I admit to being irritated by the shallowness of our supposed national debate on Social Security. Neither political party seems able — perhaps willing is a better word — to come to grips with the real issue, which is our growing shortage of young people. The Democrats — no surprise here — merely want to raise taxes, just as Jimmy Carter did during a previous Social Security cash crunch in the late ’70s. Carter promised that his tax increase, the largest in American history up to that point, would keep the trust fund solvent for another quarter-century. Seven years later it was technically bankrupt.
The Republicans have a grab bag of solutions on the table — from raising the amount of income subject to taxation, to lowering the rate at which benefits increase, to setting up private investment accounts for younger workers — none of which addresses the underlying problem, either. The party of half-measures seems determined to earn its “Democrat-lite” sobriquet yet again.
A Tale
There is a story told in Washington about how best to jumpstart a stagnant economy. The Democrats, true to form, propose a giant public works project. “Let us raze Washington to the ground,” they say, “We’ll rebuild it over the course of the next year. Think of all the jobs we will create.”
“No! No! No!” cry the Republicans in apparent horror. “We can’t do that.” Then, after a pause, they add sotto voce: “Perhaps we could phase it in over three years?”
Like most Americans, 1 barely glance at my annual Social Security Statement, but this year Jo Anne Barnhart, the Commissioner of the Social Security Administration, got my attention. “Unless action is taken soon to strengthen Social Security, in just 14 years we will begin paying more in benefits than we collect in taxes,” she wrote. “There won’t be enough younger people working to pay all of the benefits owed to those who are retiring” [italics added].
Where are the Children?
Here, cutting through all the self-serving political rhetoric, was a clear statement of our present dilemma: America has too few young people. We have created willy-nilly a society that is consuming more human capital than it produces. And not one of the Social Security solutions being talked about in Washington — raising taxes, lowering benefits, raising the age at retirement, forcing people to work longer, more foreign labor, setting up private investment accounts — even begins to address this shortfall. Some of them, such as drafting more would-be mothers and stay-at-home moms into the workforce, will almost surely make the problem even more intractable. It was when starving pioneers ate their seed corn that famine became a forgone conclusion.
Nor can we look abroad for pro- natal ideas to extricate ourselves from our present predicament. The demographic winter descending upon Europe and Japan makes our own demographic forecast look positively sunny by comparison. Aging populations, static workforces, and shrinking numbers of youth are now the norm in the developed world, and lurking in the shadows are huge, unfunded pension and similar liabilities. European efforts to boost its anemic birthrate, hovering at 1.3 children per woman, have left European couples unmoved. Even the relatively generous kindergeld payments of Austria and Germany have not filled up empty maternity wards. If there is a solution, it must be a uniquely American one, involving a renewed respect for the value of life and the centrality of family.
We are accustomed to thinking of abortion and, to a certain extent, sterilization and contraception, as exclusively moral issues (although most of us are familiar with the efforts of the radical feminists to frame them as “reproductive rights” issues). But abortion and its cohorts can also be viewed as the wanton destruction of incredible amounts of human capital, in the American case roughly equivalent to nuking a mid-sized American city each year. Government-funded contraception and sterilization programs — holdovers from the days of the population bomb scares — also deliberately suppress the birth rate, and may be said to prevent the formation of human capital. Even Social Security, by completely ignoring the vital contribution of human capital that parents make to the system, undermines their willingness to create that capital, that is, to conceive, bear and raise children.
The Investment in Children
Most American parents see babies as a drain on the family economy. It would be surprising if they didn’t. For parents make tremendous investments of time and money in each of their children, only to watch them open separate checking accounts as soon as they become gain- fully employed. Adult children in modern-day America contribute precious little to the financial wellbeing of their parents, who are expected to be supported by their own pensions and the government when they retire.
Yet the family’s loss is society’s gain, for these same children constitute the human capital that the larger society draws upon for its very life. The economy continues to flourish — and Social Security checks continue to be mailed out — only because millions of parents generously sacrifice their own financial well — being by providing for the future in the most fundamental way, by providing the next generation of Americans.
Value of Parents
I believe, as an article of faith, in the infinite worth of each and every human being. But, for the sake of the secular-minded, let us estimate the value of the gift of human capital that parents make to society. A young adult just entering the workforce on a full-time basis can expect to earn, if wages continue to rise in the future as they have in the recent past, several million dollars over the course of his lifetime. The present value of these future earnings is something in excess of a million dollars. But those who created this vital and irreplaceable human capital in the first place — the parents — are only grudgingly, and in minor ways (a modest tax credit and deductions for dependents) acknowledged by society.
