Why More Immigrants Are An Answer to the Coming Boomer Entitlement Mess

angeleno · 04-14-2010, 06:56 PM

As an economics junkie, I've made this point several times. I'm glad someone like Robert Reich is finally driving the point into the mainstream.

Quote:

By Robert Reich

I was born in 1946, just when the boomer wave began. Bill Clinton was born that year, too. So was George W. So was Laura Bush. And Ken Starr (remember him?) And then, the next year, Hillary Clinton. And soon Newt Gingrich (known as "Newty" as a boy). And Cher. Why so many of us begin getting born in 1946? Simple. My father was in World War II. He came home. My mother was waiting. Ditto for the others.

Sixty years later, we boomers have a lot to be worried about because most of us plan to retire in a few years and Social Security and Medicare are on the way to going bust. I should know because I used to be a trustee of the Social Security and Medicare trust funds. Those of you who are younger than we early boomers have even more to be worried about because if those funds go bust they won't be there when you're ready to retire.

It's already starting to happen. This year Social Security will pay out more in benefits than it receives in payroll taxes. The tipping point came sooner than anyone expected because the recession has kicked so many people off payrolls. But it was coming anyway. And it adds new urgency to reforming Social Security -- a task the president's commission on the nation's debt is focusing on.

So what's the answer?

Fed Chair Ben Bernanke this week listed the choices. "To avoid large and unsustainable budget deficits," he said in a speech on Wednesday, "the nation must choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above."

Bernanke is almost certainly right about "some combination," but he leaves out one other possible remedy that should be included in that combination: Immigration.

You see, the biggest reason Social Security is in trouble, and Medicare as well, is because America is aging so fast. It's not just that so many boomers are retiring. It's also that seniors are living longer. And families are having fewer children.

Add it all up and the number of people who are working relative to the number who are retired keeps shrinking.

Forty years ago there were five workers for every retiree. Now there are three. Within a couple of decades, there will be only two workers per retiree. There's no way just two workers will be able or willing to pay enough payroll taxes to keep benefits flowing to every retiree.

This is where immigration comes in. Most immigrants are young because the impoverished countries they come from are demographically the opposite of rich countries. Rather than aging populations, their populations are bursting with young people.

Yes, I know: There aren't enough jobs right now even for Americans who want and need them. But once the American economy recovers, there will be. Take a long-term view and most new immigrants to the U.S. will be working for many decades.

Get it? One logical way to deal with the crisis of funding Social Security and Medicare is to have more workers per retiree, and the simplest way to do that is to allow more immigrants into the United States.

Immigration reform and entitlement reform have a lot to do with one another.

Jelly Bean Lover · 04-14-2010, 08:00 PM

Nice find. I always thought this argument would be a compelling one to facilitate immigration reform. This issue will be the major problem our country faces economically in the next couple of generation and a more liberal immigration policy and population growth will help to ease its effects.

Sigmahat · 04-14-2010, 10:32 PM

Reminds me of the Romer model. Ideas have increasing returns to scale, compared with capital accumulation. Hence the more "scientists" (does not really refer to just scientists) we have, the more a nation will grow. This is because ideas are nonrivalrous, and my use of them does not affect your use. The parallel to this is as the user angeleno points out, higher education for undocumented students and their potential ability to use their degrees would help the U.S significantly; since more ideas would be produced and the country benefit off these innovators.

lookingforchange · 04-19-2010, 02:09 AM

This is absolutely true. Now I know some would say Reich is a liberal, which he is, he worked in the clinton whitehouse. But many other economists have been saying this, there are a number of articles and speeches given by economists from the right, U of Chi types, but conservatives (well the dumb ones, the Sessions, tancredos, etc..) Ignore these facts.

Its frustrating

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Why More Immigrants Are An Answer to the Coming Boomer Entitlement Mess