The Washingon Times headline:  Illegals granted Social Security, reported on the U.S. Senate vote on May 18, 2006 to allow illegal aliens to collect Social Security benefits based on past illegal employment – even if the job was obtained through forged or stolen documents.  Nevada’s Senator John Ensign offered the amendment to strip this provision from the Senate immigration bill that would essentially grant amnesty for those illegal workers who committed felonies by using falsified social security documents to obtain employment, but the amendment failed 50-49.

Lurking behind the political debate about whether to grant amnesty to illegal Mexican workers is a treaty arrangement that the Social Security Administration and the U.S. State Department are trying to slip under the radar that will add billions in additional obligations to the Social Security Trust Fund.  And this agreement would empower illegal Mexican workers to use their work under falsified documents, but it would also allow illegal workers to avoid the current requirement that American workers must have at least 40 quarters of work before becoming eligible for social security benefits.  Under this new agreement, Mexican workers could qualify for Social Security benefits after just 6 quarters, or just 18 months.

Mexican workers and their families are literally flooding into the United States, now aided with comic books printed by the Mexican government that instruct illegal aliens on how to safely swim the Rio Grande River, and then gives some tips on how to most effectively avoid the U.S. Border Patrol once they get across the border.  The latest tactic floated by the Mexican government is to issue maps showing Mexicans where they are most likely to successfully enter the United States without being caught.

Recent studies have completely debunked the theory that these Mexican workers are coming to the United States because they have no work in their homeland.  In fact, there is much more that is drawing Mexican workers to the United States, and it includes better health care (funded mostly by U.S. taxpayers), superior education for their children, and the ultimate jackpot:  Social Security benefits.

The biggest threat to the long-term security of our Social Security Trust Fund really isn’t personal accounts – despite the raging political debate where some critics of personal accounts claim allowing individual control of retirement accounts will bankrupt Social Security.  In fact, the most significant threat to seniors receiving their monthly Social Security checks in the future is actually a normally non-controversial treaty arrangement presently sitting on Secretary of State Condoleezza Rice’s desk between the United States and Mexico, called a “totalization agreement.”

These totalization agreements, of which there are currently 20 in place, have traditionally protected both U.S. workers assigned to work in other countries, and foreign workers with similar work assignments in the United States, from unreasonable requirements to pay into two government mandated retirement systems.  Until now, totalization agreements have been non-controversial, and none of those sent to Congress for approval have been rejected. 

But the proposed totalization agreement with Mexico has drawn the scrutiny of many in Congress, and significant problems with this agreement have been uncovered that document the proposed Mexico totalization agreement will likely provide a financial jackpot for currently illegal Mexican workers in the United States, and create a huge incentive for millions more to come to the United States to work.

The Center for Immigration Studies, an independent, non-partisan research organization that analyzes the impact of immigration on the United States, issued a report on the proposed Mexico Totalization Agreement that found four significant problems with the agreement:

  1. One-sided.  Unlike the 20 existing agreements, a totalization agreement with Mexico would be one-sided.  Its beneficial effects to U.S. workers would be miniscule compared to those received by potentially millions of Mexicans.  It is expected that the totalization agreement with Mexico would:
    1. Provide only modest tax savings for American workers and their employers compared to other totalization agreements.
    1. Entice Mexicans to remain in the United States for the 10 years it takes to vest for U.S. Social Security (versus 24 in Mexico) in order to maximize their retirement income.  Under totalization agreement provisions, illegal Mexican workers could vest for benefits after just 6 quarters, or 18 months.  The United States pays out far more to low-wage workers than they contribute to the system.  In contrast, Mexico only pays out what was contributed, plus accrued interest.
    1. Permit Mexicans to return home and have their spouses and dependents receive U.S. Social Security benefits they would not have been entitled to without a totalization agreement.
    1. Permit partial Social Security benefits to be paid to those who worked in the United States as little as 18 months (six quarters).
    2. Eventually compel the United States to pay out billions in retirement benefits to Mexicans for credits they acquired while using fraudulent Social Security numbers prior to obtaining legal status.
    1. Lure even more Mexicans into the United States illegally in the hopes they would obtain amnesty, thereby making themselves and their families eligible to receive U.S. Social Security benefits once the worker returned to Mexico and reached retirement age.
  1. Perversion of original concept.  The anticipated totalization agreement with Mexico is a perversion of prior agreements, calling into question the appropriateness of such a pact.  The norm in existing bilateral totalization agreements assumes employees of corporations are asked by their employers to transfer to the other country for a specified period of time. Employees and employers in both countries have been contributing to their respective social security systems. The dual objectives of existing totalization agreements were to secure tax savings for the employees and employers of both nations by eliminating double taxation and to guarantee an old age pension to those who contributed to both social security systems by “totalizing” the years worked in both countries. Employees legally enter the partner nation with documents verifying they are authorized to work. 

Virtually all of the existing 20 totalization agreements are with developed nations whose social security retirement benefits are at parity with those in the United States, providing no incentive to stay and vest for U.S. social security.  In contrast, most Mexican workers entered the United States illegally, were not affiliated with a corporation, previously lived in poverty, and paid no social security taxes in Mexico.  There is no benefit parity for American workers in Mexico as it takes more than twice as long to vest for Mexican social security (24 years vs. 10 years in United States) and the benefits are far less generous than those in the United States.

