Andrew Biggs has an important piece on the homepage today about immigration reform and Social Security—a subject that Byron York also addresses, here. Biggs also has an addendum here, analyzing a new assessment of the Gang of Eight bill released by the Social Security Administration on Friday.
As both of them point out, the benefits for Social Security’s finances of the sort of immigration reform envisioned by the Gang of Eight has been a major talking point of the champions of that reform. This post on the White House blog made that argument again yesterday, drawing attention to that new projection from the Social Security Administration. The effects on Social Security were also hugely important to CBO’s score of the Gang of Eight bill, and to the headline conclusion of that score—that the bill would reduce the deficit in the next two decades. In fact, on net, the entirely of the projected deficit reduction in the first decade (and probably in the second, as the Committee for a Responsible Federal Budget points out here) comes from increased revenue from the Social Security payroll tax. This means, by the way, that you cannot simply claim that the bill would simultaneously improve the viability of the Social Security trust funds and also reduce the deficit, since we’re talking about the same money in both cases.
As Biggs notes today, the projected positive effect on Social Security’s finances is based on assumptions about the likely earnings and likely lifespans of immigrants that do not seem to conform with the available evidence. When he ran the same kind of simulation with what he considers more realistic assumptions, he found that the effect of the Gang of Eight reform on Social Security would be a wash—the program’s finances would basically be unchanged.
As Biggs acknowledges, it’s very hard to know exactly what assumptions to make in projections like these, so no one can be sure what the real effects of a huge wave of new (mostly low-skill and low-wage) immigrants would be. But I think it’s worth noting that even the Social Security Administration’s rosier projections do not actually support the notion, advanced by the White House and by other supporters of the bill like Lindsey Graham, that the Gang of Eight reform would be a game-changer for Social Security’s future.
The SSA’s new assessment, released last Friday (yes, the day after the Senate voted on the bill), offers a fair amount of detail about the agency’s long-term projections of the effects of the bill. And while, as noted, it showed positive effects on the program’s cash flow, the effects were nowhere near sufficient to change the basic outlook for Social Security.
This chart from the report shows the projected effects of the Gang of Eight bill on the basic fiscal outlook of the Social Security trust funds:
As you see, this is a slight change of degree, not by any means a change in kind. The agency projects that, if the Gang of Eight bill were to pass, the trust funds would be depleted (requiring a sharp across-the-board cut in benefits) in 2035 rather than, as projected in the latest report of the Social Security trustees, in 2033. This is simply not a major difference. Consider, for instance, that just two years ago, in the 2011 report of the trustees, they projected the funds would be depleted in 2036, without immigration reform.
This chart, again from the SSA report, projects how they expect the program’s overall finances would be different in the longer term if the Gang of Eight bill passes:
It can be a little hard to decipher, but what it basically shows is that, if the bill becomes law, the steep (roughly 20%) across-the-board cut in benefits required by law would have to happen just two years later than it otherwise would and the overall cost of Social Security would be a little lower than it otherwise would have been for a time, and then a little higher. Again, this is far from a game-changer.
The across-the-board cut in the 2030s just isn’t going to happen, which means that some reform of the program will need to happen by that time. Immigration reform, even under the SSA’s rosy projections, does not change that fact.
There are certainly many arguments for immigration reform, including for the sort of reform sought by the Gang of Eight. But the argument that it will save Social Security’s finances and help us avoid the daunting challenges of entitlement reform just isn’t one of them.