The current issue of First Things (not yet available online) features a most interesting article by new associate editor David Goldman on the current economic crisis. While a lot of blame for our woes is rightly being placed on greedy Wall Streeters and corrupt and/or incompetent politicians Goldman casts his eye elsewhere. He makes a compelling case that our fundamental problem is demographic and that it's not going to be solved by the kinds of remedies Washington is prescribing.
The root of the problem, he notes, is the housing crisis. People borrow money to buy homes. This fuels the economy because the construction, purchase, and maintenance of houses create a multitude of jobs.
Two-parent families with children are the fulcrum of the housing market. They buy bigger, more expensive homes and spend more on their maintenance. Single-parent families tend to be poorer and often live in apartments or smaller houses. Thus, buying power is concentrated in two-parent families with children, but this cohort is in serious decline in the Western world, including the U.S.
Since 1970 our population has risen from 200 to 300 million, but the number of two-parent families is the same as it was in the early 70's - 25 million - while the number of one-parent families with children has tripled.
In 1960 dependent children made up half the population, but today they're only 30%. Meanwhile, the dependent elderly have gone from 15% of the population in 1960 to 30% today. As a result we are getting poorer. There are fewer couples with children to borrow and spend on housing and more and more elderly whose savings are being eaten up by the stock market slide.
According to Goldman, by 2025 households with children will decrease from half of all households to less than a quarter. There will be fewer people with children which means a lower demand for housing. Large lot single-family homes will slump from 56 million today to 34 million by 2025, a 40% reduction.
With a diminished demand for housing the boomers' savings will be sitting in the banks collecting very little interest because no one will be borrowing. The economy will turn to mush. Goldman says that we'll be poorer than we are now for at least a generation. Workers on the tail of the baby boom will work five to ten years longer before retiring and they'll retire with less income than they had planned. Young people will work for less money at duller jobs than did their parents and grandparents.
He argues that we must do what we can to encourage family growth and offers several recommendations toward this end:
- Cut taxes on families (Obama's Cap and Trade would be devastating since it would raise the cost of energy on families which is the equivalent of imposing a tax. His spending policies have already put future generations in debt to the tune of about $30,000 per person before they've even been born).
- Shift part of the Social Security burden to the childless by reducing payroll taxes (FICA) on those who have raised children (Those who have raised children have done their part to create the next generation. Those who haven't, haven't. Those, Goldman says, who have made the effort and paid the cost of raising children are seeing their savings erode because too many others have chosen not to. Those who avoid the effort and cost of children should be asked to pay more to fund social security than those who have raised them.)
- Make child-related expenses deductible.
- Change immigration laws to let in more highly skilled, productive individuals and fewer poor, uneducated immigrants. What we need right now are people who will generate wealth, not people who will demand services paid for by the already strapped public.
There's much else that Goldman offers in this essay that's worth reading. I would urge anyone, especially those between the ages of 18 and 40, to visit their local library, or any place that sells magazines, and read the entire article.RLC