Another issue we’ll address at the big conference at Berry College this Thursday and Friday is the erosion or even implosion of our health care and entitlement systems.
According to Big Think’s Mr. Daylight Atheism, birth control will save the world. He writes as if it were 1962 and all that Malthusian stuff about the population explosion were plausible. But the truth is that the “advanced” world from the United States to Europe to Japan is actually plagued by a “birth dearth.” The birth rate has dropped below the rate of replacement, and that fact seems to have made welfare or social insurance states unsustainable over the long term.
The demographic issue is not a crisis—although it’s a big problem—in our country because of the reproductive behavior of observant religious believers, which, for now, is causing our birth rate to be hovering just above the rate of replacement. In most of Europe, Japan, and so forth, that rate is well below replacement, no doubt for many reasons. But one is the dearth of observant religious believers.
Here’s a taste of what James Capretta is going to say at Berry on Thursday at 7. (I can’t link his remarks—that would spoil the surprise):
The social welfare programs that were erected in the postwar era were premised on assumptions of robust fertility rates, perpetually growing workforces, and never-ending economic growth.
Indeed, Paul Samuelson, one of the intellectual fathers of pay-as-you-go pension systems, had this to say about them in 1967:
The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in—exceed his payments by more than ten times (or five times counting employer payments)!
How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population. More important, with real income going up at 3% per year, the taxable base on which benefits rest is always much greater than the taxes paid historically by the generation now retired.
. . . A growing nation is the greatest Ponzi game ever contrived.
Unfortunately, almost from the moment Samuelson uttered that statement, the population of the industrialized West has been rapidly aging, birthrates have been anemic, workforces are stagnant or declining, and global economic competition has suppressed the wage growth of the West’s middle class.
The United States isn’t exempt from these problems. The Baby-Boom generation is on the verge of retirement, which will swell the ranks of enrollees in entitlement programs. The U.S. workforce is still growing, but not nearly as rapidly as the population age 65 and older. And the middle class has gone through a long period of stagnant wage growth.
Well, here’s one more taste:
But there is substantial evidence that a particular relationship between public pension schemes and fertility does indeed exist. Foreign as it may sound to the modern ear, a motivation for having children in earlier times was economic security in old age. As parents became frail and less productive, it was expected that one or more of their adult children would take care of them. Married couples thus “invested” in numerous children, in part to ensure the next generation would have the economic capacity to provide for them in their final years. With state-run Social Security schemes, the government has largely absorbed this family responsibility. Married couples have a much diminished economic incentive to have children because now they are counting on—and paying for—government-based old-age support.
Capretta is certainly right that our entitlement programs are in trouble because we have more and more old people and fewer and fewer young ones. The ratio between productive and unproductive Americans is shifting in the direction of the latter, even as we put more of a premium on being productive than ever.
That’s why traditional pension plans—based on defined benefits—have been and are being replaced with defined contribution schemes—such as 401ks. The good news is that there’s more choice for the individual. The bad is that risk is being transferred from the government or the private employer to the individual. Anyone can see that Social Security and Medicare will eventually have to be reformed along those same lines.
I disagree with Capretta—at least in the American case—by not putting so much weight on welfare-state dependency for the declining size of families. He exaggerates the extent to which people have stopped relying on their own children and started relying on the government to provide for their old-age support. People can’t actually live on Social Security alone, after all. And studies show that the Americans differ from the Europeans in still regarding themselves as primarily responsible for their aged parents.
I actually think the primary cause of our “demographic issue” is our creeping and sometimes creepy individualism. Sophisticated people have taken much more responsibility for their individual futures by focusing much more intentionally on personal health and safety. They’re all about prudently avoiding risk factors. So the good news is they’re living longer than ever. We used to think only the good die young, now we think only the stupid and self-indulgent do so.
By thinking of themselves more insistently as individuals, people are thinking of themselves less and less as biological beings to be replaced by children. Their reproductive behavior is less and less that of the social animals Darwin described. They can’t relax enough or be spontaneous enough to have unprotected sex. Why generate replacements when I’m working so hard to stay around for an indefinitely long time?
So the welfare state depended on the “Baby Boom” demographics of the late 1950s and early 1960s, when so many men dropped dead of heart disease in their fifties—having not drawn a dime of Social Security and later Medicare and after having had three or more children to pay for those programs in the future. Those demographic facts made Social Security a Ponzi scheme we could believe in.
The welfare state depended, in other words, on the human behavior displayed for us as insane on TV’s Mad Men.
Here’s a joke I probably tell students too often: I want you to embrace my two-point program for saving Social Security and Medicare. First, start smoking and really stay with it. Second, start having babies right now (although preferably after class). It goes without saying I’m not really pro-smoking, although I do love those babies.
The primary experience of the typical American today is the erosion of the various safety nets on which he or she has come to rely. The last thing, perhaps, we have to worry about is increased dependency on Big Government. The good news is that the so-called road to serfdom never gets to serfdom. The bad news might be that each of us might be more on his or her own than ever.
Our demographic issue—which can only become more pronounced—has wrecked the Progressive dream of a welfare state that humanely envelops us all.