GET GOVERNMENT OUT OF THE WAY OF CHILDREN: ANOTHER OPTION FOR SOCIAL SECURITY REFORM BY

Autor: Joseph Loconte Fuente: Population Research Institute

Dear Colleague:

What kind of Social Security reform should pro-lifers support? One that reduces the fertility disincentives contained in the structure of Social Security itself, and encourages Americans to bear more children. More children now means more taxpaying workers later to help the system avoid bankruptcy. For the politically minded, it also means a more pro-life America.

Steven W. Mosher
President

President Bush has made Social Security reform a top goal for this Congress, and now every politician and pundit in America is offering suggestions on how to go about it. Congratulations to the Washington Post for printing an op-ed advocating a reform proposal that could go a long way toward increasing the solvency of Social Security by removing some of the obstacles that Social Security has put in the way of people who want to have more children. In all the talk about tax increases, benefit cuts (including the upward adjustment of the retirement age), and investments in stocks and bonds, we should not lose sight of a more fundamental way to save Social Security: Increasing the birthrate.

There are many obstacles to achieving higher birthrates, including sky-high taxation levels that take 40% of the average family's income, degenerate public schools that force conscientious parents to pay for private schooling, and even Social Security itself. Social Security financially punishes those who have children by transferring some of their wealth to retirees who are childless or who have only one child. "There are many reasons birthrates are falling, but Social Security itself is likely a major cause because of the raw deal it creates for parents and the enormous subsidies it provides to non-parents," wrote Phillip Longman in an op-ed published in the Post on Sunday, January 9. "By raising and educating their children, parents provide the system with essential human capital. The cost of this contribution, in both direct expenses and forgone wages, is often measured in the millions. Yet parents get no compensation from Social Security, nor from the wider economy, for the investments they make in their children. Instead, Social Security pays the same benefits, and often more, to people who avoid the burdens of parenthood. So long as Social Security effectively penalizes people for having the very children the system requires, it contributes to a downward spiral of falling birthrates leading to higher and higher tax rates."

Experts agree that the rapid decline in childbearing has led to the upcoming Social Security crisis. Longman, author of The Empty Cradle: How Falling Birthrates Threaten World Prosperity and What to Do About It, suggests eliminating Social Security taxes for families who are expending financial-and other-capital on raising future workers and taxpayers.
"Have one child, and the payroll tax you pay (and that your employer nominally pays) drops by one-third," Longman wrote. "A second child would be worth a two-thirds reduction in payroll taxes. Have three or more children and you wouldn't have any payroll taxes again until your youngest child turned 18. When it came time to retire, your Social Security benefit (and your spouse's) would be calculated just as if you had both been contributing the maximum Social Security tax during the period in which you were raising children, provided that all your children graduate from high school."

Given the dramatic drop in American birthrates since the '60s, letting married adults keep more of their own money in order to spend it on children, if they wish, could go a long way toward putting Social Security on a solid footing. Conservative and pro-life Americans should also note that married people with children are much more likely than others to hold conservative beliefs and vote for conservative candidates, as Steve Sailer has argued so well (see the Dec. 30, 2004, "Weekly Briefing").

Federal Reserve Board Chairman Alan Greenspan in a speech given Aug. 27, 2004, noted the challenge to Social Security posed by declining birthrates. "The growth rate of the working-age population in the United States is anticipated to slow from about 1% per year today to about 1/4% per year by 2035," he said. "At the same time, the percentage of the population that is over 65 is poised to rise markedly-from about 12% today to perhaps 20% by 2035. These anticipated changes in the age structure of the population and workforces of developed countries are largely a consequence of the decline in birth rates that occurred after the birth of the baby-boom generation." This is partly a result of the ongoing abortion of about one out of every three babies conceived in the United States.

PRI has been among those who have been talking about Social Security from this angle. Only a small increase in our current total fertility rate of 2.0 children per woman could help keep Social Security in the black, according to an official report from the trustees of Social Security.
"Social Security's 'low cost' assumptions, which delay the collapse of the trust fund indefinitely, 'save' the system by assuming that fertility increases by 10%, to 2.2 children per woman, and does that immediately," wrote W. Patrick Cunningham in the March-April 2004 PRI Review. (The report also makes other rosy assumptions to reach that conclusion, but acknowledged that they may not hold true.)

Bush's proposal to give Americans personal retirement accounts could also encourage people not only to save more money, but to have more children as well. The more of their wealth people can leave to people they love-their children-rather than to the government, the greater their incentive to save. Unlike the current system, personal retirement accounts will allow people to look forward to leaving more money to their offspring.

Making the payroll tax fairer for families combined with a plan allowing a small portion of the payroll tax to be invested conservatively-the only plan that is likely to pass the current Congress-could rescue the Social Security system. And it could do it without painful tax increases or benefit cuts.

Joseph A. D’Agostino is Vice President for Communications at the Population Research Institute.
http://www.pop.org/main.cfm?id=203&r1=2.00&r2=1.75&r3=0&r4=0&level=2&eid=714
 
 
 
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