Two Reports from CBO

Bruce Krasting's picture
The CBO published two reports, The Role of immigrants in the U.S. Labor Market and Social Security Disability Insurance: Participation Trends and Their Fiscal Implications. Nothing really knew in these reports but I found them interesting.

The piece on immigration glosses over the issue of illegal and legal
immigration. The data used comes from census and census has a policy:

They (respondents) are not asked about their legal immigration status.

The Department of Homeland Security
has a number of 10.8mm illegal immigrants currently. I doubt that that
DHS has a real handle on this number. They are just guessing. But
absent something better it is a decent number to use. Consider this
from CBO

I will go out on a limb and say that the number of people here illegally
from the group “Canada/Europe” is statistically small. Therefore the 11
million illegal aliens come from either Mexico/Central America or Asia.
Fully 50% of the people in that group. I have no statistical evidence
to support it, but it is my belief that the % from south of the border
is much larger than the % of Asians. For the purpose of coming up with a
number I use 60-40. I think that is understating the percentage. That
would imply there are 5mm illegal Mexicans in the US work force.

Before you race off to the comment section to rip me up for that
conclusion, read the CBO report. This is the CBO/DHS numbers, not mine.
15.5% of our work force is made up of non-residents. 7% of our workforce
is comprised of illegal aliens.

-The CBO marks the report “An Update”. I don’t believe that anything in D.C. is a coincidence. To me it is impossible to look at this report and not conclude, “Something is very wrong, and Mexico is central to the issue”.
The President is suing Arizona over its laws. ABC is doing a big
special. This topic is coming front and center. And the CBO releases a
report that highlights just how big this problem is? Nice timing Mr.
Elmendorf. Thank goodness we don’t have to worry about politics getting
in the way of analysis at the CBO.

-There was a time in our country when we needed immigration to meet
demand for labor and fuel economic growth. Today we have 15 million
unemployed and 24 million foreign workers. That ratio jumps out at you.
It is easy to conclude that the US is going to move in the policy
direction of much more restrictive immigration (legal/illegal). Over a
period of years this probably will be beneficial to the employment
numbers. But it would absolutely kill growth. Japan has had zero
immigration and zero population growth for twenty years. They also have
had zero economic growth. Just another of those signs that point our
future in Japan’s direction.

The other report on the Social Security DI fund is a historical review
of the program and a discussion of the financial status. The DI fund is a
well-known shipwreck waiting to happen. The CBO says it crashes in 2018
based on very rosy economic assumptions. I think the actual sinking of
the DI will be in 2016. Any shortfalls have to be eaten by the SS
retirement fund. So this needs to be fixed or the retirees have to take a
hit.

I read the report as a plea for help. DI paid out $120b in 2009.
Nearly 1% of GDP. There are 10 million people getting benefits. It is a
big deal and a fix must be found. It must be found quickly. It can’t
wait until 2018. It will be impossible to fix it then, we have to do
something now.
Yada, yada.

Here is a graph of expenditures. Note it doubled from $60b in 2000 to $120b in 2009. A 100% increase in just ten years.

What is the cause of this explosive trend in disability payments?
According to the CBO the answer is simple. Women are at fault on this
one.

The
increased number of women who are employed have resulted in more
disabled beneficiaries and a rise in outlays for the DI program.

For the heck of it I looked up the 2000 SSTF projections for the DI
fund. Their forecast was correct to a fraction. In other words we have
know that the DI fund would blowup for at least the last ten years.
Nothing was done about it. It has been politically too easy to just push
this type of problem off to another decade. Unfortunately we don’t have
another decade left to deal with these mega problems. They are all just
a few years away.