U.S.-Mexico Pact Revealed: Billions to Non-citizens
WASHINGTON -- As a result of lawsuits, the U.S. government released this week the actual U.S.-Mexico Social Security Totalization Agreement, an understanding signed between the Bush administration and the Mexican government in 2004 that would funnel billions of Social Security funds to Mexican citizens.
TREA Senior Citizens League, a Washington-based nonpartisan seniors group, announced this week that after Freedom of Information Act lawsuits it filed against the government, it had received the secret agreement document.
Brad Phillips, a spokesperson for TREA, told NewsMax that the language in the agreement "raises more questions than it answers — such as what is the cost and who is going to pay."
The GAO has already warned that as a result of this agreement, the number of unauthorized Mexican workers and family members eligible for social security benefits will likely increase.
The Dreaded Loophole
TREA and other watchdog groups were hopeful that the agreement would directly address, and perhaps even moot, the hot-button issue of illegal immigrants at some point claiming U.S. Social Security benefits.
"A law called the Social Security Protection Act of 2004 forbids illegal immigrants from claiming Social Security benefits — but a loophole exists," Phillips explained.
"If an immigrant gains what's called a valid ‘work-authorized' Social Security number at some point, then he or she could eventually file a claim for benefits. The government would use all earnings to calculate the retirement benefit — even earnings while working illegally," Phillips added.
The U.S. commissioner of Social Security signed the agreement with the director general of the Mexican Social Security Institute on June 29, 2004. TREA has fought to make it public for over three and a half years, according to a press release from the organization.
In the meantime, the agreement has been slowly making its way through mandated reviews by the State Department and the White House. Once the White House submits it to Congress, lawmakers will have 60 legislative days to review it.
Either chamber may vote to pass a Resolution of Disapproval of the agreement — or it will take effect automatically at the end of the 60-day period. Furthermore, the Mexican Senate must affirmatively approve the totalization agreement.
In general, totalization agreements are between the United States and other countries to coordinate their respective Social Security programs. For instance, such agreements typically work to eliminate the need to pay Social Security taxes in both countries — when companies in one country send workers to the other country. Also they are crafted to protect benefit eligibility for workers who split their working careers between the two countries.
According to TREA, if an illegal worker working in the United States today gets a "work authorized" Social Security number — through guest-worker immigration legislation, the Totalization Agreement, or perhaps just over time — that worker could eventually apply for Social Security benefits once the worker has met eligibility requirements.
For example, say TREA officials, a worker who turns 62 after 1990 generally needs 40 calendar quarters of coverage to receive retirement benefits. Under Totalization Agreements, workers are allowed to combine earnings from both countries in order to qualify for benefits.
The agreement with Mexico, like other Totalization Agreements, would allow workers to qualify with just six quarters, or 18 months, of U.S. coverage.
In addition, advised TREA, that worker could be able to claim credits for work performed while in the United States illegally. The SSA maintains an "earnings suspense file," which tracks wages that cannot be posted to individual workers' records because there is no match for a name and Social Security number.
Once an immigrant gains access to a work authorized Social Security number — whether a legal citizen or not — wages earned while in the United States unlawfully could be reinstated to the worker's new Social Security account, warned TREA officers.
Such writing-on-the-wall concerns are not just being sounded by TREA, however.
Warnings by the GAO
In a recent special report to Congress, the GAO voiced a number of issues latent in the agreement:
SSA has no written policies or procedures it follows when entering into Totalization Agreements, and the actions it took to assess the integrity and compatibility of Mexico's Social Security system were limited and neither transparent nor well-documented.
SSA provided no information showing that it assessed the reliability of Mexican earnings data and the internal controls used to ensure the integrity of information that SSA will rely on to pay Social Security benefits.
The proposed agreement will likely increase the number of unauthorized Mexican workers and family members eligible for Social Security benefits. Mexican workers who ordinarily could not receive Social Security retirement benefits because they lack the required 40 coverage credits for U.S. earnings could qualify for partial Social Security benefits with as few as 6 coverage credits.
Under the proposed agreement, more family members of covered Mexican workers would become newly entitled because the agreements usually waive rules that prevent payments to non-citizens' dependents and survivors living outside the U.S.
The cost of such an agreement is highly uncertain. In March 2003, the Office of the Chief Actuary estimated that the cost of the Mexican agreement would be $78 million in the first year and would grow to $650 million (in constant 2002 dollars) in 2050. The actuarial cost estimate assumes the initial number of newly eligible Mexican beneficiaries is equivalent to the 50,000 beneficiaries living in Mexico today and would grow six-fold over time.
This proxy figure (above) does not directly consider the estimated millions of current and former unauthorized workers and family members from Mexico and appears small in comparison with those estimates. The estimate also inherently assumes that the behavior of Mexican citizens would not change and does not recognize that an agreement would create an additional incentive for unauthorized workers to enter the United States to work and maintain documentation to claim their earnings under a false identity.
An analysis performed at the GAO's request shows that a measurable impact would occur with an increase of more than 25 percent in the estimate of initial, new beneficiaries. For prior agreements, error rates associated with estimating the expected number of new beneficiaries have frequently exceeded 25 percent, even in cases where uncertainties about the number of unauthorized workers were less prevalent.
Because of the significant number of unauthorized Mexican workers in the United States, the estimated cost of the proposed totalization agreement is even more uncertain than in prior agreements.
Playing by the Rules
"The Social Security Administration itself warns that Social Security is within decades of bankruptcy — yet, they seem to have no problem making agreements that hasten its demise," said Ralph McCutchen, chairman of TREA.
"Our 1.2 million elderly members didn't play by the rules and sacrifice through difficult times so we could fund millions of workers who crossed the border and decided to work here illegally," McCutchen added.
TREA officers also warn that Mexico's retirement system is radically different than that of other participating countries.
For example, only 40 percent of non-government workers participate in Mexico's system, whereas 96 percent of America's non-government workers do. In addition, the U.S. system is progressive, meaning lower wage earners get back much more than they put in; in Mexico, workers get back only what they put in, plus accrued interest.
Uncovering the Ugly Truth
"I applaud the persistent efforts of TREA Senior Citizens League to try to get documents from the U.S. government about the U.S.-Mexico Social Security Totalization Agreement," said Rep. Walter Jones, R-N.C. "The American people are finally beginning to get some of the information regarding this Agreement that they have been seeking for so long."
According to the Social Security Administration, the Social Security Trust Fund will begin paying out more than it is taking in by 2017, and will be exhausted by the year 2040.
Phillips noted that [before the emergence of the agreement] "the Administration always called it ludicrous to suggest that illegal immigrants could get their hands on our Social Security."
"We not hearing that anymore," Phillips lamented.
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