Washington, D.C. (April 11, 2023) –
A new analysis from the Center for Immigration Studies examines the impact of immigration policy on the solvency of the Social Security and Medicare programs. Rather than offer dollar estimates for the future, the new report instead explains conceptually the differing effects of different immigration policies.
The recently released 2023 Trustees Report on the projected financial status of the programs has lawmakers considering actions that might extend the life of the program and avoid substantial benefit cuts. Although immigration is often suggested as a boost to the programs’ finances, the reality is more complicated. Toleration of illegal immigration, amnesty for illegal immigrants, and increased legal immigration are distinct policy choices that should not be conflated because that have very different effects on the trust funds.
Although some of these choices have positive impacts, they are still no substitute for hard-headed fiscal reforms. Jason Richwine, the Center’s resident scholar and author of the report, said, “Rather than looking to immigration as an outside fix for the fiscal imbalances faced by Social Security and Medicare, policymakers should acknowledge that any practical solution will primarily involve a combination of tax increases and benefit reductions that encourage Americans to live within their means.”
Key points:
· Illegal immigration unambiguously benefits the Social Security and Medicare trust funds, but amnesty (legalization) would reverse those gains and add extra costs.
· The impact of legal immigration depends largely on age of arrival and income. Immigrants who arrive young and have high earnings will be net contributors to the trust funds, while later-arriving and lower-earning immigrants will be net drains.
· Recent declines in fertility imply that legal immigrants who are net drains in their own lifetimes will not have enough children to make up the difference in the next generation.
· A
continuous inflow of working-age immigrants could appear to have a positive effect on the trust funds even as the immigrants are lifetime net drains. However, this Ponzi-style funding strategy would be difficult to sustain.
