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Mexico and U.S. Retirement Futures

Is it a win-win if American retirees relocate south of the border?

September 20, 2004

Is it a win-win if American retirees relocate south of the border?

Our immediate neighborhood should be an example to the world of how democratic governance, access to U.S. markets and cooperative economic and diplomatic relationships with the United States bring concrete benefits to poor countries willing to play the game.

If the countries in our own immediate region have not yet prospered, what promise do our policies and proposals hold out for other countries, farther from our markets and from our concerns?

If the United States is neither willing nor able to alleviate poverty on its own doorstep, what evidence can we offer the rest of the world that we are working to build a better future? The poor state of our region is a telling and deeply damaging criticism of America's role in the world.

If we cannot help people in Mexico, Jamaica, Colombia and the Dominican Republic live dramatically better lives, what does the Pax Americana offer poor people — that is, the overwhelming majority — in countries like Nigeria, Indonesia, India and Brazil?

In early 2004, President Bush proposed revisiting the conditions of illegal workers in the U.S. economy and developing ways to ease the path for Mexicans and others eager to work in the United States on a temporary basis.

I support these initiatives — though more attention should be paid to the potential impact of these measures on low-income Americans and legal residents.

Nevertheless, like NAFTA, limited guest worker programs will not give Mexico and Caribbean countries the development boost they need. There are limits to how many guest workers and immigrants the United States is willing and able to absorb.

There is another option that would be much more popular in the United States than trade and guest worker agreements — and would ultimately have a more substantial impact on regional prosperity.

In fact, by enlisting the help of the region in solving one of our major social problems, we can help our neighbors make the transition to first world prosperity much more rapidly than even most optimists dare to hope.

More than 100 million U.S. citizens are projected to reach age 65 in the next 30 years. Many of these seniors will not be able to afford the type of retirement they expect — especially as the cost of retirement housing and other services skyrockets due to the rapidly increasing demand.

At the same time, millions of workers from the region enter the United States, often illegally, to work in health care and other industries that serve the elderly.

Why should this migration be only one way? Why not allow — encourage — U.S. citizens to retire where costs are lower and where their consumer spending can encourage local economic development?

The United States (and Canada) should negotiate agreements with interested and willing partners in the region to provide favorable tax, customs and other treatment to encourage American (and Canadian) citizens to retire south of the border — and provide a suitable legal framework for issues like taxation, insurance, property rights and inheritance.

The president would also ask Congress to provide the necessary legislation that would allow qualified and licensed health care facilities to receive reimbursement under Medicare for treating eligible Americans.

These reimbursements would be at some discounted percentage of the payments offered in the United States, allowing the U.S. government to save money from the lower health costs in Mexico and elsewhere.

This kind of development policy is win-win. It is not foreign aid and it will not destroy American jobs. Employment in health services will continue to grow rapidly as the U.S. population ages, even if a substantial number of Americans choose to spend some of their retirement abroad.

Taking advantage of Mexico's lower costs will reduce the Medicare deficits that pose an even greater threat to the long-term fiscal health of the U.S. Treasury than Social Security, while creating literally millions of new jobs and billions of dollars in new investments in the region.

By creating hundreds of thousands of jobs in Mexico and the Caribbean, this policy reduces the pressure for illegal immigration.

Studies estimate that every retired household pumps an estimated $55,000 per year into local U.S. economies.
In addition to spending on consumables and medical care, there would be major investments in housing, infrastructure, recreational and tourism facilities and a whole range of related activities.

Florida was a swamp and Arizona was a desert before waves of retirees transformed those once sleepy economies.

Hosting U.S. retirees is a way for countries like Mexico to create jobs, finance infrastructure development and jump-start lasting economic growth.

This is capitalism at work. It is not foreign aid, it is not an entitlement program. It does not force anybody to do anything.

Americans who do not want to retire in Mexico or Costa Rica can retire in Ohio or Florida. Countries that do not want to participate in this program are free to stay out of it. But those who would like more choices can enjoy them.

A regional retirement initiative like this gives the poor better access to capitalism, rather than trying to shield them from it.
It increases the opportunities for citizens of Mexico and neighboring countries to find new kinds of work and build new kinds of businesses to serve a new and prosperous market.

Like the development of mortgage markets for ordinary working people in developing countries, the promotion of regional retirement is a way to use the potential of new technologies to improve the lives of people in both rich and poor countries.

When I think about the future of U.S. power, I think about the enormous potential of capitalism — its mobility of capital its capacity to abolish distance, its ability to raise human productivity and to facilitate the rise of new industries and new markets — turned to the service of human need.

Excerpted from POWER, TERROR, PEACE & WAR by Walter Russell Mead Copyright (c) 2004 by Walter Russell Mead Published by arrangement with Alfred A. Knopf.