Dec. 8, 2014

America's Shrinking

A declining birthrate is going to have a big economic impact.

Days after headlines captured America’s slide from its status as the world’s number one economy to number two behind China, a Centers for Disease Control and Prevention (CDC) report spun off a few articles about America’s declining birthrate. Let’s just say if you’re an employed taxpayer, you’d best grab your wallet.

While many in the ranks of high-brow policy don’t want to engage in the discussion of what many deem as so-called cultural “wedge” issues such as abortion, fertility and population, it’s all about the math. And that math has implications in tax policy, foreign policy, health care policy – you name it. The reality remains that if there are fewer babies, there are fewer future workers and consumers.

Let’s look at the math as it relates to our standing economically.

If our population does not replace itself, the labor market – and with it the tax base – will shrink, all while government spending rages on.

What does that CDC report say?

“Childbearing is on the decline in the United States overall and among women under age 30 and women in each of the largest race and Hispanic origin groups.” In 2013, the birthrate his a near-low of 1.86 live births per female.

The big deal?

A birth rate of 2.1 children per childbearing female is necessary just to maintain stasis. The U.S. missed the mark for the first time in 1972, and it has hit “replacement” numbers only twice since then – in 2006 and 2007.

The good news is abortions are down, too. Consistent and intense educational efforts of the pro-life movement through ultrasounds during pregnancy in tandem with state policy efforts to defund “health care” clinics offering abortion on demand has reduced the number of abortions performed.

As for the overall birthrate, the contributing factors have been the economic pressures of the 2007 recession either delaying or cancelling family plans, a more educated population that delays the birth of children, and other things such as gender disorientation pathology, access to long-acting birth control, and, candidly, selfishness that refuses to include others, such as children, in a myopic definition of success.

In light of this consistent, documented population decline, has our government spending seen appropriate adjustment? Has our need for military might changed? Are the IOUs repaid in the “Social Security Lockbox” to fund the current retirees? No, no and no.

Still not convinced this is a big deal? Let’s look across the pond at Europe. The nations that currently make up the European Union (E-28) tracked their fertility rate at 1.45 live births per women in 2002 with only a slight increase to 1.58 births in 2012, as published in a May 2014 European Commission report. Clearly, that’s far below the demographically necessary rate of 2.1 for generational replacement.

The nations of the European Union continue to struggle with government spending that averages 49% of gross domestic product, with its member nations hovering around a 10% unemployment rate.

The National Bureau of Economic Research says it plainly in its online report, “The Cost of Low Fertility in Europe”: “In the long run, low rates of fertility are associated with diminished economic growth. … If fertility rates stay at current levels … Europe’s share of working-age people will fall from about 70 percent today to somewhere between 50 and 55 percent in the long run … a 25 percent drop in the number of workers per capita.”

Clearly, changes in population cause disruption in the demand for services, produced goods and the volume of money the populace spends in any given economy.

Here in America, this decline is seen most obviously in a single government program, which happens to be the largest federal expenditure after surpassing defense spending back in 1993 – Social Security.

When the first benefits were paid in the Social Security retirement program in 1940, there were 42 workers paying into the system for each retiree receiving benefits. As of April 2014, that number is 2.8 workers per beneficiary.

Furthermore, the U.S. Treasury has borrowed money from the Social Security Trust Fund and, according to the Trustee’s 2014 report, owes $2.8 trillion as of December 2013. According to the same report, due to declining birthrates and increased life expectancy, the trust fund will be exhausted in 2033, just 19 years from now. The Heritage Foundation, meanwhile, says it could be insolvent in just 10 years.

If America continues pursuing policies that transfer wealth from workers to non-workers, allows mass immigration of a new underclass that will only increase the pressure on government entitlement services, and refuses to recognize there must absolutely be a reduction in spending, we will only remember the good old days when our economy once led the world.

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