Michael Barone: Fewer dollars and babies threaten social programs

BY MICHAEL BARONE Published: February 5, 2013
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Our major public policies are based on the assumption that America will continue to enjoy growth. Economic growth and population growth.

Through most of our history, this assumption has proved to be correct. These days, not so much.

Last week, the Commerce Department announced that the gross domestic product shrunk by 0.1 percent in the fourth quarter of 2012. And the Census Bureau reported that the U.S. birthrate in 2011 was 63.2 per 1,000 women age 15 to 44, the lowest ever recorded.

When Medicare was established in 1965 and when Social Security was vastly expanded in 1972, America was accustomed to the high birthrates of the post-World War II baby boom. It was widely assumed the baby boom generation would soon produce a baby boom of its own.

Oops. The birthrate fell from the peak of 122.7 in 1957 to 68.8 in 1973 and hovered around that level until 2007.

Social Security had to be tweaked in 1983 when it became clear there weren't enough working-age people to fund benefits promised to the elderly. It needs tweaking again today for the same reason.

Medicare presents even greater problems. Health care costs have generally been rising at rates above economic growth. By itself this is not necessarily a problem. Economic growth and market competition have enabled Americans to spend smaller percentages of their incomes on food and clothes, with more left over to spend on other things.

Spending more on health care is a sensible thing for an affluent society to do — especially as new medical procedures and drugs mean that health care can deliver more than it used to. But in a society in which the elderly are an increasing share of the population and working-age people are a decreasing share, it becomes increasingly difficult to fund these programs.

These problems are exacerbated when the economy fails to grow as rapidly as the working-age population.

Birthrates fell sharply during the Depression of the 1930s. They have fallen significantly since the housing collapse, from 69.3 in 2007 to 63.2 in 2011. The steepest decline in births since 2007 has been among Hispanic immigrants, who were also hit hard by housing foreclosures.

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