July 19, 2006

Illegal Dirty Little Secrets about Social Security

There are two dirty little secrets behind the debate over illegal aliens that even the advocates of securing the borders first have failed to discuss. The first secret is that the estimated 12 to 20 million aliens living and working illegally in the United States have to commit identity theft to secure employment. The second secret is that, without illegals' payroll tax contributions, filed under stolen or fraudulent Social Security numbers, the Social Security system would collapse years earlier than estimated.

Hard to believe, here are the facts.

The birth of the connection between illegal aliens, identity theft and the Social Security system began in 1986. That year Congress passed the Immigration Reform and Control Act (IRCA), which required workers to show a Social Security card to obtain employment. IRCA also made it illegal to knowingly hire undocumented workers. The consequence of IRCA is that millions of stolen or fraudulent Social Security numbers have been used in the past 20 years. IRCA did nothing to curb illegal aliens from crossing our borders to find work, nor to end employers' demand for their labor.

A 2006 General Accounting Office (GAO) study reports that the Social Security Administration (SSA) maintains a database called the Earnings Suspense File (ESF) to track fraudulent use of Social Security numbers. When an employer files payroll taxes for an employee, and the employee's name and Social Security number do not match or the number does not exist in Social Security's records, the unmatched or fraudulent number is recorded in the ESF. Though estimates of illegal aliens present in the U.S. range from 12 million to 20 million, as of November 2004 the ESF contained over 246 million records.

The GAO also reports that 43 percent of employers that file payroll taxes on stolen or fraudulent Social Security numbers represent just five industries. Further, 8,900 employers, which is 0.2 percent of all employers with reports in the ESF database, have submitted over 30 percent of the ESF's total records.

According to a 2005 report by MSNBC technology correspondent Bob Sullivan, the ESF represents $420 billion in payroll tax contributions. Illegal aliens who work under stolen or fraudulent Social Security numbers will never receive Social Security benefits, so the hundreds of billions of dollars they contribute represent what Sullivan rightly calls "essentially free money to the system." Eduardo Porter reported in the New York Times that payroll taxes from illegal aliens represent approximately 10 percent of the so-called Social Security surplus.

Enforcement of labor and immigration law is further hamstrung by a Byzantine bureaucratic nightmare constructed by Congress in an effort ironically designed to protect privacy.  Under current law, the SSA is barred from sharing information in the EFS with the Department of Homeland Security (DHS) because it contains taxpayer records. Congress has enabled massive invasion of our privacy by encouraging identity theft and not allowing DHS to effectively investigate employers and employees suspected of labor and immigration law infractions. Even though the EFS contains 246 million records of stolen or fraudulent Social Security numbers, in 2004 DHS only initiated 5,400 investigations of employers or workers suspected of breaking labor or immigration laws.

Illegal aliens represent cheap labor for employers and billions of dollars to the government to temporarily prop up the failing Social Security system. Congress is not only doing nothing to restructure Social Security, but its wink-and-nod policy toward illegal aliens and their employers encourages massive identity theft and ruined financial standing for millions of Americans.

 

Common sense solutions exist, but the political will to enact them is missing. First, Congress must allow DHS access to the ESF files. The ESF files would literally provide DHS the roadmap to employers and workers guilty of breaking labor and immigration laws. It’s not just law enforcement. It’s a matter of national security.

Second, Congress must increase and enforce penalties on employers of illegal aliens. Most employers want to obey the law, but the laws have to be enforced.

Third, we must secure our borders. That does not mean sending a few thousand members of the National Guard to assist border patrol agents. We must also secure the most porous areas of the border with whatever means necessary, or legal American citizens will continue to fall prey to massive identity theft.

Illegal aliens present a challenge to national security, and a false sense of temporary security to our failing Social Security system. Failure to fix the problem just makes the problem worse.

That’s not a secret. It’s common sense.