In the Long Run, We Are All Dead
The Economist of February 8th to 14th ran two very good articles that, though apparently unrelated, taken together point to a moral and philosophical public policy orientation that has serious implications for the long-term economic health of the country.
The first concerns the Congressional Budget Office’s (CBO) estimate that the Affordable Care Act will result in a reduction of 2.5 million participants in the U.S. labor force by 2025—an unintended consequence resulting from disincentives to work (page 29).
The second is a briefing on the steep increase in the deportations of undocumented migrants, often conducted in a brutal manner, during the Obama administration (pages 23-26).
It seems that the disincentives created by Affordable Care Act will further reduce the labor participation rate (that is, the ratio of the sum of the employed plus the unemployed who are seeking employment, divided by the total labor force), slowing the growth of the gross domestic product (GDP) to 2.1% per annum over the next ten years—decidedly sluggish when compared to a more normal rate of growth, represented by the average of 3.3% per year since 1953. (CBO Report, “The Budget and Economic Outlook: 2014-2014” [“CBO Report”], page 27)
According to the Bureau of Labor Statistics, the labor participation rate has fallen from 66.1% of the labor force in 2004 to 62.8% in 2014. I should note that the Affordable Care Act is by no means the only government program that is contributing to the decline in the labor participation rate. (For example, between 1967 and 2012 the ratio of persons employed to those receiving social security disability payments decreased from 65:1 to 16.2:1.)
How much of the decline is attributable to the voluntary retirement of baby-boomers as opposed to transfer payment disincentives and the temporary withdrawal from the labor force of discouraged workers is open to question. If the more significant factor is baby-boomer retirement, arguably good news in the short-run, the downward trend is likely to accelerate. This is bad news in the long-run.
I find it remarkable, therefore, that the government, according to the article on the Obama deportation policy, “now spends more money on immigration enforcement than on all other main federal law enforcement agencies combined.” In 2012 this was $17.9 billion out of a total of $33.3 billion. This is remarkable because the mainly Latino workers whom the government is kicking out are actually employed (albeit painting houses and picking cucumbers). This makes them part of the 62.8% of the workforce who are willing and able to contribute to the GDP. What is more, they are having children.
I will say more about this last point presently, but first a few more numbers. One morning a few days ago, I heard a lady journalist/political commentator state cheerily that the problem of the national debt was, in effect, resolving itself. This is because of the increasing tax revenues generated by the slowly improving economy.
President Obama has said the same thing on a number of occasions, and it is true. Indeed, it is cause for a sense of relief in the short-term. The CBO’s long-run projections, however, are by no means so cheerful. The annual deficit will shrink to $514 billion in 2014, its lowest level since the start of the recession in 2008. This represents 3% of GDP, versus a level of 10.1% in 2009. The CBO expects it to shrink further, to 2.6% of GDP, in 2015. Between 2016 and the end of 2024, however, it is projected to rise to 4% of GDP. (CBO Report, pp. 2, 18)
Compared to an average of 2.4% in the relatively “normal” economy between 1968 and 2008, this percentage is not especially good news. To put this into perspective, the CBO predicts that the federal debt held by the public, which amounts to 74% of GDP in 2014, will be 79% of GDP at the end of 2024, almost twice the average of 40% of GDP for the forty years between 1973 and 2013. As recently as 2007, in the middle of two wars, it was 35% of GDP. (CBO Report, pp. 1, 16–17)
The report attributes the government’s inability to reduce the annual deficit, and the resulting emergency level of public debt, to a variety of factors. Significantly, these include a decline in the tax-paying labor force resulting from an ageing population and the disincentives to work resulting from the Affordable Care Act. (CBO Report, pp. 2–5, 38) This continued extraordinary level of public debt, says the CBO, will crowd out productive private sector investment, put a straight-jacket on the use of fiscal policy to mitigate future recessions, and “increase the risk of a financial crisis during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates.” (CBO Report, pp. 7, 18) (Hello Greece, Italy, Spain, Ireland and Portugal!)
The message, I think, is that we have a long-run problem of too few people. To be more precise, we are going to have too few people who are working and paying taxes. This is not by any means an original observation, but a few additional facts are sobering. The population replacement rate, that is, the number of children per woman of child-bearing years that is necessary to maintain a stable population, is 2.1. As of 2012, the rate for the U.S. as a whole was 1.88. So, not only are we creating disincentives to engage in paid productive labor, but we are creating them in the face of a declining number of people who are able to perform such labor.
At this juncture, let me to return to the point I left off above. Why, one must ask, is the present administration so hell-bent on eliminating people who not only are productive private-sector workers but who are also having the babies we need, not so much to prosper so much as to avert catastrophe? According to the 2002 American Community Survey of the U.S. Census Bureau, the fertility rate for immigrant women was 2.9 children; for illegal immigrant women it was 3.1 children; and for Mexican immigrant women it was 3.5 children—all well above the 2012 fertility rate of 1.88 children for the U.S. population as a whole. It would seem, therefore, that the government could usefully divert some of the $17.9 billion it spends per year to hound these people out of the country toward helping them to ensure that their children grow up to be responsible, educated, assimilated, English-speaking, and, importantly, tax-paying American citizens. This might be accomplished most efficiently by not spending the money at all and just leaving the new immigrant families in peace. In the present context, whether such a shift in policy is just or unjust is not really the question. It is simply that it makes sense given the country’s long-term economic predicament.
Finally, one very odd thing about the Obama administration’s immigrant policy should be noted: Immigration reform is one of the president’s “hot button” issues. It is featured on Obama’s personal Organizing for Action website, together with six others. The website lists them alphabetically as Climate Change, Gun Violence, Health Care, Immigration, Jobs and the Economy, Marriage Equality, and Stand with Women.
Of these, the last two are interesting in connection with this discussion. The first, “Marriage Equality,” means the promotion of legalized same-sex marriage in all fifty states. The second, “Stand with Women,” primarily concerns the preservation of unrestricted access to abortion in all fifty states. The rightness or wrongness of the president’s strong advocacy of these two things might, I suppose, be debated. What cannot be debated, however, is that both, in a real sense, imply a preference for sterility over fertility.
Access to abortion has the necessary effect of reducing the pool of future taxpayers, and probably very substantially so. (According to the Guttmacher Institute “Fact Sheet on Induced Abortion in the United States,” 53 million legal abortions were performed in the U.S. between 1973 and 2008. Of course, the resulting reduction in the size of the population over succeeding generations is exponential.) Same-sex marriage, unlike real marriage, can never produce offspring. It is interesting, in this context, that the administration’s adamancy with regard to the HHS contraception mandate has the undeniable practical effect of promoting sterility as a matter of public policy.
For the good of the country, one might hope that the president would consider an equally strong advocacy for things like motherhood, fatherhood, and the kind of marriage that can actually keep the country alive beyond the immediate here and now. As it happens, this is just the kind of marriage we generally observe among the very immigrants of whom our government is spending so much of our money trying to rid us, striking yet another blow to our country in the name of the cause of sterility.
Considering the direction in which our leaders are taking us, it is probably time we took to heart Keynes’s famous quip, “In the long run, we are all dead.”
That is, of course, unless we have the guts to do something about it.
