According to a new study, a crackdown on illegal immigration could speed up Social Security cuts, raising concerns for millions of Americans who rely on retirement benefits. A new analysis from the Penn-Wharton Budget Model (PWBM) indicates that the Social Security trust fund might run dry earlier than the projected date if stricter immigration policies are enacted.
The trust fund is already projected to run dry by 2034, but with stricter immigration policies, it could deplete earlier. This is because unauthorized immigrants contribute significantly to Social Security. In 2024, they paid an estimated $24 billion. This money supports the program, yet these workers do not receive benefits.
Therefore, if large-scale deportations occur following stricter immigration policies, there will be a reduction in tax revenue at a time when Social Security is already facing financial difficulties. This will lead to automatic benefit cuts of almost 19% earlier than the projected 2034.
Deportation Could Cut Billions From the System
According to PWBM, there are three scenarios involved in the deportation of undocumented immigrants, and all of them will result in hundreds of billions of dollars in lost funding for Social Security over the next 30 years.
- The first scenario involves the deportation of 10% of undocumented immigrants each year for four years, then returning to normal immigration levels. This will lead to a loss of $73 billion over 10 years.
- The second scenario involves the deportation of 10% each year for 10 years, which will result in a $133 billion loss in revenue in 10 years and $656 billion in 30 years.
- The third and final scenario involves the deportation of all undocumented immigrants within 10 years, which will effectively eliminate illegal immigration. This will lead to a $884 billion loss over a span of 30 years.
These reductions will undoubtedly speed up Social Security’s insolvency process by about six months.
Your Taxes Could Go Up to Fill the Gap
To recover the loss of the above revenues following the deportation of undocumented immigrants, the government will have to make up for the shortage. According to PWBM, this could mean raising payroll taxes or applying other means to collect more money from American workers.
The PWBM study also estimates that the median U.S. household would have to pay an additional $180 in taxes in 2025 to offset the lost Social Security revenue. This amount is expected to increase by about 3.5% each year thereafter.
Legal Immigration Could Help the Economy
While the Trump Administration is pushing for stricter immigration policies, some economists advise that the opposite approach could boost the U.S. economy and offset the Social Security shortage.
Unleash Prosperity, a conservative group, says that legal immigrants play a vital role in economic growth, entrepreneurship, and innovation. It adds that half or 47% of all Fortune 500 companies were founded by immigrants or their children.
Immigrants are also more likely to earn advanced degrees, start businesses, and enter the workforce during their most productive years. This means that immigrants strengthen the economy and provide long-term tax support to programs like Social Security.
Immigration May Be the Key to Long-Term Stability
Considering that the working population in the U.S. is ageing and birthrates are falling, a younger and motivated workforce could be very important. Experts believe that immigration could offer this much-needed workforce, terming it a “demographic safety valve.”
Unleash Prosperity’s report concludes that a “generous and well-targeted legal immigration system that brings to the U.S. the talent and the work ethic that America needs is more important than ever, given the ageing of our native-born population. The U.S. is the one nation in the world with this demographic safety valve.”
Conclusion
Enacting stricter immigration policies, leading to a large-scale crackdown on illegal immigrants, could hurt Social Security because it would cut a substantial amount of revenue. This would speed up the insolvency of the Social Security trust fund, leading to cuts to Social Security monthly checks. As lawmakers explore options to save the trust fund, it is essential to carefully weigh the impact that immigration policies could have on the future of Social Security.