No matter how hard political establishments work on spin control, the truth about their policies often manages to seep out around the ragged edges. So it is with the half-century-old myth about populations and their effect on economic prosperity. Even before World War II, birthrates that had plunged after 1919 began to turn up.
By 1960, when the U.S. fertility rate peaked at 3.6 lifetime births per woman, circumstances were amenable to a cultural counterattack against the growing population. Human guinea pigs in the Third World had already been subjected to the hormonal birth-control pill, financed by Sangerite foundations. That same year, John F. Kennedy became president. In Houston that fall he made headlines by declaring, in so many words, that he would not let “beliefs” influence his decision-making. Of course, the only issue on the public table was reproductive. In other words, Kennedy affirmed that if the culture wanted widespread use of contraception, he would not stand in the way of public implementation. Perhaps he might even push it along.
The Sexual Revolution
Testing on a systemic female contraceptive based on progesterone had, of course, been funded by foundations for several years. The twofold motivation behind systemic biochemical infertility was obvious from the beginning. First, for women in general, it promised a life in which the act of contraception (taking a pill with the morning coffee) was separated from the act of coitus. It was aesthetically more acceptable than barrier methods. Although the “Pill” acted to produce abnormal body activity — either suppression of ovulation or rejected implantation of the fertilized zygote — it did so without any change in outward appearances. In fact, it appeared to “regularize” irregular menstrual periods, even though the egg commonly expelled in the menses was either absent or, when fertilized, could not stay in its nurturing womb.
The second, and more important reason for introducing the anovulant was to prey upon an almost unpenetrated market. Immigrants to the “new world” with so-called “old world” sentiments on the unitive and procreative aspects of marriage, reasonably saw barrier methods and spermicides as unnatural intrusions on the marital union. So the Pill was marketed as a “natural” means of fertility regulation. It appeared to do nothing more than guarantee the menses. What could be wrong with that? Upon introduction of the Pill, in 1962–63, millions of women demanded it.
Simultaneously, with the full-court press coverage that made the Pill seem both benign and morally acceptable, another front was opened: “The Population Bomb” scare, the neo-Malthusian effort to convince the West that human fertility was too high to be sustained indefinitely. Although Stanford biologist Paul Ehrlich did not publish his book of the same title until 1968, he and others were giving warnings in print and on the lecture circuit for years prior to that. The book predicted that widespread reduction in birth rates would lead to an almost utopian world — less poverty, less crime, and more stable families.
The results were inevitable. By 1975, exactly ten years after the Supreme Court legalized contraceptives in Griswold v. Connecticut, the fertility rate had plummeted to a low of 1.7 births per female, half the 1960 rate. This number is, of course, twenty percent below the lowest reasonable replacement rate for any population. The fate of the U.S. was thus pretty well sealed before the U.S. bicentennial. We have been an aging population ever since.
To many, this fact is a nasty little secret. For instance, presidential candidate Al Gore continues to hold overpopulation of people (and autos) as the biggest threat to the planet. But it’s beginning to ooze out of the cracks. Nicholas Eberstadt, for one, in The Public Interest (Autumn, 1997) and also in the Wall Street Journal (10/16/97) pointed out that there is now a significant chance that within forty years the population of the world in general will be in decline, when the gross number of deaths worldwide outnumbers the number of births. Social scientists are beginning to wonder what a world will be like in which few people have a personal experience of having a cousin, aunt or uncle. Economists and demographers are paying attention to the worldwide “Population Implosion” for a single reason — money flows.
Social Insecurity
Eberstadt, and others quite rightly, are worried about the public policy implications of an aging population. In particular, Social Security financing depends on expanding populations. Large numbers of workers are needed for a relatively small number of beneficiaries in any pay-as-you-go financing system. The same also can be said of a privatized Social Security system, as we now are beginning to see.
Economists at Donaldson, Lufkin and Jenerette have for the past several years been preaching that we are headed for a Japan-style collapse in interest rates and equity markets in 5–10 years, as our aging population steers money towards savings and away from consumption. Harry Dent predicts another decade of vigorous stock market growth precisely because the Boomers of America are pushing 50, which is the time most family heads spend the most money. Fewer people means less economic growth. The implication is that after the next ten years, when Boomers begin to retire, first in a trickle, then in a torrent, the economy will turn in the opposite direction.
For a look at our future, we need only look at Japan today, where an aging population is becoming increasingly unable to power its stagnant production. Japan’s stock market was indexing well above 20,000 in the 1980s. Ten years later, it is operating at about 15,000. The Russian economy gives us another example. One of the biggest reasons it has not been able to “take off” is that it has aborted a significant portion of its population potential, and now has negative growth. In coming decades, Russia’s senior population will outweigh youth by a margin of three to one.
