Legislation introduced by Republicans in the Senate that would reduce the number of green cards would have the unintended consequence of expediting Social Security’s impending insolvency, according to new analysis from the Urban Institute.
The Reforming American Immigration for Strong Employment, or RAISE Act, would reduce the number of issued green cards by 41 percent immediately, and gradually reduce the number until half are issued after 10 years. As is, about 1 million immigrants are granted lawful status annually in the U.S.
The Institute's analysis says Social Security revenues would fall faster than expenditures under the policy, increasing unfunded obligations by 13 percent, or $1.5 trillion, over the next 75 years.
The Social Security Administration is projecting its primary trust fund will run out of reserve assets by 2033, at which time all beneficiaries would see cuts in retirement benefits of up to 25 percent.
Under the RAISE Act, most of the green card reductions would be achieved by cutting the number of visas issued to extended family members of immigrants with legal status.
It would maintain the existing 140,000 quota for work-based visas, but would create new preferences for younger and better-educated immigrants, according to the Institute's analysis of the proposed legislation. Visas for refugees and asylum seekers would be limited, and a lottery that grants 50,000 green cards randomly would be eliminated.
“Because most newly arriving immigrants are working age and join the labor force, reducing immigration would shrink the labor force and the number of workers paying payroll taxes, immediately reducing trust fund revenue,” according to the paper. “The number of retirees and total benefits paid to them would not change in the short run.”
Reducing the number of legal immigrants would also cut the number of Social Security recipients in the long run.
But the Institute says that reduction would not be enough to offset lost revenue from fewer workers paying into Social Security over time. Moreover, the think tank notes that cutting immigration would ultimately reduce the country’s overall birth rate, further shrinking the labor force, and payroll tax receipts, over time.
The Institute's modeling shows the RAISE Act would reduce the labor force by 2 million workers in 2030, 6 million in 2050, and by 8 million in 2070. The labor force is expected to reach 176 million by 2030.
Proponents of limiting green cards to higher-educated immigrants argue the policy would be more productive for economic growth, as better-educated workers would earn more and pay higher taxes.
Under current policy, 20 to 30 percent of legal immigrants come to the U.S. with a four-year degree. Under the RAISE Act, the Institute says that would increase to 50 to 60 percent.
The new policy would boost the average earnings of legal immigrants, offsetting some of the lost payroll tax revenue from a smaller workforce, the Institute says.
Social Security’s two trust funds are facing an $11.6 trillion deficit over the next 75 years.
The $1.5 trillion in new deficits the Institute projects under the RAISE Act would increase the new taxes needed to close Social Security’s revenue gap. Were it to pass, the law would require an additional increase of 0.44 percent in payroll taxes to close the deficit, according to the Institute.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
