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SSTF - Steve Goss’s Bombshell – What Could it Mean?
I have written often on the status of SS. I also have some understanding
of illegal aliens working in the US. I have sponsored four over the
course of many years. I don’t hire them. But I pay many companies that
do. The employers know they are illegal, but the workers have SS cards
(fake) and so long as the PR taxes are collected no one seems to care.
These two interests of mine dovetail. SS has been collecting money from
illegal aliens for years. They will keep the money they have collected
and they will not pay out any benefits (except fraud) in the future. So
this money is “free”. I have often wondered how big the numbers on this
are. Now we know. The numbers are enormous. Without the Free Money coming in from illegal aliens SS would look much different than we "think" it does.
The WaPo had
an article on this today. They had hard numbers (sort of) in the
article. I was absolutely stunned that the source of this information
was Steve Goss, the chief actuary of the SSTF. Some thoughts/numbers:
-Steve Goss does not reveal information of this significance unless he
has a political agenda of his own, or he was told to. I am of the
opinion that it was the latter and the WaPo/Goss story was a way for the
Administration to get the illegal alien issue spun in a different
light. Because of high unemployment the illegal story is getting
traction and anger is boiling. What is happening in Arizona is the tip
of an anti-immigration movement that is brewing in America. This is not
healthy for society. Police profiling is not the American way. Except in
2010.
-This information is an unmitigated disaster for SS. It comes a month
after the release to Congress of their annual report that suggested that
things had actually improved for SS over the past 12 months. The report
did not highlight the fact that over $300b of assets held by the Fund
were in fact contributions from illegal aliens. As much as 13% of the
Funds holdings are tainted. Without this funny money the Fund would
today be running substantial deficits. That red ink would force major
changes in both payouts and taxes.
-Goss provided a range of the cumulative impact to SS of $120-240b (as
of 2007). He said that the overstatement was $12b in 2007. Those numbers
do no not add up in my opinion. We know that the illegal population
exploded from 2000 on. If the excess payroll income was only $12b in
2007, then it had to be a much smaller number ten-years earlier. There
is no way it could add up to Goss’s minimum number of $120b. I think
that when Goss was suggesting that the cumulative impact was 120-240b he
was implying that the range of impact for 2007 would have been $12-24
billion.
Goss said that as many as 67% of all illegals are working with either a
phony SS card or one that was no longer valid. Take this information
together with a Pew report that
put the number of illegal workers today at 11.1mm. This implies that
there are 7,400,000 illegal workers contributing to SS. Most of this
income is regular weekly pay. The average number for this in the US is
$30K. About $100 per day. That comes to a total payroll of $225 billion!
The SS tax on this is 12.4%, or $27b in just 2010. This analysis is how
Goss got to the $240b 2007 topside estimate. Add three years to that at
$25b a year plus interest on the whole nut and you get ~$350b.
I won’t (now) go into the longer-term impacts to SS of having overstated
its surplus by $350b. That number is 13.5% of the assets of the Fund. I
will say that this is a sea change event for how we look at SS. All
prior analysis and all future expectations must now be revisited. I
assure you that the results after excluding the illegal taxes will be
will prove to be a major blow to the solvency of the Fund. It will
change the debate on SS. It is that significant. Mr. Goss on this:
"If for
example we had not had other-than-legal immigrants in the country over
the past, then these numbers suggest that we would have entered
persistent shortfall of tax revenue to cover [payouts] starting [in]
2009, or six years earlier than estimated under the 2010 Trustees Report."
-We know that the actuaries at the Fund have been aware of the magnitude
of this issue for a very long time. The question I have is, “What did they do about it?” We need to understand what this means in terms of anticipated future benefit payments. There are two possibilities:
(1) The Fund knew the money was from illegal workers but chose to close
their eyes. For the purposes of calculating future liabilities they
assumed that everyone, including the illegal workers, would someday get
benefits. But they won’t. This would imply that the future liabilities
of the Fund are much smaller than has been projected. This “good” news
would have to be offset with the reality that the “true” assets of the
fund are significantly overstated.
(2) The Fund knew all along that the benefits that are associated with
these illegal receipts are never going to be paid and therefore it has
reduced the liabilities associated with this to some degree. This would
essentially make a fraud of all of the SS accounting. I doubt (hope)
that this is not the case. To restate both assets and liabilities would
create a very big credibility gap for SS.
I have said repeated that nothing happens in D.C. by chance. That every
nuance must be looked at closely. They all have meaning. In my opinion
the WaPo article shines a very bright light on SS. They have been
knowingly overstating assets and financial conditions for years. What
possible motive could be behind this Labor Day weekend bombshell? My
guess:
The Administration will use the Goss revelation to prove to the American
people that illegal workers have made a major contribution to the US
economy via the taxes they paid to SS. This will be done to blunt the
growing tide of ire among those who actually live here. There could be
another chapter to this story. It could be the ticket whereby some
illegals get legal. The cost for a Green Card would be that the
applicant would have to (among other things) agree to give up their
rights to any future SS benefits based on prior contributions made to
SS. They would be entitled to benefits based solely on what they were
taxed in future years. Any previous contributions (both employer and
worker) would be given up as a penalty. This thinking would set up the
possibility for two extraordinary outcomes.
(I) If SS eliminated the future liabilities associated with the
estimated $320b of excess contributions and they were allowed to keep
those tainted contributions SS would be transformed overnight to an
overfunded position of significant proportions. It would be so
significant that the Fund could reduce the current 12.4% PR tax by
20-30% for the next three to four years. That would have a meaningful
impact on the economy.
(II) America would get paid $350b (P+I) for allowing a significant
number of workers to become legal. Many would still gripe. But the
tradeoff of a partial tax holiday for 150mm workers and their employers
would shut down much of the opposition.
The Administration needs a win-win on the economy and immigration. Steve
Goss at the Trust Fund may have given them the opportunity to do that.
Stay tuned. It does not get much weirder than this.
Just a question. Has SS been aiding and abetting illegal workers? They
have taken in over $300b. They understood what they were doing. Without
the SS "wink and a nod" employers could not have hired them. Who’s abusing whom?
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Contrast that with Germany, where they still treat their social security as if it were really an insurance policy. If you work there as a legal immigrant for less than 5 years, you can apply for a refund.
Pretty amazing SSC still not making it with increased taxes, increased retirement ages, and bunch of extra free money that won't (LOL) have to (LOL) be paid out (LOL).
Even that won't save the biggest ponzi ever.
There are lot of assumptions that don't pan out.
-Many illegals are paid under the table.
-They don't make that much.
-The estimates are guesses.
"Without the Free Money coming in from illegal aliens SS would look much different than we "think" it does."
Riiiiiggghhhttt... and without all those jobs I used to have (17 at last count), which were offshored, and all that time lost spent seeking employment in between getting laid off from those offshored jobs, SS would unfrigging-believably-colossal.
Excellent points, goldfish1.
why do you people worry
SS will be handed over to the fed which they will keep on their balance sheets until they can sell them
problem solved!!!!
True, but there are a large number of bogus SS# known to the feds. They keep appearing over and over, thanks to the weasels who sell them to the immigrants. I suspect one could get a good start at a statistical analysis just using all the obviously fake numbers as a starting point.
When I sent Revenue Canada the form with a new employee's Social Insurance number, I got a warning letter back very fast if that number was wrong. Do we do that in the US? I don't think so.
They actually did, for a little while, under the Clinton Administration, but it was halted in the Bush administration and I'm not aware if it has ever been restarted?
Depends on what you consider 'very fast'. It takes 4-6 weeks to hear back about incorrect SSN's in my experience.