National Data | Is Totalization A Trap? Don`t Ask The Social Security Administration

Illegals receiving Social Security?

Ditto their dependents and survivors—many of whom have never lived in the United States?

At first glance, it seems preposterous. A law called the Social Security Protection Act of 2004 explicitly prohibits benefits to “aliens residing in the United States unlawfully.”

But a loophole in that law exempts illegals from any country “…that has a social insurance or pension system under which benefits are paid to eligible U.S. citizens who reside outside that country…” .  

“Totalization” agreements do that. They are designed to protect workers who have divided their careers between the U.S. and a foreign country, but haven`t worked long enough under either social security system to qualify for benefits. The agreements allow workers to combine (“totalize”) work credits earned in both countries to meet minimum eligibility requirements.

With the signing of the U.S.-Mexico totalization agreement on June 29, 2004, most of the 10 to 20 million illegal aliens living in the U.S. became potential Social Security recipients.

We say “potential” because the U.S.-Mexico agreement has yet to be signed by the President—or even sent to Congress for review. Eligibility and costs will ultimately depend on specific terms and language of the final agreement.

Indeed, some observers fear Mexican totalization could metastasize into a de facto guest worker program, effectively legalizing millions of erstwhile illegal aliens. [See, for example, Totalization: Sellout of American Workers, By Phyllis Schlafly November 17, 2004]

That devil will be in the details of the final agreement.

But in any event, the Social Security Administration`s preliminary cost estimates for Mexican totalization seem absurdly low. In 2003 SSA`s actuaries projected those costs at $78 million in the first year, growing to $650 million (constant 2002 dollars) by 2050. SSA claimed that the agreement would have a “negligible impact” on the Social Security trust fund long-range actuarial deficit. (Cold comfort: the trust fund is expected to be exhausted, with or without Mexican totalization, by 2040.)

However, SSA`s projections assume only 50,000 newly eligible Mexican beneficiaries would be added during the initial phases of totalization, with that number growing to 300,000 over time. Amazingly, these are the same numbers that SSA used to cost out the totalization agreement with Canada. Illegal aliens from Mexico make up about 70 percent of all illegals in the U.S. Those from Canada and the 19 other totalization countries combined account for less than 3 percent of all illegals. [Social Security `Totalization` | Examining a Lopsided Agreement with Mexico, CIS Backgrounder, By Marti Dinerstein, September 2004]

And illegal alien headcounts don`t tell the whole story. Mexico`s retirement system is rudimentary compared to those of other totalization countries. Americans, for example, vest for Social Security benefits after working for 10 years; Mexicans must work for 24 years before vesting in their national pension plan. (Mexican aliens can vest for Social Security after working just 18 months in the U.S., and make up the difference by “claiming” to have worked in Mexico.)

Moreover, under the Mexican system workers receive back exactly what they paid in, plus interest. [VDARE.COM NOTE: If it`s not stolen, that is. The men who paid into the Mexican Government`s Bracero Program in the 1940`s haven`t been paid; the money just disappeared.] By comparison, Social Security is also an income-redistribution system, with low-wage workers receiving benefits far in excess of their contributions.

Another federal agency, the Government Accountability Office [GAO], has said the prospect of easy Social Security eligibility could draw far more illegal aliens to the U.S. than SSA actuaries have projected:

“……Although the actuarial estimate indicates that the agreement would not generate a measurable impact on the trust funds, an increase of more than 25 percent in the estimate of initial, new beneficiaries would generate a measurable impact. For prior agreements, error rates associated with estimating the expected number of new beneficiaries have frequently exceeded 25 percent. Because of the significant number of unauthorized Mexican workers in the United States, the estimated cost of the proposed totalization agreement is even more uncertain than for the prior agreements.” [Barbara D. Bovbjerg, “Proposed Totalization Agreement with Mexico Presents Unique Challenges”, GAO, September 2003. PDF]

Overarching everything, according to GAO, are SSA`s secretive, albeit sloppy, procedures:

“A lack of transparency in SSA`s processes, and the limited nature of its review of Mexico`s program, cause us to question the extent to which SSA will be positioned to respond to potential program risks should a totalization agreement with Mexico take place. SSA officials told us that the process used to develop the proposed totalization agreement with Mexico was the same as for prior agreements with other countries. The process—which is not specified by law or outlined in written policies and procedures—is informal, and the steps SSA takes when entering into agreements are neither transparent nor well-documented.”  

Of course, this is all very convenient given the Bush Administration`s apparent determination to marry Mexico.

The rest of us might like to see some due diligence.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.