We are already beginning to see the effects of population implosion on a micro-scale in the United States. I am constantly amused in my industry (life insurance) at the reasons advanced for the stagnant size of our sales force. Issues like motivation and education are advanced, but demography is entirely ignored. In the 1950s and 60s, life insurance agencies bloomed as large families blossomed in the cities. The nuclear family, with mom and dad and four or five kids is the ideal insurance customer. As the DINKS (dual-income-no-kids) proliferate, they rightly ask, “Why should I have life insurance?” The declining number of nuclear families continue to buy large quantities of life insurance, but with fewer of these in the population, there is simply less demand for the whole-life product. Stories such as this can be found in every industry. We are finally learning the truth that demographics drive economics, and that a culture that ignores the rule “Increase and multiply” is a culture doomed to economic oblivion.
It may be useful to compare the 1960 fertility rate, 3.6 births per female, with extrapolations of the long-term economic effect on Social Security solvency. Both the 1996 and 1997 Social Security Trustees’ Reports agree that there is a linear relationship between female fertility and Social Security solvency.1 The more children American women have, the more solvent the system would be in the next century. Remarkably, the fertility rate needed to eliminate the long-term system deficit at the Trustees’ “intermediate” assumptions is about 3.5 births per female.2 No other controllable action could guarantee the solvency of the system.
The Modest Proposal
If, as the Social Security Trustees have urged in reports ever since the collapse of birth rates, the long-term solvency of Social Security is in great jeopardy, then there is really only one way to fix it actuarially. The fertility rate must be increased back to a number between 3 and 4 children per women, within the framework of a nuclear family; that is, with two parents.
My modest proposal is really quite easy to understand. We would simply introduce a new DRCS (Direct Recognition of Contribution to Solvency) benefits factor into Social Security. Social Security benefits would be calculated as always, by determining qualification for retirement pay by the number of years in the system, and the “primary insurance” (benefit) level by the Social Security wages. The final (new) step in the calculation would be to multiply the determined benefit by a fraction. The denominator of the fraction would be the number of children per women that would restore Social Security solvency; namely, 3.5. The numerator would be the number of children born, adopted, and supported until age 18. Thus, if a couple raised four children, they would get 114% of their customary SSI benefit. If they raised only two, their benefit would be reduced by about 43%. Those who had no children, however, would receive perhaps the minimum SSI benefit, to recognize the fact that they had paid into the system. There would, I suspect, have to be a benefits cap. (Perhaps 7 could be established as the highest value of the numerator.)
The program would be phased in, of course, over a twenty year period — which must be done for two reasons. First, the solvency crisis does not strike immediately; we have about twenty years to fix the system before it begins to eat itself up. Second, because we are changing the rules, we ought in fairness to give folks a chance to make restitution to the system by giving birth to or adopting children. I suspect this idea would immediately cause a run on older adoptable adolescents, so we might legislate that support must be provided for a minimum of six years to the child.
Is this fair to the DINKS? Should we care? Whether nature or choice causes them to be childless, in absolute justice they have done nothing to contribute to the long-term solvency of the system, so they ought to benefit only minimally from the system. Realistically, the money they would have invested in raising children should have been cycled into financial instruments or real property anyway, because they knew early on that they wouldn’t have children to take care of them in old age, and should have provided for that contingency. In article after article3, authors have shown that DINKs are financially more successful than their child-rearing contemporaries.
There will certainly have to be regulations and relief connected with this modest proposal. Any couple who served society by successfully taking in a foster child should be able to count that service towards child-rearing. There would be an immediate upswell in demand for adoption services. The system ought to give some relief to those agencies as well, but it should have a sunset provision, so that it does not continue forever.
And I suspect that a similar “fix” would restore solvency to the Medicare Trust Fund by indexing premiums and benefits to the Direct Recognition to Contribution Solvency factor, and thus increasing the co-payments and premiums from DINKs and others who have had small families.
Although this is a modest proposal, it is not likely to be treated in a non-controversial or objective manner. After all, it flies in the face of the ideologues who hold that increasing populations are bad policy. It invalidates the very raison d’etre of The Population Council and Planned Parenthood, and challenges their power base. Yet every other proposed solution to the coming crisis — privatization, benefit delay and reduction, or increasing taxation — either defies the inexorable laws of economics or modifies the intergenerational social compact. It is literally the only way to fix the system.
W. Patrick Cunningham works for the life insurance industry in San Antonio, Texas, and is a frequent contributor to PRI Review.