  1. Most Mexicans here illegally.  None of the existing totalization countries accounts for even 1 percent of the U.S. illegal population and jointly comprise only 4 percent of the total number of illegals.  In contrast, over half of the Mexicans living in the United States are illegal aliens.  The size of the illegal population from Mexico more than doubled in the last decade and now accounts for 69 percent of the U.S. illegal population.  To adopt a totalization agreement with Mexico would put the United States in the ludicrous position of offering Social Security benefits to potentially millions of Mexican workers who showed contempt for our laws by illegally crossing our border and by fraudulently obtaining the Social Security numbers (SSNs) needed to qualify for old age and disability benefits.
  1. Huge costs. It is extremely difficult to estimate the potential long-term drain of a Mexican totalization agreement on the U.S. Social Security trust fund, but it has the potential to dwarf all the other agreements combined. Serious questions have been raised about the assumptions made by the Social Security Administration (SSA) and the rigor of its analysis. Inexplicably, SSA projected its estimates based on the totalization experience with Canada.  The estimated number of Canadians living in the United States is 820,000 (vs. 9.2 million Mexicans). Given the fact that a totalization agreement would cover not just Mexican workers but also their spouses and dependents, it is highly likely that over time, potentially millions of people would receive U.S. Social Security benefits and the cost would be in the billions of dollars.

Given these damning indictments of an apparently deeply flawed Mexican Totalization proposal, it is astounding that this agreement is being pursued at the highest levels of the Bush Administration, and by many in the U.S. Congress.  Advocates for this Agreement, that include the Social Security Administration Commissioner Jo Anne Barnhart, provided testimony before the Congress that claimed the Mexico agreement would have a “negligible long-range effect on the Social Security Trust Fund” and estimated the costs to be about $105 million per year over the first five years.

The General Accountability Office (GAO), that acts as the public watchdog over government, was asked by the Chairmen of the House Judiciary and Ways and Means Committees to provide a report on how the proposed Mexican Totalization Agreement might impact the payment of Social Security benefits to potentially millions of illegal Mexican immigrants and their families and any impacts such payments would have on the long-term solvency of the Social Security Trust Fund.  The GAO report directly contradicted the assumptions used by SSA in formulating their rosy financial projections and called into question whether any parts of the SSA analysis could be relied upon to support approval of the Mexican Totalization Agreement.

The GAO report on the Mexican Totalization Agreement drew the following conclusions:

  • SSA’s actions to assess the integrity and compatibility of Mexico’s social security system were limited and neither transparent nor well-documented.
  • The agreement will likely increase the number of unauthorized Mexican workers and family members eligible for social security benefits.
  • More family members of covered Mexican workers would become newly entitled because the agreements usually waive rules that prevent payments to noncitizens’ dependents and survivors living outside of the United States.
  • The SSA estimate (50,000 current legal Mexican workers in the United States in 2003) does not directly consider the estimated millions of current and former unauthorized workers and family members from Mexico.
  • The SSA estimate inherently assumes that the behavior of Mexican citizens would not change and does not recognize the agreement would create an additional incentive for unauthorized workers to enter the United States to work and maintain documentation to claim their earnings under a false identity.

The obvious question arises about why anyone, let alone the informed and enlightened public policy makers both in the Bush Administration and the U.S. Congress, would seriously consider adding a significant and potentially catastrophic economic burden to an already unsound social security program.  For many, the answer is crystal clear:  Politics.

Hispanic voters are a growing segment of the voting population in America, and both Democrat and Republican political strategists are scrambling to capture these important votes.  Karl Rove, President Bush’s top political strategist, openly admits the Bush “Guest Worker” proposal (that has little chance of passage in the Congress in its present form) is part of the overall strategy to win a larger segment of the growing Hispanic voting bloc.  That overall strategy includes passage of the Mexico Totalization Agreement.

So many in the Congress, both Republican and Democrats, are vying to win that same voting group, that it is unlikely that the Mexico Totalization agreement could be stopped if it is sent by the White House to Congress for approval.  Yet, its passage will create an enormous financial strain on the solvency of the Social Security Trust Fund.

The hidden fatal bullet for the fiscal integrity of the Trust Fund in this calculation is the number of Mexicans who will flood into the United States in order to qualify for social security benefits.  The Mexican government is actively encouraging it, and they know that two significant advantages accrue for every Mexican citizen who is able to qualify under the United States social security system.  First, the Mexican social security system will not have to pay out any benefits to those workers.  Second, the Mexican workers will return home to retire and the flow of money from the United States to Mexican retirees will be a huge boon to Mexico’s economy.

The Mexican social security system takes much longer to vest into, and the payments are far less than the guaranteed minimum benefit provided for under the United States social security program.  It is literally a financial bonanza for Mexican workers who can work the required number of quarters to be vested into our system – even if they do so illegally and under a fraudulent social security number.

There aren’t many occasions when a United States Senator and a local City Councilman are voting on the same issue, but it’s happening virtually every day as Americans attempt to cope with the flood of illegal immigrants into the United States.  For illegal immigrants, the majority of whom are Mexican citizens seeking a better life, the economic and lifestyle advantages are potentially huge.  For elected officials at all levels of government, the burgeoning drain on social services, health care resources, and overcrowded schools has created a public policy dilemma of gigantic proportions.

The costs to taxpayers at every level of government, and the drain on local government social and welfare resources imposed by these illegal immigrants, is staggering.  And social security is only the jackpot at the end of the rainbow.  Better schools, free health care, and rent and food assistance are just the beginning of the programs sought by illegal Mexican workers and their families.  Overall, a much better quality of life for them and their families is the draw that induces them to take the risk of sneaking across our borders.

There is no doubt that America needs an immigration policy that is sensitive to legitimate needs of immigrants, and to provide support for seasonal agricultural workers on a temporary basis, but it is not a policy that should be enacted on the backs of America’s seniors by imposing an impossible burden on the Social Security Trust Fund.  Seniors who have worked their entire lives expecting the Social Security benefits will be a part of their retirement security should not have that expectation destroyed by a political policy embodied in such proposals as a Mexico Totalization Agreement.


Summer 2006