Tuesday, July 2, 2013

Immigration reform and Social Security

Over at National Review I write about the challenges in modeling the effects of immigration reform on Social Security’s finances, arguing that SSA and CBO’s models need to be sure that they’re catching all the important things that make immigrants differ from U.S. residents. In particular, immigrants have lower average lifetime earnings and longer life expectancies, which means they’ll pay less in taxes and receive more in benefits than you’d think.

At AEI’s blog, I provide an update where I tried to replicate SSA’s recently released score for the Senate immigration reform legislation. SSA concluded that the plan would cut Social Security’s 75-year deficit by around 8 percent, which is worth about half a trillion in present value dollars. But using the Policy Simulation Group’s microsimulation model, which models immigrant earnings and mortality separate from natives, the gains to social security fall to less than 1 percent. Higher future immigration still generates small gains for the system, but these are largely offset by the costs of legalizing current undocumented workers.

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