Illegal but Paid?: The question of Social Security for Mexicans.

'U.S. Social Security May Reach to Mexico," blared a Washington Post headline last month: A U.S.-Mexico agreement would send hundreds of millions of dollars in Social Security benefits annually to roughly 37,000 Mexican workers. But this and other news reports actually dramatically underestimated the true scope of the accord. If top officials at the State Department and the Social Security Administration have their way, up to $345 billion could be siphoned from the Social Security "trust fund" over the next two decades -- mostly to people who worked in the U.S. illegally.

The media reports quoted a relatively low cost because the Mexico pact is supposedly modeled after deals the U.S. already has with 20 other countries, mostly in Europe, known as Totalization Agreements. "Totalization" is government-speak for combining the taxes paid into America's and a foreign country's respective social-security systems -- thus allowing people who split their careers between two countries to get a harmonized retirement benefit from the two governments. But the Mexico accord is different in one key respect: It makes illegals from Mexico eligible for Social Security benefits, which will make the cost skyrocket.

Today, people who worked in the U.S. illegally can receive Social Security benefits for that period only if they become citizens or permanent legal residents. The new agreement would lift this requirement for Mexican illegals. Though not denying that this is the case, an SSA press officer cautions that "discussions are still in the preliminary stages." But according to an internal SSA memo obtained by NR, illegal aliens who never become legalized would be covered under the pact: "Mexican nationals working illegally in the U.S. can currently become entitled to benefits . . . [The deal] would include this population." Government sources confirm that the pact will, in fact, allow illegal aliens to qualify for Social Security without first obtaining legal residence in the U.S.

There are between 7 and 11 million illegals in the U.S. -- about half of whom are from Mexico. Allowing them to receive Social Security benefits would dramatically inflate the number of new beneficiaries, and cause the Social Security trust fund to hemorrhage hundreds of billions of dollars. The cost would be run up not just by normal benefit payments, but by increased fraud in a system already susceptible to widespread malfeasance. Because illegals, by necessity, must give employers phony Social Security numbers (SSNs), SSA allows people to claim benefits for work histories with different SSNs from the one presently used by the now-legal immigrant. This means that if someone named Fred Jones walks into a Social Security office with a green card in his name and a W-2 for someone named Joe Smith, the SSA employee would likely allow Mr. Jones to claim benefits based on the work history of "Joe Smith." But according to government investigators, SSA does not track which work histories have been claimed for benefits -- so someone could recycle W-2s or pay stubs used by someone else the week before, and SSA would be none the wiser. SSA only checks to make sure two different people aren't using the same current number while receiving benefits, not which numbers were used to claim the benefits.

One of the biggest areas of fraud is disability benefits. If someone works, on average, six months per year, he can -- upon becoming disabled -- qualify for benefits equal to up to two-thirds or more of his average salary. Law firms and others out to make a quick buck place ads, particularly in towns near the Mexican border, urging people to seek Social Security disability benefits. Along I-10 in El Paso, drivers can spot both English- and Spanish-language billboards promising to help the "disabled"; for people who heed the call of those billboards, the payout can be generous.

If the Totalization Agreement is approved, there will be a strong incentive for disability-insurance fraud. If a 24-year-old Mexican national who has worked illegally in the U.S. for three years is able to present documents from a friendly doctor and either a W-2 or pay stubs that indicate $12,000 in annual earnings, he will be eligible for the following: nearly $8,000 per year in disability income (adjusted for inflation), until age 65, at which point he would receive the same amount as retirement pay. (If he manages to get an under-the-table job in the U.S. or Mexico, he will be able to double-dip for a second income stream.) If he is survived by his wife or dependents, his family would be able to receive up to almost $12,000 annually. If he dies at 60, and his widow lives to 85, U.S. taxpayers will be on the hook for nearly a half-million dollars. That's for one worker brought into Social Security by the pact.

Since 1990, the amount of Social Security taxes paid by illegal aliens has been increasing rapidly. Nearly $300 billion has been paid under bogus Social Security numbers. The best indicator of how much the illegals will receive is how much they have paid in; but, because of the progressive nature of Social Security, the illegals stand to get back significantly more money than the taxes they paid. This would wreak havoc on the effort to reform Social Security. Notes the Heritage Foundation's Daniel Mitchell: "Adding millions of new beneficiaries without any structural reform of the system is, at best, politically and economically questionable."

Congressional and SSA officials who spoke with NR on condition of anonymity scoffed at earlier press accounts citing costs in the hundreds of millions of dollars, and predicted instead an immediate total annual cost in the billions. SSA does not keep track of how much money currently goes to Mexican nationals (legal or illegal immigrants) living in the U.S., and there are no estimates of the number of illegals who currently get disability payments. Illegals covered under the Totalization Agreement would have to wait till age 62 for retirement benefits, or till the passing of an immediate family member for survivors' benefits -- but there would be no such waiting period for disability benefits. If the requirement for a green card or citizenship is removed, it will be easier to cheat the system -- and the level of disability fraud could rise dramatically, causing a cost tsunami almost immediately.

The Totalization Agreement with Mexico could be enacted before year's end. Once SSA gives its approval to the fine print, the deal will need State's endorsement; after that, the White House -- acting on State's recommendation -- would likely rubber-stamp it (which is the standard operating procedure on most international accords) and send it to Congress for approval. According to an internal State Department memo, "the negotiations and approval processes could result in implementation as early as October 1, 2003." An internal SSA memo reflects similar optimism: "Preliminary discussions between SSA and [Mexican officials] have gone extremely well." So well, the memo continues, that "SSA is hopeful that a final Agreement text could be reached and ready for signature by the Commissioner [of SSA] in February, 2003." Negotiations, which are overseen and guided by State but carried out on the ground by SSA officials, may already be completed, according to a senior congressional staffer: "The deal is done; the announcement is all that's left."

A Totalization Agreement with Mexico could, in fact, be a good deal for the U.S. -- but only if structured properly. If illegal aliens are not made eligible for benefits -- in other words, if the deal with Mexico were concluded on the same terms we have with 20 other nations -- then the cost of the agreement would most likely be as reasonable as the low-range estimates reported last month. And the upshot would be that Mexican citizens who play by the rules could take full advantage of Social Security taxes paid both here and south of the border. But as things stand right now, it is officials at State and SSA who are not playing by the rules -- and Congress and the White House should not play along.