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Uncle Sam ought to provide some financial incentives for families to produce a booming new generation of workers, taxpayers, and entrepreneurs
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I know it sounds creepy to suggest that Uncle Sam ought to bribe women to have more babies. It has the whiff of something that chest-baring ultra-nationalist Vladimir Putin would do. More future patriots from Russian mothers for Mother Russia!
Most Americans would probably say nosy technocrats have no business trying to engineer some socially desirable family size, either bigger or smaller. And they would be right.
But what if Washington has already inadvertently instituted its own version of China’s awful one-child policy? After all, American families are having fewer children than they want. Surveys show a steady, four-decade preference for 2.6 kids. But today’s actual number is something more like 2.0.
Why the gap? Parents point to pocketbook issues. When asked by Gallup why they aren’t having more kids, 65 percent of respondents mentioned “not having enough money or the cost of raising a child.” Another 11 percent blamed the state of the economy or the paucity of jobs in the U.S. You can at least partially blame government for that, at least to the extent that bad policy slows economic growth and makes education and health care less affordable.
But there is another way government may hinder family formation. Considerable academic research suggests social insurance programs, such as Social Security and Medicare, reduce fertility rates in advanced economies. Thanks to these government-funded safety nets, parents have less incentive to produce kids to care for them in old age.
This is not just a problem that parents should care about. America’s childless ought to care a lot about the “kid gap.” Washington should care about the nation’s fertility rate the same way it cares about the nation’s productivity and labor-force participation rates. Low fertility rates are associated with diminished economic growth. Fewer kids mean fewer tax-paying workers to support public pension programs. The Obama White House has stated that real GDP growth in the 21st century “is likely to be permanently slower… due to a decline in the growth of the working age population.” An older society, noted the late Nobel laureate economist Gary Becker, is less dynamic, creative, and entrepreneurial. Thomas Piketty argues in his best-selling Capital in the Twenty-First Century that higher fertility would reduce inequality by increasing economic growth and dispersing the wealth of the rich among more descendants. And for now, at least, bigger families would boost housing demand and near-term economic growth.
Unfortunately, increasing the birth rate is hard. You really have to incentivize it.
Just ask Putin. Since 2006, the Russian government has been paying women about $10,000 for having a second and third child. Russian women are indeed having more kids, though the slight rebound began before Putin’s natalist push, and also comes after birthrates plummeted during the post-Soviet era’s economic chaos.
A study analyzing a 1990s Canadian program that paid up to $8,000 (Canadian dollars) to families having a child found a “strong effect” on fertility. Indeed, some American conservatives are suggesting a sharp expansion in the child tax credit to help offset how government currently distorts parental choice. Another idea is to reduce payroll taxes for middle-class families by a third for each kid they have until the child turns 18.
Now, trying to nudge women to have more kids than they want is both a fool’s errand and unseemly. But trying to make it easier to for parents to have the number of kids they do want — and produce the next generation of workers, taxpayers, and entrepreneurs — by lowering government hurdles is just what U.S. economy and American families need to flourish in the long run.
James Pethokoukis is the DeWitt Wallace Fellow at the American Enterprise Institute where he runs the AEIdeas blog. He has also written for The New York Times, National Review, Commentary, The Weekly Standard, and other places.
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