American Birth Rates Lowest Ever: What It Means for Welfare.

Birth rates in most advanced nations are very low. This is not a surprise. It has been observed throughout history that more advanced economies typically experience a lowering birth rate. There may be many different reasons why this occurs in any given nation, but I think the main reason is this: Large families carry larger economic benefit in agricultural societies. Less advanced societies are typically agrarian in nature. If a farmer has a large family with many children, then the children will usually be helping out on the farm. This saves the farmer a great deal on labor costs; furthermore, in a society based on outright subsistence farming, there might not even be an employee-employer social infrastructure, meaning that a farmer actually relies on a large family with many children to work on the farm.

The USA is not, of course, a primitive society based on subsistence farming.  The USA is the most advanced economy in the world. The number of Americans involved in farming is vastly smaller than those who work outside of farming. Those outside of farming typically do not rely on a large family in the same respect as a farmer. For these people, children are probably not an economic asset but actually pose more of an economic burden for their parents. With child labor laws considered, most children are practically 100% economic burden. Therefore, as an economy advances and less people are involved in subsistence farming or simple trades out of the home (such as weaving textiles or whatever), then it becomes less of an economic imperative to sire a large family. Many people in America still choose to produce large families, but not out of economic imperative.

In America, the birth rate has been declining somewhat steadily for about 20 years. Within the past 100 years, the birth rate has downright crashed. To someone who lives in fear of overpopulation, this is a good sign. I am 0% concerned about overpopulation, so I don’t care about that. However, this statistic undoubtedly makes certain politicians and bureaucrats very nervous, because a high birth rate is the health of the Welfare State. The centerpieces of Welfare States are often the extensive old-age benefits they offer. These benefits need to be paid for. They need a legion of younger “investors” to foot the bill for the oldsters.

Taxing rich people is usually the go-to solution for Welfare State advocates, but the money received from just focusing on taxing rich people and corporate entities is nowhere near enough. Welfare States need large populations to shoulder the burdens of the old folks. In order to remain anything close to solvent, they need constant injections of new suckers into the system who can provide a source of taxable funds. This is why Social Security and Medicare are often referred to as Pyramid Schemes, and rightly so. As the retirement-age population in America continues to grow (and will explode as Boomers begin to retire), the top of the welfare pyramid grows. The base needs to expand enough to support the growing top of the welfare pyramid. Government officials need to sucker in new, younger “investors” in order to pay off the old “investors”. The classic example of this was Ida May Fuller, the first person in the USA to receive a Social Security check: Ms. Fuller paid about $24 into the system, before receiving her first check in 1940. She collected checks until her death in 1970, by which time she had collected over $22,000 in Social Security benefits. How many different investors were needed to pay off the older investor?

This chart depicts the past 100 years of birth history in the USA:

chart-birth-rate-2.top.gif

The current birth rate is the lowest it has ever been. Meanwhile, the unpaid future obligations of Social Security and Medicare are the highest they’ve ever been; estimated near $220 trillion, by some analysts. That is an enormous number. The taxable base is expanding slowly; too slowly to meet the future needs of the American welfare state. Taxes would have to reach obscene levels (imagine income taxes over 50%) in order to even begin footing the bill for these programs, because the taxable population base will not be large enough. This does not even consider the fact that nearly half of all working-age adults in America pay no income tax. This really is a death spiral for the Welfare State. The situation is just as grave in nearly every other welfare state in the world. We will probably see the collapse of the Japanese Welfare State in our lifetime; they have a nearly inverted population pyramid, which is appalling.

The tax dollars will not be sufficient. This will leave the US government with only two other viable options: borrow, or inflate. At some point, interest rates will rise. Then borrowing will no longer be a viable option. At that time, the US government will agitate for extreme inflation from the Federal Reserve, in order to send out checks. I do not think hyperinflation will arrive (as I have discussed here), but mass inflation is a distinct possibility.

The Welfare State is a scam. Politicians and Bureaucrats enjoy pretending to be God, providing food, housing, medical care and more, all seemingly at almost no cost and no burden to anyone. Of course, it is all a fraud; the Welfare State is a Potemkin Village. It pays off older entrants to the system at the expense of newer entrants, as we see in Obamacare. It is all a scam. It will become more apparent as time progresses. Do not expect any politicians to admit this.

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