes that are given over to bailout banks and the wealthy who are parasites living off the work of the rest of us. And it should be mentioned that until our society rebuilds some kind of productive structure that there will not be any sort of affluent society in the future and the warfare state will become the apparatus to maintain any wealth here through predatory warfare to seize resources and markets, and Europe, China, Japan, and Russia are not going to let that go on as it will be at their expense.

    Finance/Banking as the economic structure of a society as large as ours is just wishful thinking. Without an industrial and commodity producing economic base there is no real value being created to support anything (paying fees for paper shuffling on mortgages, contracts, etc only goes so far). I think R Reich knows this too, but perhaps hates to say it and burst peoples illusions about the future.

  4. says

    Robert Reich is either setting up a straw man or is becoming a bit batty. He knows as well as I do that if we just began taxing all the income of the wealthy: wages, salaries, capital gains, dividends, everything, etc then there would be plenty of money coming in to social security, medicare, veterans benefits, education and everything we need. The system has been jury rigged to let the wealthy pay a small share of the social costs of our society by letting them off from paying taxes on most of their wealth and income. When present and former trustees of social security and medicare start telling the truth to the public of why money isn’t there, then there might be a rising of the public to demand that everyone pay their fair share, not just the working people.

    Oh, I am living on social security, love medicare, and have a small pension that I worked for. I began working in cotton fields when I was 12 and worked all my life until I retired at 67.5. I have always paid my fair share and am proud that my taxes have built schools, paid for welfare, paid for public employees, and so forth. I am not happy to have been forced to pay for the Indochina War, Grenada, the invasion of Panama, and the debacles in Iraq and Afghanistan, stains on our nation and on our military.

  5. Paul137 says

    Social Security is a problem without a solution if by “solution” one means something that will make the future a smooth extension of the past, without great upsets. For Social Security (and Medicare, and the contractual pension benefits for many state and local government workers), promises were made that can’t be kept.

    Immigrants are no answer to the problem, because most people who want to come here are would-be escapees from the Third World, and they embody little in the way of human or social capital, since they are mostly little-educated and unused to responsible self-government. Even a tsunami of such low-capability immigrants can’t possibly keep the high-tech U.S. economy operating as it has in the past.

    And Reich’s prescription is even more short-sighted because those prescribed immigrants will grow old, too, which would — following the same idea — require an even bigger cohort of low-functioning immigrants a generation hence.

    All Reich is prescribing is a quicker path to a ruined society in a grievously overpopulated land.

  6. Fat Old Man says

    If those workers were actually paying into Social Security, instead of being paid under the table or getting it all back (and then some…) as “Earned Income Tax Credit” this might make sense. But they are not.
    And what happens when they retire?

  7. Wiam says

    There’s no question that increasing the number of workers per retiree would help fund our Social Security and Medicare programs. But the problems those programs face today stem from our Democratic Party’s betrayal of their original promises to not use those funds for other programs. Social Security is going broke because our government dips into the fund. When the Social Security system was instituted in the 1930s, Congress & FDR promised that money workers paid into the system would never be used for anything else. Our Democrats broke that promise when they raided the SS fund. See Eisenhower, Johnson, Carter and Clinton’s subsequent modifications to all the original program. Even Al Gore helped break the promise that we’d never be taxed on SS earnings (he cast the tie-breaking vote as President of the Senate while he was VP). If the left wing had some reasonable control over our government, we wouldn’t have these problems. But we keep believing in guys like Obama and end up voting for people who work against our own interests. Sound familiar? Granted, the Dem Party is not as bad as the Repub, but shouldn’t we demand better than that? Shouldn’t we demand Obama take care of our needs instead of the super rich?

    Immigration is not the answer to these problems, getting more citizens educated and working is the solution. For those who still believe poor immigrants don’t impact American workers, try talking to certified, union paying carpenters who have to work for $6-$10 per hour because it’s so easy for rich developers to hire illegal immigrants at that rate.

    “Immigration reform” is a simply euphemism for allowing millions of Mexican citizens to become American citizens ahead of other immigrants who chose to follow the rules and abide by the law. The fact is, it is bad public policy to prioritize law breakers over all others. This big push to help out only those specific people who came here illegally is just wrong, and progressives should stop promoting the idea that we’re helping those poor people as well as ourselves. If we really care about struggling Hispanics, do something about the millions of poor Mexicans who DON’T sneak across the border to get into this country. What about them? Don’t they deserve our help?

    Will the Obama Administration tackle immigration the same way they handled health care (giving us faux reform that mandates America’s workers buy insurance and support the rich)? Most likely. Obama tends to give away the house before negotiating solutions that work for America’s middle and working class citizens. He nixed the public option last summer so he could get his health insurance corporate welfare act passed. He did continue to give lip service to the public option, which is why so many progressives still trusted him though the entire faux health care reform debate. He fools plenty on the left, but Independents and moderates know when they’re being ripped off, and show their displeasure at the polls. (See Scott Brown’s win in Massachusetts and the likely midterm losses this fall.)

    Obama wants to open up our fragile shorelines to drilling, and then move on to negotiating with oil companies. What’s left to negotiate? How small their tax breaks will be? Obama and our Dems will likely try to do the same with illegal immigrants: offer amnesty, then put in new stringent programs that make the right wing happier. Of course, it’ll be too late because he/Congress will have already given away the ability to properly deal with this contentious issue. Giving both sides of an issue a little bit of what they want doesn’t work because in the end, both sides are mad. The way that plays out at the polls is that right wing voters fund and vote for their worst candidates, while left wing voters get apathetic and sit out the vote in disgust. The result is a huge failure for our progressive agenda.

    If progressive want to solve the problems Social Security and Medicare face, we need to take back control of our government. Obama still could be the hero we all hoped he’d be, but only if we demand he stop pushing corporatist policies.

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