The Heritage Foundation was rightly criticized for expressing the long-term costs of so-called immigration “amnesty” in inflation-adjusted terms rather than as a present value, which accounts for the time value of money. A present value would have cut Heritage’s $6.3 trillion figure roughly in half.
The same trick is used in an editorial in yesterday’s Wall Street Journal, which claims that higher immigration would boost Social Security’s finances by $4.6 trillion. In fact, the writers call higher immigration a “$4.6 trillion opportunity.” Let’s do the math.
Social Security has a 75-year deficit of 2.72% of payroll, meaning that raising the 12.4% payroll tax rate by 2.72 percentage points would keep the program solvent over 75 years. The latest Trustees Report states that “Increasing average annual net immigration by 100,000 persons improves the long-range actuarial balance by about 0.07 percent of taxable payroll.” Since the Gang of Eight plan envisions steady-state immigration of around 150,000, multiply 0.07% by 1.5 and you have 0.105%.
This means that the Gang of Eight plan would fix roughly 3.9% of the Social Security shortfall. Since Social Security’s 75-year shortfall in dollar terms is about $9.6 trillion, that means immigration reform would save about $375 billion in present value. So no, immigration isn’t a $4.6 trillion opportunity for Social Security. It’s not even one-tenth that amount.
And even these figures may overstate the effects of immigration, since SSA assumes that immigrants have the same earnings and life expectancies as native-born workers, when in fact immigrants have lower earnings and longer life spans. As a result, immigrants — unlike native-born workers — are likely to pay less into Social Security than they’ll receive back in benefits. Could immigration conceivably be a “zero dollar opportunity” for Social Security? It’s possible. And since Social Security is about the only area in which immigration might benefit the budget, it’s all downhill from there.