If our society undervalues the contribution of parents, it treats babies as disposable commodities that can be thrown away at any time before birth.
Abortion Destroys
Just how much human capital does an abortion destroy? Or, to put the question another way, what is the economic value of an American baby at conception? The Department of Agriculture estimates the cost of raising a child born in 2005 at around $200,000 over twenty years, a substantial (and probably exaggerated) sum of money. But the future earnings of the child from 2025 to 2070 — assuming that wages continue to rise at their current rate — will be well over ten times this amount, probably in the neighborhood of between $4 and $5 million. Discounting these future costs and benefits to the present produces a figure of around $600,000, How many people realize that every abortion is the death of a small fortune — and another nail in the coffin of Social Security?
The Real Culprit
In one sense we can date our problems with Social Security back to a single act of judicial tyranny. The Roe v. Wade decision permitting abortion on demand dropped the American birthrate below replacement virtually overnight. Prior to 1972 there were roughly four million pregnancies a year in the United States, nearly all of which resulted in live births. The Total Fertility Rate (TFR) — the average number of children born to an American woman over the course of her lifetime — hovered around 3.
After Roe v. Wade there were still four million pregnancies every year, only now every third pregnancy ended in abortion. The TFR dropped below replacement — which is generally held to be 2.1 children — and has stayed there, until at present the Commissioner of Social Security tells us that we don’t have enough “younger people.” Those aborted cohorts, each almost 1 1/2 million strong, would have begun entering the economy by the early ’90s. To date the economic contribution of these 2U million young people would already be in the trillions of dollars, their contribution to Social Security in the tens of billions of dollars — and we would be spared the increasingly frenetic debate over how to “save” Social Security.
The Social Security trustees themselves estimate that, for each one-tenth increase in the TPR, Social Security will remain solvent for three additional years. The TFR currently stands at 2.0. If it were to increase to 3.0, which is where it stood after the introductions of the Pill and feminism but prior to Roe v. Wade, then Social Security would be solvent for an additional 30 years — with no change in current taxes and benefits. If any political party is serious about saving Social Security, it should be advocating the end of abortion on demand.
We should also, if we want to save Social Security, get out of the business of sterilizing and contracepting large numbers of Americans at taxpayer expense. The Family Planning Services and Population Research Act of 1970 was born out of overblown fears that America was somehow becoming “overpopulated.” It provided $382 million for “family planning services, research, and training,” and instituted Title X of the Public Health Services Act, much of which went to Planned Parenthood and other anti-natal groups for contraceptive drugs and devices. The billions of dollars spent since in this single-minded effort to drive down the birthrate have only made us all poorer, and reduced the number of young people able to help keep Social Security solvent.
Proposals to Help
I have already remarked that the cost of raising children falls solely upon the parents, while the benefits of their investment are spread over all of society. Nowhere is this more true than in the case of Social Security. Not only do parents bear the burden of raising children, they also pay the same Social Security payroll taxes — 6.2% of the first $90,000 of income for Social Security, and 1.45% of income for Medicare — as non-parents. It seems inequitable to make married parents with children under 18 pay these taxes at all, since they are already helping to ensure the future of Social Security by investing heavily in future taxpayers, namely, their own children. If we want to encourage couples to create human capital, then this “parent penalty” must be ended.
Philip Longman has proposed that couples with children under the age of 18 should be sheltered from Social Security and Medicare taxes. Those with one child should have their taxes reduced by one-third, those with two children by two-thirds, and that those with three children should pay no taxes whatsoever. At retirement, he says, such parents should have their benefits calculated as if they had paid the maximum amount into the system. Relinking the generations in this way would undoubtedly boost the birth- rate, and thus help to salvage Social Security. Whether we adopt Longman’s proposal, or some even more generous arrangement, both justice and prudence demand that we stop the double taxation of parents as soon as possible.
Our Ultimate Resource
The modem welfare state — including abortion on demand, state-funded contraception and sterilization, and the fracture of the intergenerational dependency of the family — relentlessly suppresses fertility. Yet, as my late friend Julian Simon was fond of remarking, human beings are the ultimate resource, the one resource that we cannot do without. We cannot continue to consume more of this resource than we produce. Otherwise, not only pension funds, but entire economies, will collapse, first in Europe, then in Canada and Japan, and finally here as well.
