May 24th, 2005

Brad @ Burning Man

Save Social Security: More Legal Immigrants!

OK, mind you, I'm not even vaguely convinced that Social Security needs saving. The program is forecast to be solvent out about 13 to 14 years into the future. And after the last couple of decades, is there anybody left alive who actually has faith in any kind of economic forecast that goes even 5 years into the future, let alone 14?

But everybody's convinced, no matter what the numbers do or don't say, that there must be some kind of Social Security crisis coming. As birthrates drop, as people live longer, as jobs move overseas, it's inevitable that Social Security has to mean more and more retirees living longer and longer, living partially off of stipends paid for by the payroll taxes on fewer and fewer workers. That's been the recent trend, and everybody knows, right, that trends have to continue indefinitely? Just like the last several years have clearly been a continuation of the economic trends from the eight years before that, right? Um, no. But let's go worst-case scenario here, after the 13th Beatitude: "Blessed are they who expect the worst, for they can be pleasantly surprised."

If there isn't enough money coming in to fund the Social Security benefits going out, then there are only four possible things to do about this: raise taxes, cut benefits, raise the interest rate earned on the money coming in while there's still a surplus in the Social Security fund, or something so radical, so unthinkable, that it obviously isn't even on the table: increase the number of workers paying in.

Raising the Social Security payroll tax isn't even being discussed, and nobody's surprised. Well, OK, one minor change, and one that I support, is being discussed, and if anything actually makes it through Congress any time soon this may well be in it: raising the cap on the income that's taxed. But raising the actual tax rate isn't going to happen, if for no other reason than if a 15% payroll tax (half employer-paid, half worker-paid) isn't already too damned high, it's on the ragged edge of it. The President seriously thinks that investing in riskier ventures will increase the interest earned on the current account. Of course he thinks that. He grew up in an era when "everybody knew" that stocks only go up, and never go down. Fortunately, no matter how much they tart up privatization by calling it "personal accounts," that part of the plan is dead on arrival, and everybody but Bush knows it. Will they cut benefits? Not in any meaningful way, there's just too much opposition from across the spectrum. They might slowly raise the retirement age. They might tinker slightly with the formula used to calculate cost of living increases in benefits. But even both of these things, together, constitute tinkering around the edges, and are unlikely to make any significant difference in the final outcome.

So let's think the unthinkable for a moment. If we can't significantly raise the tax, and we can't meaningfully cut the payout, and we really can't conjure money out of nowhere through "the magic of the markets," then obviously the only way to maintain the payee-to-benefactor ratio is to increase the number of workers. That means more jobs here in America, not elsewhere, and given the fact that American birthrates are dropping towards falling below the replacement rate almost as fast as they already have in Europe, that means immigration. Now, I already know what you're going to say. With unemployment going up, how can I support bringing in more people to compete for the jobs we have? The answer is simple. More legal residents, more permanent residents and citizens, does mean more job applicants, but even more than that, it means something this country needs: more demand. New immigrants step off the boat, or the plane, or the coyote's truck with little more than the clothes off their backs. As people building a new life here, they need jobs, yes, but they also need cars, and housing, and clothes, and televisions, and computers, and lamps, and kitchen accessories, and all the other things that you had to obtain when you moved out of your parents' house.

At the very least, that means two things that the American economy very badly needs. For one thing, even if the stuff gets manufactured overseas, it means more jobs in America selling them the stuff. It also means a chance to work through the piled up inventory that's accumulated since the recession began, that's depressing employment now. But there's reason to think that it means more jobs here making the stuff, too. You see, companies have finally learned the hard way that moving jobs to India and China and South Korea doesn't actually save them any money. Any savings in labor rate is temporary, and eaten up by the initial steep expense of building new factories and the ongoing expense of managing an operation on more than one continent. And yet they keep building factories in China and India and Korea anyway, and when slack times hit those markets they dump the goods here just to keep the lines rolling. Why? Because that's where the customers are. Because of flattened population growth and an aging population that already has most of the stuff they need, America is a flat-growth market. More immigration  means more customers here, and that means more jobs here.

Next: Why illegal immigration has the opposite effect, and why it's disappointing that Vincenté Fox is encouraging any kind of emigration and even worse that he is pushing Bush to accept temporary rather than permanent immigration. And I may take time out then, or after that, to apply advanced slapthology to people who think that more immigrants = the death of our culture.
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