Totalization is a Bad Idea

January 8,  2007 
 
Through a Freedom of Information Act Request, a private group recently obtained a copy of a 2004 agreement between the United States and Mexico that will allow hundreds of thousands of noncitizens to receive Social Security benefits. 

The agreement creates a so-called “totalization” plan between the two nations.  Totalization is nothing new. The first such agreements were made in the late 1970s between the United States and several foreign governments simply to make sure American citizens living abroad did not suffer from double taxation with respect to Social Security taxes.  From there, however, totalization agreements have become vehicles for noncitizens to become eligible for U.S. Social Security benefits.  The new agreement with Mexico would make an estimated 160,000 Mexican citizens eligible in the next five years.

Ultimately, the bill for Mexicans working legally in the U.S. could reach one billion dollars by 2050, when the estimated Mexican beneficiaries could reach 300,000. Worse still, an estimated five million Mexicans working illegally in the United States could be eligible for the program. According to press reports, a provision in the Social Security Act allows illegal immigrants to receive Social Security benefits if the United States and another country have a totalization agreement.

It’s important to note that Congress, like the American people, heretofore had not seen this totalization agreement.  This decision to expand our single largest entitlement program was made with no input from the legislative branch of government.  If the president signs it, Congress will have to affirmatively act to override him and in essence veto the agreement.  This is the opposite of how it’s supposed to work.

There are obvious reasons to oppose a Social Security totalization agreement with Mexico.  First, our Social Security system already faces trillions of dollars in future shortages as the Baby Boomer generation retires and fewer young workers pay into the system.  Adding hundreds of thousand of noncitizens to the Social Security rolls can only hasten the day of reckoning.

Second, Social Security never was intended to serve as an individual foreign aid program for noncitizens abroad.  Remember, there is no real Social Security trust fund, and the distinction between income taxes and payroll taxes is entirely artificial.  The Social Security contributions made by noncitizens are spent immediately as general revenues.  So while it’s unfortunate that some are forced to pay into a system from which they might never receive a penny, the same can be said of younger American citizens.  If noncitizens wish to obtain Social Security benefits, or any other U.S. government entitlements, they should seek to become U.S. citizens.

Also, totalization agreements allow noncitizens to quality for Social Security benefits by working in the U.S. as little as 18 months.  A Mexican citizen could work here for only a year and a half, return to Mexico, and retire with full U.S. benefits.  This is grossly unfair to Americans who must work more quarters even to qualify for benefits-- especially younger people who face the possibility that there may be nothing left when it is their turn to retire.

Those in favor of sending U.S. Social Security benefits to Mexican citizens argue that crushing poverty in Mexico demands some form of U.S. assistance to that country's aged. While poverty in Mexico truly is deplorable and saddening, the fact remains that Congress has no constitutional authority to enact what is essentially another foreign aid program.