clinton and immigrants07 Jul 2005
Last week, Clinton raised eyebrows by suggesting that giving amnesty to some portion of illegal immigrants could help shore up the project shortfall in social security (obligatory priority disclaimer: a relatively minor and easily corrected fiscal policy issue). This is a bit of an odd statement, given what I know about social security and immigration. But what I know about social security and immigration is spotty and not authoritative, so here is a list of what I know:
First, there’s a wealth of evidence that most illegal immigrants already pay payroll taxes (since they have to be pretend to be legal to work). These withholdings are lumped into the SSA’s “earnings suspense file” and are a huge chunk of the social security surplus. These are taxes paid by people that will never get benefits. This is a stick in the eye of the anti-illegal immigrant rallying cries that illegal immigrants are a net drain on our society, but I digress.
While this is a boon to social security’s finances, from a progressive high-level stance, it’s not really a good thing. People working (generally in the lowest class and income bracket) and paying taxes and receiving no tangible benefit is not a good thing. Nonetheless, as it pertains to Clinton’s proposal, I am having a hard time seeing how legalizing a portion of illegal immigrants will help anything if they are already paying payroll taxes. Some amnesty might provide a marginal benefit in converting under-the-table employees to legitimate taxed ones, but it seems likely to be negligible.
Second, and slightly more controversial, is the issue of legal immigrants. It’s generally accepted (although debated) that legal immigrants tend to be a boon to the government fiscal outlook because they often contribute more in taxes than they receive in benefits because they tend to be younger and return to their homeland long before retiring. Slate tackled this a few months ago, and referenced a paper (PDF) by Robert Gordon that addresses this as well. Kjetil Storesletten in “Sustaining Fiscal Policy Through Immigration” has even proposed a specific policy recommendation for targeted legal immigration based on a population model:
Using a calibrated general equilibrium overlapping generations model, which explicitly accounts for differences between immigrants and natives, this paper investigates whether a reform of immigration policies alone could resolve the fiscal problems associated with the aging of the baby boom generation. Such policies are found to exist and are characterized by an increased inflow of working-age high and medium-skilled immigrants. One particular feasible policy involves admitting 1.6 million 40-44-year-old high-skilled immigrants annually.
Admittedly, the American public seems opposed to such large increase in immigration. However, when one is faved with the trade-off between higher taxes on the one hand and a larger number of high-skilled immigrants on the other, it seems reasonable that a majority would, on the margin, opt for increasing the number of immigrants.
I doubt somehow that this prognosis is enough to “resolve the fiscal problems” we’re facing alone, but it seems to indicate a possible direction for a plausible immigration policy that could help.
What I don’t see is much evidence that Clinton’s suggestion makes much sense. However, I do think it’s good that he raised the issue. Since 9/11, in my opinion, we’ve seen a disturbing rise in xenophobic tendencies in this country. With self-proclaimed armed “minute men” patrolling the borders, and obnoxious radio hosts holding rallies to “de-magnetize” Tennessee – I think it’s important that we revisit the stunning contribution that immigrants, both legal and illegal, make to this country’s economy and culture every day.