"To Stop the Fiscal Apocalypse, Bet on the Young."
A column reprint, in which I push investments to fix the debt
At the end of 2023, I testified in front of the Joint Economic Committee about the debt and deficit. The premise of the hearing was demographics. Medicare and Social Security are expensive, and more people will be on both programs each day.
You can read my testimony or watch it.
I struggled with the defeatist mindset of the hearing, like we can’t have nice things in our economy because there are old people. I felt like the older population was being used as a bogeyman to justify spending cuts. I pushed back hard: investing in the young—in workers and families—is the only path forward for fiscal sustainability.
As we watch Congress limp towards a terrible debt-ridden bill, it’s helpful to remember that whatever damage they cause today, the solution the economy and budget needs for the future is the same.
To Stop the Fiscal Apocalypse, Bet on the Young
The only viable way to support an aging population is to make working people richer and more plentiful.
Published November 2023
Have you heard about America’s impending fiscal apocalypse? It’s that moment in the not-too-distant future when there will be too many elderly people for younger generations to support, rendering the federal government incapable of meeting its obligations.
The apocalypse can be averted. Just make the young richer and more plentiful. Fantastic as that might seem, it’s entirely attainable.
Policy makers are rightly concerned about the country’s demographics. Over the next 20 years, the number of Americans over age 65 will grow 50%, from 54.1 million to 81.5 million. This, in turn, will radically increase the cost of programs that serve the elderly, including Medicare, Social Security, Supplemental Security Income and Medicaid.
Making the old cheaper isn’t much of an option. The biggest cost driver is their sheer number, and the second biggest is their increasing longevity — two things one shouldn’t want to change.
Thus, the only viable solution is to make the young more capable of bearing the cost. This doesn’t necessarily require making individuals wealthier, as long as generations as a whole have greater resources. Given that the majority of income comes from earnings, the key is to increase the number of people working.
The good news is that there’s a lot the US can do. The federal government has so far failed to implement numerous policies with a proven track record of increasing labor force participation. And there’s plenty of room for improvement: Among 38 countries in the Organization for Economic Cooperation and Development, the US ranks 29th by share of the population employed.
Some policies would have no direct cost for the government. If it mandated a minimum number of paid sick days, the right to work part-time and the right of tenured workers to request flexible work arrangements, it would help mothers, the disabled and the elderly work more. Instituting paid leave for family and medical reasons — financed with a payroll tax paid into a separate trust fund -- would help all workers stay employed amid various crises and life events.
Other policies require investment. Subsidizing child care arguably has the highest upfront cost, but also offers massive potential gains. In the short run, it would increase the percentage of women working. In the longer run, it would likely make their children more likely to work and to earn more when they come of age.
Another way to enrich a generation is to increase its size. To that end, immigration policy must recognize that the US needs workers, and that having millions of people in the country not able to fully participate in the economy is a bad idea. Whatever their citizenship status, people who are here should be allowed to work.
Boosting fertility can help, too. The US is experiencing a 15-year decline: What started as a slide attributed to the 2007 recession is now a generational trend. One in five couples struggle with infertility. Yet the combination of poor insurance coverage and high medical costs means that in-vitro fertilization can cost tens of thousands of dollars per kid, and even a regular delivery costs on average $2,600. That’s a tax on childbirth. No wonder surveys find as many as two thirds of families with children citing cost as the reason they won’t have another.
What seems lost on Congress is that if the US fails to enrich younger generations, the burden of an aging population won’t go away. If the elderly lose government benefits, their children and grandchildren will have to make up the difference. No matter what, the burden falls on working families. So investing in younger generations would still be the right policy, to help them prepare for what is coming.
Instead, legislators seem poised to make a bogeyman of the elderly, citing the cost of Social Security and Medicare as a justification for slashing spending elsewhere. But America can’t cut its way to growth. To prevent the fiscal apocalypse, it’s time to bet all we can on the one group of people that can hold up the future: young workers.
Some potentially good proposals here, but saying “America can’t cut its way to growth” might be going too far. Aside from the usual points on higher gov spending, a program like social security is quite costly to growth by substituting savings.
There’s tremendous common sense in taking this approach of supporting, resourcing, and incentivizing more people to work, rather than ignoring the coming problem, or treating our older generations poorly which is what our current administration is attempting to do.