This week on Facing the Future, we speak with nationally known demographer Dr. Ken Johnson of the Carsey School of Public Policy at the University of New Hampshire about his latest research. Among other findings, Johnson says fertility rates in the United States have been on a steady decline since 2007, even though they were up slightly in 2021. Declining birth rates have enormous implications for both future labor force and economic growth, as well as the federal budget, especially Social Security and Medicare. Joining us for that conversation was Concord Coalition chief economist Steve Robinson who has also researched how changing demographics are impacting the federal budget and our national debt.
Later in the program, Robinson and Concord Coalition policy director Tori Gorman discussed the implications of the latest population numbers, and we also took a look at the latest inflation numbers which actually went up slightly in August after July numbers showed a decline in the year-to-year inflation figure. Congress also has some serious work ahead of it if lawmakers want to prevent a federal government shutdown at the end of September, and we discussed the Congressional agenda and some of the political dynamics in the House and Senate in the next couple of weeks that will determine if lawmakers can make a deal.
When looking at the U.S. population, Dr. Ken Johnson says the United States has seen a dramatic decline in fertility rates among women across the board in terms of racial, ethnic, and socioeconomic backgrounds. He said the decline is part of a 14 year trend that can be traced back to the Great Recession of 2008.
“Many of us thought that after the recession ended and economic growth resumed that the birth rate would turn up, but that hasn’t happened,” said Johnson. “In 2021 there were about 3.65 million births in the United States; that compares to about 4.3 million in 2007. So about 600,000 fewer births, even though we have about 9% more women in their prime child bearing years. The birthrates have declined significantly during that period. I calculated that if the birthrates of 2007 - which were not terribly high, compared to the baby boom for example - had they continued through 2021, we would have had about 8.6 million more babies born during that 14 years than we actually have had.”
Among Johnson’s findings: 26 out of 50 states last year had more deaths than they had births for the entire year- a phenomenon called natural decrease. The previous record was five states in any one given year. Johnson says one bright spot in the data is that births by teenage mothers have declined dramatically. Women in their 20s are also having significantly fewer children, and Johnson says immigration is an important factor.
“Immigrants in general tend to be younger, either in their late teens or early 20s, so they bring with them not just themselves, but the potential for children. And that’s been going on in American history since we’ve all been here,” said Johnson. “Immigration right now is at a significant low. Traditionally, immigrant women have tended to have more children than native born women. The difference between the two birth rates is considerably lower now than it was when the Irish were immigrating to the United States in the last century. If there were to be more immigration to the United States, there would be more women in their child bearing years. That is a big unknown.”
These figures have enormous implications for our labor force, the entire economy, our federal budget, and especially social safety net programs for seniors such as Social Security and Medicare. The simple math shows you that fewer babies born translates into a smaller working age population to pay for a sharply growing number of seniors transitioning out of the workforce and receiving Social Security and Medicare benefits. This can have an exponential impact on spending, which in turn will require higher taxes, a reduction in other spending or a ballooning debt-to-GDP ratio. Demographic changes also mean a smaller workforce and less economic output. Concord policy director Tori Gorman says aside from increased immigration, there is more the federal government can do to incentivize having more children.
“We need to look at making it easier for women to work as a parent - as a mother. So family leave policies, making childcare better and more affordable to help women be in the workforce and be a parent,” said Gorman. “There are a lot of women that are waiting until they are financially stable to have children and can possibly stay at home with their children. When that happens, your family size is smaller. Making college more affordable will also help family sizes. In my own personal experience, my husband and I decided to have two children because we knew we couldn’t put three or four through college. We wanted them to get through college without debt, so that was the decision we made about the size of our family.”
Gorman says there is currently bipartisan legislation to reduce the financial burden on families raising children. But Concord chief economist Steve Robinson says generous European government family policies have not had a substantial impact on fertility rates, which are down worldwide. Robinson was also skeptical about claims made by some economists and pundits supportive of the Biden Administration and Democrats in Congress that inflation had peaked and was finally on its way down. Turns out Steve was right. Inflation rose slightly by 0.1% in August. Robinson blames a built-in delay in counting higher real estate prices.
“We changed the way we count housing in the inflation index back in the 1980s from the price of housing to the rental equivalent of housing - what it would cost you if you rented your own home,” said Robinson. “When I went back and looked at this, I realized that when home prices peaked, which are not in the CPI, there was a delay of about 12-18 months and then those higher prices showed up in the rental equivalent measure which is in the CPI. When I looked back at what housing prices were doing in the last year, and compared that to what the rental equivalent measure was, it seemed to me that those higher prices had not shown up yet in the rental equivalent. I think that’s what we saw this month. The shelter component of CPI was up considerably.”
Where inflation goes from here is anyone’s guess, but the markets did not react well to this week’s CPI report.
Hear more on Facing the Future. I host the program each week on WKXL in Concord N.H., and it is also available via podcast. Join my guests and me as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.